DEF 14A 1 d385588ddef14a.htm DEF 14A DEF 14A
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant  [X]                            

Filed by a Party other than the Registrant [  ]

Check the appropriate box:

[  ]

  

Preliminary Proxy Statement

[  ]

  

Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

[X]

  

Definitive Proxy Statement

[  ]

  

Definitive Additional Materials

[  ]

  

Soliciting Material Pursuant to §240.14a-12

FedEx Corporation

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]   No fee required.

[  ]

  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

  (2)  

Aggregate number of securities to which transaction applies:

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

  (4)  

Proposed maximum aggregate value of transaction:

 

  (5)  

Total fee paid:

 

[  ]

  Fee paid previously with preliminary materials.

[  ]

  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

  (2)  

Form, Schedule or Registration Statement No.:

 

  (3)  

Filing Party:

 

  (4)  

Date Filed:

 


Table of Contents

 

 

LOGO

2017 Annual Meeting

of Stockholders

Monday, September 25, 2017

8:00 a.m. local time

FedEx Express World Headquarters

Auditorium

3670 Hacks Cross Road, Building G

Memphis, Tennessee 38125


Table of Contents

INFORMATION ABOUT THE ANNUAL MEETING

Voting Matters and Board Recommendations

FedEx’s Board of Directors is furnishing you this proxy statement in connection with the solicitation of proxies on its behalf for the 2017 Annual Meeting of Stockholders. Our stockholders will be voting on the following matters at the annual meeting:

 

Matter

  

Board’s

Recommendation

     Page   

Proposal 1: Election of directors

     For        15   

Proposal 2: Advisory vote to approve named executive officer compensation

     For        57   

Proposal 3: Advisory vote on the frequency of future advisory votes on executive compensation

     Every Year        59   

Proposal 4: Amendment to the 2010 Omnibus Stock Incentive Plan to increase the number of authorized shares

     For        60   

Proposal  5: Ratification of the appointment of the independent registered public accounting firm

     For        75   

Proposals 6  – 9: Stockholder proposals

     Against        77   

Stockholders also will consider any other matters that may properly come before the meeting.

How to Cast Your Vote and Annual Meeting Admission

If you are a registered stockholder, you can vote by any of the following methods:

 

LOGO    LOGO    LOGO    LOGO

 

If your shares are held by a bank, brokerage firm or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If your shares are held in street name, these proxy materials are being forwarded to you by your bank, brokerage firm or other nominee (the “bank or broker”), along with a voting instruction form. To direct your bank or broker how to vote your shares, complete, sign and return the voting instruction form in the envelope provided or follow the instructions provided to you for voting your shares by telephone or on the Internet. To ensure your shares are voted in the way you would like, you must provide voting instructions by the deadline provided in the materials you receive from your bank or broker. As a beneficial owner, in order to be able to vote your shares at the meeting, you must obtain a legal proxy from your bank or broker and bring it with you to hand in with your signed ballot.

If you plan to attend the annual meeting in person, you must register in advance. The registration deadline is 11:59 p.m. Eastern time on Thursday, September 21, 2017.

If you attend the annual meeting in person, you will need to present your admission ticket, which you will receive when you register in advance, and a valid government-issued photo identification. For more information on how to register to attend the annual meeting and obtain an admission ticket, please see “Do I have to register in advance to attend the meeting?” and “Who can attend the meeting?” on page 90.

 

Your vote is very important. Please vote whether or not you plan to attend the meeting.

We are first sending the proxy statement, form of proxy and accompanying materials to stockholders on or about August 14, 2017.

 

 

Online www.investorvote.com/FEDX through 9/24/2017 By Phone 1-800-652-VOTE (8683) through 9/24/2017 Proxy Card Completing, signing and returning your proxy card In Person With a ticket obtained upon advance registration and valid photo identification

 

  2017 Proxy Statement       i


Table of Contents

Effect of Not Casting Your Vote

 

If you are a registered stockholder and you do not sign and return your proxy card or vote electronically on the Internet or by telephone, no votes will be cast on your behalf on any of the items of business at the meeting.

If you hold your shares in street name and you do not instruct your bank or broker how to vote your shares, your broker may vote your shares in its discretion on the ratification of the appointment of the independent registered public accounting firm, but will not be allowed to vote your shares on any of the other proposals.

 

General Information

 

The principal executive offices of FedEx Corporation are located at 942 South Shady Grove Road, Memphis, Tennessee 38120.

FedEx’s Annual Report to Stockholders for the fiscal year ended May 31, 2017, which includes FedEx’s fiscal 2017 audited consolidated financial statements, accompanies this proxy statement. Although the Annual Report is being distributed with this proxy statement, it does not constitute a part of the proxy solicitation materials and is not incorporated by reference into this proxy statement.

By submitting your proxy (either by signing and returning the enclosed proxy card or by voting electronically on the Internet or by telephone), you authorize Christine P. Richards, FedEx’s Executive Vice President, General Counsel and Secretary, and Alan B. Graf, Jr., FedEx’s Executive Vice President and Chief Financial Officer, to represent you and vote your shares at the meeting in accordance with your instructions. They also may vote your shares to adjourn the meeting and will be authorized to vote your shares at any postponements or adjournments of the meeting.

 

Reduce Mailing Costs

If you vote on the Internet, you may elect to have next year’s proxy statement and annual report to stockholders delivered to you electronically. We strongly encourage you to enroll in electronic delivery. It is a cost-effective way for us to provide you with proxy materials and annual reports.

 

 

ii  

    2017 Proxy Statement

 


Table of Contents

PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references are supplied to help you find further information in this proxy statement.

Corporate Governance Matters (see page 1)

 

FedEx’s strong and independent Board of Directors effectively oversees our management and provides vigorous oversight of FedEx’s business and affairs in support of our mission of producing superior financial returns for our shareowners by providing high value-added logistics, transportation and related business services through focused operating companies. The Board is currently comprised of 12 members — a combined Chairman and Chief Executive Officer, the Lead Independent Director and 10 other independent, active and effective directors of equal importance and rights.

The Board believes that this current leadership structure provides the most effective governance of FedEx’s business and affairs for the long-term benefit of stockholders and promotes a culture and reputation of the highest ethics, integrity and reliability.

In March 2016, our Board of Directors adopted a proxy access bylaw after we engaged with a number of our largest stockholders to understand their views on proxy access and the appropriate proxy access structure for FedEx. The proxy access bylaw permits up to 20 stockholders owning 3% or more of FedEx’s outstanding voting stock continuously for at least three years to nominate and include in FedEx’s proxy materials director nominees constituting up to two individuals or 20% of the Board, whichever is greater, provided that the stockholder(s) and the nominee(s) satisfy the requirements specified in the Bylaws.

You can find detailed information about our corporate governance policies and practices in the Corporate Governance Matters section of this proxy statement. You can also access our corporate governance documents in the Governance & Citizenship section of the Investor Relations page of our website at http://investors.fedex.com.

 

Corporate Governance Facts

 

Proxy Access

     Yes   

Majority Voting for Directors

     Yes   

Annual Election of All Directors

     Yes   

Diverse Board

     Yes   

Annual Board and Committee Self-Evaluations

     Yes   

Separate Chairman & CEO

     No   

Lead Independent Director

     Yes   

Independent Directors Meet Regularly Without Management Present

     Yes   

Annual Independent Director Evaluation of Chairman and CEO

     Yes   

Code of Business Conduct and Ethics Applicable to Directors

     Yes   

Nominating & Governance Committee Composed of Independent Directors

     Yes   

Stock Ownership Goal for Directors and Senior Officers

     Yes   

Size of Board*

     12   

Number of Independent Directors*

     11   

Average Age of Directors*

     62   

Average Director Tenure (in years)*

     13   

Median Director Tenure (in years)*

      

 

*

As of August 14, 2017

 

 

  2017 Proxy Statement       iii


Table of Contents

Voting Matters and Board Recommendations

Proposal 1 – Election of Directors (see page 15)

 

You are being asked to elect the 12 nominees named in this proxy statement as directors for a term of one year. Each of our current directors is standing for reelection.

Your Board of Directors recommends that you vote “FOR” the election of each of the twelve nominees.

 

Director Nominees (see page 16)

 

Director Nominee

  Age   Director
Since
    Independent   Position   Other public directorships   AC   CC   ITOC   NGC 

Frederick W. Smith

  73     1971       Chairman and
Chief Executive Officer of FedEx Corporation
         

James L. Barksdale

  74     1999       Chairman and President
of Barksdale Management
Corporation
        C  

John A. Edwardson

  68     2003       Former Chairman and
Chief Executive Officer of CDW Corporation
  Chubb Limited,
Rockwell Collins, Inc.
  C      

Marvin R. Ellison

  52     2014       Chairman and Chief
Executive Officer of
J. C. Penney Company, Inc.
  J. C. Penney Company, Inc.        

John C. (“Chris”)
Inglis

  62     2015       Professor at the
U.S. Naval Academy
  Huntington Bancshares Inc.,
KEYW Corp.
       

Kimberly A. Jabal

  48     2013       Chief Financial Officer of Weebly, Inc.          

Shirley Ann Jackson

  71     1999       President of Rensselaer
Polytechnic Institute
  International Business
Machines Corporation, Medtronic, Inc.,
Public Service Enterprise
Group Incorporated
       

R. Brad Martin

  65     2011       Chairman of RBM Venture
Company
  Chesapeake Energy
Corporation (Chairman),
First Horizon National
Corporation
       

Joshua Cooper
Ramo

  48     2011       Vice Chairman, Co-Chief
Executive Officer, Kissinger
Associates, Inc.
  Starbucks Corporation        

Susan C. Schwab

  62     2009       Professor at the University
of Maryland School of
Public Policy
  The Boeing Company, Caterpillar Inc.,
Marriott International, Inc.
       

David P. Steiner

  57     2009      

Former Chief

Executive Officer of

Waste Management, Inc.

  Vulcan Materials Company         C

Paul S. Walsh

  62     1996       Chairman of Compass
Group PLC
 

Avanti Communications Group
plc (Chairman), Compass
Group PLC (Chairman),

RM2 International S.A.

      C        

 

 

iv  

    2017 Proxy Statement

 


Table of Contents

Director Experience, Qualifications, Attributes and Skills (see page 20)

The Board believes that it is desirable that the following experience, qualifications, attributes and skills be possessed by one or more of FedEx’s Board members because of their particular relevance to the company’s business and structure, and these were all considered by the Board in connection with this year’s director nomination process:

 

 

LOGO

 

Proposal 2 – Advisory Vote to Approve Named Executive Officer Compensation (see page 57)

 

Our executive compensation program is designed not only to retain and attract highly qualified and effective executives, but also to motivate them to substantially contribute to FedEx’s future success for the long-term benefit of shareowners and reward them for doing so. We believe there should be a strong relationship between pay and corporate performance, and our executive compensation program reflects this belief.

The Compensation Discussion and Analysis, Summary Compensation Table and related compensation tables and narrative provide detailed information on the compensation of our named executive officers, and can be found on pages 21 through 56. We believe this information demonstrates that our executive compensation program promotes the best interests of FedEx and our shareowners by enabling FedEx to retain and attract talented executive management, while ensuring they are compensated in such a manner as to sustain and enhance long-term shareowner value.

In the 2016 advisory vote, 95.3% of the voted shares supported the compensation of our named executive officers.

Your Board of Directors recommends that you vote “FOR” this proposal.

 

Proposal 3 – Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation (see page 59)

 

You are being provided the opportunity to vote on how often you believe we should hold an advisory vote to approve executive compensation in the future. The frequency options are to hold the advisory vote to approve executive compensation every year, every two years or every three years. The Board believes that an annual advisory vote on executive compensation is the most appropriate policy for our stockholders and the company at this time.

Your Board of Directors recommends that you vote for conducting future advisory votes on executive compensation EVERY YEAR.

 

Proposal 4 – Amendment to FedEx’s 2010 Omnibus Stock Incentive Plan (see page 60)

 

You are being asked to approve an amendment to FedEx’s 2010 Omnibus Stock Incentive Plan (as amended to the date hereof, the “Plan”) to increase the number of shares authorized for issuance under the Plan. If approved, the amendment would authorize an additional 10,000,000 shares for issuance under the Plan. However, none of the additional shares will be issuable as full-value awards. The amendment would not make any other changes to the Plan.

Absent an increase in the number of authorized shares under the Plan, we do not expect to have sufficient shares to meet our anticipated equity compensation needs for fiscal 2020 (which begins on June 1, 2019). We believe that increasing the number of shares issuable under the Plan is necessary in order to allow FedEx to continue to utilize equity awards to retain and attract the services of key individuals essential to FedEx’s long-term growth and financial success and to further align their interests with those of FedEx’s stockholders.

Your Board of Directors recommends that you vote “FOR” this proposal.

 

 

  2017 Proxy Statement       v


Table of Contents

Proposal 5 – Ratify the Appointment of Ernst & Young LLP as FedEx’s Independent Registered Public Accounting Firm (see page 75)

 

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm and has specific policies in place to ensure its independence. The Audit Committee has appointed Ernst & Young LLP (“Ernst & Young”) to serve as FedEx’s independent registered public accounting firm for fiscal 2018. Ernst & Young has been our independent registered public accounting firm since 2002.

 

Fees paid to Ernst & Young for fiscal 2017 and 2016 are detailed on page 74.

Representatives of Ernst & Young will be present at the meeting, will be given the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.

Your Board of Directors recommends that you vote “FOR” this proposal.

 

Proposals 6 – 9: Four Stockholder Proposals, if properly presented (see pages 77 – 87)

Four stockholder proposals are expected to be presented for a vote at the annual meeting.

Your Board of Directors recommends that you vote “AGAINST” each of these proposals.

 

 

vi  

    2017 Proxy Statement

 


Table of Contents

LOGO

 

 

  Notice of Annual Meeting of Stockholders

 

  To Be Held September 25, 2017

 

 

To Our Stockholders:

We cordially invite you to attend the 2017 annual meeting of FedEx’s stockholders. The meeting will take place in the auditorium at the FedEx Express World Headquarters, 3670 Hacks Cross Road, Building G, Memphis, Tennessee 38125, on Monday, September 25, 2017, at 8:00 a.m. local time. We look forward to your attendance either in person or by proxy.

The purposes of the meeting are to:

 

1.

Elect the twelve nominees named in the proxy statement as FedEx directors;

2.

Hold an advisory vote to approve named executive officer compensation;

3.

Hold an advisory vote on the frequency of future advisory votes on executive compensation;

4.

Approve an amendment to FedEx’s 2010 Omnibus Stock Incentive Plan to increase the number of authorized shares;

5.

Ratify the appointment of Ernst & Young LLP as FedEx’s independent registered public accounting firm for fiscal year 2018;

6.

Act upon four stockholder proposals, if properly presented at the meeting; and

7.

Transact any other business that may properly come before the meeting.

Members of FedEx’s management team will be present at the meeting to respond to appropriate questions from stockholders.

Only stockholders of record at the close of business on July 31, 2017, may vote at the meeting or any postponements or adjournments of the meeting.

If you plan you to attend the annual meeting in person, you must register by 11:59 p.m. Eastern time on Thursday, September 21, 2017. See page 90 of the proxy statement for information on how to register in advance to attend the meeting.

By order of the Board of Directors,

 

 

LOGO

Christine P. Richards

Executive Vice President, General Counsel and Secretary

August 14, 2017

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON SEPTEMBER 25, 2017: The following materials are available on the Investor Relations page of the FedEx website at http://investors.fedex.com:

 

 

The Notice of Annual Meeting of Stockholders To Be Held September 25, 2017;

 

The proxy statement; and

 

FedEx’s Annual Report to Stockholders for the fiscal year ended May 31, 2017.

 

Your vote is very important. Please vote whether or not you plan to attend the meeting.


Table of Contents

2017 PROXY STATEMENT

Table of Contents

Page 

CORPORATE GOVERNANCE MATTERS      1  
FedEx Corporate Governance        1  
Board Leadership Structure      1  
Board Risk Oversight      2  
Executive Management Succession Planning      3  
Director Independence      3  
Audit Committee Financial Expert      4  
Director Mandatory Retirement      5  
Stock Ownership Goal for Directors and Senior Officers      5  
Policy on Poison Pills      5  
Communications with Directors      5  
Proxy Access      6  
Nomination of Director Candidates      6  
Majority-Voting Standard for Director Elections      7  
Policy on Review and Preapproval of Related Person Transactions      7  
Related Person Transactions      7  
STOCK OWNERSHIP     9  
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS     11  
DIRECTORS’ COMPENSATION     13  
PROPOSAL 1 — ELECTION OF DIRECTORS     15  
EXECUTIVE COMPENSATION     21  
Report of the Compensation Committee of the Board of Directors      21  
Compensation Discussion and Analysis      21  
Summary Compensation Table      40  
Grants of Plan-Based Awards During Fiscal 2017      45  
Outstanding Equity Awards at End of Fiscal 2017      47  
Option Exercises and Stock Vested During Fiscal 2017      49  
Fiscal 2017 Pension Benefits      50  
Potential Payments Upon Termination or Change of Control      52  
PROPOSAL 2 — ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION     57  
PROPOSAL 3 — ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION     59  
PROPOSAL 4 — AMENDMENT TO 2010 OMNIBUS STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF AUTHORIZED SHARES     60  
EQUITY COMPENSATION PLANS     72  
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS     73  
AUDIT AND NON-AUDIT FEES     74  
PROPOSAL 5 — RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     75  
STOCKHOLDER PROPOSALS: PROPOSALS 6 – 9     77  
INFORMATION ABOUT THE ANNUAL MEETING     88  
ADDITIONAL INFORMATION     94  
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2018 ANNUAL MEETING     95  
APPENDIX A — Companies in Executive Compensation Comparison Survey Group     A-1  
APPENDIX B — Reconciliations of Non-GAAP Measures     B-1  
APPENDIX C — 2010 Omnibus Stock Incentive Plan     C-1  


Table of Contents

CORPORATE GOVERNANCE MATTERS

FedEx Corporate Governance

 

Our Board of Directors and management team are committed to achieving and maintaining high standards of corporate governance, as well as a culture of and reputation for the highest levels of ethics, integrity and reliability. We periodically review our governance policies and practices against evolving standards and make changes as appropriate. We also value the perspectives of our stockholders and other stakeholders, including our employees and the communities in which we operate, and take steps to implement their points of view where warranted.

In considering possible modifications of our corporate governance policies and practices, our Board and management focus on those changes that are appropriate for our company and our industry, rather than adopting a one-size-fits-all approach. Our focus is on the best long-term interests of our company, our stockholders and our other stakeholders.

The following sections summarize our corporate governance policies and practices, including our Board leadership structure, our criteria for director selection and the responsibilities and activities of our Board and its committees. Our corporate governance documents, including our Corporate Governance Guidelines, our Board committee charters and our Code of Business Conduct and Ethics, are available in the Governance & Citizenship section of the Investor Relations page of our website at http://investors.fedex.com.

 

Board Leadership Structure

 

The leadership structure of our Board of Directors includes (i) a combined Chairman of the Board and Chief Executive Officer, (ii) independent, active and effective directors of equal importance and rights, who all have the same opportunities and responsibilities in providing vigorous oversight of the effectiveness of management policies and (iii) a Lead Independent Director. The Chairperson of the Nominating & Governance Committee, who is elected annually by a majority of the independent Board members, serves as the Lead Independent Director. The Board believes that FedEx has been and continues to be well served by having the company’s founder, Frederick W. Smith, serve as both Chairman of the Board and Chief Executive Officer. The current Board leadership model, when combined with the composition of the Board, the strong leadership of our independent directors, Board committees and Lead Independent Director, and the highly effective corporate governance structures and processes already in place, strikes an appropriate balance between consistent leadership and independent oversight of FedEx’s business and affairs.

The Board believes that FedEx’s Bylaws and Corporate Governance Guidelines help ensure that strong and independent directors will continue to play the central oversight role necessary to maintain FedEx’s commitment to the highest quality corporate governance. Under our Bylaws and Corporate Governance Guidelines, the Board maintains the following long-standing practices, in addition to those described above:

 

 

Directors Stand for Election Annually By Majority Vote. Under our Bylaws, all members of our Board of Directors are elected annually. In addition, our Bylaws require that we use a majority-voting standard in uncontested director elections in which a director nominee must receive more votes cast “for” than “against” in order to be elected.

 

 

Our Non-Management Directors Hold Regular Executive Sessions. Our non-management Board members meet at regularly scheduled executive sessions without management present in conjunction with each in-person Board meeting. The Lead Independent Director conducts and presides at these meetings. At least once a year, such meetings include only the independent members of the Board. In addition, the Lead Independent Director may call such meetings of the non-management Board members as he or she deems necessary or appropriate, may be designated to preside at any Board or stockholder meeting and presides at all Board meetings at which the Chairman of the Board and Chief Executive Officer is not present.

 

 

Board Members May Submit Agenda Items and Information Requests. Each Board member may place items on the agenda for Board meetings, raise subjects that are not on the agenda for that meeting or request information that has

 

  2017 Proxy Statement       1


Table of Contents

CORPORATE GOVERNANCE MATTERS

 

 

not otherwise been provided to the Board. Additionally, the Lead Independent Director reviews and approves all Board meeting schedules and agendas and consults with the Chairman of the Board and Chief Executive Officer regarding other information sent to the Board in connection with Board meetings or other Board action.

 

 

Our Board Members Interact With Management. Consistent with our philosophy of empowering each member of our Board of Directors, each Board member has complete and open access to any member of management and to the chairman of each Board committee for the purpose of discussing any matter related to the work of such committee. The Lead Independent Director also serves as a liaison, but not a buffer, between the Chairman of the Board and Chief Executive Officer and independent Board members.

 

 

Our Directors Are Encouraged to Interact With Stockholders. If any of our major stockholders asks to speak with any Board member on a matter related to FedEx, we encourage that director to make himself or herself available and will facilitate such interaction. Additionally, the Lead Independent Director is available to communicate with stockholders, as appropriate, if requested by such stockholders.

 

 

Our Directors Can Request Special Board Meetings. Special meetings of the Board can be called by the Chairman of the Board and Chief Executive Officer or at the request of two or more directors.

 

 

The Board or Any Board Committee Can Retain Independent Advisors. The Board and each Board committee have the authority to retain independent legal, financial and other advisors as they deem appropriate.

 

 

Our Directors Conduct Annual Evaluations. Our directors evaluate the Board’s processes on an annual basis to ensure, among other things, that its leadership structure remains effective, that Board and committee meetings are conducted in a manner that promotes candid and constructive dialog and that sufficient time has been allocated for such meetings.

 

Board Risk Oversight

 

The Board of Directors’ role in risk oversight at FedEx is consistent with the company’s leadership structure, with management having day-to-day responsibility for assessing and managing the company’s risk exposure and the Board and its committees providing oversight in connection with those efforts, with particular focus on ensuring that FedEx’s risk management practices are adequate and regularly reviewing the most significant risks facing the company. The Board performs its risk oversight role by using several different levels of review. Each Board meeting begins with a strategic overview by the Chairman of the Board and Chief Executive Officer that describes the most significant issues, including risks, affecting the company, and also includes business updates from the President and Chief Operating Officer and each reporting segment CEO. In addition, at least annually, the Board reviews in detail the business and operations of each of the company’s reporting segments, including the primary risks associated with that segment. The Board also reviews the risks associated with the company’s financial forecasts and annual business plan.

Additionally, risks are identified and managed in connection with the company’s robust enterprise risk management (“ERM”) process. Our ERM process provides the enterprise with a common framework and terminology to ensure consistency in identification, reporting and management of key risks. The ERM process is embedded in our strategic financial planning process, which ensures explicit consideration of risks that affect the underlying assumptions of strategic plans and provides a platform to facilitate integration of risk information in business decision-making.

The Board has delegated to each of its committees responsibility for the oversight of specific risks that fall within the committee’s areas of responsibility. For example:

 

 

The Audit Committee reviews and discusses with management the company’s major financial and other risk exposures and the steps management has taken to monitor and control such exposures and the implementation and effectiveness of the company’s compliance and ethics programs, including the Code of Business Conduct and Ethics and the employee hotline program.

 

 

The Compensation Committee reviews and discusses with management the relationship between the company’s compensation policies and practices and the company’s risk management, including the extent to which those policies and practices create or decrease risks for the company.

 

 

The Information Technology Oversight Committee reviews and discusses with management the company’s cybersecurity risks and the technologies, policies, processes and practices for managing and mitigating such risks, and it reviews and discusses with management the quality and effectiveness of the company’s information technology systems and processes, including the extent to which those systems and processes protect the company from technology-related risks.

 

2  

    2017 Proxy Statement

 


Table of Contents

CORPORATE GOVERNANCE MATTERS

 

 

The Nominating & Governance Committee reviews and discusses with management, in light of the company’s risk exposure, the composition, structure, processes and practices of the Board and the Board committees.

In addition, the Audit Committee is responsible for reviewing and discussing with management the guidelines and policies that govern the processes by which the company assesses and manages its exposure to all risk, including our ERM process. The ERM process culminates in an annual presentation to the Audit Committee on the key enterprise risks facing FedEx.

 

Executive Management Succession Planning

 

The Board of Directors has in place an effective planning process to select successors to the Chairman of the Board and Chief Executive Officer and other members of executive management. The Nominating & Governance Committee, in consultation with the Chairman of the Board and Chief Executive Officer, annually reports to the Board on executive management succession planning. The entire Board works with the Nominating & Governance Committee and the Chairman of the Board and Chief Executive Officer to evaluate potential successors to the CEO and other members of executive management. Through this process, the Board receives information that includes qualitative evaluations of potential successors to the CEO and other executives. As noted above, each Board member has complete and open access to any member of management. We believe this enhances the Board’s oversight of succession planning. The Chairman of the Board and Chief Executive Officer periodically provides to the Board his recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals. Additionally, the Board periodically reviews and revises as necessary the company’s emergency executive management succession plan, which details the actions to be taken by specific individuals in the event a member of executive management suddenly dies or becomes incapacitated.

 

Director Independence

 

The Board of Directors has determined that each member of the Audit, Compensation and Nominating & Governance Committees and, with the exception of Frederick W. Smith, each of the Board’s current members (James L. Barksdale, John A. Edwardson, Marvin R. Ellison, John C. (“Chris”) Inglis, Kimberly A. Jabal, Shirley Ann Jackson, R. Brad Martin, Joshua Cooper Ramo, Susan C. Schwab, David P. Steiner and Paul S. Walsh) is independent and meets the applicable independence requirements of the New York Stock Exchange (including the additional requirements for Audit Committee and Compensation Committee members) and the Board’s more stringent standards for determining director independence. Mr. Smith is FedEx’s Chairman of the Board and Chief Executive Officer. Gary W. Loveman retired as a director immediately before the 2016 annual meeting, and the Board of Directors had previously determined that he was independent.

Under the Board’s standards of director independence, which are included in FedEx’s Corporate Governance Guidelines, a director will be considered independent only if the Board affirmatively determines that the director has no direct or indirect material relationship with FedEx, other than as a director. The standards set forth certain categories or types of transactions, relationships or arrangements with FedEx, as follows, each of which (i) is deemed not to be a material relationship with FedEx, and thus (ii) will not, by itself, prevent a director from being considered independent:

 

 

Prior Employment of Director. The director was employed by FedEx or was personally working on FedEx’s audit as an employee or partner of FedEx’s independent auditor, and over five years have passed since such employment, partner or auditing relationship ended.

 

 

Prior Employment of Immediate Family Member. An immediate family member was an officer of FedEx or was personally working on FedEx’s audit as an employee or partner of FedEx’s independent auditor, and over five years have passed since such employment, partner or auditing relationship ended.

 

 

Current Employment of Immediate Family Member. An immediate family member is employed by FedEx in a non-officer position, or by FedEx’s independent auditor not as a partner and not personally working on FedEx’s audit.

 

 

Interlocking Directorships. An executive officer of FedEx served on the board of directors of a company that employed the director or employed an immediate family member as an executive officer, and over five years have passed since either such relationship ended.

 

  2017 Proxy Statement       3


Table of Contents

CORPORATE GOVERNANCE MATTERS

 

 

Transactions and Business Relationships. The director or an immediate family member is a partner, greater than 10% shareholder, director or officer of a company that makes or has made payments to, or receives or has received payments (other than contributions, if the company is a tax-exempt organization) from, FedEx for property or services, and the amount of such payments has not within any of such other company’s three most recently completed fiscal years exceeded one percent (or $1 million, whichever is greater) of such other company’s consolidated gross revenues for such year.

 

 

Indebtedness. The director or an immediate family member is a partner, greater than 10% shareholder, director or officer of a company that is indebted to FedEx or to which FedEx is indebted, and the aggregate amount of such debt is less than one percent (or $1 million, whichever is greater) of the total consolidated assets of the indebted company.

 

 

Charitable Contributions. The director is a trustee, fiduciary, director or officer of a tax-exempt organization to which FedEx contributes, and the contributions to such organization by FedEx have not within any of such organization’s three most recently completed fiscal years exceeded one percent (or $250,000, whichever is greater) of such organization’s consolidated gross revenues for such year.

The Board broadly considered all relevant facts and circumstances, including the following immaterial transactions, relationships and arrangements:

 

 

Mr. Barksdale served as an officer of FedEx, but he left the company well over five years ago (his employment at FedEx ended in 1992).

 

 

An entity with which Mr. Smith is affiliated has made a passive investment (holding a less-than-5% equity interest) in a privately held entity with which Mr. Barksdale is affiliated.

 

 

Mr. Barksdale has made an investment (holding a less-than-10% equity interest) in a privately held entity that is headed by Mr. Smith’s daughter and of which Mr. Smith is a director and 10% owner.

 

 

Messrs. Ellison and Martin and Alan B. Graf, Jr., FedEx’s Executive Vice President and Chief Financial Officer, serve on the Board of Trustees of the University of Memphis, a non-profit entity to which FedEx makes payments and charitable contributions. The payments and charitable contributions made by FedEx to the University of Memphis in its 2016 and 2015 fiscal years represented slightly more than one percent of the University’s consolidated gross revenues for each year, and the payments made by FedEx to the University in its 2014 fiscal year represented less than one percent of the University’s consolidated gross revenues for the year. The Board determined that Messrs. Ellison and Martin are still independent directors under the Board’s independence standards as neither of them have a direct or indirect material relationship with either FedEx or the University of Memphis, other than as a director or trustee, and neither of them derive any financial or other personal benefit from these transactions.

 

 

Mr. Martin and Rajesh Subramaniam, FedEx’s Executive Vice President, Chief Marketing and Communications Officer, serve as members of the Board of Directors of First Horizon National Corporation.

 

 

Mr. Martin and Robert B. Carter, FedEx’s Executive Vice President, FedEx Information Services and Chief Information Officer, serve as members of the board of managers of Pilot Travel Centers LLC.

 

 

In the ordinary course of business, FedEx makes purchases of aircraft and related services and equipment from The Boeing Company, for which Ambassador Schwab serves as a director. The payments made by FedEx to Boeing in its three most recently completed fiscal years represented one percent or slightly more than one percent of Boeing’s consolidated gross revenues for the year. Ambassador Schwab recuses herself when the Board discusses or votes on Boeing-related matters. The Board determined that Ambassador Schwab is still an independent director under the Board’s independence standards as she does not have a direct or indirect material relationship with either FedEx or Boeing, other than as a director, and does not derive any financial benefit from these ordinary course transactions.

 

 

In the ordinary course of business, FedEx makes purchases from Waste Management, Inc., an entity for which Mr. Steiner served as Chief Executive Officer until November 2016. The amount of the payments made by FedEx to Waste Management within any of its three most recently completed fiscal years has not exceeded one percent (or $1 million, whichever is greater) of its consolidated gross revenues for such year.

 

Audit Committee Financial Expert

The Board of Directors has determined that at least one member of the Audit Committee, John A. Edwardson, is an audit committee financial expert as that term is defined in Securities and Exchange Commission (“SEC”) rules.

 

4  

    2017 Proxy Statement

 


Table of Contents

CORPORATE GOVERNANCE MATTERS

 

Director Mandatory Retirement

A director must retire immediately before the annual meeting of FedEx’s stockholders during the calendar year in which he or she attains age 75.

Stock Ownership Goal for Directors and Senior Officers

 

In order to encourage significant stock ownership by our directors and senior officers, and to further align their interests with the interests of FedEx’s stockholders, the Board of Directors has established a goal that (a) each non-management director serving as of March 13, 2017 own FedEx shares valued at (i) three times his or her annual retainer fee within four years after joining the Board and (ii) five times his or her annual retainer fee by December 31, 2020, (b) each non-management director who joins the Board after March 13, 2017 own FedEx shares valued at five times his or her annual retainer fee within five years after joining the Board, and (c) within five years after being appointed to his or her position, each member of senior management own FedEx shares valued at the following multiple of his or her annual base salary:

 

 

6x for the Chairman of the Board and Chief Executive Officer;

 

 

5x for the President and Chief Operating Officer;

 

 

3x for the other FedEx executive officers, including the chief executive officers of FedEx Express, FedEx Ground and FedEx Freight;

 

 

2x for executive vice presidents of FedEx Express, FedEx Ground, FedEx Freight and FedEx Services; and

 

 

1x for certain other senior officers.

For purposes of meeting this goal, unvested restricted stock is counted, but unexercised stock options are not. The Board also recommends that each director and senior officer retain shares acquired upon stock option exercises until his or her goal is met. The stock ownership goal is included in FedEx’s Corporate Governance Guidelines. As of July 31, 2017, each director who had been a Board member for over four years (and Mr. Inglis and Ms. Jabal) and each executive officer owned sufficient shares to comply with this goal.

 

Policy on Poison Pills

 

The Board of Directors has adopted a policy requiring stockholder approval for any future “poison pill” prior to or within twelve months after adoption of the poison pill. (A poison pill is a device used to deter a hostile takeover. Note that FedEx does not currently have, nor have we ever had, a poison pill.) The policy on poison pills is included in FedEx’s Bylaws and Corporate Governance Guidelines.

 

Communications with Directors

 

Stockholders and other interested parties may communicate directly with any member (including the Lead Independent Director) or committee of the Board of Directors by writing to: FedEx Corporation Board of Directors, c/o Corporate Secretary, 942 South Shady Grove Road, Memphis, Tennessee 38120. Please specify to whom your letter should be directed. The Corporate Secretary of FedEx will review all such correspondence and regularly forward to the Board a summary of all such correspondence and copies of all correspondence that, in her opinion, deals with the functions of the Board or its committees or that she otherwise determines requires the attention of any member, group or committee of the Board of Directors. Board members may at any time review a log of all correspondence received by FedEx that is addressed to Board members and request copies of any such correspondence.

 

  2017 Proxy Statement       5


Table of Contents

CORPORATE GOVERNANCE MATTERS

 

Proxy Access

 

In March 2016, the Board of Directors amended our bylaws to implement proxy access. Prior to the Board’s adoption of the

proxy access bylaw, we consulted with many of our largest institutional stockholders in order to understand their views and policies regarding proxy access, including the specific provisions they considered important. We spoke with, or otherwise received feedback from, representatives of stockholders owning nearly half of our then-outstanding shares. We also spoke with a representative of the proponent of the proxy access stockholder proposal that was approved at our 2015 annual meeting of stockholders.

Substantially all of these stockholders indicated their support for a proxy access bylaw with terms consistent with those now included in our Bylaws, which are as follows:

 

 

a 3% ownership threshold and 3-year holding period requirement;

 

 

a cap on the number of director nominees at 2 or 20% of the board, whichever is greater; and

 

 

a stockholder group aggregation limit of 20.

Based on this feedback from our stockholders, and the Board’s assessment of the relative merits of the various proxy access formulations, our Board of Directors approved amendments to our Bylaws to implement proxy access consistent with the terms set forth above, which it determined to be in the best interests of our stockholders. Our Bylaws are available in the Governance & Citizenship section of the Investor Relations page of our website at http://investors.fedex.com.

 

Nomination of Director Candidates

 

The Nominating & Governance Committee will consider director nominees proposed by stockholders. To recommend a prospective director candidate for the Nominating & Governance Committee’s consideration, stockholders may submit the candidate’s name, qualifications, including whether the candidate satisfies the requirements set forth in our Corporate Governance Guidelines and discussed in “Proposal 1 — Election of Directors — Experience, Qualifications, Attributes and Skills,” and other relevant biographical information in writing to: FedEx Corporation Nominating & Governance Committee, c/o Corporate Secretary, 942 South Shady Grove Road, Memphis, Tennessee 38120. FedEx’s Bylaws require stockholders to give advance notice of stockholder proposals, including nominations of director candidates. For more information, please see “Stockholder Proposals and Director Nominations for 2018 Annual Meeting.”

The Board is responsible for recommending director candidates for election by the stockholders and for electing directors to fill vacancies or newly created directorships. The Board has delegated the screening and evaluation process for director candidates to the Nominating & Governance Committee, which identifies, evaluates and recruits highly qualified director candidates and recommends them to the Board. The Nominating & Governance Committee considers potential candidates for director that may come to the attention of the Nominating & Governance Committee through current directors, management, professional search firms, stockholders or other persons. The Nominating & Governance Committee has engaged a third-party executive search firm to assist in identifying potential director candidates. The Nominating & Governance Committee considers and evaluates a director candidate recommended by a stockholder in the same manner as a nominee recommended by a Board member, management, search firm or other sources.

If the Nominating & Governance Committee determines that an additional or replacement director is necessary or advisable, the Nominating & Governance Committee may take such measures that it considers appropriate in connection with its evaluation of a potential director candidate, including interviewing the candidate, engaging an outside firm to gather additional information and making inquiries of persons with knowledge of the candidate’s qualifications and character. In its evaluation of potential director candidates, including the members of the Board of Directors eligible for reelection, the Nominating & Governance Committee considers the current size, composition and needs of the Board of Directors and each of its committees.

 

6  

    2017 Proxy Statement

 


Table of Contents

CORPORATE GOVERNANCE MATTERS

 

Majority-Voting Standard for Director Elections

 

FedEx’s Bylaws require that we use a majority-voting standard in uncontested director elections and contain a resignation requirement for directors who fail to receive the required majority vote. The Bylaws also prohibit the Board from changing back to a plurality-voting standard without the approval of our stockholders. Under the majority-voting standard, a director nominee must receive more votes cast “for” than “against” his or her election in order to be elected to the Board. In accordance with the majority-voting standard and resignation requirement, each director who is standing for reelection at the annual meeting has tendered an irrevocable resignation from the Board of Directors that will take effect if (i) the director does not receive more votes cast “for” than “against” his or her election at the annual meeting, and (ii) the Board accepts the resignation. FedEx’s Bylaws require the Board of Directors, within 90 days after certification of the election results, to accept the director’s resignation unless there is a compelling reason not to do so and to promptly disclose its decision (including, if applicable, the reasons for rejecting the resignation) in a filing with the SEC.

 

Policy on Review and Preapproval of Related Person Transactions

 

The Board of Directors has adopted a Policy on Review and Preapproval of Related Person Transactions, which is included in FedEx’s Corporate Governance Guidelines. The policy requires that all proposed related person transactions (as defined in the policy) and all proposed material changes to existing related person transactions be reviewed and preapproved by the Nominating & Governance Committee. To the extent the related person (as defined in the policy) is a director or immediate family member of a director, the transaction or change must also be reviewed and preapproved by the full Board. The policy provides that a related person transaction or a material change to an existing related person transaction may not be preapproved if it would:

 

 

interfere with the objectivity and independence of any related person’s judgment or conduct in carrying out his or her duties and responsibilities to FedEx;

 

 

not be fair as to FedEx; or

 

 

otherwise be opposed to the best interests of FedEx and its stockholders.

The policy requires the Nominating & Governance Committee to annually (i) review each existing related person transaction that has a remaining term of at least one year or remaining payments of at least $120,000, and (ii) determine, based upon all material facts and circumstances and taking into consideration our contractual obligations, whether it is in the best interests of FedEx and our stockholders to continue, modify or terminate the transaction or relationship.

 

Related Person Transactions

 

In accordance with the policy described above, the Nominating & Governance Committee has reviewed the following related person transactions and determined that they remain in the best interests of FedEx and our stockholders:

 

 

In November 1999, FedEx entered into a multi-year, $205 million naming rights agreement with Washington Football, Inc. Under this agreement, FedEx has certain marketing rights, including the right to name the stadium where the NFL Washington Redskins professional football team plays “FedExField.” In August 2003, Mr. Smith acquired an approximate 10% ownership interest in the Washington Redskins and joined its Leadership Council, or board of directors.

 

 

FedEx’s policy on personal use of corporate aircraft requires officers to pay FedEx two times the cost of fuel, plus applicable passenger ticket taxes and fees, for personal trips. Pursuant to this requirement, Mr. Smith and David J. Bronczek, FedEx’s President and Chief Operating Officer, paid FedEx $387,612 and $188,951, respectively, during fiscal 2017 in connection with certain personal use of corporate aircraft.

 

 

During fiscal 2017, Mr. Smith’s son was employed by FedEx Express as Vice President of Global Trade Services and as Senior Vice President of Global Trade and Specialty Services. Beginning July 1, 2017, he is employed by FedEx Trade Networks as its President and Chief Executive Officer. The

 

  2017 Proxy Statement       7


Table of Contents

CORPORATE GOVERNANCE MATTERS

 

 

compensation of Mr. Smith’s son for fiscal 2017 (including all incentive compensation and the Black-Scholes value of any stock option award) was approximately $757,000.

 

 

Mr. Smith’s daughter is employed by FedEx Corporation as a global public policy advisor in Washington, D.C.; Mr. Subramaniam’s brother is employed by FedEx Services as a manager of information technology; and Henry J. Maier is the President and Chief Executive Officer of FedEx Ground – his son is employed by FedEx Services as a manager of marketing. The total annual compensation of each of Mr. Smith’s daughter, Mr. Subramaniam’s brother and Mr. Maier’s son for fiscal 2017 (including any incentive compensation) did not exceed $165,000.

 

 

In fiscal 2017, FedEx entered into a two-year agreement with LiveSafe, Inc., a leading mobile safety communications platform delivering actionable crowd-sourced safety and security intelligence, preventing incidents, and connecting people to the help they need. Mr. Smith is a member of the board of directors of LiveSafe and an affiliated entity of Mr. Smith invested $5.25 million in LiveSafe’s Series B financing. Mr. Smith’s son is an employee and partial owner of LiveSafe. Under the terms of the agreement, FedEx pays LiveSafe $300,000 per year, in addition to an initial set-up fee of approximately $20,000. The Board of Directors, upon the recommendation of the Nominating & Governance Committee, previously preapproved this agreement.

 

8  

    2017 Proxy Statement

 


Table of Contents

STOCK OWNERSHIP

Directors and Executive Officers

The following table sets forth the amount of FedEx’s common stock beneficially owned by each director, each named executive officer included in the Summary Compensation Table and all directors and executive officers as a group, as of July 31, 2017. Unless otherwise indicated, beneficial ownership is direct and the person shown has sole voting and investment power.

 

       Common Stock Beneficially Owned  

Name of Beneficial Owner

     Number of
Shares
     Number of
Option Shares (1)
      

Percent of 

Class (2) 

 

Frederick W. Smith

       19,509,690  (3)       1,474,880           7.78%   

James L. Barksdale

       61,600         44,355            

John A. Edwardson (4)

       26,208         39,955            

Marvin R. Ellison

       —         11,878            

John C. (“Chris”) Inglis

       3,015         3,980            

Kimberly A. Jabal

       2,100         3,980            

Shirley Ann Jackson

       8,111         3,980            

R. Brad Martin

       56,500  (5)       24,515            

Joshua Cooper Ramo

       4,360         20,155            

Susan C. Schwab

       3,254         39,955            

David P. Steiner

       5,000         35,555            

Paul S. Walsh

       10,000         39,955            

David J. Bronczek

       50,385  (6)       207,692            

Robert B. Carter

       45,527  (7)       120,738            

Alan B. Graf, Jr.

       203,375  (8)       179,418            

Christine P. Richards

       100,604         73,403            

T. Michael Glenn

       216,956  (9)       13,637            

All directors and executive officers as a group (21 persons) (10)

       20,245,491  (11)       2,642,729           8.45%   

 

*

Less than 1% of FedEx’s outstanding common stock.

 

(1)

Reflects the number of shares that can be acquired at July 31, 2017, or within 60 days thereafter through the exercise of stock options. These shares are excluded from the column headed “Number of Shares,” but included in the ownership percentages reported in the column headed “Percent of Class.”

 

(2)

Based on 268,259,262 shares outstanding on July 31, 2017.

 

(3)

Includes 15,365,262 shares owned by Mr. Smith (as of July 31, 2017, 3,775,000 of such shares have been pledged as security by Mr. Smith), 4,141,280 shares owned by Frederick Smith Enterprise Company, Inc. (“Enterprise”), a family holding company (as of July 31, 2017, 105,000 of such shares have been pledged as security by Enterprise) and 736 shares owned by Mr. Smith’s spouse. Regions Bank, Memphis, Tennessee, as trustee of a trust of which Mr. Smith is the lifetime beneficiary, holds 55% of Enterprise’s outstanding stock, and Mr. Smith owns 45% directly. Includes 2,412 shares held in FedEx’s retirement savings plan. Mr. Smith’s business address is 942 South Shady Grove Road, Memphis, Tennessee 38120.

 

(4)

On July 31, 2017, Mr. Edwardson exercised a stock option for 4,400 shares. Upon settlement of the transaction on August 3, 2017, he acquired an additional 2,192 shares, which increased his total share ownership to 28,400 shares.

 

(5)

Includes 7,250 shares owned by R. Brad Martin Family Foundation and 2,100 shares owned by Mr. Martin’s spouse.

 

(6)

Includes 701 shares held in FedEx’s retirement savings plan.

 

(7)

Includes 1,245 shares owned by Mr. Carter’s spouse.

 

(8)

Includes 40,000 shares owned by family trusts and 450 shares held in FedEx’s retirement savings plan.

 

(9)

Includes 88,750 shares owned by Glenn Family Partners, L.P. Mr. Glenn disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein. Also includes 576 shares held in FedEx’s retirement savings plan.

 

(10)

Does not include Mr. Glenn, who retired as FedEx’s Executive Vice President – Market Development & Corporate Communications effective December 31, 2016.

 

(11)

Includes 4,402 shares held in FedEx’s retirement savings plan and 21 stock units held in a deferred compensation plan. The stock units are payable in shares of FedEx common stock on a one-for-one basis.

 

  2017 Proxy Statement       9


Table of Contents

STOCK OWNERSHIP

 

Significant Stockholders

The following table lists certain persons known by FedEx to own beneficially more than five percent of FedEx’s outstanding shares of common stock as of March 31, 2017.

 

     

Amount and Nature of

Beneficial Ownership

    Percent of Class   

BlackRock, Inc.
55 East 52nd Street
New York, New York 10055

     14,823,307  (1)      5.54%   

PRIMECAP Management Company
177 East Colorado Boulevard, 11th Floor
Pasadena, California 91105

     15,730,767  (2)      5.88%   

The Vanguard Group, Inc.
100 Vanguard Boulevard
Malvern, Pennsylvania 19355

     17,997,225  (3)      6.73%   

 

(1)

BlackRock, Inc. is the parent holding company of certain institutional investment managers, which collectively had sole voting power over 12,419,345 shares and sole investment power over all 14,823,307 shares.

 

(2)

PRIMECAP Management Company, a registered investment advisor, had sole voting power over 2,035,427 shares and sole investment power over all 15,730,767 shares.

 

(3)

The Vanguard Group, Inc., a registered investment advisor, had sole voting power over 385,050 shares, sole investment power over 17,562,527 shares and shared investment power over 434,698 shares.

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires directors and certain officers of FedEx and persons who own more than ten percent of FedEx’s common stock to file with the SEC initial reports of beneficial ownership (Form 3) and reports of subsequent changes in their beneficial ownership (Form 4 or Form 5) of FedEx’s common stock. Such directors, officers and greater-than-ten-percent stockholders are required to furnish FedEx with copies of the Section 16(a) reports they file. The SEC has established specific due dates for these reports, and FedEx is required to disclose in this proxy statement any late filings or failures to file.

Based solely upon a review of the copies of the Section 16(a) reports (and any amendments thereto) furnished to FedEx and written representations from FedEx’s directors and reporting officers that no additional reports were required, FedEx believes that its directors and reporting officers complied with all these filing requirements for the fiscal year ended May 31, 2017.

 

10  

    2017 Proxy Statement

 


Table of Contents

COMMITTEES AND MEETINGS OF

THE BOARD OF DIRECTORS

Committees

The Board of Directors has a standing Audit Committee, Compensation Committee, Information Technology Oversight Committee and Nominating & Governance Committee. Each committee’s written charter, as adopted by the Board of Directors, is available on the Investor Relations page of our website at http://investors.fedex.com in the Governance & Citizenship section under “Committee Charters.” Committee memberships are currently as follows:

 

                       
    Audit Committee             
    Committee functions:

 

    

Committee members

John A. Edwardson (Chairman)

Kimberly A. Jabal

Shirley Ann Jackson

R. Brad Martin

Joshua Cooper Ramo

 

FY17 meetings held: 10

   
   

  

oversees the independent registered public accounting firm’s qualifications, independence and performance;

 

        
   

  

assists the Board of Directors in its oversight of (i) the integrity of FedEx’s financial statements; (ii) the effectiveness of FedEx’s disclosure controls and procedures and internal control over financial reporting; and (iii) the performance of the internal auditors;

 

        
   

  

preapproves all audit and allowable non-audit services to be provided by FedEx’s independent registered public accounting firm;

 

        
   

  

reviews and discusses with management and the Board of Directors (i) the guidelines and policies that govern the processes by which the company assesses and manages its exposure to risk and (ii) the company’s major financial and other risk exposures and the steps management has taken to monitor and control such exposures; and

 

        
   

  

oversees FedEx’s compliance with legal and regulatory requirements and the implementation and effectiveness of FedEx’s corporate integrity and compliance programs.

 

            

 

                       
    Compensation Committee             
    Committee functions:

 

    

Committee members

Paul S. Walsh (Chairman)

Marvin R. Ellison

John C. (“Chris”) Inglis

Shirley Ann Jackson

Susan C. Schwab

 

FY17 meetings held: 6

   
   

  

evaluates, together with the independent members of the Board, the performance of FedEx’s Chairman of the Board and Chief Executive Officer and recommends his compensation for approval by the independent directors;

 

        
   

  

helps discharge the Board’s responsibilities relating to the compensation of executive management;

 

        
   

  

reviews and discusses with management the Compensation Discussion and Analysis and produces a report recommending whether the Compensation Discussion and Analysis should be included in the proxy statement; and

 

        
   

  

oversees the administration of FedEx’s equity compensation plans and reviews the costs and structure of key employee benefit and fringe-benefit plans and programs.

 

          

 

                       
    Information Technology Oversight Committee             
    Committee functions:

 

    

Committee members

James L. Barksdale (Chairman)

Marvin R. Ellison

John C. (“Chris”) Inglis

Kimberly A. Jabal

Joshua Cooper Ramo

Susan C. Schwab

 

FY17 meetings held: 5

 

   
   

  

reviews major information technology (“IT”) related projects and technology architecture decisions;

 

        
   

  

assesses whether FedEx’s IT programs effectively support FedEx’s business objectives and strategies;

 

        
   

  

assists FedEx’s Board of Directors in oversight of cybersecurity risks and FedEx management’s efforts to monitor and mitigate those risks; and

 

        
   

  

advises FedEx’s senior IT management team and the Board of Directors on IT-related matters.

 

          

 

  2017 Proxy Statement       11


Table of Contents

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

 

 

                       
    Nominating & Governance Committee             
    Committee functions:

 

    

Committee members

David P. Steiner (Chairman)

James L. Barksdale

Marvin R. Ellison

John C. (“Chris”) Inglis

Shirley Ann Jackson

R. Brad Martin

 

FY17 meetings held: 6

 

 

   
   

  

identifies individuals qualified to become Board members;

 

        
   

  

recommends to the Board director nominees to be proposed for election at the annual meeting of stockholders;

 

        
   

  

recommends to the Board directors for appointment to Board committees; and

 

        
   

  

assists the Board in developing and implementing effective corporate governance programs.

 

 

          

In addition, as discussed above under “Corporate Governance Matters — Board Risk Oversight,” each Board committee has responsibility for the oversight of specific risks that fall within the committee’s areas of responsibility. Also, the Audit Committee is responsible for reviewing and discussing with management the guidelines and policies that govern the processes by which the company assesses and manages its exposure to all risk, including our ERM process.

In response to stockholder demand letters, three special committees of the Board were formed, comprised of Messrs. Edwardson and Steiner and Ms. Jabal. Two of these special committees were dissolved during fiscal 2017. In the aggregate, these committees met two times during fiscal 2017.

The Board of Directors has approved maintaining the committees so that, immediately following the annual meeting, if all of the director nominees are elected, committee memberships will remain the same as the previous year.

 

Board Meetings and Meeting Attendance

 

During fiscal 2017, the Board of Directors held six regular meetings. The average attendance of all directors at Board and committee meetings was 96%. Each director attended at least 80% (and each current director attended at least 86%) of the aggregate meetings of the Board and any committees on which he or she served.

 

Attendance at Annual Meeting of Stockholders

FedEx expects all Board members to attend annual meetings of stockholders. Each then-current member of the Board of Directors attended the 2016 annual meeting of stockholders.

 

12  

    2017 Proxy Statement

 


Table of Contents

DIRECTORS’ COMPENSATION

Outside Directors’ Compensation

 

During fiscal 2017, non-management (outside) directors were paid an annual retainer of $125,000. Chairpersons of the Compensation, Nominating & Governance and Information Technology Oversight Committees were paid an additional annual fee of $15,000. The Audit Committee chairperson was paid an additional annual fee of $25,000. In addition, each outside director who was elected at FedEx’s 2016 annual meeting received a stock option for 3,980 shares of FedEx common stock.

In response to stockholder demand letters, three special committees of the Board were formed. Two of these special committees were dissolved during fiscal 2017. Special committee members (Messrs. Edwardson and Steiner and Ms. Jabal) are paid $2,000 for each in-person meeting attended and $1,500 for each telephonic meeting attended.

 

Frederick W. Smith, the only director who is also a FedEx employee, receives no additional compensation for serving as a director.

The Compensation Committee annually reviews director compensation, including, among other things, comparing FedEx’s director compensation practices with those of other companies with annual revenues between $25 billion and $100 billion. Before making a recommendation regarding director compensation to the Board, the Compensation Committee considers that the directors’ independence may be compromised if compensation exceeds appropriate levels or if FedEx enters into other arrangements beneficial to the directors.

 

Retirement Plan for Outside Directors

 

In July 1997, the Board of Directors of FedEx Express (FedEx’s predecessor) voted to freeze the Retirement Plan for Outside Directors (that is, no further benefits would be earned under this plan). Concurrent with the freeze, the Board amended the plan to accelerate the vesting of the benefits for each outside director who was not yet vested under the plan. This plan is unfunded and any benefits under the plan are general, unsecured obligations of FedEx. Once all benefits are paid from the plan, it will be terminated.

The plan benefit payable to the one individual who served on the Board during fiscal 2017 who has not yet received any plan benefits will be paid as a single lump sum distribution. The lump sum distribution is payable on or before the fifteenth business day of the month immediately following the later of the date of the director’s retirement and the date he attains age 60. In the event of the outside director’s death, his surviving spouse shall be entitled to receive the lump sum payment. The following table sets forth for the one director entitled to receive future benefits under the plan who served on the Board during fiscal 2017, the amount payable to him assuming a hypothetical retirement date of June 1, 2017.

 

Name

  

Lump Sum    
Payment Amount    

($)    

 

P.S. Walsh

     69,704 (1)   

 

(1)

Discounted from the age 60 normal retirement date provided for in the plan.

 

  2017 Proxy Statement       13


Table of Contents

DIRECTORS’ COMPENSATION

 

Fiscal 2017 Director Compensation

The following table sets forth information regarding the compensation of FedEx’s non-employee (outside) directors for the fiscal year ended May 31, 2017:

 

Name

  

Fees Earned

or Paid in
Cash

($) (1)

    

Option

Awards
($) (2)(3)

     All Other
Compensation
($)
     Total 
($) 
 

J.L. Barksdale

     140,000        175,172        0        315,172   

J.A. Edwardson

     153,000        175,172        0        328,172   

M.R. Ellison

     125,000        175,172        0        300,172   

J.C. Inglis

     125,000        175,172        0        300,172   

K.A. Jabal

     128,000        175,172        0        303,172   

S.A. Jackson

     125,000        175,172        0        300,172   

G.W. Loveman (4)

     0        0        52,389        52,389   

R.B. Martin

     125,000        175,172        0        300,172   

J.C. Ramo

     125,000        175,172        0        300,172   

S.C. Schwab

     125,000        175,172        0        300,172   

D.P. Steiner

     143,000        175,172        0        318,172   

P.S. Walsh

     140,000        175,172        0        315,172   

 

(1)

Includes retainer payments and committee chairperson fees (as applicable). Also includes special committee meeting fees for Messrs. Edwardson and Steiner and Ms. Jabal. See “— Outside Directors’ Compensation” above.

 

(2)

On September 26, 2016, each outside director elected at the 2016 annual meeting received a stock option for 3,980 shares of common stock. The grant date fair value of each such option was computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 and is set forth in this column. Assumptions used in the calculation of these amounts are included in note 10 to our audited consolidated financial statements for the fiscal year ended May 31, 2017, included in our Annual Report on Form 10-K for fiscal 2017. Stock options granted to the outside directors generally vest fully one year after the grant date.

 

(3)

The following table sets forth the aggregate number of outstanding stock options held by each current or former outside director listed in the above table as of May 31, 2017:

 

Name

  

Options 

Outstanding 

 

J.L. Barksdale

     44,355   

J.A. Edwardson

     44,355   

M.R. Ellison

     11,878   

J.C. Inglis

     3,980   

K.A. Jabal

     12,607   

S.A. Jackson

     3,980   

G.W. Loveman

     29,535   

R.B. Martin

     24,515   

J.C. Ramo

     20,155   

S.C. Schwab

     39,955   

D.P. Steiner

     35,555   

P.S. Walsh

     39,955   

 

(4)

Gary W. Loveman retired as a director immediately before the 2016 annual meeting. The amount in the “All Other Compensation” column for Mr. Loveman includes $29,783 for a retirement gift and a $22,606 tax payment relating to the gift.

 

14  

    2017 Proxy Statement

 


Table of Contents

PROPOSAL 1 —  ELECTION OF DIRECTORS

 

All of FedEx’s directors are elected at each annual meeting of stockholders and hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified. The Board of Directors currently consists of twelve members. The Board proposes that each of the current directors be reelected to the Board. Each of the nominees elected at this annual meeting will hold office until the annual meeting of stockholders to be held in 2018 and until his or her successor is duly elected and qualified.

Each nominee has consented to being named in this proxy statement and has agreed to serve if elected. If a nominee is unable to stand for election, the Board of Directors may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the proxy holders may vote your shares for the substitute nominee.

Under FedEx’s majority-voting standard, each of the twelve director nominees must receive more votes cast “for” than “against” his or her election in order to be elected to the Board. For more information, please see “Corporate Governance Matters — Majority-Voting Standard for Director Elections.”

YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE TWELVE NOMINEES.

 

Experience, Qualifications, Attributes and Skills

 

The Nominating & Governance Committee seeks director nominees with the skills and experience needed to properly oversee the interests of the company. The Committee carefully evaluates each candidate to ensure that he or she possesses the experience, qualifications, attributes and skills that the Committee has found are necessary for an effective board member. These crucial qualities include, among others:

 

 

The highest level of personal and professional ethics, integrity and values;

 

 

Practical wisdom and mature judgment;

 

 

An inquiring and independent mind;

 

 

Expertise that is useful to FedEx and complementary to the background and experience of other Board members; and

 

 

Willingness to represent the best interests of all stockholders and objectively appraise management performance.

In addition to the qualifications that each director nominee must have, the Board believes that one or more of FedEx’s Board members should possess the experience and expertise listed below because of their particular relevance to the company’s business and structure. These were all considered by the Board in connection with this year’s director nomination process.

 

 

Transportation Industry Experience

 

 

International Experience

 

 

Financial Expertise

 

 

Marketing Expertise

 

 

Technological Expertise

 

 

Energy Expertise

 

 

Government Experience

 

 

Leadership Experience

 

Diversity: The Board is committed to diversity and inclusion and is always looking for highly qualified candidates, including women (Ms. Jabal, Dr. Jackson and Ambassador Schwab) and minorities (Dr. Jackson and Mr. Ellison), who meet our criteria. The Board seeks, and believes it has found in this group of nominees, a diverse blend of experience and perspectives, institutional knowledge and personal chemistry, and directors who will provide sound and prudent guidance with respect to all of FedEx’s operations and interests.

Below you will find each nominee’s biography along with other pertinent information, including a selection of each Board nominee’s skills and qualifications. Following the biographies, we have included a chart that exhibits the collective experience, qualifications, attributes and skills of our Board nominees.

 

  2017 Proxy Statement       15


Table of Contents

PROPOSAL 1 — ELECTION OF DIRECTORS

 

Nominees for Election to the Board

 

    Frederick W. Smith    
   

 

LOGO

     

Age: 73

Director since: 1971

Committees: None

Other public directorships: None

   
   

Mr. Smith is the company’s founder and has been Chairman and Chief Executive Officer of FedEx since 1998 and Chairman of FedEx Express since 1975. Mr. Smith was President of FedEx from 1998 through January 2017. He was Chairman, President and Chief Executive Officer of FedEx Express from 1983 to 1998, Chief Executive Officer of FedEx Express from 1977 to 1998, and President of FedEx Express from 1971 to 1975.

 

Skills and Qualifications:

  Transportation Industry: Founder of our company and the pioneer of the express transportation industry.

 

  International: Leads our multinational company and has served on the board of the Council on Foreign Relations and as chairman of the U.S.-China Business Council and the French-American Business Council.

 

  Energy: Co-chairman of the Energy Security Leadership Council.

 

   

 

    James L. Barksdale    
   

 

LOGO

     

Age: 74

Director since: 1999

Committees: Information Technology Oversight (Chairman), Nominating & Governance

Other public directorships: None

   
   

Mr. Barksdale is Chairman and President of Barksdale Management Corporation, an investment management company, a position he has held since 1999. He is also the former Managing Partner of The Barksdale Group, a venture capital firm, a position he held from 1999 to 2013. He was President and Chief Executive Officer of Netscape Communications Corporation, a provider of software, services and website resources to Internet users, from 1995 to 1999. He held various senior management positions at FedEx Express from 1979 to 1992, including Executive Vice President and Chief Operating Officer, and was a director of FedEx Express from 1983 to 1991. From January 2012 to June 2012, he served as the interim Executive Director of the Mississippi Development Authority. He is a former director of Sun Microsystems, Inc. and Time Warner, Inc.

 

Skills and Qualifications:

  Transportation Industry: Held various senior management positions at our company during its early years.

 

  Technology: Has held executive positions with multiple technology companies.

 

  Government: Served on the U.S. President’s Intelligence Advisory Board for seven years.

 

   

 

    John A. Edwardson    
   

 

LOGO

     

Age: 68

Director since: 2003

Committees: Audit (Chairman)

Other public directorships: Chubb Limited and Rockwell Collins, Inc.

   
   

Mr. Edwardson is the former Chairman and Chief Executive Officer of CDW Corporation, a provider of technology products and services, serving as Chief Executive Officer from 2001 to September 2011 and as Chairman from 2001 to December 2012. He was Chairman and Chief Executive Officer of Burns International Services Corporation, a provider of security services, from 1999 to 2000. He was President and Chief Operating Officer of UAL Corporation (the parent company of United Air Lines, Inc.), an airline, from 1995 to 1998. He is a former director of CDW Corporation.

 

Skills and Qualifications:

  Transportation Industry/International: Former President and COO of a major airline.

 

  Financial: Former CFO of two public companies.

 

  Technology: Former CEO of a technology products and services provider.

 

   

 

16  

    2017 Proxy Statement

 


Table of Contents

PROPOSAL 1 — ELECTION OF DIRECTORS

 

    Marvin R. Ellison    
   

 

LOGO

     

Age: 52

Director since: 2014

Committees: Compensation, Information Technology Oversight, Nominating & Governance

Other public directorships: J. C. Penney Company, Inc.

   
   

Mr. Ellison has been Chairman of J. C. Penney Company, Inc., an apparel and home furnishings retailer, since August 1, 2016 and Chief Executive Officer since August 1, 2015. Mr. Ellison served as President and CEO-Designee of J. C. Penney from November 1, 2014 through July 2015. From August 2008 through October 2014, he served as Executive Vice President – U.S. Stores of The Home Depot, Inc., a home improvement specialty retailer. From June 2002 to August 2008, he served in a variety of operational roles at The Home Depot, including as President – Northern Division and as Senior Vice President – Global Logistics. Prior to joining The Home Depot, Mr. Ellison spent 15 years at Target Corporation in a variety of operational roles. He is a former director of H&R Block, Inc.

 

Skills and Qualifications:

  Transportation Industry: Served in a variety of logistics roles during his career, including as Senior Vice President – Global Logistics at The Home Depot. Also has significant e-commerce experience due to his executive positions held at J. C. Penney and The Home Depot.

 

  Marketing: Gained marketing expertise through his executive experience at The Home Depot and J. C. Penney.

 

  Leadership: Significant executive leadership experience gained from executive positions held at The Home Depot and J. C. Penney.

 

 

   

 

    John C. (“Chris”) Inglis    
   

 

LOGO

     

Age: 62

Director since: 2015

Committees: Compensation, Information Technology Oversight, Nominating & Governance

Other public directorships: Huntington Bancshares Inc. and KEYW Corp.

   
   

Mr. Inglis is currently a Visiting Professor of Cyber Studies at the U.S. Naval Academy. He previously served for 28 years at the National Security Agency as a computer scientist and operational manager, retiring in 2014 as the Agency’s Deputy Director and senior civilian leader. In this role, he acted as the NSA’s chief operating officer responsible for guiding and directing strategies, operations and policy. Prior to joining the NSA, Mr. Inglis had nine years of active duty service as an officer and pilot in the U.S. Air Force, followed by twenty-one years with the Air National Guard, from which he retired as a Brigadier General.

 

Skills and Qualifications:

  Transportation Industry: Commanded USAF C-130 tactical airlift units at the Squadron and Group level, holds the rating of USAF Command Pilot and has more than 20 years of experience piloting USAF C-141 and C-130 aircraft.

 

  International: Has extensive experience conducting intelligence liaison as a senior representative of the U.S. government, including three years as the U.S. Special Liaison to the United Kingdom at U.S. Embassy London.

 

  Technology: Serves on technical advisory boards across the private and public sectors and holds graduate degrees in engineering and computer science from Columbia, Johns Hopkins, and George Washington Universities.

 

  Government/Leadership: Served for 17 years as a senior executive in the U.S. Department of Defense, including seven and one-half years as the Deputy Director and Chief Operating Officer of the NSA. He currently serves as a member of the Strategic Advisory Groups for U.S. Strategic Command and the Director of National Intelligence.

 

   

 

    Kimberly A. Jabal    
   

 

LOGO

     

Age: 48

Director since: 2013

Committees: Audit, Information Technology Oversight

Other public directorships: None

   
   

Ms. Jabal currently is the Chief Financial Officer and oversees the customer support and human resources functions at Weebly, Inc., a privately-held small business software company. Prior to joining Weebly in November 2015, she served as Chief Financial Officer of Kong Technologies, Inc. (formerly Path, Inc.) and as Vice President of Finance at Lytro, Inc., both early-stage technology companies. She served in various capacities at Google from 2003 to 2011, including as director of engineering finance, director of investor relations and director of online sales finance. Prior to Google, Ms. Jabal spent two years at Goldman Sachs in technology investment banking and eight years with Accenture working in information technology.

 

Skills and Qualifications:

   Financial: CFO of a privately-held small business software company and former CFO of a privately-held social networking company.

 

  Technology: Has extensive information technology experience, having spent eight years serving in various capacities with Google and eight years with Accenture designing and building technical infrastructure for major IT systems implementations at global companies.

 

   

 

 

  2017 Proxy Statement       17


Table of Contents

PROPOSAL 1 — ELECTION OF DIRECTORS

 

    Shirley Ann Jackson    
   

 

LOGO

     

Age: 71

Director since: 1999

Committees: Audit, Compensation, Nominating & Governance

Other public directorships: International Business Machines Corporation, Medtronic, Inc. and Public Service Enterprise Group Incorporated

   
   

Dr. Jackson is President of Rensselaer Polytechnic Institute (RPI), a technological research university, a position she has held since 1999. She was Chairman of the U.S. Nuclear Regulatory Commission (NRC) from 1995 to 1999 and Commissioner of the NRC from 1995 to 1999. Dr. Jackson was a member of the President’s Council of Advisors on Science and Technology (PCAST) from 2009 until 2014, Co-Chair of the President’s Intelligence Advisory Board from November 2014 to January 2017, a member of the International Security Advisory Board to the U.S. Secretary of State from July 2011 to January 2017 and a member of the Secretary of Energy Advisory Board from 2013 to 2017. Dr. Jackson was Vice-Chair of the Board of Regents of the Smithsonian Institution from 2014 to 2017 and a member of the Board of Regents from 2005 to 2017. She also is a life trustee of M.I.T. (member of the M.I.T. Corporation). Dr. Jackson is a National Medal of Science recipient. She was previously a director of Marathon Oil Corporation, NYSE Euronext and U.S. Steel Corporation.

 

Skills and Qualifications:

   Financial: Has numerous years of public company audit committee experience, including as a chair. Dr. Jackson is also a former director of NYSE Euronext and former chair of the Board of NYSE Regulation.

 

   Technology: Earned undergraduate and doctorate degrees in physics from the Massachusetts Institute of Technology and is the president of a world-renowned technological research university (RPI). Dr. Jackson is also a member of the Board of IBM and a former member of PCAST.

 

   Energy/Government: Former Chairman and Commissioner of the U.S. Nuclear Regulatory Commission, former Co-Chair of the President’s Intelligence Advisory Board, a former member of the International Security Advisory Board to the U.S. Secretary of State, a former member of the Secretary of Energy Advisory Board and a former director of Marathon Oil Corporation.

 

   

 

    R. Brad Martin    
   

 

LOGO

     

Age: 65

Director since: 2011

Committees: Audit, Nominating & Governance

Other public directorships: Chesapeake Energy Corporation (Chairman) and First Horizon National Corporation

   
   

Mr. Martin is Chairman of RBM Venture Company, a private investment company, a position he has held since 2007. He also is Chairman of the Board of Chesapeake Energy Corporation, a producer of natural gas and oil and natural gas liquids, a position he has held since October 2015. Mr. Martin is the former Interim President of the University of Memphis, a position he held from July 2013 until May 2014. Mr. Martin was Chairman and Chief Executive Officer of Saks Incorporated from 1989 to 2006 and remained Chairman until 2007, when he retired. He was previously a director of Caesars Entertainment Corporation, Dillards, Inc., Gaylord Entertainment Company, lululemon athletica inc. and Ruby Tuesday, Inc.

 

Skills and Qualifications:

    Financial: Earned an MBA from Vanderbilt University and has public company audit committee experience.

 

   Marketing: Gained valuable retail marketing experience and successfully applied his marketing expertise as the former CEO of Saks, a leading department store retailer.

 

   Energy: Member of the boards of Chesapeake Energy Corporation, where he currently serves as Chairman, and Pilot Travel Centers LLC.

 

   Government: Former Tennessee state representative.

 

 

   

 

    Joshua Cooper Ramo    
   

 

LOGO

     

Age: 48

Director since: 2011

Committees: Audit, Information Technology Oversight

Other public directorships: Starbucks Corporation

   
   

Mr. Ramo is Vice Chairman, Co-Chief Executive Officer, Kissinger Associates, Inc., a strategic advisory firm (he has been Vice Chairman since 2011 and Co-Chief Executive Officer since July 1, 2015). He served as Managing Director of Kissinger Associates from 2006 to 2011. Prior to joining Kissinger Associates, he was Managing Partner of JL Thornton & Co., LLC, a consulting firm. Before that, he worked as a journalist and served as Senior Editor, Foreign Editor and then Assistant Managing Editor of TIME Magazine from 1995 to 2003.

 

Skills and Qualifications:

   International: Has been a term member of the Council on Foreign Relations, Asia 21 Leaders Program, World Economic Forum’s Young Global Leaders and Global Leaders of Tomorrow. He co-founded the U.S.-China Young Leaders Forum in conjunction with the National Committee on U.S.-China Relations.

 

   Leadership: Vice Chairman, Co-Chief Executive Officer, Kissinger Associates.

 

 

   

 

18  

    2017 Proxy Statement

 


Table of Contents

PROPOSAL 1 — ELECTION OF DIRECTORS

 

    Susan C. Schwab    
   

 

LOGO

     

Age: 62

Director since: 2009

Committees: Compensation, Information Technology Oversight

Other public directorships: The Boeing Company, Caterpillar Inc. and Marriott International, Inc.

   
   

Ambassador Schwab is a Professor at the University of Maryland School of Public Policy, a position she has held since January 2009. She has also served as a strategic advisor to Mayer Brown LLP, a law firm, since March 2010. She served as U.S. Trade Representative from 2006 to January 2009 and as Deputy U.S. Trade Representative from 2005 to 2006. She was Vice Chancellor of the University System of Maryland and President and Chief Executive Officer of the University System of Maryland Foundation from 2004 to 2005. She was Dean of the University of Maryland School of Public Policy from 1995 to 2003. She was Director of Corporate Business Development of Motorola, Inc., an electronics manufacturer, from 1993 to 1995. She was Assistant Secretary of Commerce for the U.S. and Foreign Commercial Service from 1989 to 1993. She was previously a director of The Adams Express Company, Calpine Corporation and Petroleum & Resources Corporation.

 

Skills and Qualifications:

    International/Government: Former U.S. Trade Representative and former Director-General of the U.S. and Foreign Commercial Service (Assistant Secretary of Commerce), the export promotion arm of the U.S. government.

 

   Leadership: Former U.S. Trade Representative, former Director-General of the U.S. and Foreign Commercial Service (Assistant Secretary of Commerce), former President and Chief Executive Officer of the University System of Maryland Foundation and former Dean of the University of Maryland School of Public Policy.

 

   

 

    David P. Steiner    
   

 

LOGO

     

Age: 57

Director since: 2009

Committees: Nominating & Governance (Chairman)

Other public directorships: Vulcan Materials Company

   
   

Mr. Steiner is the former Chief Executive Officer of Waste Management, Inc., a provider of integrated waste management services, serving as Chief Executive Officer from 2004 through October 2016. He was President of Waste Management, Inc. from 2010 through July 2016, Executive Vice President and Chief Financial Officer from 2003 to 2004, Senior Vice President, General Counsel and Corporate Secretary from 2001 to 2003, and Vice President and Deputy General Counsel from 2000 to 2001. He was a partner at Phelps Dunbar L.L.P., a law firm, from 1990 to 2000. Mr. Steiner was previously a director of TE Connectivity Ltd. and Waste Management, Inc.

 

Skills and Qualifications:

   Transportation: Former CEO of Waste Management, which transports waste materials.

 

   Financial: Has an accounting degree from Louisiana State University and was CFO of Waste Management before becoming its CEO.

 

 

   Energy: Former CEO of Waste Management, which has taken an industry leadership role in converting waste to renewable energy.

 

   

 

    Paul S. Walsh    
   

 

LOGO

     

Age: 62

Director since: 1996

Committees: Compensation (Chairman)

Other public directorships: Avanti Communications Group plc (Chairman), Compass Group PLC (Chairman) and RM2 International S.A.

   
   

Mr. Walsh is Chairman of the Board of Compass Group PLC, a food service and support services company, a position he has held since February 2014. He also is Chairman of the Board of Avanti Communications Group plc, a leading satellite operator providing high speed internet and data services, a position he has held since November 2013. Mr. Walsh serves as an advisor for L.E.K. Consulting, a global strategy consulting firm, and TPG Capital LLP, a private investment firm. Mr. Walsh served as Chief Executive Officer of Diageo plc, a beverage company, from 2000 to June 2013 and then served as an advisor to the company from July 2013 through 2014. Mr. Walsh also is a director of Chime Communications Limited, where he serves as Chairman of the Board, RM2 International S.A. and Simpsons Malt Limited, and has been a member of the U.K. Prime Minister’s Business Advisory Group since July 2015. He was Chairman, President and Chief Executive Officer of The Pillsbury Company, a wholly owned subsidiary of Diageo plc, from 1996 to 2000, and Chief Executive Officer of The Pillsbury Company from 1992 to 1996. He was appointed as a Business Ambassador on the U.K. government’s Business Ambassador Network in August 2012. He was previously a director of Centrica plc, Diageo plc, HSBC Holdings plc, Ontex Group NV, Pace Holdings Corp. and Unilever PLC.

 

Skills and Qualifications:

   International: Former CEO of a U.K.-based, large multinational corporation.

 

   Financial: Has held executive finance positions, including CFO of a major division, at a U.K.-based public company.

 

   Marketing: Led a company that owes much of its growth and success to highly effective marketing of its brands.

 

   Government: Has held executive positions at companies where government interface is crucial.

 

   

 

  2017 Proxy Statement       19


Table of Contents

PROPOSAL 1 — ELECTION OF DIRECTORS

 

                                                      
  Summary of Director Experience, Qualifications, Attributes and Skills      LOGO     LOGO     LOGO     LOGO     LOGO     LOGO     LOGO     LOGO     LOGO     LOGO     LOGO     LOGO    
                                                      
 

Transportation Industry Experience is a positive attribute as it greatly increases a director’s understanding of our business operations and its management.

 

                                                                                        
 

International Experience is beneficial given our continued capitalization on increasing globalization and the resulting expansion of customer access to goods, services and information.

 

                                                                                        
 

Financial Expertise is important given our use of financial targets as measures of success and the importance of accurate financial reporting and robust internal auditing.

 

                                                                                          
 

Marketing Expertise is valuable because we emphasize promoting and protecting the FedEx brand, one of our most important assets.

 

                                                                                                
 

Technological Expertise is beneficial because attracting and retaining customers and competing effectively depend in part upon the sophistication and reliability of our technology.

 

                                                                                            
 

Energy Expertise is important as we are committed to protecting the environment and have initiatives underway to reduce our energy use and minimize our environmental impact.

 

                                                                                              
 

Government Experience is useful in our highly-regulated industry as we work constructively with governments around the world.

 

                                                                                          
 

Leadership Experience is critical because we want directors with the experience and confidence to capably advise our executive management team on a wide range of issues.

 

                                                                              
                                                      

 

 

20  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

Report of the Compensation Committee of the Board of Directors

 

The Compensation Committee has reviewed and discussed with management the following Compensation Discussion and Analysis. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors, and the Board approved, that the Compensation Discussion and Analysis be included in this proxy statement and in FedEx’s Annual Report on Form 10-K for the fiscal year ended May 31, 2017.

Compensation Committee Members

Paul S. Walsh – Chairman

Marvin R. Ellison

John C. (“Chris”) Inglis

Shirley Ann Jackson

Susan C. Schwab

 

Compensation Discussion and Analysis

 

In this section we discuss and analyze the compensation of our principal executive and financial officers, our three other most highly compensated executive officers, and T. Michael Glenn (the “named executive officers”) for the fiscal year ended May 31, 2017. Mr. Glenn retired as FedEx’s Executive Vice President — Market Development & Corporate Communications effective December 31, 2016. Upon his retirement, Mr. Glenn entered into a consulting agreement with FedEx, the terms of which are summarized beginning on page 55. In addition, on July 20, 2017, we announced that Christine P. Richards will retire as Executive Vice President, General Counsel and Secretary effective September 30, 2017. Ms. Richards and FedEx have entered into a separation and release agreement, the terms of which are described on page 56. For additional information regarding compensation of the named executive officers, see “— Summary Compensation Table” and other compensation-related tables and disclosure below.

 

Executive Summary

 

 

During fiscal 2017, we continued to focus on our strategic cost reduction programs, finding ways to improve efficiency and rationalize capacity, improving on our already high levels of service, and continuing to invest in critical, long-term projects (including the integration of TNT Express) as part of our global strategy to position the company for stronger growth. Although our financial performance improved during fiscal 2017, FedEx Express segment adjusted operating income and adjusted consolidated operating income were below our aggressive target objectives under our fiscal 2017 annual incentive compensation (“AIC”) program. Accordingly, and consistent with our pay-for-performance philosophy, the payouts under our AIC program were below target. Maximum payouts were earned in fiscal 2017 by all participants, including the named executive officers, under our long-term incentive compensation (“LTI”) program, which is tied to financial performance over a three-year period (fiscal 2015 through fiscal 2017 for the FY2015–FY2017 LTI plan).

The following table details key compensation highlights of the last five fiscal years.

 

 

LOGO

 

Compensation Highlights FY2017 AIC plan paid below target FY2015-FY2017 LTI plan paid at maximum FY2016 AIC plan paid below target (slightly below target payout for FedEx Express CEO) FY2014-FY2016 LTI plan paid at maximum FY2015 AIC plan paid below target No FY2013-FY2015 LTI plan payout FY2014 AIC plan paid below target FY2012-FY2014 LTI plan paid above target FY2013 No AIC plan payout to Chairman, President and CEO AIC plan paid below target to other named executive officers FY2011-FY2013 LTI plan paid at maximum

 

  2017 Proxy Statement       21


Table of Contents

EXECUTIVE COMPENSATION

 

 

Philosophy. FedEx is consistently ranked among the world’s most admired and trusted employers and respected brands. Maintaining this reputation and continuing to position FedEx for future success requires high caliber talent to protect and grow the company in support of our mission of producing superior financial returns for our shareowners. We design our executive compensation program to provide a competitive and internally equitable compensation and benefits package that reflects individual and company performance, job complexity, and strategic value of the position while ensuring long-term retention and motivation.

Each of the named executive officers is a longstanding member of our management, and our Chairman of the Board and Chief Executive Officer, Frederick W. Smith, founded the company and pioneered the express transportation industry over 45 years ago. As a result, our named executive officers are especially knowledgeable about our business and our industry and thus particularly valuable to the company and our shareowners.

As with tenure, position and level of responsibility are important factors in the compensation of any FedEx employee, including our named executive officers. There are internal salary ranges for each level, and annual target bonus percentages, long-term bonus amounts, and the number of stock options and restricted shares awarded are all closely tied to management level and responsibilities. For instance, our Chief Financial Officer, General Counsel, and Chief Information Officer have the same salary range and annual target bonus percentages and receive the same long-term bonus and the same number of options and restricted shares in the annual grant.

Our philosophy is to (i) closely align the compensation paid to our executives with the performance of the company on both a short-term and long-term basis, and (ii) set performance goals that do not promote excessive risk while supporting the company’s core long-term financial goals, which include:

 

 

Achieving a 10%+ operating margin;

 

 

Increasing earnings per share (“EPS”) by 10% to 15% per year;

 

 

Growing profitable revenue;

 

 

Improving cash flow; and

 

 

Increasing returns, such as return on invested capital.

Our executive compensation is, in large measure, highly variable and linked to the above goals and the performance of the FedEx stock price over time.

 

2016 Say-on-Pay Advisory Vote Outcome

 

 

The Compensation Committee annually considers the results of the most recent advisory vote by shareowners to approve named executive officer compensation. In the 2016 advisory vote, 95.3% of the voted shares supported the compensation of FedEx’s named executive officers, and the Compensation Committee and the Board of Directors interpret this strong level of support as affirmation of the current design, purposes and direction of FedEx’s executive compensation programs. In its ongoing evaluation of FedEx’s executive compensation programs and practices, the Compensation Committee will continue to consider the results from future shareowner advisory votes to approve named executive officer compensation.

 

Compensation Objectives and Design-Related Features

 

We design our executive compensation program to further FedEx’s mission of producing superior financial returns for our shareowners by pursuing the following objectives:

 

    How Pursued

Objective

  Generally    Specifically

Retain and attract highly qualified and effective executive officers.

 

Pay competitively.

  

Use comparison survey data as a point of reference in evaluating target levels for total direct compensation, which includes both fixed and variable, at-risk components tied to stock price appreciation and short- and long-term financial performance.

Motivate executive officers to contribute to our future success and to build long-term shareowner value and reward them accordingly.

 

Link a significant part of compensation to FedEx’s financial and stock price performance, especially long-term performance.

  

Weight executive compensation program in favor of incentive and equity-based compensation elements (rather than base salary), especially long-term incentive cash compensation and equity incentives in the form of stock options and restricted stock.

Further align executive officer and shareowner interests.

 

Encourage and facilitate long-term shareowner returns and significant ownership of FedEx stock by executives.

  

Make annual equity-based grants; tie long-term cash compensation to growth in our EPS, which strongly correlates with long-term stock price appreciation; maintain a stock ownership goal for senior officers and encourage each officer to retain shares acquired upon stock option exercises until his or her goal is met.

 

22  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

Commitment to Retain and Attract. FedEx is widely acknowledged as one of the world’s most admired and respected companies, and it is our people — our greatest asset — who have earned FedEx its strong reputation. Because FedEx operates a global enterprise in a highly challenging business environment, we compete for talented management with some of the largest companies in the world — in our industry and in others. Our global recognition and reputation for excellence in management and leadership make our people attractive targets for other companies, and our key employees are aggressively recruited. To prevent loss of our managerial talent, we seek to provide an overall compensation program that is competitive with all types of companies and continues to retain and attract outstanding people to conduct our business. Each element of compensation is intended to fulfill this important obligation.

Market Referencing. Because retention is imperative and tenure and management level are determinative factors, we use external survey data solely as a market reference point to assess the competitiveness of our compensation programs. The target compensation levels of our named executive officers are not designed to correspond to a specific percentile of compensation in those surveys. Instead, our analysis considers multiple market reference points for the analyzed positions, rather than referring to a specific percentile.

For the fiscal 2017 executive compensation review, we considered survey data published by two major consulting firms engaged by the company: Willis Towers Watson and Aon Hewitt. Each consulting firm provided target compensation data for general industry companies (excluding financial services companies) in its respective database with annual revenues between $25 billion and $100 billion. A list of these companies is attached to this proxy statement as Appendix A.

General industry is the appropriate comparison category because our executives are recruited by and from businesses outside of FedEx’s industry peer group. Moreover, our industry peer group does not provide a sufficient number of companies that are of a comparable size to FedEx. Using a robust data sample (112 companies for fiscal 2017) mitigates the impact of outliers, year-over-year volatility of compensation levels and the risk of selection bias, and increases the likelihood of comparing with companies with executive officer positions similar to ours. Because the annual revenues of these companies vary significantly, each consulting firm used regression analysis to allow for the inclusion of data from a large number of both larger and smaller companies. The data results provided by each firm were then averaged to arrive at blended market compensation data for general industry executives.

When we evaluate the elements of compensation of our executive officers in light of the referenced survey data, we consider total direct compensation (“TDC”). The TDC composition is illustrated below:

Elements of TDC

 

Short-Term

Compensation

  

Base Salary

  

AIC

Long-Term

        Compensation        

  

LTI

  

Stock Options

  

Restricted Stock (includes related tax payments)

TDC includes AIC at target (i.e., assuming achievement of all objectives) and all long-term components at target. Long-term components of target TDC are valued consistent with the valuation methodology used in the referenced surveys. Tax payments on restricted stock awards are included in TDC.

Other elements of compensation of the named executive officers (such as perquisites and retirement benefits) are not included in TDC, consistent with our referenced survey information. Accordingly, these other elements are not referenced against survey data, and decisions as to these other elements do not influence decisions as to the elements of compensation that are included in TDC. These other elements of compensation, however, are reviewed and approved by the Compensation Committee.

While we may reference our target executive compensation levels against the survey group of companies, we do not compare our AIC and LTI financial performance goals against these companies or any other group of companies. Rather, as discussed below, our AIC and LTI financial performance goals are based upon our internal business objectives which, when set each year, represent aggressive but achievable goals. Accordingly, the relationship between our financial performance and the financial performance of the survey companies does not affect the relationship between our executive compensation and the executive compensation of that group in a given year.

Pay for Performance. Our executive compensation program is intended not only to retain and attract highly qualified and effective managers, but also to motivate them to substantially contribute to FedEx’s future success for the long-term benefit of shareowners and appropriately reward them for doing so. Accordingly, we believe that there should be a strong relationship between pay and corporate performance (both financial results and stock price), and our executive compensation program reflects this belief. In particular, AIC payments, LTI payments and stock options represent a significant portion of our executive compensation program, as shown by the chart below, and this variable compensation is

 

  2017 Proxy Statement       23


Table of Contents

EXECUTIVE COMPENSATION

 

“at risk” and directly dependent upon the achievement of pre-established corporate goals and stock price appreciation:

 

 

Fiscal 2017 AIC payouts were tied to meeting aggressive business plan goals for FedEx Express segment adjusted operating income and adjusted consolidated operating income, as well as individual performance objectives for the named executive officers other than the Chairman of the Board and Chief Executive Officer. FedEx Express segment adjusted operating income and adjusted consolidated operating income fell below the target objectives for annual financial performance for fiscal 2017. As a result, the named executive officers received below-target AIC payouts.

 

 

LTI payouts are tied to meeting aggregate EPS goals over a three-fiscal-year period. Adjusted EPS growth over the past three years resulted in maximum payouts under the LTI program.

 

 

The exercise price of stock options granted under our equity incentive plans is equal to the fair market value of our common stock on the date of grant, so the options will yield value to the executive only if the stock price appreciates.

 

The following chart illustrates for each named executive officer the allocation of fiscal 2017 target TDC between base salary and incentive and equity-oriented compensation elements (the restricted stock value includes the related tax payment):

 

 

Fiscal 2017 Target TDC Components

 

 

LOGO

 

We believe that long-term performance is the most important measure of our success, as we manage FedEx’s operations and business for the long-term benefit of our shareowners. Accordingly, not only is our executive compensation program weighted towards variable, at-risk pay components, but we emphasize incentives that are dependent upon long-term corporate performance and stock price appreciation. These long-term incentives include LTI cash compensation and equity awards (stock options and restricted stock), which comprise a significant portion of an executive officer’s total compensation. These incentives are designed to motivate and reward our executive officers for achieving long-term corporate financial performance goals and maximizing long-term shareowner value.

 

24  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

The following chart illustrates for each named executive officer the allocation of fiscal 2017 target TDC between long-term incentives — LTI, stock options and restricted stock, including the related tax payment — and short-term components — base salary and AIC:

Fiscal 2017 Long-Term vs. Short-Term Compensation

 

LOGO

 

We include target AIC and LTI payouts (discounted to present value to be consistent with the valuation methodology used in this year’s survey data) in TDC, so the actual compensation paid out in a given year may vary widely from target levels because compensation earned under the AIC and LTI programs is variable and commensurate with the level of achievement of pre-established financial performance goals. When we fall short of our business objectives, payments under these variable programs decrease correspondingly. Conversely, when we achieve superior results, we reward our executives accordingly under the terms of these programs. As shown by the following chart, with the exception of Mr. Glenn who retired in December 2016, the actual TDC of our named executive officers in each of fiscal 2017 and fiscal 2016 was above target TDC because our financial performance exceeded our pre-established goals for the LTI plan. Conversely, the actual fiscal 2015 TDC of our named executive officers was below target levels because our financial performance fell short of our pre-established goals for the AIC and LTI plans.

 

Actual TDC vs Target TDC (1)

LOGO

 

  (1)

Actual TDC includes base salary, actual AIC and LTI payouts (if any), equity-based awards valued at grant date consistent with the valuation methodology used in the survey data, and tax payments related to restricted stock awards. The forfeiture of stock options due to Mr. Glenn’s retirement is not reflected in his actual TDC values.

 

  2017 Proxy Statement       25


Table of Contents

EXECUTIVE COMPENSATION

 

Align Management and Shareowner Interests. We award stock options and restricted stock to create and maintain a long-term economic stake in the company for the officers, thereby aligning their interests with the interests of our shareowners.

In addition, as discussed above, payout under our LTI program is dependent upon achievement of an aggregate EPS goal for a three-fiscal-year period. EPS was selected as the financial measure for the LTI plan because growth in our EPS strongly correlates to long-term stock price appreciation.

 

The following graph illustrates the relationship between FedEx’s EPS growth and stock price appreciation (based on the fiscal year-end stock price and adjusted for stock splits) from 1978 to 2017:

 

 

LOGO

 

  (1)

Fiscal 2015, 2016 and 2017 adjusted EPS of $8.87, $10.60 and $12.02, respectively, are included in the adjusted EPS line. As discussed in detail below, the Board of Directors, upon the recommendation of the Compensation Committee, approved certain adjustments to fiscal 2015, 2016 and 2017 EPS for LTI plan purposes in order to ensure that payouts, if any, under the applicable LTI plans more accurately reflect core financial performance. The adjustments include those relating to stock repurchase activity and mark-to-market pension accounting, among others. See Appendix B for a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures.

 

Stock Ownership Goal for Senior Officers. In order to encourage significant stock ownership by FedEx’s senior management, including the named executive officers, and to further align their interests with the interests of our shareowners, the Board of Directors has adopted a stock ownership goal for senior officers, which is included in FedEx’s Corporate Governance Guidelines. With respect to our executive officers, the goal is that within five years after being appointed to his or her position, each officer own FedEx shares valued at the following multiple of his or her annual base salary:

 

 

6x for the Chairman of the Board and Chief Executive Officer;

 

 

5x for the President and Chief Operating Officer; and

 

 

3x for the other executive officers.

For purposes of meeting this goal, unvested restricted stock is counted, but unexercised stock options are not. Until the ownership goal is met, the officer is encouraged to retain “net profit shares” resulting from the exercise of stock options. Net profit shares are the shares remaining after payment of the option exercise price and taxes owed upon the exercise of options. As of July 31, 2017, each executive officer exceeded the stock ownership goal.

Policy Against Hedging and Pledging Transactions. In addition, we have adopted comprehensive and detailed policies (the FedEx Securities Manual) that regulate trading by our insiders, including the named executive officers and Board members. The Securities Manual includes information regarding quiet periods and explains when transactions in FedEx stock are permitted. The Securities Manual and our Corporate Governance Guidelines also set forth certain types of transactions that are prohibited. Specifically, (1) publicly traded (or exchange-traded) options, such as puts, calls and other derivative securities, (2) short sales, including “sales against the box,” and (3) hedging or monetization transactions designed to limit the financial risk of ownership, including

 

26  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

prepaid variable forward contracts, equity swaps, collars, exchange funds and other similar transactions. The Securities Manual and our Corporate Governance Guidelines also prohibit margin accounts and pledges; provided, however, that our Lead Independent Director and General Counsel, acting together, may grant an exception to the prohibition against holding FedEx securities in a margin account or pledging FedEx securities on a case-by-case basis to any member of the Board of Directors or the Chairman of the Board and Chief Executive Officer if he or she clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities.

Based upon this criterion, such an exception has been granted with respect to the shares that are disclosed in this proxy statement as having been pledged as security by Frederick W. Smith, FedEx’s Chairman of the Board and Chief Executive Officer, and Enterprise. See “Stock Ownership — Directors and Executive Officers.” With respect to the shares pledged by Mr. Smith and Enterprise as of July 31, 2017:

 

 

None of the shares pledged by Mr. Smith were acquired through a FedEx equity compensation plan.

 

 

The pledged shares are not used to shift or hedge any economic risk in owning FedEx shares. These shares collateralize loans used to fund outside personal business ventures and prior purchases of FedEx shares. If Mr. Smith had been unable to pledge these shares, he may have been forced to sell the shares in order to obtain the necessary funds.

 

 

The pledged shares represent 1.4% of FedEx’s outstanding shares as of July 31, 2017, and therefore, do not present any appreciable risk for investors or the company.

 

 

Mr. Smith is FedEx’s founder and one of the company’s largest shareowners. Mr. Smith has pledged only 19.9% of his total share ownership. The number of shares pledged by Mr. Smith has decreased by 100,000 during the last year and by 1,423,000 over the last five years. Based on the fiscal year-end stock price ($193.84), the value of his pledged shares was approximately $752 million. Excluding the pledged shares, Mr. Smith still substantially exceeds our stock ownership goal.

 

 

In accordance with our policy, Mr. Smith has established his financial capacity to repay the loan without resorting to the pledged shares. In the unlikely event such a sale were necessary, based on the 30-day average trading volume for FedEx shares as of July 31, 2017, it would take three days for the pledged shares to be sold in the open market. Furthermore, Mr. Smith’s unpledged share ownership is very substantial and would likely be able to prevent any margin call.

We have an active shareowner engagement program in which we meet regularly with our largest shareowners. During these discussions, none of our largest shareowners have raised any concerns regarding Mr. Smith’s pledged shares.

No other FedEx executive officer or Board member currently holds FedEx securities that are pledged pursuant to a margin account, loan or otherwise.

Restricted Stock Program. FedEx’s restricted stock program has been in place for over 25 years and has encouraged FedEx executives to own and retain company stock. Although none of our largest shareowners have raised any concerns to us regarding our restricted stock program, during fiscal 2017 the Compensation Committee again reviewed our restricted stock program and, for all of the following reasons, determined that it continues to be appropriate for FedEx.

By facilitating the ownership of FedEx shares by our executives, we strengthen the alignment of their interests with those of our investors. When granting restricted stock, FedEx first determines the total target value of the award and then approves the delivery of that value in two components: restricted shares and cash payment of taxes due. Therefore, the total target value of the award is the same as it would be if there were no tax payments. In particular, because the amount of the tax payment is included in the calculation of the target value of the restricted stock award, the officers receive fewer shares in each award than they would in the absence of the tax payment: fewer by an amount equal in value to the tax payment.

 

  2017 Proxy Statement       27


Table of Contents

EXECUTIVE COMPENSATION

 

This methodology prevents the need for an officer to make a disposition of FedEx stock to cover the tax consequences of a restricted stock award and dilute his or her interest in FedEx. Conversely, absent the tax payment, the number of shares received in each award would be larger by an amount equal in value to the forgone tax payment, thereby having a dilutive effect on our shareowners’ equity interest in FedEx. While SEC disclosure rules require that these payments be included with tax reimbursement payments and reported as “other compensation” in the Summary Compensation Table, we do not believe these payments are “tax gross-ups” in the traditional sense, since their value is fully reflected in the number of shares ultimately delivered to recipients. The following chart illustrates this principle, using the target value for the fiscal year 2017 restricted stock awards granted to our Chief Financial Officer, General Counsel, and Chief Information Officer (as in previous years, Mr. Smith did not receive a restricted stock award in fiscal 2017):

 

                Target Value of Restricted Stock Award

 

LOGO

 

Not only is the value to the officer, as well as the cost to the company, generally the same as it would be otherwise, but this practice uses fewer shares of stock to arrive at the same benefit and has proved extremely successful in retaining executives and enabling them to retain their shares. During fiscal 2014, we broadened our restricted stock program to include certain lower-level officers and high-performing managers and individual contributors. We also make tax payments as part of restricted stock awards to these individuals. In sum, we strongly believe that our restricted stock program is effectively designed and is aligned with the best interests of our shareowners.

 

Role of the Compensation Committee, its Compensation Consultant and the Chairman of the Board and Chief Executive Officer

 

 

Our Board of Directors is responsible for the compensation of our executive management. The purpose of the Board’s Compensation Committee, which is composed solely of independent directors, is to help discharge this responsibility by, among other things:

 

 

Reviewing and discussing with management the factors underlying our compensation policies and decisions, including overall compensation objectives;

 

 

Reviewing and discussing with management the relationship between the company’s compensation policies and practices and the company’s risk management, including the extent to which those policies and practices create risks for the company;

 

 

Reviewing and approving all company goals and objectives (both financial and non-financial) relevant to the compensation of the Chairman of the Board and Chief Executive Officer;

 

 

Evaluating, together with the other independent directors, the performance of the Chairman of the Board and Chief Executive Officer in light of these goals and objectives and the quality and effectiveness of his leadership;

 

 

Recommending to the Board for approval by the independent directors each element of the compensation of the Chairman of the Board and Chief Executive Officer;

 

 

Reviewing the performance evaluations of all other members of executive management (the Chairman of the Board and Chief Executive Officer and the President and Chief Operating Officer are responsible for the performance evaluations of the non-CEO executive officers who report to them);

 

28  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

 

 

Reviewing and approving (and, if applicable, recommending to the Board for approval) each element of compensation, as well as the terms and conditions of employment, of these other members of executive management;

 

 

Granting awards under our equity compensation plans and overseeing the administration of all such plans; and

 

 

Reviewing the costs and structure of our key employee benefit and fringe-benefit plans and programs.

The Compensation Committee may form and delegate authority to any subcommittee as it deems appropriate or advisable in accordance with the terms of its written charter. To date, however, the Committee has not formed or delegated authority to any subcommittee.

In furtherance of the Compensation Committee’s responsibility, the Committee has engaged Steven Hall & Partners (the “consultant”) to assist the Committee in evaluating FedEx’s executive compensation, including during fiscal 2017. In connection with this engagement, the consultant reports directly and exclusively to the Committee. The consultant participates in Committee meetings, reviews Committee materials and provides advice to the Committee upon its request. For example, the consultant: updates the Committee on trends and issues in executive compensation and comments on the competitiveness and reasonableness of FedEx’s executive compensation program; assists the Committee in the development and review of FedEx’s AIC and LTI programs, including commenting on performance measures and the goal-setting process; and reviews and provides advice to the Committee for its consideration in reviewing compensation-related proxy statement disclosure, including this Compensation Discussion and Analysis, and on any new equity compensation plans or plan amendments proposed for adoption.

Other than services provided to the Compensation Committee, the consultant does not perform any services for FedEx. Additionally, the consultant has robust policies and procedures in place to prevent conflicts of interest; the fees received by the consultant from FedEx in the consultant’s most recently completed fiscal year represented less than 5% of the consultant’s revenues; neither the consultant nor any adviser of the consultant had a business or personal relationship with any member of the Compensation Committee or any executive officer of FedEx during fiscal 2017; and no adviser of the consultant directly owns, or directly owned during fiscal 2017, any FedEx stock. Accordingly, the Compensation Committee has determined the consultant to be independent from the company and that no conflicts of interest exist related to the consultant’s services provided to the Committee. Compensation Committee pre-approval is required for any services to be provided to the company by the Committee’s independent compensation consultant. This ensures that the consultant maintains the highest level of independence from the company, in both appearance and fact.

The Chairman of the Board and Chief Executive Officer, who attends most meetings of the Compensation Committee by invitation of the Committee’s chairman, assists the Committee in determining the compensation of all other executive officers by, among other things:

 

 

Approving any annual merit increases to the base salaries of the executive officers who report to him within limits established by the Committee;

 

 

Establishing annual individual performance objectives for the executive officers who report to him and evaluating their performance against such objectives (the Committee reviews these performance evaluations); and

 

 

Making recommendations, from time to time, for special stock option and restricted stock grants (e.g., for motivational or retention purposes) to other executive officers.

The other executive officers do not have a role in determining their own compensation, other than discussing their annual individual performance objectives and results achieved with the Chairman of the Board and Chief Executive Officer or the President and Chief Operating Officer, as applicable.

 

Compensation Elements and Fiscal 2017 Amounts

 

 

Base Salary. Our primary objective with respect to the base salary levels of our executive officers is to provide sufficient fixed cash income to retain and attract these highly marketable executives in a competitive market for executive talent. The base salaries of our executive officers are reviewed and adjusted (if appropriate) at least annually to reflect, among other things, economic conditions, base salaries for comparable positions from the executive compensation survey data discussed above, the tenure of the officers, and the base salaries of the officers relative to one another, as well as the internal salary ranges for the officer’s level.

 

  2017 Proxy Statement       29


Table of Contents

EXECUTIVE COMPENSATION

 

Effective October 1, 2016, each named executive officer’s annual base salary was increased by 3%. Additionally, in connection with his appointment as President and Chief Operating Officer of FedEx in February 2017, Mr. Bronczek’s annual base salary was increased. Effective in October 2017, Mr. Smith’s base salary will be increased by 2% and the annual base salaries of Messrs. Graf, Bronczek and Carter will be increased by 3%. As a result, effective in October 2017, the new annual base salaries of FedEx’s named executive officers will be as follows:

 

Name

   Current Annual
Base Salary
($)
    

New Annual 
Base Salary 

($) 

 

F.W. Smith

     1,324,548        1,351,044   

A.B. Graf, Jr.

     957,768        986,496   

D.J. Bronczek

     1,100,016        1,133,016   

R.B. Carter

     809,424        833,712   

C.P. Richards (1)

     735,900        n/a   

T.M. Glenn (2)

     n/a        n/a   

 

(1)

Ms. Richards is retiring effective September 30, 2017 and will not receive a base salary following that date. Ms. Richards has entered into a separation and release agreement with FedEx, the terms of which are summarized on page 56.

 

(2)

Mr. Glenn, who retired effective December 31, 2016, no longer receives an annual base salary from FedEx. Mr. Glenn has entered into a consulting agreement with FedEx, the terms of which are summarized beginning on page 55.

Cash Payments Under Annual Incentive Compensation Program. The primary objective of our AIC program is to motivate our people to achieve our annual financial goals and other business objectives and reward them accordingly. The program provides an annual cash bonus opportunity to our employees, including the named executive officers, at the conclusion of each fiscal year based upon the achievement of AIC performance objectives.

For fiscal 2017, the AIC plan for the named executive officers, with the exception of Mr. Bronczek, included one company financial performance measure — adjusted consolidated operating income. For the portion of the year during which Mr. Bronczek served as President and CEO of FedEx Express, the AIC plan included two company financial performance measures — FedEx Express segment adjusted operating income and adjusted consolidated operating income. These measures were chosen as the financial performance metrics in order to provide a greater tie between individual business segment performance, and to incentivize management to improve the company’s core financial performance and find ways to improve efficiency.

Target AIC payouts are established as a percentage of the executive officer’s base salary actually paid during the fiscal year. Payouts above target levels are based exclusively upon the company’s performance. Accordingly, the executive officer receives above-target payouts only if the company exceeds the AIC target objective for annual financial performance.

AIC objectives for company annual financial performance are typically based upon our business plan for the fiscal year, which is reviewed and approved by the Board of Directors and which reflects, among other things, the risks and opportunities identified in connection with our enterprise risk management process. Consistent with our long-term focus and in order to discourage unnecessary and excessive risk-taking, we measure performance against our business plan, rather than a fixed growth rate or an average of growth rates from prior years, to account for short-term economic and competitive conditions and anticipated strategic investments that may have adverse short-term profit implications. We address year-over-year improvement targets through our LTI plans, as discussed below.

The fiscal 2017 AIC target payouts for the named executive officers, as a percentage of base salary, were as follows:

 

Name

  

Target Payout 

(as a percentage of base salary) 

 

F.W. Smith

     140%   

A.B. Graf, Jr.

     100%   

D.J. Bronczek (1)

     110%/120%   

R.B. Carter

     100%   

C.P. Richards

     100%   

T.M. Glenn (2)

     100%   

 

(1)

Mr. Bronczek’s target payout was 110% for the portion of fiscal 2017 during which he served as President and CEO of FedEx Express and 120% for the portion of fiscal 2017 during which he served as President and COO of FedEx.

 

(2)

Mr. Glenn, who retired effective December 31, 2016, received a prorated 2017 AIC payout based on the portion of fiscal 2017 during which he was employed.

The maximum fiscal 2017 AIC payout opportunity for each named executive officer was 200% of his or her target bonus.

Chairman of the Board and Chief Executive Officer. Mr. Smith’s AIC payout is tied to the achievement of corporate objectives for company financial performance for the fiscal year. His target AIC payout is set as a percentage of his base salary, and his maximum AIC payout is set as a multiple of the target payout. The independent members of the Board of Directors, upon the recommendation of the Compensation Committee, approve these percentages. The actual AIC payout ranges, on a sliding scale, from the minimum to the maximum based upon the performance of the company against our company financial performance goals.

Mr. Smith’s fiscal 2017 AIC payout was based on the achievement of corporate objectives for adjusted consolidated operating income, subject to the maximum payout opportunity. The adjusted consolidated operating income target objective under the fiscal 2017 AIC program was the same as the fiscal 2017 business plan objective for adjusted consolidated operating income (excluding, in each case, fiscal 2017 TNT Express integration and restructuring costs and financial results and the year-end mark-to-market accounting

 

30  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

adjustment for defined benefit pension and other post-retirement plans (the “MTM Adjustment”)). Subject to any adjustment by the independent directors based on their annual evaluation of Mr. Smith’s performance as described below, Mr. Smith’s minimum fiscal 2017 AIC payout was 50% of his target payout.

In addition, the independent Board members, upon the recommendation of the Compensation Committee, may adjust this amount upward or downward based on their annual evaluation of Mr. Smith’s performance, including the quality and effectiveness of his leadership, the execution of key strategic initiatives and the following corporate performance measures:

 

 

FedEx’s stock price performance relative to the Standard & Poor’s 500 Composite Index, the Dow Jones Transportation Average, the Dow Jones Industrial Average and competitors;

 

 

FedEx’s stock price to earnings (P/E) ratio relative to the Standard & Poor’s 500 Composite Index, the Dow Jones Industrial Average and competitors;

 

 

FedEx’s market capitalization;

 

 

FedEx’s revenue growth and operating income growth (excluding certain items and the MTM Adjustment) relative to competitors;

 

 

FedEx’s free cash flow (excluding business acquisitions), return on invested capital (excluding certain items and the MTM Adjustment), and weighted average cost of capital;

 

 

Analyst coverage and ratings for FedEx’s stock;

 

 

FedEx’s U.S. and international revenue market share;

 

 

FedEx’s reputation rankings by various publications and surveys; and

 

 

Each FedEx business segment’s achievement of corporate objectives for financial performance under the AIC program.

None of these factors is given any particular weight in determining whether to adjust Mr. Smith’s bonus amount.

Non-CEO Named Executive Officers. Mr. Bronczek’s fiscal 2017 AIC target payout opportunity for the portion of the year during which he served as President and Chief Executive Officer of FedEx Express was based on the achievement of corporate objectives for FedEx Express segment adjusted operating income for fiscal 2017. For the portion of the year during which Mr. Bronczek served as President and Chief Operating Officer of FedEx, his fiscal 2017 AIC target payout opportunity was based on the achievement of corporate objectives for adjusted consolidated operating income. The FedEx Express segment adjusted operating income target objective under the fiscal 2017 AIC program was the same as the fiscal 2017 business plan objective for FedEx Express segment adjusted operating income (excluding, in each case, applicable fiscal 2017 TNT Express integration costs). Above-target payouts for Mr. Bronczek were tied to the achievement of corporate objectives for adjusted consolidated operating income, subject to the maximum payout opportunity. Mr. Bronczek’s minimum fiscal 2017 AIC payout was 50% of his target payout (subject to adjustment by Mr. Smith as described below).

The fiscal 2017 AIC payout opportunity for each of Messrs. Graf, Carter and Glenn and Ms. Richards was based on the achievement of corporate objectives for adjusted consolidated operating income, subject to a minimum payout of 50% of his or her target payout (subject to adjustment by Mr. Smith based on the executive’s achievement of individual performance objectives as described below) and the maximum payout opportunity.

The target AIC payout for each non-CEO named executive officer is set as a percentage of the executive’s base salary, and the maximum AIC payout is set as a multiple of the target payout. The actual AIC payout ranges, on a sliding scale, from the minimum to the maximum based upon the performance of the individual and the company against the objectives.

Mr. Smith may adjust each officer’s bonus amount based on the achievement of individual performance objectives established at the beginning of the fiscal year. Individual performance objectives for the non-CEO named executive officers vary by management level and by operating segment and include (but are not limited to):

 

 

Provide leadership to support the achievement of financial goals;

 

 

Guide and support key strategic initiatives;

 

 

Enhance the FedEx customer experience and meet goals related to internal metrics that measure customer satisfaction and service quality;

 

 

Recruit and develop executive talent and ensure successors exist for all management positions; and

 

 

Implement and document good faith efforts designed to ensure inclusion of females and minorities in the pool of qualified applicants for open positions and promotional opportunities, and otherwise promote FedEx’s commitment to diversity, tolerance and inclusion in the workplace.

Individual performance objectives are designed to further the company’s business objectives. Achievement of individual performance objectives is generally within each officer’s control or scope of responsibility, and the objectives are intended to be achieved with an appropriate level of effort and effective leadership by the officer. The achievement level of each non-CEO named executive officer’s individual performance objectives is based on Mr. Smith’s evaluation at the conclusion of the fiscal year, which is reviewed by the Compensation Committee.

Adjustments to Operating Income for Fiscal 2017 AIC Plan Purposes. FedEx’s consolidated operating income and FedEx

 

  2017 Proxy Statement       31


Table of Contents

EXECUTIVE COMPENSATION

 

Express’s segment operating income for fiscal 2017 were impacted by several items that did not reflect core business performance. In order to ensure that payouts under the AIC plan accurately reflected the company’s core financial performance, the Board of Directors, upon the recommendation of the Compensation Committee, designed the fiscal 2017 AIC plan to exclude, or approved adjustments to exclude, the following items from fiscal 2017 consolidated operating income for purposes of the fiscal 2017 AIC plan:

 

 

The MTM Adjustment;

 

 

TNT Express integration and restructuring costs and TNT Express’s financial results (FedEx Express segment operating income was also adjusted to remove the impact of applicable TNT Express integration costs);

 

 

Expenses related to the settlement of and certain expected losses relating to independent contractor litigation matters involving FedEx Ground; and

 

 

Charges accrued in connection with pending U.S. Customs and Border Protection matters involving FedEx Trade Networks.

Fiscal 2017 AIC Performance and Payouts. As noted above, both the FedEx Express segment adjusted operating income target objective and the adjusted consolidated operating income target objective under the fiscal 2017 AIC program were the same as the corresponding fiscal 2017 business plan objectives.

 

The following table presents the threshold, target and maximum objectives (if applicable) for FedEx Express segment adjusted operating income and adjusted consolidated operating income under our fiscal 2017 AIC program, and our actual FedEx Express segment adjusted operating income and adjusted consolidated operating income for fiscal 2017 (in millions):

 

Company Performance Measure

   Threshold     Target      Maximum     Actual   

FedEx Express Segment Adjusted Operating Income (1)

     n/a  (2)    $ 2,865        n/a  (3)    $ 2,795   

Adjusted Consolidated Operating Income (4)

     n/a  (5)    $ 5,421      $ 5,881     $ 5,228   

 

(1)

As discussed above, the Board of Directors, upon the recommendation of the Compensation Committee, approved the exclusion of applicable TNT Express integration costs from the FedEx Express segment adjusted operating income target objective and actual FedEx Express segment operating income for purposes of the fiscal 2017 AIC plan. See Appendix B for a reconciliation of fiscal 2017 FedEx Express segment adjusted consolidated operating income to the most directly comparable GAAP measure.

 

(2)

Under the fiscal 2017 AIC plan, there was no threshold objective for FedEx Express segment adjusted operating income because the minimum AIC payout was 50% of the target payout for the applicable executive officers and other plan participants in the FedEx Express segment (subject to adjustment based on the achievement level for individual performance objectives).

 

(3)

There was no maximum objective under the FedEx Express segment adjusted operating income metric because once the target objective was met, any remaining payout was tied to the achievement of adjusted consolidated operating income objectives.

 

(4)

As discussed above, the Board of Directors, upon the recommendation of the Compensation Committee, approved the exclusion of certain items from the adjusted consolidated operating income objectives and actual consolidated operating income for purposes of the fiscal 2017 AIC plan. See Appendix B for a reconciliation of fiscal 2017 adjusted consolidated operating income to the most directly comparable GAAP measure.

 

(5)

Under the fiscal 2017 AIC plan, there was no threshold objective for adjusted consolidated operating income because the minimum AIC payout was 50% of the target payout for each of the named executive officers and other plan participants at FedEx and FedEx Services (subject to adjustment based on the achievement level for individual performance objectives).

Based upon below-target FedEx Express segment adjusted operating income and adjusted consolidated operating income performance, and each non-CEO named executive officer’s achievement of individual performance objectives, payouts to the named executive officers under the fiscal 2017 AIC program were as follows (compared to the target payout opportunities):

 

Name

   Target AIC Payout
($)
    

Actual AIC Payout 

($) 

 

F.W. Smith

     1,836,363        1,215,948   

A.B. Graf, Jr.

     948,468        731,468   

D.J. Bronczek

     1,162,275        926,694   

R.B. Carter

     801,564        512,023   

C.P. Richards

     728,756        550,670   

T.M. Glenn *

     507,148        395,068   

 

*

Mr. Glenn, who retired effective December 31, 2016, received a prorated payout based on the portion of fiscal 2017 during which he was employed.

 

The independent members of the Board of Directors, upon the recommendation of the Compensation Committee, exercised their discretion (as described above) to reduce the amount of Mr. Smith’s fiscal 2017 AIC payout from $1,430,527, the formulaic amount resulting solely from below-target adjusted consolidated operating income performance under the fiscal 2017 AIC program, to $1,215,948. This decision was based upon below-business-plan achievement for fiscal 2017 adjusted consolidated operating income.

 

32  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

Fiscal 2018 AIC Plan Design. In order to further motivate management to improve the company’s overall financial performance, several changes have been made to the fiscal 2018 AIC program. Unlike the fiscal 2017 AIC plan that included performance metrics based on operating segment performance, the performance measure for all participants in the fiscal 2018 AIC plan is adjusted consolidated operating income.

In order to ensure that payouts under the fiscal 2018 AIC plan accurately reflect the company’s core financial performance, the Board of Directors, upon the recommendation of the Compensation Committee, has approved excluding the impact of the MTM Adjustment and fiscal 2018 TNT Express integration and restructuring costs from fiscal 2018 consolidated operating income for purposes of the plan. The adjusted consolidated operating income target objective under the fiscal 2018 AIC program is the same as the fiscal 2018 business plan objective for adjusted consolidated operating income (the target and business plan objectives for consolidated operating income exclude fiscal 2018 TNT Express integration and restructuring costs and the MTM Adjustment).

The fiscal 2018 AIC payout opportunity for each of Messrs. Smith, Bronczek, Graf and Carter and Ms. Richards (as it may be adjusted by the independent directors in the case of the Chairman and CEO as described above or by Mr. Smith in the case of the non-CEO named executive officers as described below) will be based on the achievement of corporate objectives for adjusted consolidated operating income, subject to a minimum payout of 50% of his or her target payout and the maximum payout opportunity.

Mr. Smith may adjust each officer’s bonus amount based on the achievement of individual performance objectives established at the beginning of the fiscal year. Mr. Smith will determine the achievement level of each officer’s individual objectives at the conclusion of fiscal 2018.

The fiscal 2018 AIC target payouts for the named executive officers (other than Mr. Glenn), as a percentage of their respective base salary actually paid during fiscal 2018, are as follows:

 

Name

  

Target Payout 

(as a percentage of base salary) 

 

F.W. Smith

     140%   

A.B. Graf, Jr.

     100%   

D.J. Bronczek

     120%   

R.B. Carter

     100%   

C.P. Richards (1)

     100%   

 

(1) 

Ms. Richards is retiring effective September 30, 2017. Her fiscal 2018 AIC payout will be prorated based on the portion of fiscal 2018 during which she was employed.

The maximum fiscal 2018 AIC payout opportunity for each named executive officer will be 200% of his or her target bonus.

 

Cash Payments Under LTI Program. The primary objective of our LTI program is to motivate management to contribute to our future success and to build long-term shareowner value and reward them accordingly. The program provides a long-term cash payment opportunity to members of management, including the named executive officers, based upon achievement of aggregate EPS goals for the preceding three-fiscal-year period. The LTI plan design provides for payouts that correspond to specific EPS goals established by the Board of Directors. The EPS goals represent total growth in EPS (over a base year) for the three-year term of the LTI plan. The following chart illustrates the relationship between EPS growth and payout:

LTI Payout Opportunity

(as a percentage of target)

 

LOGO

 

 

  2017 Proxy Statement       33


Table of Contents

EXECUTIVE COMPENSATION

 

As illustrated by the above chart, the LTI program provides for:

 

 

No LTI payment unless the three-year average annual EPS growth rate is at least 5%;

 

 

Target payouts if the three-year average annual EPS growth rate is 12.5%;

 

 

Above-target payouts if the growth rate is above 12.5%, up to a maximum amount (equal to 150% of the target payouts) if the growth rate is 15% or higher; and

 

 

Below-target payouts if the growth rate is below 12.5%, down to a threshold amount (equal to 25% of the target payouts) if the growth rate is 5%.

Mark-to-Market Accounting and Other Adjustments to EPS for LTI Plan Purposes. The Board of Directors, upon the recommendation of the Compensation Committee, approved the exclusion of certain items from fiscal 2015, fiscal 2016 and fiscal 2017 EPS for purposes of FedEx’s FY2015–FY2017, FY2016–FY2018 and FY2017–FY2019 LTI plans, and for establishing the base-year EPS for the FY2016–FY2018, FY2017–FY2019 and FY2018-FY2020 LTI plans, as applicable. In particular, because the MTM Adjustment is not reflective of core business performance, the Board previously determined that the MTM Adjustment will be excluded from fiscal 2016 and fiscal 2017 EPS for purposes of the FY2015–FY2017 LTI plan and from EPS calculations under all future LTI plans, beginning with the FY2016–FY2018 LTI plan.

For purposes of the applicable plans, fiscal 2015 EPS was adjusted to exclude: (i) the net impact of the company’s adoption of MTM accounting for its defined benefit pension and other postretirement plans, including the impact of lowering the expected return on plan assets (“EROA”) assumption from 7.75% to 6.5% in the presentation of segment results for all prior periods; (ii) aircraft impairment and related charges; and (iii) a charge to increase the legal reserve associated with the settlement of a legal matter at FedEx Ground to the amount of the settlement.

In addition to the MTM Adjustment, fiscal 2016 EPS was adjusted for purposes of the applicable plans to exclude: (i) expenses incurred in connection with the settlement of and certain expected losses relating to independent contractor litigation matters involving FedEx Ground, net of recognized immaterial insurance recovery; (ii) expenses related to the settlement of a U.S. Customs and Border Protection matter involving FedEx Trade Networks, net of recognized immaterial insurance recovery; (iii) expenses associated with the acquisition, financing and integration of TNT Express, net of any tax impact, and TNT Express’s fiscal 2016 financial results; and (iv) the favorable income tax benefit from an internal corporate legal entity restructuring to facilitate the integration of FedEx Express and TNT Express.

Similarly, in addition to the MTM Adjustment, fiscal 2017 EPS was adjusted for purposes of the applicable plans to exclude: (i) fiscal 2017 TNT Express integration and restructuring costs; (ii) expenses related to the settlement of and certain expected losses relating to independent contractor litigation matters involving FedEx Ground; and (iii) charges accrued in connection with pending U.S. Customs and Border Protection matters involving FedEx Trade Networks.

As a result, adjusted fiscal 2015 EPS of $8.87, rather than reported fiscal 2015 EPS of $3.65, is being used for purposes of the FY2015–FY2017 LTI plan. In addition, $8.87 is the base-year EPS for the FY2016–FY2018 LTI plan. Adjusted fiscal 2016 EPS of $10.60, rather than reported fiscal 2016 EPS of $6.51, is being used for purposes of the FY2015–FY2017 and FY2016–FY2018 LTI plans (as described in more detail below, adjusted fiscal 2016 EPS of $10.80 is further adjusted to $10.60 for these plans to account for the effect of stock repurchases). Adjusted fiscal 2016 EPS of $10.80 is the base-year EPS for the FY2017–FY2019 LTI plan. Finally, adjusted fiscal 2017 EPS of $12.02, rather than reported fiscal 2017 EPS of $11.07, is being used for purposes of the FY2015–FY2017, FY2016–FY2018 and FY2017–FY2019 LTI plans (as described in more detail below, adjusted fiscal 2017 EPS of $12.09 is further adjusted to $12.02 for these plans to account for the effect of stock repurchases). Adjusted fiscal 2017 EPS of $12.09 is the base-year EPS for the FY2018–FY2020 LTI plan. The Board of Directors, upon the recommendation of the Compensation Committee, determined that, by excluding these items, payouts, if any, under these plans will more accurately reflect FedEx’s core financial performance in fiscal 2015, fiscal 2016 and fiscal 2017, as applicable. See Appendix B for a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures.

For the same reason, the Board of Directors, upon the recommendation of the Compensation Committee, has also approved the exclusion of TNT Express integration and restructuring costs from fiscal 2018, fiscal 2019 and fiscal 2020 EPS for purposes of the FY2016-FY2018, FY2017-FY2019 and FY2018-FY2020 LTI plans, as applicable.

Stock Repurchase Program-Related Adjustments to EPS for LTI Plan Purposes. During fiscal 2016 and fiscal 2017, the company repurchased 18.2 million shares and 3.0 million shares, respectively, as part of our stock repurchase program. Because the positive impact on EPS resulting from these stock repurchases did not reflect core business performance, the Board of Directors, upon the recommendation of the Compensation Committee, approved the exclusion of the impact of the stock repurchases (net of interest expense on debt issued to fund a portion of the stock repurchase programs) on fiscal 2016 EPS for purposes of the FY2015–FY2017 and FY2016–FY2018 LTI plans and fiscal 2017 EPS for purposes of the FY2015–FY2017, FY2016–FY2018 and FY2017-FY2019 LTI plans.

 

34  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

As a result, adjusted fiscal 2016 EPS of $10.60, rather than adjusted fiscal 2016 EPS of $10.80 (as further discussed above), is being used for purposes of the FY2015–FY2017 and FY2016–FY2018 LTI plans. Additionally, adjusted fiscal 2017 EPS of $12.02, rather than adjusted fiscal 2017 EPS of $12.09 (as further discussed above), is being used for purposes of the FY2015–FY2017, FY2016–FY2018 and FY2017-FY2019 LTI plans. See Appendix B for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

 

Fiscal 2017 LTI Performance and Payouts. Typically, the base-year number over which the three-year average annual EPS growth rate goals are measured for an LTI plan is the final full-year EPS of the preceding fiscal year. For the FY2015–FY2017 LTI plan, however, the base-year year number is $7.12, not fiscal 2014 EPS of $6.75 as originally reported before the company’s adoption of MTM accounting. The Board of Directors, upon the recommendation of the Compensation Committee, approved this increase in the base-year EPS in order to exclude the impact of the company’s stock repurchase program on a prospective basis. The following table presents the aggregate EPS threshold (minimum), target and maximum under our FY2015–FY2017 LTI plan, which was established by the Board of Directors in 2014, and our adjusted aggregate EPS under the plan for the three-year period ended May 31, 2017:

 

Performance Measure

   Threshold      Target      Maximum      Actual  

FY2015–FY2017 Aggregate Adjusted EPS

     $23.57        $27.16        $28.44        $31.49

 

*

The actual aggregate adjusted EPS consists of $8.87 for fiscal 2015 (which excludes the $0.08 net impact of FedEx’s adoption of MTM pension accounting, including the related segment EROA recast), $10.60 for fiscal 2016 (which excludes the $0.20 net impact of stock repurchases as discussed above), and $12.02 for fiscal 2017 (which excludes the $0.07 net impact of stock repurchases as discussed above). See Appendix B for a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures.

Based upon this above-target performance, we made the following LTI payouts to the named executive officers under the FY2015–FY2017 LTI plan — as illustrated by the following table (compared to the threshold, target and maximum payout opportunities):

 

Name

   Threshold LTI Payout
($)
     Target LTI Payout
($)
     Maximum LTI Payout
($)
    

Actual LTI Payout 

($) 

 

F.W. Smith

     1,000,000        4,000,000        6,000,000        6,000,000   

A.B. Graf, Jr.

     300,000        1,200,000        1,800,000        1,800,000   

D.J. Bronczek

     375,000        1,500,000        2,250,000        2,250,000   

R.B. Carter

     300,000        1,200,000        1,800,000        1,800,000   

C.P. Richards

     300,000        1,200,000        1,800,000        1,800,000   

T.M. Glenn*

     258,330        1,033,320        1,549,980        1,549,980   

 

*

Mr. Glenn, who retired effective December 31, 2016, received a prorated payout based on the portion of the three-year period during which he was employed.

 

LTI Payout Opportunities. The Board of Directors has established LTI plans for the three-fiscal-year periods 2016 through 2018, 2017 through 2019 and 2018 through 2020, providing cash payment opportunities upon the conclusion of fiscal 2018, 2019 and 2020, respectively, if certain EPS goals are achieved with respect to those periods.

Typically, the base-year number over which the three-year average annual EPS growth rate goals are measured for an LTI plan is the final full-year EPS of the preceding fiscal year. However, the base-year EPS amounts over which the three-year average annual EPS growth rate goals will be measured for the FY2016–FY2018, FY2017–FY2019 and FY2018-2020 LTI plans are $8.87, $10.80 and $12.09, respectively (as discussed above).

 

  2017 Proxy Statement       35


Table of Contents

EXECUTIVE COMPENSATION

 

As described above, adjusted fiscal 2016 EPS of $10.60 (which excludes the $0.20 net impact of stock repurchases) is being used for purposes of the FY2016–FY2018 LTI plan and adjusted fiscal 2017 EPS of $12.02 (which excludes the $0.07 net impact of stock repurchases) is being used for purposes of the FY2016–FY2018 and FY2017-FY2019 LTI plans. The following table presents the aggregate EPS thresholds, targets and maximums under the FY2015–FY2017 and FY2016–FY2018 LTI plans and our progress toward these goals as of May 31, 2017:

 

Performance

Period

   Aggregate
EPS Threshold
     Aggregate
EPS Target
     Aggregate
EPS Maximum
     Actual Aggregate 
Adjusted EPS 
as of May 31, 2017* 
 

FY2016–FY2018

     $29.36        $33.84        $35.42        $22.62   
                                  (with one year remaining)   

FY2017–FY2019

     $35.75        $41.20        $43.13        $12.02   
                                  (with two years remaining)   

 

*

See Appendix B for a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures.

The following table sets forth the potential threshold, target and maximum payouts for the named executive officers under the FY2016–FY2018, FY2017–FY2019 and FY2018-FY2020 LTI plans.

 

            Potential Future Payouts  

Name

   Performance
Period
     Threshold
($)
     Target
($)
     Maximum
($)
 

F.W. Smith

     FY2016–FY2018        1,000,000        4,000,000        6,000,000  
     FY2017–FY2019        1,150,000        4,600,000        6,900,000  
       FY2018–FY2020        1,150,000        4,600,000        6,900,000  

A.B. Graf, Jr.

     FY2016–FY2018        300,000        1,200,000        1,800,000  
     FY2017–FY2019        343,750        1,375,000        2,062,500  
       FY2018–FY2020        343,750        1,375,000        2,062,500  

D.J. Bronczek (1)

     FY2016–FY2018        422,917        1,691,667        2,537,500  
     FY2017–FY2019        491,667        1,966,667        2,950,000  
       FY2018–FY2020        518,750        2,075,000        3,112,500  

R.B. Carter

     FY2016–FY2018        300,000        1,200,000        1,800,000  
     FY2017–FY2019        343,750        1,375,000        2,062,500  
       FY2018–FY2020        343,750        1,375,000        2,062,500  

C.P. Richards (2)

     FY2016–FY2018        300,000        1,200,000        1,800,000  
     FY2017–FY2019        343,750        1,375,000        2,062,500  
       FY2018–FY2020        343,750        1,375,000        2,062,500  

T.M. Glenn (3)

     FY2016–FY2018        158,330        633,320        949,980  
     FY2017–FY2019        66,836        267,346        401,019  
       FY2018–FY2020        n/a        n/a        n/a  

 

(1)

Mr. Bronczek’s payout opportunities under the FY2016–FY2018 and FY2017–FY2019 LTI plans are prorated based on the applicable fiscal years during which he served as President and CEO of FedEx Express (fiscal 2017) and President and COO of FedEx (fiscal 2018 and 2019).

 

(2)

Ms. Richards, who is retiring effective September 30, 2017, will be eligible for payouts under each of the FY2016-FY2018, FY2017-FY2019 and FY2018-FY2020 LTI plans based on the portion of the applicable three-fiscal-year period during which she was employed.

 

(3)

Mr. Glenn, who retired effective December 31, 2016, is eligible for payouts under each of the FY2016-FY2018 and FY2017-FY2019 LTI plans based on the portion of the applicable three-fiscal-year period during which he was employed.

 

Retention Awards for Chief Financial Officer. On July 17, 2017, the Board of Directors, upon the recommendation of the Compensation Committee, approved a performance-based cash award for Mr. Graf. The award has a target value of $574,661 that is tied to the achievement of a fiscal 2020 EPS goal (excluding mark-to-market pension accounting adjustments and TNT Express integration and restructuring expenses and subject to any adjustments that may be approved by the Board, upon the recommendation of the Compensation Committee). The cash award will be paid in its entirety if the fiscal 2020 EPS goal is met or exceeded. If fiscal 2020 EPS is less than 80% of the goal, no cash award will be paid. If fiscal 2020 EPS is between 80% and 100% of the goal, the Chairman of the Board will determine the actual award

 

36  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

paid (but in no event will it exceed $574,661). To remain eligible for the award, Mr. Graf must remain FedEx’s Chief Financial Officer through the end of fiscal 2020. In the event of death or permanent disability prior to the end of fiscal 2020, payment will be made in accordance with the timing and payout criteria described above. On July 17, 2017, Mr. Graf was also granted a restricted stock award of 1,785 shares with a four-year ratable vesting period.

Long-Term Equity Incentives — Stock Options and Restricted Stock. Our primary objective in providing long-term equity incentives to executive officers is to further align their interests with those of our shareowners by facilitating significant ownership of FedEx stock by the officers. This creates a direct link between their compensation and long-term shareowner return.

Amount. Stock options and restricted stock are generally granted to executive officers on an annual basis. As discussed above, an officer’s position and level of responsibility are the primary factors that determine the number of options and shares of restricted stock awarded to the officer in the annual grant. For instance, FedEx’s Chief Financial Officer, General Counsel, and Chief Information Officer receive the same number of options and restricted shares in the annual grant.

The number of stock options and restricted shares awarded at each management level can vary from year to year. In determining how many options and shares of restricted stock should be awarded at each level, the Compensation Committee may consider:

 

 

Target TDC levels and referenced survey data — as discussed above, we include the total target value of all equity-based awards (including tax payments for restricted stock awards) in our calculation of target TDC (using the same valuation methodology used in the market survey data), and in evaluating the fiscal 2016 target TDC levels for our named executive officers, we referred to multiple market reference points for comparable positions in the referenced surveys;

 

 

The total number of shares then available to be granted; and

 

 

Potential shareowner dilution. As of July 31, 2017, the total number of shares underlying options and shares of restricted stock outstanding or available for future grant under our equity compensation plans represented 7.1% of the sum of shares outstanding plus the shares underlying options outstanding or available for future grant plus shares of restricted stock available for future grant.

Other factors that the Compensation Committee may consider, especially with respect to special grants outside of the annual-grant framework, include the promotion of an officer or the desire to retain a valued executive or recognize a particular officer’s contributions, like the restricted stock award described above granted to Mr. Graf on July 17, 2017. None of these factors is given any particular weight and the specific factors used may vary among individual executives.

Timing. In selecting dates for awarding equity-based compensation, we do not consider, nor have we ever considered, the price of FedEx’s common stock or the timing of the release of material, non-public information about the company. Stock option and restricted stock awards are generally made to executive officers on an annual basis according to a pre-established schedule.

When the Compensation Committee approves a special grant outside of the annual-grant framework, such grants are made at a regularly scheduled meeting and the grant date of the awards is the approval date or the next business day, if the meeting does not fall on a business day. If the grant is made in connection with the promotion of an individual or the election of an officer, the grant date may be the effective date of the individual’s promotion or the officer’s election, if such effective date is after the approval date.

Pricing. The exercise price of stock options granted under our equity incentive plans is equal to the fair market value of FedEx’s common stock on the date of grant. Under the terms of our equity incentive plans, the fair market value on the grant date is defined as the average of the high and low trading prices of FedEx’s stock on the New York Stock Exchange on that day. We believe this methodology is the most equitable method for determining the exercise price of our stock option awards given the intra-day price volatility often shown by our stock.

Vesting. Stock options and restricted stock granted to executive officers generally vest ratably over four years beginning on the first anniversary of the grant date. This four-year vesting period is intended to further encourage the retention of the executive officers, since unvested stock options are forfeited upon termination of the officer’s employment for any reason other than death or permanent disability and unvested restricted stock is forfeited upon termination of the officer’s employment for any reason other than death, permanent disability or retirement.

Tax Payments for Restricted Stock Awards. As discussed previously, FedEx pays the taxes resulting from a restricted stock award on behalf of the recipient. This prevents the need for the officer to sell a portion of a stock award to pay the corresponding tax obligation and thus encourages and facilitates FedEx stock ownership by our officers, thereby further aligning their interests with those of our shareowners. The total target value of the award is the same as it would be if there were no tax payments.

Voting and Dividend Rights on Restricted Stock. Holders of restricted shares are entitled to vote and receive any dividends on such shares. The dividend rights are included in the computation of the value of the restricted stock award for purposes of determining the recipient’s target TDC.

 

  2017 Proxy Statement       37


Table of Contents

EXECUTIVE COMPENSATION

 

Fiscal 2017 Awards. On June 6, 2016, the named executive officers were granted stock option and restricted stock awards as follows:

 

Name

   Number of Stock Options     Number of Shares of Restricted Stock  

F.W. Smith

     156,210         

A.B. Graf, Jr.

     19,385        3,635   

D.J. Bronczek

     25,195        4,690   

R.B. Carter

     19,385        3,635   

C.P. Richards

     19,385        3,635   

T.M. Glenn

     19,385  (1)      3,635  (2) 

 

(1)

These options were forfeited upon Mr. Glenn’s retirement.

 

(2)

In accordance with the terms of FedEx’s 2010 Omnibus Stock Incentive Plan, the restrictions applicable to these shares lapsed upon Mr. Glenn’s retirement on December 31, 2016.

 

As in previous years, at the request of Mr. Smith and in light of his significant stock ownership, the Compensation Committee did not award him any restricted stock. Instead, his equity awards were in the form of stock options, which will yield value to him only if the stock price increases from the date of grant.

The target value of stock options and restricted stock awarded in fiscal 2017 to each named executive officer remained substantially the same compared to the fiscal 2016 target value (although the valuation methodology of stock options for accounting purposes and reporting in the Summary Compensation Table may yield a higher value).

Perquisites, Tax Payments and Other Annual Compensation. FedEx’s named executive officers receive certain other annual compensation, including:

 

 

certain perquisites, such as personal use of corporate aircraft (though officers are required to reimburse FedEx for substantially all of the incremental cost to FedEx of such usage), security services and equipment, tax return preparation and financial counseling services, umbrella insurance, physical examinations, travel privileges on certain airline partners, salary continuation benefits for short-term disability and supplemental long-term disability benefits;

 

 

group term life insurance and 401(k) company-matching contributions; and

 

 

tax payments relating to restricted stock awards (as discussed above) and certain business-related use of corporate aircraft.

We provide this other compensation to enhance the competitiveness of our executive compensation program and to increase the productivity (corporate aircraft travel, professional assistance with tax return preparation and financial planning), safety (security services and equipment) and health (annual physical examinations) of our executives so they can focus on producing superior financial returns for our shareowners. Our tax payments relating to restricted stock awards are a component of the total target value of the restricted stock grant. As a result, the total target value of the award is the same as it would be if there were no tax payments and there is no dilutive effect on our shareowners’ equity interest in FedEx. The Compensation Committee reviews and approves each of these elements of compensation, and all of the independent directors approve each element as it relates to Mr. Smith. The Committee also reviews and approves FedEx’s policies and procedures regarding perquisites and other personal benefits and tax payments, including:

 

 

FedEx’s written policy setting forth guidelines and procedures regarding personal use of FedEx corporate aircraft; and

 

 

FedEx’s executive security procedures.

FedEx’s executive security procedures, which prescribe the level of personal security to be provided to the Chairman of the Board and Chief Executive Officer and other executive officers, are based on bona fide business-related security concerns and are an integral part of FedEx’s overall risk management and security program. These procedures have been assessed by an independent security consulting firm, and deemed necessary and appropriate for the protection of the officers and their families given the history of direct security threats against FedEx executives and the likelihood of additional threats against the officers. The security services and equipment provided to FedEx executive officers may be viewed as conveying personal benefits to the executives and, as a result, their values must be reported in the Summary Compensation Table.

With respect to Mr. Smith, consistent with FedEx’s executive security procedures, the Board of Directors requires him to use FedEx corporate aircraft for all travel, including personal travel. In addition, FedEx provides certain physical and personal security services for Mr. Smith, including on-site residential security at his primary residence. The Board of Directors believes that Mr. Smith’s personal safety and security are of the utmost importance to FedEx and its shareowners and, therefore, the costs associated with such security are appropriate and necessary business expenses.

 

38  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

Post-Employment Compensation. While none of FedEx’s named executive officers has an employment agreement, they are entitled to receive certain payments and benefits upon termination of employment or a change of control of FedEx, including:

 

 

Retirement benefits under FedEx’s 401(k) and pension plans, including a tax-qualified, defined contribution 401(k) retirement savings plan called the FedEx Corporation Retirement Savings Plan, a tax-qualified, defined benefit pension plan called the FedEx Corporation Employees’ Pension Plan, and a supplemental non-tax-qualified plan called the FedEx Corporation Retirement Parity Pension Plan — which is designed to provide to the executives the benefits that otherwise would be paid under the tax-qualified pension plan but for certain limits under United States tax laws;

 

 

Accelerated vesting of restricted stock upon the executive’s retirement (at or after age 60), death or permanent disability or a change of control of FedEx;

 

 

Accelerated vesting of stock options upon the executive’s death or permanent disability or a change of control of FedEx; and

 

 

Lump sum cash payments and post-employment insurance coverage under their Management Retention Agreements with FedEx (the “MRAs”) upon a qualifying termination of the executive after a change of control of FedEx. The MRAs, as well as the accelerated vesting of equity awards upon a change of control of FedEx, are intended to secure the executives’ continued services in the event of any threat or occurrence of a change of control, which further aligns their interests with those of our shareowners when evaluating any such potential transaction.

 

In addition, Mr. Glenn has entered into a consulting agreement with FedEx and Ms. Richards has entered into a separation and release agreement with FedEx, each in connection with his or her retirement. The terms of these agreements are described under the caption “Retirements of T. Michael Glenn and Christine P. Richards” beginning on page 55.

The Compensation Committee approves and recommends Board approval of all plans, agreements and arrangements that provide for these payments and benefits.

 

Risks Arising from Compensation Policies and Practices

 

 

Management has conducted an in-depth risk assessment of FedEx’s compensation policies and practices and concluded they do not create risks that are reasonably likely to have a material adverse effect on the company. The Compensation Committee has reviewed and concurred with management’s conclusion. The risk assessment process included, among other things, a review of (i) all key incentive compensation plans to ensure that they are aligned with our pay-for-performance philosophy and include performance metrics that meet and support corporate goals, and (ii) the overall compensation mix to ensure an appropriate balance between fixed and variable pay components and between short-term and long-term incentives. The objective of the process was to identify any compensation plans and practices that may encourage employees to take unnecessary risks that could threaten the company. No such plans or practices were identified.

 

Tax Deductibility of Compensation

 

 

Section 162(m) of the Internal Revenue Code limits the income tax deduction by FedEx for compensation paid to the Chief Executive Officer and the three other highest-paid executive officers (other than the Chief Financial Officer) to $1,000,000 per year, unless the compensation is “qualified performance-based compensation” or qualifies under certain other exceptions.

 

 

Neither Mr. Smith’s nor Mr. Bronczek’s base salary is designed to meet the requirements of Section 162(m) and, therefore, is subject to the $1,000,000 deductibility limit.

 

 

FedEx’s equity compensation plans satisfy the requirements of Section 162(m) with respect to stock options, but not with respect to restricted stock awards. Accordingly, compensation recognized by the four highest-paid executive officers (excluding Mr. Graf) in connection with stock options is fully deductible, but compensation with respect to restricted stock awards is subject to the $1,000,000 deductibility limit.

 

 

FedEx’s AIC and LTI plans do not meet all of the conditions for qualification under Section 162(m). Compensation received by the four highest-paid executive officers (excluding Mr. Graf) under each of these plans is subject, therefore, to the $1,000,000 deductibility limit.

We do not require all of our compensation programs to be fully deductible under Section 162(m) because doing so would restrict our discretion and flexibility in designing competitive compensation programs to promote varying corporate goals. We believe that our Board of Directors should be free to make compensation decisions to further and promote the best interests of our shareowners, rather than to qualify for corporate tax deductions. In fiscal 2017, we incurred approximately $7.1 million of additional tax expense as a result of the Section 162(m) deductibility limit for compensation paid to Mr. Smith and the three other highest-paid executive officers (other than Mr. Graf).

 

  2017 Proxy Statement       39


Table of Contents

EXECUTIVE COMPENSATION

 

Summary Compensation Table

In this section we provide certain tabular and narrative information regarding the compensation of our principal executive and financial officers, our three other most highly compensated executive officers, and T. Michael Glenn (who retired as FedEx’s Executive Vice President, Market Development and Corporate Communications on December 31, 2016) for the fiscal year ended May 31, 2017, and for each of the previous two fiscal years.

 

Name and Principal Position

  Year     Salary
($)
    Bonus
($) (1)
    Stock
Awards
($) (2)
    Option
Awards
($) (2)
    Non-Equity
Incentive Plan
Compensation
($) (3)
    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) (4)
    All Other
Compensation
($) (5)
   

Total 

($) 

 

Frederick W. Smith

    2017       1,311,688       0       0       6,564,913        7,215,948             513,048       15,605,597   

Chairman and

Chief Executive Officer

(Principal Executive Officer)

    2016       1,279,632       0       0       7,572,908        7,360,950             543,543       16,757,033   
    2015       1,266,960       0       0       8,243,126        981,723       2,942,549       372,817       13,807,175   
                                                                       

Alan B. Graf, Jr.

    2017       948,468       0       591,851       814,678        2,531,468             630,587       5,517,052   

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

    2016       920,840       0       623,829       914,898        2,409,351             600,087       5,469,005   
    2015       902,784       0       572,027       995,987        505,581       2,202,335       613,814       5,792,528   
                                                                       

David J. Bronczek

    2017       1,023,280       75,000       763,626       1,058,850        3,176,694             702,997       6,800,447   

President and
Chief Operating Officer

    2016       960,936       0       803,745       1,213,197        3,201,327             722,645       6,901,850   
    2015       942,096       0       737,104       1,320,316        598,561       2,992,979       654,050       7,245,106   
                                                                       

Robert B. Carter

    2017       801,564       0       591,851       814,678        2,312,023       785,840       592,757       5,898,713   

Executive Vice President,

FedEx Information Services and Chief Information Officer

    2016       778,216       0       623,829       914,898        2,277,809       562,045       588,897       5,745,694   
    2015       762,960       0       572,027       995,987        395,793       730,363       522,364       3,979,494   
                                                                       

Christine P. Richards (6)

    2017       728,756       50,000       591,851       814,678        2,350,670             503,360       5,039,315   

Executive Vice President,

General Counsel and Secretary

    2016       707,532       0       623,829       914,898        2,313,371             519,803       5,079,433   
    2015       660,624       0       572,027       995,987        342,705       1,588,508       479,261       4,639,112   
                                                                       

T. Michael Glenn (7)

    2017       507,148       0       591,851       814,678  (8)      1,945,048             1,534,396       5,393,121   

Former
Executive Vice President,

Market Development and Corporate Communications

    2016       850,028       0       623,829       914,898  (8)      2,339,297       186,648       640,209       5,554,909   
    2015       833,364       0       572,027       995,987  (8)      442,141       3,038,492       562,120       6,444,131   
                                                                       

 

(1)

The amounts reported in this column reflect a promotional bonus received by Mr. Bronczek and a special recognition award received by Ms. Richards in fiscal 2017.

 

(2)

The amounts reported in these columns reflect the aggregate grant date fair value of restricted stock and option awards granted to the named executive officer during each year, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. These amounts reflect our calculation of the value of these awards on the grant date and do not necessarily correspond to the actual value that may ultimately be realized by the officer.

 

  

The fair value of restricted stock awards is equal to the fair market value of FedEx’s common stock (the average of the high and low prices of the stock on the New York Stock Exchange) on the date of grant multiplied by the number of shares awarded.

 

  

For accounting purposes, we use the Black-Scholes option pricing model to calculate the grant date fair value of stock options. Assumptions used in the calculation of the amounts in the “Option Awards” column are included in note 10 to our audited consolidated financial statements for the fiscal year ended May 31, 2017, included in our Annual Report on Form 10-K for fiscal 2017. See the “Grants of Plan-Based Awards During Fiscal 2017” table for information regarding restricted stock and option awards to the named executive officers during fiscal 2017.

 

40  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

(3)

Reflects cash payouts, if any, under FedEx’s fiscal 2017, 2016 and 2015 annual incentive compensation (“AIC”) plans and FY15–FY17, FY14–FY16 and FY13–FY15 long-term incentive (“LTI”) plans, as follows (for further discussion of the fiscal 2017 AIC plan and the FY15–FY17 LTI plan, see “— Compensation Discussion and Analysis — Compensation Elements and Fiscal 2017 Amounts — Cash Payments Under Annual Incentive Compensation Program” and “— Cash Payments Under LTI Program” above):

 

Name

   Year        AIC Payout
($)
       LTI Payout
($)
      

Total Non-Equity 

Incentive Plan 

Compensation 

($) 

 

F.W. Smith

     2017          1,215,948          6,000,000          7,215,948   
     2016          1,360,950          6,000,000          7,360,950   
       2015          981,723          0          981,723   

A.B. Graf, Jr.

     2017          731,468          1,800,000          2,531,468   
     2016          609,351          1,800,000          2,409,351   
       2015          505,581          0          505,581   

D.J. Bronczek

     2017          926,694          2,250,000          3,176,694   
     2016          951,327          2,250,000          3,201,327   
       2015          598,561          0          598,561   

R.B. Carter

     2017          512,023          1,800,000          2,312,023   
     2016          477,809          1,800,000          2,277,809   
       2015          395,793          0          395,793   

C. P. Richards

     2017          550,670          1,800,000          2,350,670   
     2016          513,371          1,800,000          2,313,371   
       2015          342,705          0          342,705   

T.M. Glenn *

     2017          395,068          1,549,980          1,945,048   
     2016          539,297          1,800,000          2,339,297   
       2015          442,141          0          442,141   

 

  *

Mr. Glenn, who retired effective December 31, 2016, received payouts under each of the fiscal 2017 AIC and FY15–FY17 LTI plans based on the portion of the applicable period during which he was employed.

 

(4)

Reflects the actuarial increase in the present value of the named executive officer’s benefits under the Pension Plan and the Parity Plan (as each such term is defined under “— Fiscal 2017 Pension Benefits — Overview of Pension Plans”). The present value of the benefits under the Pension Plan and Parity Plan for Mr. Smith decreased as follows: (a) between fiscal 2016 and 2017 — $479,543; and (b) between fiscal 2015 and 2016 — $784,178. The present value of the benefits under the Pension Plan and Parity Plan for Messrs Graf, Bronczek and Glenn and Ms. Richards decreased between fiscal 2016 and 2017 by $116,057, $165,154, $331,888 and $42,048, respectively (the amount for Mr. Glenn reflects the decrease in value of his pension plan benefits through December 31, 2016, the date of his retirement); and for Messrs. Graf and Bronczek and Ms. Richards between fiscal 2015 and 2016 by $97,207, $167,856 and $15,962, respectively. The present value of the pension benefits for each named executive officer increased significantly in 2015 primarily due to a change in the assumed lump sum interest rate and the mortality tables used for nonqualified pension benefits for financial reporting purposes. The amounts in the table and this footnote were determined using assumptions (e.g., for interest rates and mortality rates) consistent with those used in the audited consolidated financial statements included in our annual report on Form 10-K for the fiscal year ended May 31, 2017. See “— Fiscal 2017 Pension Benefits” below.

 

(5)

Includes:

 

   

the aggregate incremental cost to FedEx of providing perquisites and other personal benefits;

 

   

group term life insurance premiums paid by FedEx;

 

   

company-matching contributions under FedEx’s tax-qualified, defined contribution 401(k) retirement savings plan called the FedEx Corporation Retirement Savings Plan (the “401(k) Plan”);

 

   

tax payments relating to restricted stock awards and certain business-related use of corporate aircraft. FedEx pays the taxes resulting from a restricted stock award on behalf of the recipient to prevent the need for the officer to sell a portion of a stock award to pay the corresponding tax obligation. While SEC disclosure rules require that these payments be included with tax reimbursement payments and reported as “other compensation” in the Summary Compensation Table, we do not believe these payments are “tax gross-ups” in the traditional sense, since their value is fully reflected in the number of shares ultimately delivered to recipients. See “— Compensation Discussion and Analysis — Compensation Objectives and Design-Related Features — Restricted Stock Program” above; and

 

   

with respect to Mr. Glenn for fiscal 2017, amounts related to his retirement and compensation for services under his consulting agreement with FedEx, as discussed below.

 

  2017 Proxy Statement       41


Table of Contents

EXECUTIVE COMPENSATION

 

The following table shows the amounts included for each such item:

 

Name

   Year      Perquisites
and Other
Personal
Benefits
($) (a)
     Life
Insurance
Premiums
($)
     Company
Contributions
Under 401(k)
Plan
($)
     Tax
Reimbursement
Payments
($) (a)
    

Other

($) (b)

    

Total 

($) 

 

F.W. Smith

     2017        500,777        3,060        9,211        0        —         513,048   
     2016        531,742        3,060        8,741        0        —         543,543   
       2015        362,268        2,017        8,532        0        —         372,817   

A.B. Graf, Jr.

     2017        169,003        3,060        9,300        449,224        —         630,587   
     2016        114,058        3,060        9,473        473,496        —         600,087   
       2015        167,477        3,060        9,100        434,177        —         613,814   

D.J. Bronczek

     2017        113,294        3,060        7,040        579,603        —         702,997   
     2016        100,321        3,060        9,210        610,054        —         722,645   
       2015        82,167        3,060        9,350        559,473        —         654,050   

R.B. Carter

     2017        127,473        3,060        9,206        453,018        —         592,757   
     2016        100,792        3,060        9,307        475,738        —         588,897   
       2015        72,547        3,060        9,251        437,506        —         522,364   

C.P. Richards

     2017        41,752        3,060        9,324        449,224        —         503,360   
     2016        33,157        3,060        9,005        474,581        —         519,803   
       2015        32,674        3,060        9,350        434,177        —         479,261   

T.M. Glenn

     2017        103,892        3,060        96        488,436        938,912        1,534,396   
     2016        154,373        3,060        9,280        473,496        —         640,209   
       2015        115,533        3,060        9,350        434,177        —         562,120   

 

  (a)

See the following two tables for additional details regarding the amounts included in each item.

 

  (b)

The amount for Mr. Glenn for fiscal 2017 is compensation for services rendered under the consulting agreement referred to in note 7 below, which is discussed further under the caption “Retirements of T. Michael Glenn and Christine P. Richards” beginning on page 55.

During fiscal 2017, 2016 and 2015, unless otherwise noted below, FedEx provided the following perquisites and other personal benefits to the named executive officers:

 

 

Personal use of corporate aircraft: FedEx maintains a fleet of corporate aircraft that is used primarily for business travel by FedEx employees. FedEx has a written policy that sets forth guidelines and procedures regarding personal use of FedEx corporate aircraft. The policy requires officers to pay FedEx two times the cost of fuel for personal trips, plus applicable passenger ticket taxes and fees. These payments are intended to approximate the incremental cost to FedEx of personal corporate aircraft usage.

 

   

Mr. Smith is not required to pay FedEx for any travel on corporate aircraft by his family members or guests when they are accompanying him and he is on business travel. Mr. Smith is required to pay FedEx, however, for any personal travel by him and any personal travel by his family members or guests when they are accompanying him and he is on personal travel or when they are traveling without him.

 

   

Compensation is included in the table above for personal corporate aircraft travel (which for this purpose includes travel to attend a board or stockholder meeting of an outside company or organization for which the officer serves as a director or trustee) by a named executive officer and his or her family members and guests to the extent, if any, that the aggregate incremental cost to FedEx of all such travel exceeds the amount the officer paid FedEx for such travel. The incremental cost to FedEx of personal use of corporate aircraft is calculated based on the variable operating cost to FedEx, which includes the cost of fuel, aircraft maintenance, crew travel, landing fees, ramp fees and other smaller variable costs. Because FedEx corporate aircraft are used primarily for business travel, fixed costs that do not change based on usage, such as pilots’ salaries and purchase and lease costs, are excluded from this calculation.

 

   

In addition, when an aircraft is already flying to a destination for business purposes and the officers or their family members or guests ride along on the aircraft for personal travel, there is no additional variable operating cost to FedEx associated with the additional passengers, and thus no compensation is included in the table above for such personal travel. With the exception of Mr. Smith, the officer is still required to pay FedEx for such personal travel if persons on business travel occupy less than 50% of the total available seats on the aircraft. The amount of such payment is a pro rata portion (based on the total number of passengers) of the fuel cost for the flight, multiplied by two, plus applicable passenger ticket taxes and fees.

 

   

For tax purposes, income is imputed to each named executive officer for personal travel and “business-related” travel (travel by the officer’s spouse or adult guest who accompanies the officer on a business trip for the primary purpose of assisting the officer with the business purpose of the trip) for the excess, if any, of the Standard Industrial Fare Level (SIFL) value of all such flights during a calendar year over the aggregate fuel payments made by the officer during that calendar year. The Board of Directors and the FedEx executive security procedures require Mr. Smith to use FedEx corporate aircraft for all travel, including personal travel. Accordingly, FedEx reimburses Mr. Smith for taxes relating to any imputed income for his personal travel and the personal travel of his family members and guests when they are accompanying him (no such reimbursement payments have been made during the last three fiscal years). FedEx reimburses the other named executive officers for taxes relating to imputed income for business-related travel.

 

42  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

 

Security services and equipment: Pursuant to FedEx’s executive security procedures, the named executive officers are provided security services and equipment. To the extent the services and equipment are provided by third parties (e.g., out-of-town transportation and other security-related expenses and home security system installation, maintenance and monitoring), we have included in the table above the amounts paid by FedEx for such services and equipment. For Mr. Smith, these amounts totaled $28,661, $34,938 and $38,484 for fiscal 2017, 2016 and 2015, respectively. To the extent the security services are provided by FedEx employees, we have included amounts representing: (a) the number of hours of service provided to the officer by each such employee multiplied by (b) the total hourly compensation cost of the employee (including, among other things, pension and other benefit costs). For Mr. Smith, these amounts totaled $240,374, $262,731 and $232,198 for fiscal 2017, 2016 and 2015, respectively. For additional information regarding executive security services provided to Mr. Smith, see “— Compensation Discussion and Analysis — Compensation Elements and Fiscal 2017 Amounts — Perquisites, Tax Payments and Other Annual Compensation” above.

 

 

Tax return preparation services: FedEx requires officers to have their income tax returns prepared by a qualified third party (other than our independent registered public accounting firm) and pays all reasonable and customary costs for such services.

 

 

Financial counseling services: FedEx reimburses officers for certain financial counseling services, subject to various caps.

 

 

Umbrella insurance premiums: FedEx pays umbrella insurance premiums on behalf of officers.

 

 

Physical examinations: FedEx pays for officers to have comprehensive annual physical examinations.

 

 

Travel Privileges: FedEx provides certain executive officers and their spouses with travel privileges on certain airline partners. There is a small per-trip ticketing fee incurred by FedEx in connection with these privileges.

 

 

Supplemental Disability Benefits: FedEx provides executive officers with salary continuation benefits for short-term disability (100% of base salary for 28 weeks) and supplemental long-term disability benefits. Both benefit programs are self-funded (i.e., no premiums are paid to a third-party insurer) and thus there is no incremental cost to FedEx to provide these benefit programs.

The following table shows the amounts included in the table (the aggregate incremental cost to FedEx) for each such item:

 

Name

   Year      Personal
Use of
Corporate
Aircraft
($) (a)
     Security
Services and
Equipment
($)
     Tax Return
Preparation
Services
($)
     Financial
Counseling
Services
($)
     Umbrella
Insurance
Premiums
($)
     Other
($) (b)
    

Total 

($) 

 

F.W. Smith

     2017        134,281        269,035        44,854        50,000        2,607        0        500,777   
     2016        135,226        297,669        46,240        50,000        2,607        0        531,742   
       2015        0        270,682        38,979        50,000        2,607        0        362,268   

A.B. Graf, Jr.

     2017        133,916        11,441        8,891        12,148        2,607        0        169,003   
     2016        76,748        11,242        9,212        14,249        2,607        0        114,058   
       2015        71,990        71,055        10,514        11,311        2,607        0        167,477   

D.J. Bronczek

     2017        55,114        11,483        14,200        29,578        2,607        312        113,294   
     2016        71,754        25,696        0        0        2,607        264        100,321   
       2015        23,255        9,814        14,200        32,051        2,607        240        82,167   

R.B. Carter

     2017        20,221        86,806        3,250        14,445        2,607        144        127,473   
     2016        25,836        57,442        2,850        12,033        2,607        24        100,792   
       2015        0        38,836        2,850        28,182        2,607        72        72,547   

C.P. Richards

     2017        0        27,949        4,550        6,646        2,607        0        41,752   
     2016        0        27,175        3,375        0        2,607        0        33,157   
       2015        0        26,092        3,975        0        2,607        0        32,674   

T.M. Glenn

     2017        15,539        27,112        21,372        2,990        2,607        34,272        103,892   
     2016        2,213        124,207        21,580        2,782        2,607        984        154,373   
       2015        0        92,195        16,354        3,484        2,607        893        115,533   

 

  (a)

The amounts shown include the following amounts for use of corporate aircraft to attend board or stockholder meetings of outside companies or organizations for which the officers serve as directors for fiscal 2017: Mr. Graf — $101,164, Mr. Carter — $19,486 and Mr. Glenn — $7,923, and for fiscal 2016: Mr. Graf — $54,835. The entire amounts shown for Mr. Graf for fiscal 2015 and Mr. Carter for fiscal 2016, represent use of corporate aircraft to attend board or stockholder meetings of outside companies or organizations for which the officers serve as directors.

 

  (b)

For fiscal 2017, 2016 and 2015, includes physical examinations and/or ticketing fees for airline travel privileges. The amount for Mr. Glenn for fiscal 2017 also includes $34,200 for a retirement gift.

 

  2017 Proxy Statement       43


Table of Contents

EXECUTIVE COMPENSATION

 

The following table shows the tax payments relating to the items listed, which are included in the table:

 

Name

   Year      Restricted
Stock
($)
     Business-
Related
Use of
Corporate
Aircraft
($)
     Other
($)*
    

Total 

($) 

 

F.W. Smith

     2017        0        0        —          
     2016        0        0        —          
       2015        0        0        —          

A.B. Graf, Jr.

     2017        449,224        0        —         449,224   
     2016        473,496        0        —         473,496   
       2015        434,177        0        —         434,177   

D.J. Bronczek

     2017        579,603        0        —         579,603   
     2016        610,054        0        —         610,054   
       2015        559,473        0        —         559,473   

R.B. Carter

     2017        449,224        3,794        —         453,018   
     2016        473,496        2,242        —         475,738   
       2015        434,177        3,329        —         437,506   

C.P. Richards

     2017        449,224        0        —         449,224   
     2016        473,496        1,085        —         474,581   
       2015        434,177        0        —         434,177   

T.M. Glenn

     2017        449,224        14,497        24,715         488,436   
     2016        473,496        0        —         473,496   
       2015        434,177        0        —         434,177   

 

  *

The amount for Mr. Glenn for fiscal 2017 is the tax payment related to his retirement gift.

 

(6)

Ms. Richards is retiring effective September 30, 2017. In connection with her retirement, Ms. Richards and FedEx entered into a separation and release agreement, which is discussed under the caption “Retirements of T. Michael Glenn and Christine P. Richards” beginning on page 55.

 

(7)

Mr. Glenn retired on December 31, 2016. In connection with Mr. Glenn’s retirement, he entered into a consulting agreement, which is discussed under the caption “Retirements of T. Michael Glenn and Christine P. Richards” beginning on page 55.

 

(8)

In connection with his retirement, Mr. Glenn forfeited an aggregate of 47,183 options that had not yet vested, including 19,385, 12,008 and 9,635 options that were granted in fiscal 2017, 2016 and 2015, respectively.

 

44  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

Grants of Plan-Based Awards During Fiscal 2017

The following table sets forth information regarding grants of plan-based awards made to the named executive officers during the fiscal year ended May 31, 2017:

 

                   

 

Estimated Future
Payouts Under
Non-Equity Incentive
Plan Awards

   

All-Other
Stock
Awards:
Number of
Shares of

Stock or
Units
(#)

   

All Other
Option
Awards:
Number of
Securities
Underlying

Options
(#)

   

Exercise
or Base
Price of
Option

Awards
($/Sh) (1)

   

Closing
Price on
Grant

Date
($/Sh)

   

Grant 

Date Fair 

Value of 

Stock and 

Option 

Awards 

($) (2) 

 

Name

  Type of
Plan/Award
  Grant
Date
    Approval
Date
    Threshold
($)
    Target
($)
    Maximum
($)
           

F.W. Smith

  Stock Option (3)     06/06/2016       06/05/2016                                       156,210       162.82       163.27       6,564,913   
  FY17 AIC (4)         918,182       1,836,363       3,672,726            
    FY17–FY19 LTI (5)                     1,150,000       4,600,000       6,900,000                                          

A.B. Graf, Jr.

  Restricted Stock (6)     06/06/2016       06/05/2016             3,635             591,851   
  Stock Option (3)     06/06/2016       06/05/2016               19,385       162.82       163.27       814,678   
  FY17 AIC (4)         474,234       948,468       1,896,936            
    FY17–FY19 LTI (5)                     343,750       1,375,000       2,062,500                                          

D.J. Bronczek

  Restricted Stock (6)     06/06/2016       06/05/2016             4,690             763,626   
  Stock Option (3)     06/06/2016       06/05/2016               25,195       162.82       163.27       1,058,850   
  FY17 AIC (4)(7)         581,138       1,162,275       2,324,550            
    FY17–FY19 LTI (5)(7)                     491,667       1,966,667       2,950,000                                          

R.B. Carter

  Restricted Stock (6)     06/06/2016       06/05/2016             3,635             591,851   
  Stock Option (3)     06/06/2016       06/05/2016               19,385       162.82       163.27       814,678   
  FY17 AIC (4)         400,782       801,564       1,603,128            
    FY17–FY19 LTI (5)                     343,750       1,375,000       2,062,500                                          

C.P. Richards

  Restricted Stock (6)     06/06/2016       06/05/2016             3,635             591,851   
  Stock Option (3)     06/06/2016       06/05/2016               19,385       162.82       163.27       814,678   
  FY17 AIC (4)         364,378       728,756       1,457,512            
    FY17–FY19 LTI (5)                     343,750       1,375,000       2,062,500                                          

T.M. Glenn

  Restricted Stock (6)(8)     06/06/2016       06/05/2016             3,635             591,851   
  Stock Option (3)(9)     06/06/2016       06/05/2016               19,385       162.82       163.27       814,678   
  FY17 AIC (4)(10)         253,574       507,148       1,014,296            
    FY17–FY19 LTI (5)(10)                     66,836       267,346       401,019                                          

 

 (1)

The exercise price of the options is the fair market value of FedEx’s common stock (the average of the high and low prices of the stock on the New York Stock Exchange) on the grant date.

 

 (2)

Represents the grant date fair value of each equity-based award, computed in accordance with FASB ASC Topic 718. See note 2 to the Summary Compensation Table for information regarding the assumptions used in the calculation of these amounts.

 

 (3)

Stock options granted to the named executive officers generally vest ratably over four years beginning on the first anniversary of the grant date. The options may not be transferred in any manner other than by will or the laws of descent and distribution and may be exercised during the lifetime of the optionee only by the optionee. See “— Compensation Discussion and Analysis — Compensation Elements and Fiscal 2017 Amounts — Long-Term Equity Incentives — Stock Options and Restricted Stock” above for further discussion of stock option awards.

 

 (4)

In June 2016, the Board of Directors, upon the recommendation of the Compensation Committee, established this annual performance cash compensation plan, which provided a cash payment opportunity to the named executive officers at the conclusion of fiscal 2017. Payment amounts were based upon the achievement of company financial performance goals for fiscal 2017. See “— Compensation Discussion and Analysis — Compensation Elements and fiscal 2017 Amounts — Cash Payments Under Annual Incentive Compensation Program” above for further discussion of this plan, including actual payment amounts.

 

 (5)

The Board of Directors, upon the recommendation of the Compensation Committee, established this long-term performance cash compensation plan in June 2016. The plan provides a long-term cash payment opportunity to the named executive officers at the conclusion of fiscal 2019 if FedEx achieves an aggregate earnings-per-share goal established by the Board with respect to the three-fiscal-year period 2017 through 2019. No amounts can be earned under the plan until 2019 because achievement of the earnings-per-share goal can only be determined following the conclusion of the three-fiscal-year period. The estimated individual future payouts under the plan are set dollar amounts ranging from threshold (minimum) amounts, if the earnings-per-share goal achieved is less than target, up to maximum amounts, if the plan goal is substantially exceeded. There is no assurance that these estimated future payouts will be achieved. See “— Compensation Discussion and Analysis — Compensation Elements and Fiscal 2017 Amounts — Cash Payments Under LTI Program” above for further discussion of this plan.

 

  2017 Proxy Statement       45


Table of Contents

EXECUTIVE COMPENSATION

 

 (6)

Shares of restricted stock awarded to the named executive officers generally vest ratably over four years beginning on the first anniversary of the grant date. Holders of restricted shares are entitled to vote such shares and receive any dividends paid on FedEx common stock. FedEx pays the taxes resulting from a restricted stock award on behalf of the recipient (these tax payments are included in the “All Other Compensation” column in the Summary Compensation Table). See “— Compensation Discussion and Analysis — Compensation Elements and Fiscal 2017 Amounts — Long-Term Equity Incentives — Stock Options and Restricted Stock” above for further discussion of restricted stock awards.

 

 (7)

Mr. Bronczek, who became President and COO of FedEx on February 1, 2017, received a prorated fiscal 2017 AIC payout based on the portions of the year that he served as President and CEO of FedEx Express and as President and COO of FedEx. Mr. Bronczek’s payout opportunity under the FY17–FY19 LTI plan will be prorated based on the applicable fiscal years during which he served as President and CEO of FedEx Express (fiscal 2017) and President and COO of FedEx (fiscal 2018 and 2019).

 

 (8)

In accordance with the terms of FedEx’s 2010 Omnibus Stock Incentive Plan, the restrictions applicable to these shares lapsed upon Mr. Glenn’s retirement on December 31, 2016.

 

 (9)

These options were forfeited upon Mr. Glenn’s retirement.

 

(10)

Mr. Glenn, who retired effective December 31, 2016, received a prorated fiscal 2017 AIC payout based on the portion of fiscal 2017 during which he was employed. Mr. Glenn is eligible for a payout under the FY17-FY19 LTI plan based on the portion of the applicable three-fiscal-year period during which he was employed.

 

46  

    2017 Proxy Statement

 


Table of Contents

EXECUTIVE COMPENSATION

 

Outstanding Equity Awards at End of Fiscal 2017

The following table sets forth for each named executive officer certain information about unexercised stock options and unvested shares of restricted stock held at the end of the fiscal year ended May 31, 2017:

 

     Option Awards            Stock Awards  
     Number of Securities
Underlying
Unexercised
Options
(#)
     Number of Securities
Underlying
Unexercised
Options
(#)
   

Option
Exercise
Price

($)

    

Option
Expiration

Date

          

Number of
Shares or
Units of Stock
That Have
Not Vested

(#) (a)

   

Market Value of
Shares or Units of
Stock That Have
Not Vested

($) (b)

 

Name

   Exercisable      Unexercisable (a)              

F.W. Smith

     204,150              90.8100        06/02/2018                           
     271,750              56.3100        06/08/2019         
     195,500              78.1900        06/07/2020         
     176,100              89.1050        06/06/2021         
     198,675              85.2550        06/04/2022         
     152,835        50,945  (1)      96.8650        06/03/2023         
     79,742        79,743  (2)      143.5450        06/09/2024         
     33,130        99,390  (3)      180.8200        06/08/2025         
            156,210  (4)      162.8200        06/06/2026         

A.B. Graf, Jr.

     24,100              90.8100        06/02/2018         
     34,580              56.3100        06/08/2019         
     23,100              78.1900        06/07/2020         
     21,480              89.1050        06/06/2021         
     24,235              85.2550        06/04/2022         
     18,465        6,155  (5)      96.8650        06/03/2023         
     9,635        9,635  (6)      143.5450        06/09/2024         
     4,002        12,008  (7)      180.8200        06/08/2025         
            19,385  (8)      162.8200        06/06/2026         
                  9,646  (9)      1,869,781  

D.J. Bronczek

     1,101              90.8100        06/02/2018         
     46,555              56.3100        06/08/2019         
     30,775              78.1900        06/07/2020         
     28,450              89.1050        06/06/2021         
     32,100              85.2550        06/04/2022         
     24,480        8,160  (10)      96.8650        06/03/2023         
     12,772        12,773  (11)      143.5450        06/09/2024         
     5,307        15,923  (12)      180.8200        06/08/2025         
            25,195  (13)      162.8200        06/06/2026         
                  12,435  (14)      2,410,400  

R.B. Carter

     24,100              90.8100        06/02/2018         
     23,100              78.1900        06/07/2020         
     21,480              89.1050        06/06/2021         
     24,235              85.2550        06/04/2022         
     18,465        6,155  (15)      96.8650        06/03/2023         
     9,635        9,635  (16)      143.5450        06/09/2024         
     4,002        12,008  (17)      180.8200        06/08/2025         
            19,385  (18)      162.8200        06/06/2026         
                  9,646  (19)      1,869,781  

C.P. Richards

     21,480              89.1050        06/06/2021         
     18,465        6,155  (20)      96.8650        06/03/2023         
     9,635        9,635  (21)      143.5450        06/09/2024         
     4,002        12,008  (22)      180.8200        06/08/2025         
            19,385  (23)      162.8200        06/06/2026         
                  9,646  (24)      1,869,781  

T.M. Glenn

     9,635              143.5450        06/09/2024         
       4,002              180.8200        06/08/2025                           

 

  2017 Proxy Statement       47


Table of Contents

EXECUTIVE COMPENSATION

 

(a)

The following table sets forth the vesting dates of the options and restricted stock included in these columns:

 

          Date      Number                       Date      Number   

F.W. Smith

  (1)     06/03/2017        50,945        

A.B. Graf, Jr.

  (5)     06/03/2017        6,155   
  (2)     06/09/2017        39,871           (6)     06/09/2017        4,817   
      06/09/2018        39,872               06/09/2018        4,818   
  (3)     06/08/2017        33,130           (7)     06/08/2017        4,003   
      06/08/2018        33,130               06/08/2018        4,002   
      06/08/2019        33,130               06/08/2019        4,003