Proxy Blog

Fedex

September 6, 2018

The annual proxy for this courier delivery service had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Shareholder proposals on:
    -Lobbying disclosure
    -Written consent
    -Shareholder approval of bylaw changes 

Magni voted as follows: 

  1. Magni voted for the proforma proposals.
    -Directors. The board has a majority of independent directors and some have CEO/CFO experience with other companies. The compensation of directors is disclosed with a meaningful portion in equity where the equity has restrictions to align director incentives with long-term value creation. The compensation levels are set using a benchmarking process.
    -Auditors. There appear to be no controversies with the financial statements of the company.
    -“Say-on-pay” Advisory Vote. The proxy materials demonstrated that the board has considered the results of the “say-on-pay” proposal, though shareholder engagement on the topic should be more extensive. In addition, the proxy materials disclosed the benchmarking done on executive compensation, including listing the peer group used in the benchmarking.

  2. Magni voted for and against the shareholder proposals.
    -Against lobbying disclosure – This vote was very difficult. The shareholder proposal was too intrusive and appeared designed to restrict company activities, as opposed to simply disclosing lobbying. Currently, Fedex disclosures appear to meet minimum legal and regulatory requirements. It should be noted that the regulatory requirements appear stricter than in other industries. Good corporate governance is demonstrated by strong and clear disclosure without the disclosure limiting activities that management considers in the company’s best interests. Since the shareholder proposal is an overreach, Magni voted against it.
    -Against written consent – Shareholders making a written consent proposal generally believe the capability would improve responsiveness to shareholders. Magni believes written consent, if enacted by a company, could be used in ways that are counter to shareholder best interests and hence inconsistent with corporate governance best practices. Simply put, written consent potentially provides an opaque process for a limited number of shareholders with a slight majority to make changes. Magni will soon post a research article defining the firm’s position on written consent.
    -For shareholder approval of bylaw changes – This vote was also very difficult. The shareholder proposal expected every bylaw change to be submitted for shareholder approval. Further, the change couldn’t be effective until after a successful shareholder vote. A company could hypothetically become “hamstrung” on making noncontroversial changes in a timely manner. Fedex took the position that bylaw changes were the responsibility of the board, and the directors were best positioned to make the decision. If Fedex had instead stated that all changes will be reported to the shareholders, so the shareholders know what is changing, AND if Fedex had said that generally material changes would be taken to the shareholders for a vote (even on an advisory basis), then Magni would have easily voted against the proposal. Given the disconnect between the Fedex statement against the proposal and Magni standards for good shareholder relationships, Magni voted for it.