FedEx CEO pay cut by 91% for duration of COVID-19 crisis

FedEx Corp chairman and founder Fred Smith has taken a 91% pay cut for the next six months for the COVID-19 crisis, according to a document filed with the US Securities and Exchanges Commission (SEC).

The document states:

“On April 2, 2020, the independent members of the Board of Directors of FedEx Corporation, based upon the recommendation of its Compensation Committee and at the request of Frederick W. Smith, the Company’s Chairman of the Board and Chief Executive Officer, approved a 91% reduction in Mr. Smith’s base salary for the six-month period from April 1, 2020 to September 30, 2020.

“As a result, Mr. Smith’s base salary has been reduced from $115,402 per month to $10,728 per month for this six-month period, which will result in net pay of $1 per pay period after tax withholding and other deductions.”

The filing also summarises the impact of the pandemic on the company:

“The COVID-19 pandemic and the efforts to contain it have negatively impacted the global economy, disrupted manufacturing operations and global supply chains and created significant volatility and disruption of financial markets. In addition, the COVID-19 pandemic has significantly increased economic and demand uncertainty, potentially causing a global recession. As we focus on managing our business and operations in response to the COVID-19 pandemic, the safety of our employees, our customers and the communities in which we operate is our top priority. The COVID-19 pandemic and resulting significantly weaker global economic conditions have negatively impacted our results of operations and are expected to continue to impact our business, results of operations, cash flows and liquidity.

“Globally, business-to-business (B2B) demand across all of our transportation businesses has been negatively impacted by the COVID-19 pandemic. In the United States, while demand for FedEx Ground Package System, Inc. (“FedEx Ground”) residential delivery services has increased due to sharp increases in e-commerce volume resulting from shelter-in-place and other responsive measures, the shift in mix is expected to negatively impact margins and operating results. Due to the significant uncertainty caused by the COVID-19 pandemic and the related deterioration in global economic conditions, we have suspended forecasts for our results of operations, including forecasts for all of our operating segment results.

“Since March 17, 2020, business demand in Asia remains elevated due to backlogs caused by the COVID-19 pandemic and the impact of responsive measures in Asia in early calendar 2020, as well as decreases in cargo capacity on passenger airlines. However, due to weakening economic conditions in Europe and the United States and resulting decreases in demand for goods manufactured in Asia, there are no assurances that these increased levels of demand will be sustainable. 

“Demand in Europe has been negatively impacted by shelter-in-place and other responsive measures taken in response to the COVID-19 pandemic in many European countries.

“We remain well positioned to adjust to market conditions to assist our customers as they work to manage their supply chains and inventories. Due to the crucial role we play in moving supply chains and delivering critical relief, FedEx is considered an essential business and is continuing to operate under state-of-emergency and shelter-in-place orders recently issued in the U.S. and globally. We are flexing our network and making adjustments as needed to align with volumes and operating conditions. We are taking additional measures and incurring additional expense to protect the health and safety of our employees, contractors, and the public and are working with customers to accommodate special requests around modified store hours, closings, and delivery alternatives to comply with applicable government restrictions and safety guidance.

“We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial condition and results of operations, to be dictated by, among other things, its duration, the success of efforts to contain it and the impact of actions taken in response. While we are not able at this time to estimate the impact of the COVID-19 pandemic, an extended period of global supply chain and economic disruption could materially and adversely affect our business, results of operations, access to sources of liquidity and financial condition. In addition, an extended global recession caused by the COVID-19 pandemic would have a further adverse impact on our financial condition and operations.”