Teamster Shareholders Proposal Gets "Huge" Vote
The financial world fully digested the news around FedEx Corporation's annual shareholders' meeting. And the conclusions seem to depend on where you get your news.
Bloomberg got the company's perspective.
FedEx Corp. shareholders rejected proposals to separate the chairman and chief executive officer jobs at the second-largest U.S. package-delivery company and to give owners of the stock a greater voice on executive pay.
More than 177 million shares were voted against the International Brotherhood of Teamsters' plan to separate the roles of chairman and chief executive, while about 77.5 million were in favor, the Memphis, Tennessee-based company said. The results were tallied today at its annual meeting. FedEx founder Frederick W. Smith has held both jobs for 30 years.
``Today's vote is a strong show of support for Mr. Smith's combined role,'' said Jess Bunn, a company spokesman. ``The FedEx board of directors provides independent and effective oversight of FedEx's business and affairs, and separation of the chairman and CEO roles is not necessary.''
More balanced coverage came from the hometown Memphis newspaper.
Corporate governance observers say that the number of shares voting for the controversial changes was significant for a first-time vote and that change likely will occur.
Despite support for the resolutions from several proxy advisory firms, including RiskMetrics Group in New York, slightly more than 26 percent of the shares represented in the annual meeting Monday at the Hilton Memphis voted for a resolution brought by the International Brotherhood of Teamsters General Fund to separate the role of chairman and CEO.
Since 1998, company founder Frederick W. Smith has served as chairman and chief executive.
About 32 percent voted for a nonbinding referendum each year on executive pay.
"I would say these are huge votes," said Charles Elson at the Weinberg Center for Corporate Governance at the University of Delaware and a member of the AutoZone board of directors. "These are controversial issues. To get 30 percent or close to 30 percent is huge."
In both cases, the votes signal an increasingly sophisticated shareholder calling "for better board function and board monitoring," said Elson.
"I'm a little skeptical that shareholder voting gets you to the ultimate solution (on executive pay)," he said. "It should be done more through an open election process."
Subtracting the number of votes that the Teamsters say are controlled by Smith in the vote to separate the chairman/CEO roles, the group said it figured the vote was closer to 35 percent.
"You have to get beyond the personality of this particular leader," Teamster spokesman Louis Malizia said after the meeting. "You have to get beyond the idea that this is the founder's company. FedEx is publicly held company with a very diverse group of stockholders."
The Teamsters are pushing for an independent audit of the independent contractor model at FedEx Ground. With a chairman who is also the chief executive, the union says the board has not done enough to show what effect the various suits against its independent contractor model will have on share value.
"To get 30 percent or close to 30 percent is huge." Those are the words that thousands of FedEx employees read on Tuesday morning. This issue is not going away.
-- September 28
Straight Talk, Pure Fantasy & Questions that Won't Go Away
The IBT's day two story following yesterday's ho-hum FedEx Corp quarterly conference call sure knocked the "FedEx reported..." articles off the charts. As of 5:00, the Yahoo! finance page for FDX has two headlines about the IBT; the Money.cnn.com page for FDX has got six headlines and the News.google.com page for FDX has four headlines.
And in none of these articles will you find any FedEx spokes-podperson say what the incentives are. They will say that the Teamsters' figures are pure fantasy. But that is what is called a non-denial denial in the biz.
The unwillingness to come clean on how much money this illegal contractor model will cost FedEx is clear for all to see in the dismissive way that the company responded to the reporters following the IBT release. And this unwillingness to come clean on the liabilities is precisely the point of the IBT's shareholder resolution at the annual meeting next Monday. The lies, the secrecy, the delay deny and lose strategy are all issues that the Board of Directors should be handling on behalf of shareholders.
But CEO Fred Smith and Chairman of the Board Fred Smith agree that the IBT is out of line. The FedEx Corporation official response in its proxy (warning: big PDF file) is:
Separation of the Chairman of the Board and Chief Executive Officer roles is not necessary to ensure that our Board provides independent and effective oversight of FedEx's business and affairs...
The Board of Directors and its committee vigorously oversee the effectiveness of management policies and decisions, including the execution of key strategic initiatives...
Finally, we take issue with the proponent's (read: Teamsters) irrelevant and clearly self-serving reference to the purported class-action lawsuits and other proceedings that claim that FedEx Ground's owner-operators should be treated as employees and not independent contractors. Our Board of Directors has reveiwed FedEx Ground's independent contractor model and closely monitors the status of these proceedings...We strongly believe that FedEx Ground's owner-operators are properly classified as independent contractors and we continue to vigorously defend ourselves in these proceedings.
(Emphasis added just for chuckles. This proxy is from August 13. Guess all that vigor of defending the model in CA just wore them out.)
We wonder what the CEO Fred Smith told the Chairman Fred Smith or the rest of the Board about the California changes. The math of the California Ultimatum when applied to the nation sure add up quickly - $25,000 times 1055 single vehicle contractors in CA = $25,000,000 minimum while $XX,000 times (say) 10,000 SVCs in USA = $XXX,000,000.
Oh, and Maury, try reading FedExaminer. You might learn a thing or two. Like how much the incentives are for the California Ultimatum. Any CA driver who wants to contact the IBT should email to asap.
-- September 21
Dave Rebholz on California Ultimatum
So, how many FedEx Ground managers really knew what was coming down the pike in California? Not all of them. And some of them are talking to us. Here's what Dave Rebholz sent around yesterday
GROUNDNEWS/CORP/FXG
09/20/2007 12:11 PM
To
cc
Subject An important message from Dave Rebholz
We have some important news and I wanted to make sure you heard it from me first. For more than 20 years, this company and its independent contractors have formed a powerful competitive alliance that has clearly made its mark on the ground, small package delivery industry.
We strongly believe in the effectiveness of independent contractors and are vigorously defending our business model in the state of California. That said, in the face of growing legal and regulatory uncertainty, we must take further steps to strengthen our ability to continue operating with contractors in that state. Therefore, FedEx Ground is announcing today its goal of serving California customers exclusively through multiple work area contractors by fiscal year end May 31, 2008. Contractors with multiple vehicles and drivers on the road every day have greater flexibility in providing the high level of customer service expected from the FedEx Ground network.
In addition, we will no longer renew California single work area contracts as they expire. After exploring every available option, weʼve concluded that transitioning to an all multiple work area contractor workforce in California is the right thing to do.
We realize that being a multiple route business owner may not be for everyone. So, for those California-based single route contractors who donʼt wish to expand their business to operate multiple routes, they will be offered voluntary transition incentives to facilitate the sale or transfer of their routes and special support for disposition of their vehicles.We firmly believe that the independent contractor model at FedEx Ground is a mutually beneficial relationship and we will continue to invest in improving and strengthening the contractor network.
Dave Rebholz
President and CEO
"Uncertainty." Fred Smith said it to Wall Street analysts yesterday. Dave Rebholz clings to that word too. To them it sounds so much better than "losing."
But this whole kick in the teeth to "contractors" and "FedEx business partners" in California is both in response to uncertainty and is meant to create uncertainty. What this offer means to each driver in California is different based on each person's situation. This ultimatum in California and the 30 day timeline is intended to cause as much uncertainty to those drivers as possible. All those California folks need to get legal advice before signing anything or deciding to sell, buy or transfer anything.
FedEx obviously thought long and hard and planned for this. Be smart about your reaction to it.
-- September 21
More Mr. Smith Whining in Washington
"It was the rudest I've been treated in Congress."
So the Chairman of a House of Representatives Committe ignores Fred Smith's charms and persuasions. And Mr. Smith responds like a rejected date on a reality tv show. More desperation.
Congress changing hands in 2007 is another change in tide that is just as natural and predictible. But when the ones on top one day make enemies through their arrogance - especially enemies with long memories and committee seniority like Oberstar - then one shouldn't whine like a school girl when the enemies get their day on top.
The delivery giants and organized labor have battled over the issue before. FedEx Express briefly lost its airline status in the mid-1990s, but a Republican-controlled Congress reinstated it after a bitter fight with some pro-labor Democrats, including Oberstar. Oberstar said he "vowed at the time" to change the law if Democrats ever took control of Congress. He said he was "offended by FedEx's powerhouse lobbying in 1996 protecting themselves against any future organizing activities."
There is a lot to learn from reviewing the transcripts from the Senate showdown in 1996 over the FedEx sweetheart clause in the FAA bill that year. What goes around comes around, Mr. Smith.
-- September 14
