Good morning, ladies and gentlemen, and welcome to the annual stockholders meeting of FedEx Corporation. I'm Frederick Wallace Smith, Chairman of the Board and Chief Executive Officer of FedEx Corporation. We appreciate the interest of the stockholders who have come to the meeting, and thank you for being here. This meeting is being webcast live. I'd like to also welcome stockholders who have joined us via that webcast. Let me begin by introducing the other members of our board of directors. As I call your name, I'd appreciate each of you standing and being recognized. Jim Barksdale, John Edwardson, Marvin Ellison, Chris Inglis, Kim Jabal, Shirley Jackson, Brad Martin, Joshua Ramo, Susan Schwab, David Steiner, and Paul Walsh. Joining me on the stage is Christine Richards, our Executive Vice President, General Counsel and Corporate Secretary, who will act as Secretary of the meeting.
At the end of this month, Chris will be retiring after 33 years of service at FedEx, including over 12 years as our General Counsel. While we're certainly sorry to be losing her services as our trusted daily advisor and counselor, I personally, and the corporation, will always be grateful for the extraordinary contributions she's made, both as an individual and as the leader of a talented team of legal, government affairs, regulatory, and security professionals. Thanks again, Chris, for your service and dedication. We wish you good health and good luck in your retirement. Also joining me on stage is John Ruocco, Assistant Vice President and Senior Relationship Manager of Computershare Trust Company, our transfer agent, who has been appointed and duly sworn as Inspector of Election. John Ruocco has been the Inspector of Election how many years?
15-plus years.
Done a good job, too.
Thank you.
Representatives of EY are also present and available to answer appropriate questions that you may have of them as auditors of the company's fiscal year 2017 financial statements. As each of you entered the meeting room this morning, you were given a copy of the agenda and the annual meeting guidelines. The meeting will be conducted in accordance with the agenda and guidelines. If you've not received copies of those, please raise your hand and copies will be brought to you. I'll now call the meeting to order. Ms. Richards will report on the giving of notice for the meeting and the presence of a quorum.
Mr. Chairman, I have a complete list of the holders of record of the company's common stock at the close of business on July 31st, 2017, who are entitled to vote at this meeting. The list is arranged in alphabetical order and indicates the number of shares held by each stockholder. It was prepared and certified by Computershare Trust Company, the company's transfer agent for the common stock. I have also received an affidavit of a representative of Computershare, which states that on August 14th, 2017, the notice of annual meeting, the proxy statement, the proxy, the 2017 annual report, and a postage prepaid return envelope were mailed to the stockholders of record as of July 31st, 2017. A tabulation of the proxies received from stockholders indicates that the majority of the shares outstanding on the record date are represented at this meeting and a quorum is present.
Thank you, Chris. A copy of the affidavit will be filed with the records of this meeting. The polls for each proposal are now open at 8:03 Central Time on September 25, 2017. The proposals to be considered today are listed on the agenda and in the proxy materials previously distributed. If you've already submitted your proxy, your shares will be voted accordingly. If there is any stockholder present who has not yet voted and wishes to do so, please hold up your hand so that we may distribute ballots. Anybody in that category? If you previously voted by proxy, you do not have to fill out one of these ballots unless you wish to change your proxy vote. Do I have to go through the rest since there's nobody? Nobody here, so I don't.
The first matter to be taken up is the election of directors. 12 directors are to be elected today. A nominee will be elected to the board of directors if the number of votes cast for such nominee's election exceeds the number of votes cast against such nominee's election. If elected, each nominee will serve as a director until the 2018 annual meeting and until his or her successor is duly elected and qualified. The nominees are as follows: James L. Barksdale, John A. Edwardson, Marvin R. Ellison, John C. Inglis, Kimberly A. Jabal, Shirley Ann Jackson, R. Brad Martin, Joshua Cooper Ramo, Susan C. Schwab, Frederick W. Smith, David P. Steiner, and Paul S. Walsh. The next item of business is the proposal to approve on a non-binding basis an advisory resolution on named executive officer compensation as follows.
Resolved that the compensation paid to FedEx's named executive officers as disclosed in the company's proxy statement for the 2017 annual meeting of stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the accompanying compensation tables, and the related narrative discussion, is hereby approved. The third item of business is the proposal to approve, on a non-binding basis, the frequency of future advisory votes on executive compensation of either one, two, or three years. The fourth item of business is the proposal to approve an amendment to FedEx's 2010 Omnibus Stock Incentive Plan to increase the number of shares issuable under the plan. The next item of business is the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the company for the fiscal year ending May 31st, 2018.
Next item of business is the consideration of a stockholder proposal regarding shareholder proxy access revision. I will now ask a qualified representative of the proponent to present the proposal. Please limit the presentation of your proposal to three minutes. First, would you please identify yourself and provide the number of shares you represent?
Good morning. My name is Mari Schwartzer. I am here to represent the proponents. I am not the proponent of this proposal. Proposal six.
Excuse me. How many shares do you represent?
I don't know the proponent shares, the person who wrote this proposal.
Who is the proponent?
It's sponsored by Myra K. Young of Elk Grove, California.
What's your relationship to them?
They have asked me to present it on their behalf.
Do you do this as a living or what are you-
I'm here to present proposal number nine.
Okay.
I'm from NorthStar Asset Management. We are a socially responsible-
I've got it
investment firm based in Boston.
Good. Very efficient.
Since you're already coming, they asked me to present these proposals on their behalf because they're in California.
I was just curious. That was smart. Okay.
Go right ahead.
Resolved, shareholders ask the board of directors to revise its nominations of directors included in the corporation's proxy materials, bylaw, and other associated provisions to ensure the following. The number of shareholder-nominated candidates eligible to appear in proxy materials should be 25% of the directors then serving, or two, whichever is greater. There should be no limitation on the number of shareholders that can aggregate their shares to achieve the 3% minimum number of shares required to nominate. Current bylaws limit shareholder nominees to 20% of the 12-member board, or two. This proposal recommends 25% of directors then serving, or two, whichever is greater. In the case of FedEx, that would yield up to three candidates. Research suggests that three women may constitute a critical mass for reframing the decision-making culture of boards.
Similarly, having three shareholder-nominated directors may help ensure not only a participation on each of the committees, but a critical mass for bringing a shareholder perspective to board decisions. Current bylaws limit nominating groups to 20 members. The Council of Institutional Investors studied such provisions and found their members who hold an excess of $3 trillion in assets would not be able to meet the requirement of 3% held for three years with a 20-member limit. The proposal seeks removal of the cap on the number of members that can form a group. One thing few take into account is that shares are not consistently held. Funds frequently buy or sell shares. Looking at funds that held in the last reporting period does not tell you which funds have held significant amounts over the last 12 quarterly reporting periods.
No limits on the number of participants would give a voice to smaller funds and even individuals concerned with FedEx's sustainability. They can join together with like-minded investors. Remember, this would just get them on the proxy. As a shareholder, you would still help decide who gets elected. Increase shareholder value. Vote for proxy access enhancement, proposal six.
Thank you. The next item of business is the consideration of a stockholder proposal regarding a lobbying activity and expenditure report. I'll now ask a qualified representative of the proponent to present the proposal. Please limit the presentation of your proposal to three minutes. Could you identify yourself, please, and provide the number of shares you represent?
Good morning. I'm Dan Willett, representing the Teamsters General Fund, owner of 176 shares of stock. I'm speaking on behalf of proposal seven, calling for increased disclosure of lobbying activities and political expenditures. We are calling for an annual reporting of what are increasingly large amounts of money being spent by our company. For example, our company spent over $24 million in the last two years on federal lobbying. Our company had as many as 130 lobbyists registered to lobby in 30 states. In opposing Proposal 7, our board makes two arguments. One, that it already reports the information. Two, disclosure by FedEx and non-disclosure by competitors could put it at a competitive disadvantage. We respond that if the information is already disclosed, that it is disingenuous to argue this because that disclosure makes it easier to pull the information together for shareholders at minimal expense.
In regards to the argument of competitive disadvantage, we are caught between institutional powers that are calling for the other to move first. The U.S. Supreme Court, in explaining its decision on the case referred to as Citizens United, had Justice Kennedy suggesting that in the absence of federal oversight on political spending, shareholders should call on their companies to disclose. We come to our company with a proposal and are told by directors that unilateral disclosure is unwise. Caught between these two arguments, we can only point out that the amounts being spent by our company have risen to a level that must be considered significant as a standalone line item in the budget. We think the value of disclosure outweighs any cost that can be quantified of money to be lost by our company or made by our competitor as a result of disclosure.
We urge your support for Proposal 7. Thank you.
Thank you. The next item of business is the consideration of a stockholder proposal regarding executive pay confidential voting. I'll now ask a qualified representative of the proponent to present the proposal. Again, please limit the presentation of your proposal to three minutes. You've already identified yourself, so go right ahead.
Proposal 8, executive pay confidential voting, sponsored by John Chevedden of Redondo Beach, California. Shareholders request our board of directors to take steps necessary to adopt a bylaw that, prior to the annual meeting, the outcome of votes cast by proxy on certain executive pay matters, including a running tally of votes for and against, shall not be available to management or the board and shall not be used to solicit votes. Certain matters include the topics of say on executive pay and management-sponsored or board-sponsored resolutions seeking approval of executive pay plans. This proposal would not prohibit management access to shareholder comments submitted along with shareholder meeting ballots. This proposal is limited to executive pay items. Shareholders could still waive their confidentiality of their ballots on executive pay items. For instance, by checking a box on the ballot.
Our management can currently monitor incoming votes and then use shareholder money to blast shareholders with costly solicitations on matters where they have a direct self-interest, such as the ratification of lucrative stock options and to obtain artificially high votes for their lucrative executive pay. It is important for shareholders that the company get executive pay rights in order to give management the best-focused incentive for long-term shareholder value. Please vote to enhance shareholder value. Executive pay confidential voting, Proposal eight.
Thank you. The last item of business is the consideration of a shareholder proposal regarding application of company non-discrimination policies in states with pro-discrimination laws. I will now ask a qualified representative of the proponent to present the proposal. Go ahead.
Thank you. Again, my name is Mari Schwartzer from NorthStar Asset Management, a socially responsible investment firm based in Boston, and the beneficial owner of over $4.4 million of FedEx common stock. I am here to present resolution number nine, a proposal asking the company to set in place a plan to protect employee rights and shareholder value. In recent years, so-called religious freedom bills have been introduced or passed in parts of the United States. These bills actively discriminate against LGBT employees of our company, putting the employees as well as their partners and children at risk of violence and discrimination. We believe that there is a real risk to the company if we fail to consider whether our cherished LGBT employees will survive state-encouraged discrimination. Our company's policies protecting employees from discrimination are robust.
We fear that discriminatory legislation will harm employees' ability to bring their best selves to work. Here are some of the many things we are concerned about. LGBT employees residing in states where they can lose their housing if they choose to marry the person they love. The children of our LGBT employees who face harassment and physical violence because lawmakers in their home state are supporting discriminatory laws. LGBT employees whose families may be refused service, healthcare, and access to public facilities simply because of who they are. The cost of having to shut down operations in a state where laws have become increasingly discriminatory. Customer refusal to engage a FedEx employee because of their perceived sexual orientation or gender identity, which will harm the company and impact shareholder value.
We know that you understand the importance of employee morale and employee retention, in addition to shareholder and brand value. Our proposal buttresses all of these goals and allows company management additional opportunities to support our employees. At least 160 CEOs and business leaders signed a letter organized by the Human Rights Campaign, which urged Governor Pat McCrory and the North Carolina General Assembly to repeal the, quote, "Radical provisions in a deeply discriminatory law that was rammed through the legislature." End quote. It is this sort of action, speaking out against discrimination, that moved the state government to repeal HB2. The assault on the human rights and dignity of lesbian, gay, bisexual, and transgender people continues. Just this year, we have seen the administration introduce plans to ban transgender men and women from serving in the military in any capacity.
Not only do we need to protect our employees from discrimination while at work, but we owe it to them and to the health of our company to do what we can to ensure that they and their families are safe outside of our company grounds as well. North Carolina's infamous HB2 cost its state billions of dollars when businesses and events pulled their plans, and surely FedEx suffered losses from that as well. Without a peremptory plan to protect employees and/or remedy employee concerns of harassment situations outside of the workplace, the company puts itself and shareholder value at risk. We urge you to vote for proxy item number nine.
Thank you. Ladies and gentlemen, I'd like to open the floor to any discussion regarding these proposals. Any questions or comments relating to any of the proposals should be made at this time, not during the general question and answer period following the conclusion of the meeting. Please remember, questions or statements that are irrelevant to the business of the company or repetitious of questions or statements by other stockholders will not be permitted. If there are any questions or comments not directly related to these proposals, please defer them until after the conclusion of the meeting. The audience will be given the opportunity to ask general questions at that time. Yes, sir.
Hi, good morning. My name is Justin Danhof from the National Center for Public Policy Research, we encourage all the investors today to reject proposal number seven. It's time that someone speaks the truth to the lies that are presented in these proposals. The groups such as the Teamsters and Investor Voice are part of a broad network of liberal organizations that are attempting to use American corporations to silence speech and defund advocates of free enterprise. Following Citizens United, this network has filed hundreds of resolutions complaining about a so-called alleged lack of transparency and accountability in corporate lobbying and political activity. However, such groups never express concern about the billions of corporate dollars that go to fund liberal causes and politicians which they support. Herein lies their hypocrisy.
This liberal network abhors corporate speech when it is perceived to skew to the political right, but it remains silent when it supports leftists that they favor. Today, the Teamsters are attempting to conscript FedEx's shareholders into its efforts to defund the U.S. Chamber of Commerce and the American Legislative Exchange Council. These are groups that seek to improve America's business environment. The proponents claim that FedEx relationship with ALEC and the Chamber will expose the company to reputational risk. Considering that the proponent and its allies regularly smear the pro-business community promoted by ALEC and the Chamber, this is a circular argument with no basis in fact. The Chamber and ALEC seek to promote fair economic environment devoid of excess regulation and onerous corporate taxation. Such an environment would help, not harm the company. Proposal 7 holds no relevance to the company or its investors.
The proponents are simply trying to use us to censor speech that they can't otherwise because our Constitution protects it. Don't let this network silence speech and freedom of association by dictating FedEx's business relationships. Please vote no on proposal number 7. Just a quick comment on the final proposal. Freedom of religion has been one of the founding principles of this country since it was originated. Reject that one, too.
Thank you. Are there other comments on the proposals? Seeing none, I believe that concludes the discussion on the proposals. We will now have the Inspector of Election give a report on the preliminary voting results. We didn't have anybody receive ballots, so that's unnecessary, right? John?
Mr. Chairman, there are present at this meeting in person or by proxy, 237,943,359 shares of the company's common stock out of a total of 268,259,262 shares outstanding and entitled to vote. With respect to proposal 1, the election of directors, each director nominee received more votes cast for such nominee's election than against such nominee's election. With respect to proposal 2, the advisory resolution to approve named executive officer compensation, a majority of shares present in person or represented by proxy and entitled to vote have been voted in favor of this proposal. With respect to proposal 3, the advisory vote on the frequency of future advisory votes on executive compensation, majority of shares present in person or represented by proxy and entitled to vote have been voted in favor of an annual advisory vote on executive compensation.
With respect to Proposal 4, the approval of the amendment of the 2010 Omnibus Stock Incentive Plan, a majority of shares present in person or represented by proxy and entitled to vote have been voted in favor of this proposal. With respect to Proposal 5, the ratification of the appointment of the independent registered public accounting firm, a majority of the shares present in person or represented by proxy and entitled to vote have voted in favor of this proposal. With respect to Proposals 6 through 9, a majority of the shares present in person or represented by proxy and entitled to vote have voted against these proposals.
Thank you, Mr. Ruocco. Polls are closed. To summarize the voting results, each of the director nominees has been duly elected to serve as a director of the company. The advisory resolution to approve named executive officer compensation has been approved. An annual advisory vote on executive compensation has been approved. The amendment to the 2010 Omnibus Stock Incentive Plan has been approved. The appointment of Ernst & Young LLP as the independent registered public accounting firm of the company's fiscal year 2018 has been ratified. None of the stockholder proposals has been adopted. Please note that the voting results announced by Mr. Ruocco are preliminary. Final voting results will be included in a Form 8-K filed with the Securities and Exchange Commission following this meeting. Now, ladies and gentlemen, that concludes the official business portion of the meeting. There being no further business, the meeting is hereby adjourned.
I will conclude with some brief remarks and a corporate overview, followed by a general question and answer session. Again, thank you for attending the shareowners meeting. Fiscal 2017 was a great year for FedEx, and we're optimistic about the future. Last year, we delivered a great peak season with the highest volumes and service levels ever. We managed volumes and yields well. We made strategic investments in facilities and technology to position FedEx for more growth in the future. As a result, we boosted long-term value for our shareowners. We had three focus areas in fiscal year 2017: investments, integration, and innovation. We made strategic investments, especially to meet e-commerce demands. At FedEx Ground, we expanded our network and automation to give customers more capacity, efficiency, and flexibility. Our state-of-the-art facilities allow us to quickly adjust to volume fluctuations.
At FedEx Express, we upgraded our air fleet to improve margins and add operational flexibility. In fact, unit operating costs are down about 20% overall because of these investments. At FedEx Freight, we're improving efficiency to significantly boost margins by 2020. We've also added dimensioning technology to improve freight yields and automate the customer experience. We've invested in advanced safety technology for our fleet to avoid collisions and increase Freight's advantage of the fastest published transit times in the less-than-truckload industry. Regarding integration, recent acquisitions of TNT Express, FedEx Supply Chain, formerly GENCO, and FedEx Cross Border are having profound effects on our business. They fill strategic gaps in our global network and strengthen supply chain and e-commerce capabilities. We're making great progress with the TNT Express integration. 64 countries were integrated in the past fiscal year, and additional countries are coming on board this year.
We're capitalizing on the talent and expertise of former TNT executives, now about 40% of our international officers and managing directors team. We're targeting an operating income improvement in the Express segment of $1.2 billion to $1.5 billion in FY 2020 compared with FY 2017. Integrating FedEx Supply Chain with FedEx's transportation networks has broadened our portfolio of solutions. FedEx Fulfillment, based on extensive customer input, is a new way for us to support e-commerce companies of all sizes. The online platform makes monitoring logistics activity as easy as using a smartphone and helps customers simplify returns and serve international markets. The integration of Ground and SmartPost operations lets us use Ground contracted service providers to deliver a SmartPost package going to the same location on the same day, resulting in lower cost per delivery.
Residential e-commerce revenues are smaller than our B2B revenues, but it's the fastest-growing market segment and requires constant innovation to make delivery to consumers more efficient. We're expanding our FedEx OnSite network of convenient pickup and drop-off locations. This lets us deliver multiple packages to one location instead of a single package to individual residences. Our new Walgreens alliance will add close to 8,000 locations to the FedEx OnSite network by FY 2018 peak season. FedEx Delivery Manager means customers can use their mobile phone to track, schedule, reroute, and sign for packages remotely and receive delivery confirmations. FedEx Freight has bought more than 100 compressed natural gas tractors and installed a natural gas fueling station at our Oklahoma City service center, all in an effort to reduce our carbon footprint. FedEx Express is introducing new vehicle technologies and using conventional vehicles more efficiently.
Since we beat a fuel efficiency goal five years ahead of schedule, we're now setting a new one, and that is by 2025 to increase the FedEx Express vehicle fuel efficiency by 50% over a 2005 baseline. We must build on our FY 2017 successes by executing with precision for greater agility in the future. That means evolving our technology to make FedEx and our customers more productive and doing business together easier. It means flexing our portfolio of solutions to produce the best financial results for the overall enterprise. Our team members are key to that execution, and once again, their performance has been recognized by Fortune's naming FedEx as one of the world's most admired companies. Even with the achievements of FY 2017, we must manage some big issues that have significant consequences for our business. We'll continue to advocate for open trade, tax reform, and infrastructure upgrades.
The right approach on these issues will mean a more prosperous outlook, not only for FedEx, but for the United States and the world as a whole. Cyberattacks continue to be a major ongoing challenge. The world has changed, and cyberattacks are more destructive and virulent than ever. The attacks are coming from nation states as well as criminals and anarchists. Having fought the recent battles that affected our business, FedEx is better prepared than ever to safeguard our systems and information. We're collaborating with the best cybersecurity firms in the world and deploying the best cybersecurity tools. Also, we've empowered our information security teams to keep security a top priority. At the same time, we're educating our entire FedEx team with a Security is Everyone's Business campaign.
As September draws to a close, I'd like to again take this opportunity to say farewell to Christine Richards, our EVP, General Counsel, and Secretary since 2005. With the company for 33 years, she will retire at the end of this month. As I said in my opening remarks, she's been our trusted legal advisor, and her many contributions over the years have helped make FedEx the worldwide industry giant it is today. Chris was the leader of the legal team that negotiated an alliance agreement with the United States Postal Service that many thought could not be achieved, her innovative thinking in successfully defending FedEx against baseless criminal allegations has changed the way major corporations approach such matters. Please join me again in wishing Christine all the best in her well-deserved retirement.
On the 1st of October, Mark Allen will become Executive Vice President, General Counsel, and Secretary of FedEx Corporation. Mark has been with the company 35 years. Where's Mark? Stand up if you wouldn't mind, Mark. Mark's career has taken him around the globe from his first FedEx job in Memphis to General Counsel positions in Canada, Asia Pacific, and Europe, where he currently leads a team of international legal and security professionals as Senior Vice President and International General Counsel. From the start of his FedEx career, Mark recognized the important role that international would play in the long-term success of the company. He helped acquire Flying Tigers, and he led the team responsible for successfully blocking the attempted acquisition of TNT by UPS, and more recently, was instrumental in our subsequent acquisition of that company. Congratulations, Mark, and look forward to working with you.
Sum up, based on our achievements in FY 2017, FedEx has never been stronger, and our confidence never more certain. In FY 2018, we're continuing to invest, integrate, and innovate so that we can deliver greater value and more opportunity to share owners, customers, and team members in the years to come. Thank you. I'll now entertain any questions that you might have. Seeing no questions, I will thereby declare the meeting adjourned, and thank you for your attendance.