Annual Meeting: September 27, 2021

 FedEx Chairman and CEO Frederick Smith had total reported compensation of $14,235,537 for FY 21, including an option award of $8.8 million and a cash bonus of $3.4 million.

The International Brotherhood of Teamsters issued a letter to shareholders urging FedEx shareholders to vote against this pay package, contending that the Compensation Committee’s response to the COVID-19 pandemic has essentially resulted in double dipping on the annual bonus opportunity.

In June 2020, FedEx announced there would not be an FY21 Annual Incentive Compensation (AIC) plan for incentive officers due to the impact of COVID. Instead, the Compensation Committee awarded executives retention grants, including options award to Smith “for motivation and retention purposes.” The board then reversed course and reinstated the AIC for “the eligible team other than executive officers” in September. In December 2021, the Compensation Committee approved included the executive officers in the plan. The Teamsters argue this created an excessively lucrative and oversized compensation package for CEO Smith.

The Teamsters argue that no equity award should have been required. "Having founded the company, been chief executive since 1998 and holding an 8% equity stake, surely CEO Smith has the appropriate incentives to drive shareholder value," wrote the Teamsters general secretary-treasurer, Ken Hall, in the letter.

 “Of course, this compensation remains at risk, and has yet to vest,” Teamsters wrote. “But it points to a larger issue: why is it necessary, from a retention and incentive perspective, to provide CEO Smith with such large option awards, and a special award, to boot?”

FedEx has filed a supplemental statement in an appeal to convince shareholders that its course of action was reasonable.

Among the arguments the company makes, were that executive officers had not earned payout under annual incentive since 2018, and there was no payout under the 2018 to 2020 LTI plan. However, this is exactly how pay for performance is supposed to work. The performance didn’t meet thresholds, so pay was not awarded. The idea that a period of poor performance needs to be offset by an extra retention grant is deeply flawed.

Retention awards may be justified in some cases for particular employees, but as the Teamsters pointed out, it is unlikely that the company founder with his equity stake was likely to leave the company.  

The company also disclosed the fiscal 2021 annual total compensation of its median employee was $46,171 (including $8,609 in employer-provided health benefits), and the ratio of these amounts to CEO pay was 311:1.