Teamsters Cite FedEx’s Poor Performance, Oversight Failures
The International Brotherhood of Teamsters today asked shareholders of FedEx Corporation to support the union’s proposal for an independent board chairman at FedEx’s upcoming annual meeting.
In a letter to shareholders, Teamsters General Secretary-Treasurer C. Thomas Keegel said that Frederick W. Smith’s dual role as chairman and chief executive of FedEx has resulted in a CEO-dominated board incapable of providing the rigorous, independent oversight of management that investors require. FedEx’s annual meeting will be September 28 in Memphis, Tennessee.
“FedEx’s lack of independent board leadership, compromised board independence and effectiveness, chronic poor performance, excessive executive pay, and questionable business strategies underscore the urgent need for an independent chairman to lead FedEx’s board in holding management accountable and providing strategic oversight and guidance,” Keegel said.
FedEx has significantly underperformed in the trucking and shipping industries, the S&P 500 Index, and compared to direct competitor United Parcel Service Inc. on a one-year, three-year, and five-year total shareholder returns basis, according to data from The Corporate Library (TCL), a leading provider of independent corporate governance research and analysis. Meanwhile, Smith has raked in exorbitant pay, accruing more than $84 million over the past three fiscal years while shareholder value has fallen by 50.2 percent. Profits made on the exercise of stock option grants with no performance hurdles make up the bulk of Smith’s pay.
The letter also raised concerns that Smith’s controlling influence on a board that includes potentially conflicted and over-extended directors has led the board to rubber stamp an unlawful and unsustainable business model at the company’s second-highest revenue generating business segment, FedEx Ground, which has exposed the company to staggering legal and financial risks.
The FedEx Ground business model, which relies on the misclassification of employee drivers as “independent contractors,” has allowed FedEx to evade expenses like payroll taxes, overtime pay and benefits. Numerous state courts and government agencies have found that FedEx Ground’s contractor model is a sham and are looking to collect the money owed to workers and states. According to an August 2008 Bloomberg article, the pre-tax liability from unpaid payroll taxes alone could reach as high as $2.5 billion.
“Many FedEx shareholders have already joined our call for independent board leadership, with 34 percent of the vote by shareholders supporting the Teamsters’ independent board chairman proposal in 2008,” Keegel said. “We believe that now, more than ever, an independent chairman is necessary for the company to successfully navigate the extraordinary legal, regulatory, reputation- and recession-related challenges facing FedEx.”