Delivering an eyeful to FedEx shareholders…

July 25, 2011

When it comes to proxy filings, we tend to write about a key handful of topics: executive pay and perks, related-party transactions, and director compensation and oversight. Often we just look at one issue a time for a given company.

Then there are companies like FedEx (FDX), which give us a trifecta — and not exactly the good kind. In the preliminary proxy FedEx delivered to the Securities and Exchange Commission on Friday afternoon, the company tells investors about corporate-jet rides, high-end security services, and a $2.4 million tab for that part-time workforce known as its board of directors.

We’ll start with the perks. Although FedEx no longer gives Chairman and Chief Executive Frederick W. Smith a free sport-utility vehicle — chiefly because the manufacturer no longer supplies one free of charge — he and other top execs still got tax-return preparation ($43,750 for Smith; imagine the size of that 1040) and financial counseling services ($32,164 for Smith). Smith also got to bring some friends or family along on business trips on the corporate jet, at about $5,800 for the year. It’s worth noting that this is less than the free jet rides some other executives got, including Chief Financial Officer Alan B. Graf Jr. ($75,731) and Chief Information Officer Robert B. Carter ($50,529), and that, elsewhere, the proxy discloses that Smith reimbursed FedEx for his own personal use of the jet, to the tune of $246,000.

The big bucks for Smith’s perks, however, came in the form of “security services and equipment,” at $333,304. Some of this stemmed from services and equipment bought from third parties, including “out-of-town transportation and other security-related expenses and home security system installation, maintenance and monitoring”, at $41,927 in the last fiscal year.

But most of it is a tally of in-house costs, of $291,377, for services “provided by FedEx employees”, including:

“(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).”

While the total is down from recent years, most striking is the description of this perk elsewhere in the filing, which makes it clear that FedEx has an entire unit devoted to keeping its top officers safe. The proxy has little to say about exactly what this team does:

“the FedEx Corporate Security Executive Protection Unit provides certain physical and personal security services for Mr. Smith, including on-site residential security at his primary residence.”

Just one prior filing seems to provide any additional detail, the proxy filed in August 2008, which describes the unit as being “composed of highly trained and experienced security professionals…” We’re imagining a crack team of ex-military types wearing cool shades and sharp suits (in orange and blue?), driving souped-up FedEx trucks with puncture-proof tires and all the best Bond gadgets. That said, a little Googling around suggests a more prosaic approach, including this site listing a Security Specialist 2 job in Colorado (scroll down a little over halfway) in part to provide “the protection of Sr. Management as specified in the executive program as required.” Meantime, an Executive Protection Unit manager appears to be (or have been) on the board of Streets Ministries, a Memphis-area group serving kids in a poor part of town.

FedEx’s charitable endeavors go beyond the personal efforts of its security-program managers, of course. The company has extensive information about its philanthropic activities on its website — but the proxy makes clear that some of those support projects of a couple board members and one director’s spouse.

This past fiscal year, for example, FedEx promised $5 million — at $500,000 a year — to the Shelby Farms Park Conservancy, whose chairman is the wife of FedEx director J.R. Hyde III (who’s stepping down with the coming annual meeting). Meantime, FedEx contributed $530,000 to the National Civil Rights Museum — a fascinating and moving collection housed in the Memphis hotel where Dr. Martin Luther King Jr. was killed, and overseen in part by Hyde, who sits on its board.

But perhaps most interesting among FedEx’s nonprofit contributions is the $5 million it’s in the process of giving to Memphis Tomorrow (at $1 million a year), whose board members include Hyde and David J. Bronczek, head of the company’s FedEx Express unit. Memphis Tomorrow, the proxy says, was formed

“to bring top business leaders together with Memphis government and civic leaders to foster economic prosperity for the local community.”

That’s a noble goal, and no doubt good for Memphis, given FedEx’s resources. And yet, we can’t help but think that closer ties with Memphis government officials might have some benefits for FedEx as well.

To FedEx’s credit, the proxy also notes that it no longer considers Hyde to be an independent director after considering “the totality of the multiple relationships between FedEx and entities affiliated with Mr. Hyde…”

Hyde is just one of FedEx’s 10 board members, of course. Collectively, those 10 people received $2.4 million in cash and stock options from FedEx. In return, the full board met six times, as did the compensation committee, the Information Technology Oversight Committee and the Nominating & Governance Committee — presumably all around the same time as the board as a whole Only the Audit Committee seemed to put in more time, at 10 meetings.

That’s not at the top of the range for a big company — it doesn’t even begin to compare to the pay we’ve footnoted at Western Union (WU) or Cephalon (CEPH) , for example — but it still strikes us as a pretty nice part-time gig.

Image source: FedEx website

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