Teamster Shareholders Proposal Gets "Huge" Vote - September 28, 2007

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.