2016. Welcome to the annual stockholders meeting of FedEx Corporation. I think most of you know, I'm Frederick Wallace Smith, Chairman of the Board and CEO of FedEx Corporation. We appreciate the interest of the stockholders who have come to the meeting, and we thank you for being here. This meeting is being webcast live. I would also like to welcome our stockholders who have joined us via that webcast. Let me begin by introducing the other members of the FedEx Board of Directors. As I call your name, please stand and be recognized. Jim Barksdale? John Edwardson, Marvin Ellison, John Inglis, Kim Jabal, Shirley Jackson, Brad Martin, Joshua Ramo, Susan Schwab, David Steiner, and Paul Walsh. As you may know, Gary Loveman, who has been a member of our board of directors since 2007, has retired from the board effective today.
We thank Mr. Loveman for his service and dedication to FedEx and wish him well. Joining me on stage are Christine Richards, our Executive Vice President, General Counsel, and Corporate Secretary, who will act as Secretary of the meeting. 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. Representatives of Ernst & Young are also present and available to answer appropriate questions that you may have of them as auditors of the company's fiscal year 2016 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 those guidelines.
If you have not received copies of the agenda and guidelines, 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 of 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 August 1, 2016, 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 also have received an affidavit of a representative of Computershare, which states that on August 15, 2016, the notice of annual meeting, the proxy statement, the proxy, the 2016 annual report, and a postage prepaid return envelope were mailed to the stockholders of record as of August 1, 2016.
A tabulation of the proxies received from shareholders indicates that a majority of the shares outstanding on the record day are represented at this meeting, and a quorum is present.
Thank you, Ms. Richards. 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 A.M., Central Time, September 26, 2016. Proposals to be considered today are listed on the agenda and in the proxy materials previously distributed. If you have 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 we may distribute ballots. If you have previously voted by proxy, please do not fill out a ballot unless you wish to change your proxy vote. Anybody in that category? Since there are none, I don't have to even go through this next one, do I? Good. 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 2017 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.
So, the next item of business is the proposal to approve, on a non-binding basis, an advisory resolution on named executive officer compensations, compensation as follows: Resolved, that the compensation paid to FedEx's named executive officers. As disclosed in the company's proxy statement for the 2016 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. No, I think we go through all of these. Is that not right? And then we'll take questions on the proposal.
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 31, 2017. The fourth item of business is the consideration of a stockholder proposal regarding a lobbying activity and expenditure report. I will now ask a qualified representative of the proponents to present the proposal. Please limit the presentation of your proposal to 3 minutes. First, please identify yourself, the institution you represent, and the number of shares.
Mr. Chairman, my name is Louis Malizia, and I'm presenting this proposal on behalf of Clean Yield Asset Management and the International Brotherhood of Teamsters General Fund.
The number of shares?
I think. Oh, it's, I'm sure, in the statement. I'll get back to that.
Well, listen, you've been here before, and we trust you, so we're gonna-
I'm not.
So, you're a shareholder, and go ahead.
I'm not positive of the Clean Yield's number, so.
That's all right. Go ahead.
Mr. Chairman, we believe FedEx has a strong corporate responsibility record, demonstrated by the actions of the company taking on environmental, social, and governance issues. Unfortunately, with respect to transparency of its lobbying activities, FedEx is not displaying leadership, a situation our proposal seeks to rectify. This year's proxy currently tells investors where to find its lobbying expenditures each quarter on a Senate database. But there are significant gaps in what that database reveals. What we can piece together from the public record is the following: In the last 10 years, FedEx has spent over $128 million on lobbying, according to the Center for Responsive Politics. To date, in this year alone, FedEx has spent nearly $3 million. It's the 20th largest lobbyist among the more than 3,000 organizations tracked by the widely regarded Center for Responsive Politics.
These figures are not complete. They do not include state lobbying expenditures where disclosure is uneven or absent altogether. Although it is public information that our company spent over $500,000 lobbying in California alone in 2014 and 2015. These are significant expenditures from the corporate treasury. What did we spend our time and money lobbying for or against? Why not describe it to investors? FedEx does not disclose trade association payments used for lobbying, even though the proxy statement notes that accounting procedures are in place to record and monitor these expenditures for the organizations. It would be simple to add a list of trade associations to whom you pay significant dues and fees, such as the US Chamber of Commerce and the American Trucking Associations, and disclose the amount of the payment and the percent of that payment that is spent on lobbying.
This would render a far more thorough picture of FedEx's lobbying priorities than the partial and misleading that currently constitute this company's disclosure. We believe the ATA stance on misclassification of workers and the Chamber's anti-union efforts correlate to the company's high legal costs associated with FedEx Ground misclassification lawsuits, as well as court defeats and National Labor Relations Board challenges. Are these organizations leading FedEx down a treacherous and ill-advised path? Again, we cannot evaluate the extent of the company's financial and lobbying commitment because of the lack of transparency. FedEx is a board member of the US Chamber of Commerce, the country's largest lobby. Since 1998, the Chamber spent more than $1.2 billion on lobbying and $85 million in 2015 alone, making it the country's most active lobby.
This is particularly problematic because the Chamber has campaigned to block effective environmental regulation in the US and sued the EPA to stop the Clean Power Plan. This policy goal is accomplished. It'll undermine or even render meaningless FedEx's hard work to reduce its own carbon emissions from the aircraft and trucking fleets. The Chamber-
Thank you. That's your three minutes.
We urge fellow shareholders for support of this proposal. Thank you.
Thank you. The next item of business is the consideration of a stockholder proposal regarding simple majority vote counting. 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, please identify yourself and the institution you represent and provide the number of shares represented.
Mr. Chairman, I'm again, Louis Malizia. I'm standing here on behalf of the Newground Social Investment Forum to move proposal five, which seeks a democratic, simple majority voting standard for shareholder-sponsored items. One that counts votes cast either for or against, but does not include abstained votes in the formula. It must be pointed out that FedEx's vote counting policies are not mandated by Delaware law, as the proxy implies. It must also be pointed out FedEx has printed a falsehood in the proxy. The company claims that its vote counting methodology applies identically to management-sponsored proposals and stockholder proposals. However, management-sponsored proposal number one, which is the board election, uses a simple majority formula that is patently different from how shareholder-sponsored items are counted. Majority of Americans would agree that what's good for the goose is good for the gander.
Applied for FedEx, it would be fair to use the same formula for shareholder-sponsored items as is used for the board election. In addition, it would make voting both consistent and transparent, in contrast to the company's stilted two-formula policy, places shareholder items at a disadvantage compared to how directors are elected. Simple majority voting is superior because it neither distorts the channel of communication from shareholders to management, nor ignores voter intent by unilaterally counting every abstained vote as if against shareholder items. Judging by the number of shareholder proposals to be voted on today, it is clear that FedEx faces growing concern over a range of its practices, which makes it high time for the company to embrace this good governance measure that increases fairness, equity, and transparency.
Therefore, we recommend to vote for this common sense proposal, the same voting standard for shareholder items as is used for the board. Thank you.
I should note that the second proposal there was from by a different group than the first, right?
Yes, Newground is social investments.
Okay, good. Thank you. Next item of business is the consideration of a stockholder proposal regarding the Holy Land Principles. I'll now ask a qualified representative of the proponent to present the proposal. Please limit the presentation of your proposal to three minutes. First, please identify yourself, the institution you represent, and provide the number of shares represented.
My name is Father Sean McManus, representing the Holy Land Principles. God bless America. God bless FedEx. Good morning, Mr. Chairman, and all present here. The Holy Land Principles are pro-Jewish, pro-Palestinian, and pro-company. The principles do not call for quotas, reverse discrimination, divestment, disinvestment, or boycotts. The principles do not take any position on the solutions to the Israeli-Palestinian issue. The principles do not try to tell the Palestinians or the Israelis what to do. The Holy Land Principles only call for fair employment by companies doing business in Israel, Palestine. Let me repeat that. The Holy Land Principles only call for fair employment by American companies doing business in the Holy Land. Irrespective of what Americans think about the Palestinian-Israeli issue, one thing is certain: Americans expect American companies in the Holy Land to practice fair employment.
Yet incredibly, before we launched the Holy Land Principles, this issue had never been brought before FedEx or any other American company doing business in the Holy Land. Our resolution calls for FedEx to set the standard by signing and implementing the Holy Land Principles, which are based on the very effective MacBride Principles for Northern Ireland. Now, initially, American companies resisted signing the MacBride Principles, but now 116 companies, including FedEx, to its credit, has signed the MacBride Principles. So why would FedEx or any other, American company refuse to sign the Holy Land Principles? Last year, GE, Corning, and Intel tried to get the SEC to exclude the Holy Land Principles from their 2015 proxy materials. However, the SEC, standing for Truth, Justice, and the American Way, ruled in favor of the Holy Land Principles.
Father, I hate to say this, but you got to wind it up here to be fair to the other.
Therefore, you know, the Holy Land Principles are reasonable and eminently fair. Please vote for the Holy Land Principles. Thank you.
Thank you. The last item of business is the consideration of a stockholder proposal regarding application of company non-discrimination policies in states with pro-discrimination laws. I will now ask a qualified representatives of the, representative of the proponent to present the proposal.
A tabulation of the proxies received from shareholders indicates that a majority of the shares outstanding on the record day are represented at this meeting, and a quorum is present.
Thank you, Ms. Richards. 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 A.M. Central Time, September 26, 2016. Proposals to be considered today are listed on the agenda and in the proxy materials previously distributed. If you have 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 we may distribute ballots. If you have previously voted by proxy, please do not fill out a ballot unless you wish to change your proxy vote. Anybody in that category? Since there are none, I don't have to even go through this next one, do I? Good. 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 2017 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.
So, the next item of business is the proposal to approve, on a non-binding basis, an advisory resolution on named executive officer compensations, compensation as follows: Resolved, that the compensation paid to FedEx's named executive officers, as disclosed in the company's proxy statement for the 2016 annual meeting of stockholders pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, including the compensation discussion and analysis, the accompanying compensation tables, and the related narrative discussion, is hereby approved. No, I think we go through all of these. Is that not right? And then we'll take questions on the proposal.
Okay, thank you. The next item of business is the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm. Please limit the presentation of your proposal to three minutes. As before, please identify yourself, the organization you represent, and the number of shares represented.
Good morning. My name is Christine Jantz of NorthStar Asset Management. It's a socially responsible investment firm based in Boston, and the beneficial owner of over $5.4 million worth of FedEx Corporation common stock. I am here to present resolution number seven, a proposal asking for the company to set in place a plan to protect employee rights and shareholder value. In recent months, several religious freedoms bills have been introduced or passed in parts of the United States, which 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 real risk to the company if we fail to consider whether our cherished LGBT employees will survive statewide discrimination in housing, public accommodation, and the accompanying public harassment and humiliation.
Our company's policies protecting employees from discrimination are robust, yet we fear that discriminatory legislation will harm employees' ability to bring their best selves to work. Here are some of the many issues we are concerned about: LGBT employees residing in states where they can lose their housing if they choose to marry the person that they love. LGBT employees who face harassment, physical violence because lawmakers in their home state are supporting discriminatory laws. LGBT employees who may be refused service, healthcare, and access to public facilities simply because of who they are. Customers' refusal to engage with FedEx because a FedEx employee has a perceived sexual orientation or gender identity.
At least 160 CEOs and business leaders have signed a letter organized by the Human Rights Campaign, urging Governor Pat McCrory, North Carolina General Assembly, to repeal the, quote, "radical provisions in the deeply discriminatory law that was rammed through the legislature." Our company has yet to take a public stance on these discriminatory laws. We know that FedEx understands the importance of employee morale and employee retention. Without a preemptive plan to protect employees and/or remedy employee harassment, the company puts itself and shareholder value at risk. We urge you to vote for proxy item number seven.
Thank you. Now, ladies and gentlemen, I would 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, which we will have 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.
Question about Proposal 2 on the advisory vote on compensation.
Two minutes is the limit here.
Sure. Okay. FedEx compensation structure, we believe, suffers from several critical flaws, including lowball performance hurdles and an excessive focus on earnings per share, a performance measure that long-term investors increasingly consider a poor proxy for underlying long-term profitability. However, the most worrying factor for us is the Compensation Committee's decision to strip out nearly $500 million of legal costs from the earnings measure used to calculate our CEO's long-term bonus. These charges are not only a significant loss to shareholders, but stem, stem from strategic decisions to run a now failed independent contractor model at FedEx Ground. The fines, in other words, reflect real operational costs. It should be, we hope, that incentivizing long-term sustainable value creation demands that executives are exposed to the downside risk and liabilities incurred by their operational and strategic decisions, even if those costs occur in subsequent periods.
My question would be, to the Comp Committee, will they agree to include such costs when it calculates payouts under the 2016 to 2017 short-term plan and the 2016 to 2018 long-term incentive awards?
Let me make a comment or two about your issue, and then I'll ask Mr. Walsh, the chair of the Compensation Committee, if he wants to add anything on it.
Thanks.
First, the most important thing that you and the other stockholders' representatives should know is the board of directors of this company is composed of all independent outside directors other than myself. The Compensation Committee is composed completely of independent outside directors, and it employs a very distinguished outside consultant on how it conducts its business. On the issue that you mentioned, in particular, FedEx acquired Caliber RPS, which had been using the business model, which provided for individuals to come in and own a route and then develop their business and be successful, which was done many, many times, and that particular business model was defended successfully over 100 times.
The laws changed, in part because of the involvement of the group that you represent, and the business model that related to the charges you talked about has not been in use in FedEx since 2011. The compensation structure of the company is designed to focus on the core operations of the company. You chose me as an example. The reality is, all members of the management subject to the LTI were affected by this decision, but on the other side of the coin, you did not mention the puts and takes on the other sides. For instance, Compensation Committee yesterday was informed that the vast majority of companies who are repurchasing stock do not take that into account, and the people involved in incentive compensation benefit because the number of shares are declining and the EPS goes up.
The Compensation Committee and the board excluded those from the calculation of the incentive compensation, and I presume your proposal would not suggest to us that we reverse that particular issue.
Certainly not.
So the point is that the puts and takes involved in the Compensation Committee's deliberations are just that, puts and takes. But again, it's done by outside directors with the assistance of very good compensation executives. And the answer to your question, in short, is no, we will not reverse that decision since we have already voted on it. Paul Walsh, anything you want to add to that?
Nothing.
Nothing to add. Okay. Any other questions on these proposals? Okay, I believe that concludes the discussion of the proposals. We'll now have the inspectors of election give a report on the preliminary voting results. First of all, stockholders who received ballots, mark them and turn them in. If you still have a ballot, please raise your hand so we may pick them up. I don't think anybody is in that category to begin with, so I assume we now have all the ballots. Accordingly, I hereby declare the polls closed at 8:25 A.M. Central Time on September 26, 2016. I'll now ask the inspector of election to report on the preliminary voting results for each of the proposals.
Mr. Chairman, there are present at this meeting, in person or by proxy, 236,095,005 shares of the company's common stock out of a total of 265,547,382 shares outstanding and entitled to vote. With respect to Proposal 1, the election of directors, each director nominee received more cast votes 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 the shares present in person or represented by proxy, entitled to vote, have been, have been voted in favor of this proposal.
With respect to Proposal number three, the ratification and the appointment of independent registered public accounting firm, a majority of shares present in person or represented by proxy and entitled to vote, have voted in favor of this proposal. With respect to Proposals four through seven, the majority of shares present in person or represented by proxy and entitled to vote, have voted against these proposals.
Thank you, Mr. Ruocco. 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. The appointment of Ernst & Young LLP as the independent registered public accounting firm of the company for fiscal year 2017 has been ratified. None of the stockholder proposals have 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 U.S. 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, and I will conclude with some brief remarks and a corporate overview, followed by a general question-and-answer session.
Fiscal year 2016 was a pivotal year for FedEx Corporation, one that positioned the company to reach new heights. Overall, we achieved higher growth and profits despite a low growth economy. We said we'd finish FY 2016 with an annual run rate of $1.6 billion in FedEx Express additional profit, and we did that. We said we'd complete the TNT Express acquisition in the first half of calendar 2016, and we did that, too. We said we'd improve the corporation's margins, EPS, cash flows, and returns, and we did that as well. From FY 2014 through FY 2016, our stock repurchase program, and we've returned more than $8.8 billion to shareowners. Our strong balance sheet gives us the flexibility to do this, even while continuing to execute on our strategic growth initiatives.
TNT Express, the largest acquisition we've made, is transformative and strategically significant. TNT will expand our global portfolio of solutions in Europe, particularly by broadening our pickup and delivery density and lowering operational cost. We expect the acquisition to generate substantial improvements long-term in revenues, earnings, and shareowner value. Coupling TNT with the FY 2015 acquisitions of Schenker and Bongo, now rebranded as FedEx Cross Border, we have dramatically broadened our service offerings. Through our detailed post-acquisition planning process, we will continue to fully integrate TNT over the next few years, and we'd like to say thanks to our hardworking integration teams who are now making this happen. Equally important, we'd like to say welcome to the approximately 56,000 TNT team members who have joined FedEx. Each FedEx major operating company achieved great things in FY 2016, particularly in the expansion of our networks and technology.
At FedEx Express, our profit improvement plan, as I mentioned, have been very successful, and we intend to further increase Express margins. One way we're doing this is through fleet modernization. Every aircraft we replace with a new Boeing 767-300 freighter adds $ millions annually to profits, because the new planes use 30% less fuel and require less maintenance expense. At FedEx Ground, we've nearly tripled our market share of the Of the company for the fiscal year, ending May 31, 2017.
The fourth item of business is the consideration of a stockholder proposal regarding a lobbying activity and expenditure report. I will now ask a qualified representative of the proponents to present the proposal. Please limit the presentation of your proposal to three minutes. First, please identify yourself, the institution you represent, and the number of shares.
Mr. Chairman, my name is Louis Malizia, and I'm presenting this proposal on behalf of Clean Yield Asset Management and the International Brotherhood of Teamsters General Fund.
The number of shares?
I believe... Oh, it's. I'm sure in the statement. I'll get back to that.
Well, listen, you've been here before, and we trust you, so we're gonna-
I'm not.
Assume you're a shareholder and, go ahead.
I'm not positive of the Clean Yield's number.
That's all right. Go ahead.
Mr. Chairman, we believe FedEx has a strong corporate responsibility record, demonstrated by the actions of the company taking on environmental, social, and governance issues. Unfortunately, with respect to transparency of its lobbying activities, FedEx is not displaying leadership, a situation our proposal seeks to rectify. This year's proxy currently tells investors where to find its lobbying expenditures each quarter on a Senate database. But there are significant gaps in what that database reveals. What we can piece together from the public record is the following: In the last 10 years, FedEx has spent over $128 million on lobbying, according to the Center for Responsive Politics. To date, in this year alone, FedEx has spent nearly $3 million is the 20th largest lobbyist among the more than 3,000 organizations tracked by the widely regarded Center for Responsive Politics.
These figures are not complete. They do not include state lobbying expenditures where disclosure is uneven or absent altogether. Although it is public information that our company spent over $500,000 lobbying in California alone in 2014 and 2015. These are significant expenditures from the corporate treasury. What did we spend our time and money lobbying for or against? Why not describe it to investors? FedEx does not disclose trade association payments used for lobbying, even though the proxy statement notes that accounting procedures are in place to record and monitor these expenditures for the organizations. It would be simple to add a list of trade associations to whom you pay significant dues and fees, such as the US Chamber of Commerce and the American Trucking Associations, and disclose the amount of the payment and the % of that payment that is spent on lobbying.
This would render a far more thorough picture of FedEx's lobbying priorities than the partial and misleading that currently constitute this company's disclosure. We believe the ATA stance on misclassification of workers and the Chamber's anti-union efforts correlate to the company's high legal costs associated with FedEx Ground misclassification lawsuits, as well as court defeats and National Labor Relations Board challenges. Are these organizations leading FedEx down a treacherous and ill-advised path? Again, we cannot evaluate the extent of the company's financial and lobbying commitment because of the lack of transparency. FedEx is a board-
-- last 20 years. We continue to widen our competitive advantage by investing in highly automated facilities that quickly process Ground's growing package volumes. Also, we've begun to combine FedEx Ground and FedEx SmartPost networks for greater flexibility. Add to that, new routing technology that makes our deliveries more efficient, particularly in residential areas. FedEx Freight is the less-than-truckload market leader and continues to reshape the LTL industry, just as FedEx did in both the Express and Ground segments. We're offering customers more convenient shipping solutions, such as zone-based pricing, which allows customers to quickly find a rate for their shipment. The new FedEx Freight Box is a simplified way to ship LTL that increases security and shipment protection. To more accurately cost and price LTL shipments, we continue to expand our use of dimensional scanners.
At FedEx Services, we continue to sharpen our revenue management and pricing science, as well as revamping our information technology. For example, we're currently evaluating and executing a number of pricing initiatives to help us increase margins and profitability. We are also concentrating on simplifying and modernizing our IT systems to spend less on infrastructure and upgrades, and to lower costs over time. Our team members around the world enable these achievements by delivering the FedEx Purple Promise, which states simply, "I will make every FedEx experience outstanding." We thank them for their commitment and hard work. These efforts, I might add, resulted in FedEx placing number 8 on Fortune's Most Admired Companies list. We intend to continue to improve the efficiency and reliability of our global networks, which position FedEx to better provide innovative solutions to meet the growing demands of e-commerce.
In this regard, if e-commerce trends continue, 2016 will be the seventh consecutive year that online sales grew about 15% year-over-year. In 2018, e-commerce is forecasted to reach a worldwide merchandise value of $2.4 trillion, a 26% increase over this year. In turn, we're constantly expanding FedEx network capacity to handle such increases in e-commerce-generated shipments. Our operating companies are positioned to smoothly handle the upcoming peak season and ongoing e-commerce growth. For example, FedEx Office is preparing for large volumes of e-commerce shipments while making it easier for customers to pack, ship, and pick up packages. And we're also piloting neighborhood third-party retail locations for additional customer convenience.
With acquisitions and network growth, we've expanded our presence in the world, and we recently announced that our original color scheme of purple and orange will now be applied to all our operating companies' logos. Coincidence, I might add, had TNT using the exact color purple that FedEx uses. Research has shown that this is the color combination most customers associate with FedEx, and we'll complete this transition to the standard purple and orange logo in phases over the next 5 years. Summarizing FY 2016 in a sentence, I think we could say we've done what we said we'd do in terms of financial performance and acquisitions, along with networks, enhancements, and technology improvements. At FedEx, we have the ability to pick up, transport, and deliver an item to and from 95% of the human beings on the globe within a 1-2 business days.
Every time we add a node to our network, a hub, a station, that node is connected to every other node, resulting in an exponential increase in the number of potential connections. After all, as we often say, the business of FedEx is to connect people and possibilities around the world. With all we've accomplished in FY 2016, we're now ready to build on our achievements to create even greater success for our shareowners, our customers, and our teammates. Let me now turn to a few organizational items. First, as I mentioned earlier, Gary Loveman is retiring from our board today after nine years of service. He was here yesterday doing his duty on his committee assignments. Let me again thank Gary for his contributions and unwavering focus on increasing shareholder value over his nine years of service. We wish him great success in his new position at Aetna.
Mike Glenn, our Executive Vice President of Marketing, Sales, and Corporate Communications, and CEO of FedEx Services, has advised us he will retire on 31 December of this year. Now, Mike has worked for FedEx for 35 years and with me directly for 25 years. I have to tell you, our association has been one of the most pleasant and enjoyable of my business career. I will miss Mike greatly. His office is next to mine, and the almost daily interactions have been a source of great intellectual interest and enjoyment for me. No one has been more responsible for FedEx's growth and success than Mike, and he is admired and respected throughout the FedEx ranks, within our industry, and in the overall business community.
Mike was the architect of many of the FedEx strategies, initiatives, and programs that have literally changed the world's commerce. There is no one I admire more as a colleague and as a man. Mike's integrity, intelligence, work ethic, professional knowledge, team orientation, and commitment to the highest values are simply inspirational. In this regard, as many within FedEx and outside the company know, Mike and his wife, Donna, who's sitting here in the audience, have, for many years, dealt with the significant challenge of raising a special needs child. Tucker, Mike and Donna's oldest son, is here, and of course, the requirements of dealing with his sister have been a great challenge to this family. It is a measure of the man that Mike has decided he must devote even more time to his child's well-being and care.
I think no other thing Mike has done demonstrates his great character than this commitment to his family. I will have more to say about Mike on his last analyst call in December, and I can assure you, Mike will stay involved with FedEx in some meaningful way, but his unique skills require we make related organizational changes when he leaves active FedEx service. Before I announce those, though, I'd like for Mike to stand up here. Where is he? Now, regarding the organizational changes related to Mike's retirement in a few months, first, our Executive Vice President and Chief Information Officer and the current co-CEO of FedEx Services, Rob Carter, will become the FedEx Services CEO and then oversee the administration of the common IT, sales, solutions, marketing, and corporate communications services that are provided for our operating companies.
Second, given the increased breadth of FedEx Global Operations, given the TNT acquisition, Raj Subramaniam, our EVP of Marketing and Corporate Communications, and Don Colleran, EVP of Sales and Solutions, both of whom now report to Mike Glenn, will become members of the Strategic Management Committee, increasing that group from 10 to 11 officers. That will be effective on January 1, 2017. David Bronczek, the President and CEO of FedEx Express, will become President and Chief Operating Officer of FedEx Corporation in 15 months, on January 1, 2018. In the interim, Dave will chair our Revenue Management Committee upon Mike Glenn's retirement, December 31. When Dave assumes the FedEx Corporation President and COO role, the FedEx Express, FedEx Ground, and FedEx Freight CEOs will report to him, along with Raj, Don Colleran, and Gloria Boyland, our Corporate Vice President of Operations Support and Services.
At that time, Finance, Legal, IT, and our Corporate Vice President of HR will continue to report to me as the Chairman and CEO. These sequential changes will ensure continuity of our most important project within FedEx at present, the integration of TNT, which Dave Bronczek has overseen and will continue to do so over the critical 18 months following the acquisition, which was made, I think, on June 4 of last June. This will also allow Dave to ensure the new combined FedEx/TNT executive team is functioning well before handing over FedEx Express to its new CEO, who will be named in the fall of 2017. So thank you very much for those 35 years of incomparable service, Mike, and words can't express the appreciation we have for you and Donna and all the things you've meant to FedEx.
Now let me turn the floor over to any questions from anybody in the audience. State your name and who you represent, please.
Okay, Mr. Chairman, my name is Robert Barry. I am proxy for the International Brotherhood of Teamsters Local 710 Pension Fund, but I am also a Charlotte FedEx Freight employee of seven years.
Not from Charlotte, I take it?
I'm from Charlotte, yes.
Are you?
Yes. Charlotte FedEx Freight employee, seven years. Currently 2388567. I'm here today to raise to the board of directors and the shareholders a serious issue that I believe affects all of us at FedEx. It's the lack of affordable healthcare. As a cancer survivor who is 151 days in remission, it is an issue close to my heart and my family's heart. Your high deductible plan, implemented in 2014, has caused a burden on me and my coworkers' families. It has been noted in the Commercial Appeal, a Memphis newspaper, that the change was designed to slow down one of the company's fastest-growing expenses. The article is called FedEx Shifts Gears on Healthcare.
We are the people who helped this $50 billion corporation be so successful, and what was once a benefit is now a burden to me and more of your coworkers than you know about. I have incurred over $13,900 in the last two years in medical expenses, including out-of-pocket costs and payroll deductions of our, of our weekly paychecks. Our, our weekly, payroll deduction have risen 76% since 2010. This is a concession of 76%, and in 2017, that will rise to 84% concession being deducted out of our weekly paychecks. Deductibles have risen 380% since 2010, another employee concession here at FedEx.
Mr. Chairman, you seem to find plenty of money to support, to support a race car, a race team, a major golf tournament, a football stadium, of which you have a conflict of interest by being part owner of that team. But taking care of your employees, you can't seem to find the resources. Thank God I voted for the Teamsters, and we won our election in Charlotte because the Teamsters helped me in a time of need by raising money for me and my family to help me with the $13,000 that FedEx let me down on. Your health plan let me down. And when are you gonna start putting people first, Mr. Chairman?
So let me. That's - thank you. You can sit down now if you want to. Thank you. That, I'm certainly sorry you have the-
Member of the U.S. Chamber of Commerce, the country's largest lobby. Since 1998, the Chamber spent more than $1.2 billion on lobbying and $85 million in 2015 alone, making it the country's most active lobby. This is particularly problematic because the Chamber has campaigned to block effective environmental regulation in the U.S. and sued the EPA to stop the Clean Power Plan. This policy goal is accomplished. It'll undermine or even render meaningless FedEx's hard work to reduce its own carbon emissions from the aircraft and trucking fleets. The Chamber-
Thank you. That's your three minutes.
We urge fellow shareholders for support of this proposal. Thank you.
Thank you. The next item of business is the consideration of a stockholder proposal regarding simple majority vote counting. 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, please identify yourself and the institution you represent and provide the number of shares represented.
Mr. Chairman, I'm again Louis Malizia. I'm standing here on behalf of the Newground Social Investment Forum to move proposal 5, which seeks a democratic, simple majority voting standard for shareholder-sponsored items, one that counts votes cast either for or against, but does not include abstained votes in the formula. It must be pointed out that FedEx's vote counting policies are not mandated by Delaware law, as the proxy implies. It must also be pointed out FedEx has printed a falsehood in the proxy. The company claims that its vote counting methodology applies identically to management-sponsored proposals and stockholder proposals. However, management-sponsored proposal number 1, which is the board election, uses a simple majority formula that is patently different from how shareholder-sponsored items are counted. Majority of Americans would agree that what's good for the goose is good for the gander.
Applied for FedEx, it would be fair to use the same formula for shareholder-sponsored items as is used for the board election. In addition, it would make voting both consistent and transparent, in contrast to the company's stilted two-formula policy, places shareholder items at a disadvantage compared to how directors are elected. Simple majority voting is superior because it neither distorts the channel of communication from shareholders to management, nor ignores voter intent by unilaterally counting every abstained vote as if against shareholder items. Judging by the number of shareholder proposals to be voted on today, it is clear that FedEx faces growing concern over a range of its practices, which makes it high time for the company to embrace this good governance measure that increases fairness, equity, and transparency.
Therefore, we recommend to vote for this common sense proposal, the same voting standard for shareholder items as is used for the board. Thank you.
... I should note that the second proposal there was from by a different group than the first, right?
Yes, Newground Social Investment.
Okay, good. Thank you. Next item of business is the consideration of a stockholder proposal regarding the Holy Land Principles. I'll now ask a qualified representative of the proponent to present the proposal. Please limit the presentation of your proposal to three minutes. First, please identify yourself, the institution you represent, and provide the number of shares represented.
My name is Father Sean McManus, representing the Holy Land Principles. God bless America. God bless FedEx. Good morning, Mr. Chairman.
Listen, your family, but, as I said last year at this meeting, the basic reason that companies like FedEx, and we are just one among thousands and thousands who have moved to higher deductible plans, is because of the Affordable Care Act that was passed several years ago, with the support, I might add, of the International Brotherhood of Teamsters. The Affordable Care Act was designed to do something very simple. It was designed to take money from people who had good healthcare plans or could afford them and chose not to buy them, particularly young, healthy people, and move that money over to people who could not afford healthcare or could not get it. It's just that simple.
Second, you leave out an important aspect of our healthcare plan, and that is the savings accounts, which we put in place every year, that allow you to help mitigate some of those deductible expenses. Now, to the comment. You had your two minutes. That's the rules of the meeting. Now, the most important thing, presuming that you want to continue to work at FedEx, and I presume you do, because you had the interest to come here. The most important thing that we can do for you and the people of FedEx is to generate lots of freight, lots of packages, and lots of revenue that provide the wages and benefits that allow us to do things like, over the last two years, we had no increase last year in our healthcare costs borne by employees, and this year.
Where's Judy Edge here? How much is it? 4.3% this year. So I am sure. Are you a driver? Well, I'm sure you're a great driver. We're doing our best to give you the best technology, the safest equipment, and so forth. So please give us the credit that we're not idiots on spending money on race cars, on sports sponsorships, or whatever the things that you just listed for no good reason. Mike Glenn, who's one of the greatest marketeers in current American history and the most expert person in sports marketing, will tell you that every dollar that we spend on those sports marketing is designed to produce the traffic that you transport in your trucks. So that is simply unknown. You do not know how business operates if you want us to quit having customer hosting and advertising.
Within the context of the Affordable Care Act, we think we have done a good job of trying to balance the needs of our employees with the needs of the company. That's the answer to your question. Next question.
Mr. Chairman, Mike Thiemer, FedEx Road Driver, South Brunswick, New Jersey, representing the proxy of Amalgamated Trust Company, 145 shares. As far as a follow-up to Mr. Barry there.
Not a salvo, it's an answer to the question.
The Affordable Care Act, sir. Okay, we're self-insured. My name is Mike Thiemer, 14 years.
Wait a minute. I'm not sure you understand what I just said. The Affordable Care Act. Well, you go ahead and make your point here.
Do I get my time back?
You can get your time back. I'll give you 15 seconds more. How about that?
Thank you. We would like to know why our healthcare is driving so many employees into bankruptcy. We are a Fortune 500 company and a top 100 company to work for. With that being said, we must ask ourselves, why the average tenure with FedEx Freight is only 7-10 years. Why are there so many fundraisers going on for coworkers if our healthcare is so good? That being said, the word around FedEx is, FedEx gives, and FedEx takes back. Every time we get a raise, our healthcare costs go up. For us to be considered a Cadillac plan, we would exceed $27,000. The average cost by the company per driver is $14,000. That gives the company a $13,000 leeway to raise our healthcare better and lower our deductible. If the union carriers can do this, why can't FedEx?
I have a coworker who recently was diagnosed with multiple myeloma. Along with a heavy dose of chemotherapy once a week, his kidneys have also been affected, and he undergoes 5 hours of dialysis procedure three times a week. His disability is 60% of his pay, which already makes a loss of 40%. His wife does not work, and even if she did, she would have to go on FMLA to take care of him. Then the bills come in before he even leaves the hospital. That's when people start putting these charges on a charge card and getting into trouble with the credit card companies and filing bankruptcy.
That's your two minutes, plus your 15 seconds. Thank you very much.
Thank you.
So let me go to the comment that he made about the Affordable Care Act. When the Affordable Care Act was originally passed, again, with the strong support of organized labor, including the International Brotherhood of Teamsters, they put in a provision called the Cadillac tax, and what that meant was the Cadillac tax kicked in as an excise tax when healthcare plans reached a certain level. So the design of our healthcare plan after the ACA was done on the assumption that that would be put in place in 2018, and the cost of the program would be related to our hitting the Cadillac healthcare excise tax in 2018, which is a 40% tax.
The Congress, was it last year, changed the bar and moved that to 2020, which is one of the reasons that we had no healthcare increases last year and a very small healthcare increase this year. The examples you have are absolutely tragic, but our statistics show that the people who use up the maximum healthcare of their family and their deductibles and maximum out-of-pocket is 0.007. 0.007. So it is a tiny percentage. We, every year, look at our, benefit steering, board, looks at these benefits, cost and benefits, trade-off, and we'll continue to do so. But it's incorrect to say that the wage increases, which we are providing for our employees on average, are being eaten up by the healthcare plans. That's just factually incorrect.
So, of course, again, a tragic situation like you described, our hearts go out to them and, you know, we all wish that human life didn't have the kind of bad draws of the card that person had. But again, the Affordable Care Act has driven all of this. One of the things that you don't hear, you're talking about spending money one way or another. Alan Graf, our CFO, how much did we pay in new taxes as a result of the Affordable Care Act into that provision? Wasn't it $60 million?
$60 million.
It's $ tens of millions. So that money went from FedEx to pay for people who didn't have healthcare or couldn't afford it. Maybe the benefit steering committee, if it had. I think the number is $60 million, it sticks in my mind. Now, maybe it's not far off. That's about right, our chief of accounting. If we had that $60 million back, then maybe we'd have put it into a lower deductible or whatever the case may be. So it's just not as simple as you say, and many of the plans that you're comparing it to are legacy plans, which I can assure you, if the Cadillac tax comes into effect, are not going to stand any more than the Central States Teamsters pension plan stood, which is underfunded to an incredible degree.
Stuff happens, and you have to manage events the way they're dealt to you, and we've done the best job that we can, and I think we've done a fair job. Other questions?
Mr. Chairman, my name is Jorge Lopez, and I'm proxy for SEIU General Fund. I am a seven-year FedEx Freight driver from Stockton, California. The issue I would like to address to the shareholders and board of directors is a serious issue at our facility. Back in 2015, in March, my coworkers and I chose to exercise our federal right to unionize and won overwhelmingly our election. It's been a year and a half, and we have yet been able to sit down and bargain a fair contract. During that time, Stockton FedEx Freight Management has accrued numerous unfair labor charges filed with the National Labor Relations Board, to which we have prevailed on every count. Mr. Chairman, will you commit management to seriously engage the union and bargain in good faith as it is required by federal law?
You are discussing a legal issue, and accordingly, I'll ask the General Counsel to answer it.
All of our actions in connection with the actions at Stockton are in accordance with the requirements of the law under the National Labor Relations Act. We have proceeded through the process. We have responded to every unfair labor charge that has been made, and I respectfully disagree with your characterization of the outcome of those matters. The company stands ready and willing to bargain in good faith, but we are proceeding through the process to exercise our rights as permitted under that law. We appreciate you coming today and making this question.
Any other questions?
Mr. Chairman, my name is Patrick Harrington. I am a proxy for the Southwest Carpenters Pension Fund. I am a 21-year road driver for FedEx Freight in Charlotte, North Carolina. I want, I want to raise an issue that is deeply troubling to me, my coworkers and I, our retirement security. Our portable pension, which we started in 2008, is calculated on a minimum of six factors by FedEx, which includes the performance of the company, which allows for reductions, but as far as I can tell, not increases. There is absolutely no healthcare benefit available to us in retirement.
We have drivers and dock workers that because of this lack of medical coverage, medical bills could easily drown out our monthly pension checks, which incredibly, could be as low as $355 per month for an employee with 30 years of service to this company. My own pension benefit, as of last week, is $142 a month after 21 years of service. Mr. Chairman, will this company commit to reinstalling a defined pension plan or working with employees to set new parameters to our existing plan that will allow employees to retire with dignity and respect for the jobs we perform faithfully every day?
Let me ask you one question. Are you a former Watkins driver?
No, sir. I'm an American Freightways driver.
American Freightways driver. Well, I can't answer the particular question about the $300 you're talking about. You're taking an isolated example, which is the same situation over here. We unfortunately can't manage a company with 470,000 people by anecdote and you know, untoward issue. But to the best of my knowledge, our pension plan is extremely well-funded. It's an excellent plan. And again, I point out, you compare that to the Central States Teamster plan, which is going to run out of money in 10 years, and people are looking at anything, at getting 40% of their value. So if you'll send your particular inquiry in, we'll be glad to answer it to you, but I can't answer a specific question like that standing up here today. Sorry.
Thank you, sir.
Good morning. My name is Michael Thomas. I'm a ramp agent in the Indianapolis Hub. My question is not about healthcare. With the acquisition of TNT that you talked about, do you know if there will be any expansions going on within the U.S. network to compensate for that additional volume, or will most of that stay over there, or is it too soon to tell?
No, there'll be significant expansions in the U.S. because of that, and specifically in Indianapolis. As you may know, we've asked for a pilot for a significant expansion of the equipment installed in Indianapolis. I think $170 million and related facility expenses will make that expansion, if it's approved, $300 million. So that's on the griddle right now and exactly where you work. The acquisition of TNT is designed to do exactly what you said. It's designed to produce more volume for, in this particular case, with FedEx Express. That's what business is all about. That's why we sponsor NASCAR. That's why we acquired TNT. We're trying to make business decisions that allow us to grow the company, increase profitability, and we are committed to making that something that's good for our teammates, too.
It will definitely be a good thing for Indianapolis, that I can assure you.
Thank you.
Mr. Chairman, my name is Mel Mendieta. I'm a proxy for Service Employees International Union Pension Masters Trust. I'm a 26-year city driver out of Stockton, California. I'm here to address the shareholder and members of the board about management's lack of respect for freight drivers on a day-to-day basis. For example, they're forcing us to use our personal cell phones to conduct day-to-day businesses. Another one that's kind of disturbing is our service center manager. Just a couple weeks ago, on Employee Appreciation Week, he barbecued expired hamburgers, causing some of our drivers to get sick.
That's rough, I tell you.
While the surrounding-
I had a lot of bad food in the Marine Corps, but I can tell you, a bad hamburger is no good. Go ahead.
Especially while the surrounding service centers are having barbecued steak, chicken, taco bar, et cetera. This is one of the main reasons I voted for the union representation, to sit down and hammer out a fair agreement and address the needs of the drivers and the company. To date, my coworkers and I have been frustrated by management's lack of commitment to collective bargaining. First, through not recognizing a majority election for Teamster representation, by exhausting legal channels to overturn our vote, and then making it difficult for drivers to participate in negotiations by making it impossible schedules, demands, and barely spending any time at the actual table to discuss proposals. I have here over 1,000, maybe 1,500 signatures across the country, if I can leave them with you. Mr. Chairman, will you commit management and-
All present here?
The Holy Land Principles are pro-Jewish, pro-Palestinian, and pro-company. The principles do not call for quotas, reverse discrimination, divestment, disinvestment, or boycotts. The principles do not take any position on the solutions to the Israeli-Palestinian issue. The principles do not try to tell the Palestinians or the Israelis what to do. The Holy Land Principles only call for fair employment by companies doing business in Israel, Palestine. Let me repeat that. The Holy Land Principles only call for fair employment by American companies doing business in the Holy Land. Irrespective of what Americans think about the Palestinian-Israeli issue, one thing is certain: Americans expect American companies in the Holy Land to practice fair employment. Yet incredibly, before we launched the Holy Land Principles, this issue had never been brought before FedEx or any other American company doing business in the Holy Land.
Our resolution calls for FedEx to set the standard by signing and implementing the Holy Land Principles, which are based on the very effective MacBride Principles for Northern Ireland. Now, initially, American companies resisted signing the MacBride Principles, but now 116 companies, including FedEx, to its credit, has signed the MacBride Principles. So why would FedEx or any other American company refuse to sign the Holy Land Principles? Last year, GE, Corning, and Intel tried to get the SEC to exclude the Holy Land Principles from their 2015 proxy materials. However, the SEC, standing for Truth, Justice, and the American Way, ruled in favor of the Holy Land Principles.
Father, I hate to say this, but you got to wind it up here to be fair to the other-
Therefore, you know, the Holy Land Principles are reasonable and eminently fair. Please vote for the Holy Land Principles. Thank you.
Thank you. The last item of business is the consideration of a stockholder proposal regarding application of company non-discrimination policies in states with pro-discrimination laws. I will now ask a qualified representatives of the representative of the proponent to present the proposal.
Seriously engage in the union bargain in good faith, as required by federal law.
Well, first of all, I'm not going to accept any thousand signatures from anybody in this room. If you want to get me, you can email me. There are all kinds of channels to do that. The corporate secretary has already answered the question that you just posed.
Chairman, Christopher Buchmeyer, representing Chevy Chase Trust, and 89,605 shares. The question is to the general counsel. It was alluded to by one of the employees about the anti-worker, anti-union campaign. It is accurate that our company has not prevailed at any level of any litigation or anything in reference to the collective rights and the collective bargaining of the employees. We've spent $ millions and $ millions and $ millions on this, and it's to the point where, just on September twenty-second, the NLRB put a decision that said, "The real damage is done by permitting the kind of sandbagging that FedEx has gotten away with here." When will we stop sandbagging our employees' rights to their freedom of speech and freedom of association and put those $ millions back into the company and invest in our employees?
That question has been asked to two preceding people and answered. I mean, you're certainly welcome to make these questions. They're political statements, and we're gonna give you the same answer. You're involved in a legal process, and the legal process always has two sides. So Ms. Richards represents the company side. Presumably, you're the IBT represents the other side, so it is where it is. Next question.
Hello, my name is John Kern. I represent New York Carpenters Pension Fund. Over the past six years, shareholders have provided over $2.7 million in personal security benefits to our top executives. This is over and above nearly $1 million for personal use of corporate aircraft. The $300,000 or so that CEO receives annually is the largest security perks in corporate America. While our named executives are paid amounts above the median S&P 500 CEO, worth nearly $4 billion, I'm sure the CEO has more to lose than the average person from a burglary, but it's less than clear why shareholders should be paying to keep his billions safe. Accordingly, can the Compensation Committee explain why the payments are vital to attracting and retaining executives when our closest competitor, UPS, provides no such benefits?
Well, a couple of things here... First of all, a famous man one time said, "Anybody's entitled to their own opinion, but nobody's entitled to their own set of facts," and the facts you just relayed are incorrect. I pay out of my pocket, as described in the proxy, for personal use of the airplane. The only exception to that, if somebody is accompanying with me and the tax department concludes that that person, usually my wife, to an event, for a company matter, is subject to the U.S. Federal Aviation tax for tickets. But any purely personal use for the airplane, I pay for, and I think that was $367,000. Second, as to the personal security and the compensation, let me get to the latter first.
As I mentioned, our Compensation Committee is composed of completely independent. Please limit the presentation of your proposal to three minutes. As before, please identify yourself, the organization you represent, and the number of shares represented.
Good morning. My name is Christine Jantz of NorthStar Asset Management. It's a socially responsible investment firm based in Boston, and the beneficial owner of over $5.4 million worth of FedEx Corporation common stock. I am here to present resolution number seven, a proposal asking for the company to set in place a plan to protect employee rights and shareholder value. In recent months, several religious freedoms bills have been introduced or passed in parts of the United States, which 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 real risk to the company if we fail to consider whether our cherished LGBT employees will survive statewide discrimination in housing, public accommodation, and the accompanying public harassment and humiliation.
Our company's policies protecting employees from discrimination are robust, yet we fear that discriminatory legislation will harm employees' ability to bring their best selves to work. Here are some of the many issues we are concerned about: LGBT employees residing in states where they can lose their housing if they choose to marry the person that they love. LGBT employees who face harassment, physical violence because lawmakers in their home state are supporting discriminatory laws. LGBT employees who may be refused service, healthcare, and access to public facilities simply because of who they are. Customers' refusal to engage with FedEx because a FedEx employee has a perceived sexual orientation or gender identity.
At least 160 CEOs and business leaders have signed a letter organized by the Human Rights Campaign, urging Governor Pat McCrory, North Carolina General Assembly, to repeal the, quote, "radical provisions in the deeply discriminatory law that was rammed through the legislature." Our company has yet to take a public stance on these discriminatory laws. We know that FedEx understands the importance of employee morale and employee retention. Without a preemptive plan to protect employees and/or remedy employee harassment, the company puts itself and shareholder value at risk. We urge you to vote for proxy item number seven.
Thank you. Now, ladies and gentlemen, I would 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, which we will have 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.
Question about Proposal 2 on the advisory vote on compensation.
Two minutes is the limit here.
Sure. Okay. FedEx compensation structure, we believe, suffers from several critical flaws, including lowball performance hurdles and an excessive focus on earnings per share of performance-
Directors, we have no relationship other than the fact that they govern the compensation of the executives. Despite the Teamsters putting a letter out to attempt to persuade shareholders to vote against say on pay, our compensation programs, do you know what the percentage of votes was for our compensation program? It's about 95% as of the votes a few minutes ago. 95%. Third, in terms of the personal security situation, most of that is security that has to, under the rules, be provided when somebody is driving me around from one place to another, including today. We have 35,000 employees in the local area and around. That's what the security department says they want to do. It's done with the advice of a professional security firm, and that's what I agree to let them do.
It's as simple as that. And last, we don't have compensation anyplace close to the levels that you're talking about. Our base compensation for our named executive officers, and we looked at this just yesterday in the comp committee, is about at the 50th percentile of the market for our company. Now, we can make it up to the 75th percentile or get up to the 100th percentile, but your facts are just incorrect. So that's the answer to your question. Other things? Okay, well, we appreciate everybody being here today, and with that, we'll adjourn the meeting. Thank you. See you next year, God willing.
measure that long-term investors increasingly consider a poor proxy for underlying long-term profitability. However, the most worrying factor for us is the Compensation Committee's decision to strip out nearly $500 million of legal costs from the earnings measure used to calculate our CEO's long-term bonus. These charges are not only a significant loss to shareholders, but stem from strategic decisions to run a now failed independent contractor model at FedEx Ground. The fines, in other words, reflect real operational cost. It should be, we hope, that incentivizing long-term sustainable value creation demands that executives are exposed to the downside risk and liabilities incurred by their operational and strategic decisions, even if those costs occur in subsequent periods.
My question would be, to the Comp Committee, will they agree to include such costs when it calculates payouts under the 2016-2017 short-term plan and the 2016-2018 long-term incentive awards?
Let me make a comment or two about your your issue, and then I'll ask Mr. Walsh, the Chair of the Compensation Committee, if he wants to add anything on it.
Thanks.
First, the most important thing that you and the other stockholders' representatives should know is the board of directors of this company is composed of all independent outside directors, other than myself. The Compensation Committee is composed completely of independent outside directors, and it employs a very distinguished outside consultant on how it conducts its business. On the issue that you mentioned, in particular, FedEx acquired Caliber RPS, which had been using the business model, which provided for individuals to come in and own a route and then develop their business and be successful, which was done many, many times, and that particular business model was defended successfully over 100 times.
The laws changed, in part because of the involvement of the group that you represent, and the business model that related to the charges you talked about has not been in use in FedEx since 2011. The compensation structure of the company is designed to focus on the core operations of the company. You chose me as an example. The reality is, all members of the management, subject to the LTI, were affected by this decision. But on the other side of the coin, you did not mention the puts and takes on the other sides. For instance, Compensation Committee yesterday was informed that the vast majority of companies who are repurchasing stock do not take that into account, and the people involved in incentive compensation benefit because the number of shares are declining and the EPS goes up.
The Compensation Committee and the board excluded those from the calculation of the incentive compensation, and I presume your proposal would not suggest to us that we, that we reverse that particular issue.
Certainly not.
So the point is that the puts and takes involved in the Compensation Committee's deliberations are just that, puts and takes. But again, it's done by outside directors with the assistance of very good compensation executives. And the answer to your question, in short, is no, we will not reverse that decision since we have already voted on it. Paul Walsh, anything you want to add to that?
Nothing.
Nothing to add. Okay. Any other questions on these proposals? Okay, I believe that concludes the discussion of the proposals. We'll now have the Inspectors of Election give a report on the preliminary voting results. First of all, stockholders who received ballots, marked them, and turned them in, if you still have a ballot, please raise your hand so we may pick them up. I don't think anybody is in that category to begin with, so I assume we now have all the ballots. Accordingly, I hereby declare the polls closed at 8:25 A.M. Central Time on September 26, 2016. I'll now ask the Inspector of Election to report on the preliminary voting results for each of the proposals.
Mr. Chairman, there are present at this meeting, in person or by proxy, 236,095,005 shares of the company's common stock out of a total of 265,547,382 shares outstanding and entitled to vote. With respect to Proposal 1, the election of directors, each director nominee received more cast votes 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 the shares present in person or represented by proxy, entitled to vote, have been voted in favor of this proposal. With respect to Proposal Number Three, the ratification and the appointment of independent registered public accounting firm, a majority of shares present in person or represented by proxy and entitled to vote, have voted in favor of this proposal. With respect to Proposals Four through Seven, the majority of shares present in person or represented by proxy and entitled to vote, have voted against these proposals.
Thank you, Mr. Ruocco. 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. The appointment of Ernst & Young LLP as the independent registered public accounting firm of the company for fiscal year 2017 has been ratified, and none of the stockholder proposals have 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, and I will conclude with some brief remarks and a corporate overview, followed by a general question-and-answer session.
Fiscal year 2016 was a pivotal year for FedEx Corporation, one that positioned the company to reach new heights. Overall, we achieved higher growth and profits despite a low growth economy. We said we'd finish FY 2016 with an annual run rate of $1.6 billion in FedEx Express additional profit, and we did that. We said we'd complete the TNT Express acquisition in the first half of calendar 2016, and we did that, too. We said we'd improve the corporation's margins, EPS, cash flows, and returns, and we did that as well. From FY 2014 through FY 2016, our stock repurchase program, and we've returned more than $8.8 billion to shareowners. Our strong balance sheet gives us the flexibility to do this, even while continuing to execute on our strategic growth initiatives.
TNT Express, the largest acquisition we've made, is transformative and strategically significant. TNT will expand our global portfolio of solutions in Europe, particularly by broadening our pickup and delivery density and lowering operational cost. We expect the acquisition to generate substantial improvements long-term in revenues, earnings, and shareowner value. Coupling TNT with the FY 2015 acquisitions of GENCO and Bongo, now rebranded as FedEx Cross Border, we have dramatically broadened our service offerings. Through our detailed post-acquisition planning process, we will continue to fully integrate TNT over the next few years, and we'd like to say thanks to our hardworking integration teams who are now making this happen. Equally important, we'd like to say welcome to the approximately 56,000 TNT team members who have joined FedEx. Each FedEx major operating company achieved great things in FY 2016, particularly in the expansion of our networks and technology.
At FedEx Express, our profit improvement plan, as I mentioned, have been very successful, and we intend to further increase Express margins. One way we're doing this is through fleet modernization. Every aircraft we replace with a new Boeing 767-300 freighter adds $ millions annually to profits, because the new planes use 30% less fuel and require less maintenance expense. At FedEx Ground, we've nearly tripled our market share over the last 20 years. We continue to widen our competitive advantage by investing in highly automated facilities that quickly process Ground's growing package volumes. Also, we've begun to combine FedEx Ground and FedEx SmartPost networks for greater flexibility. Add to that new routing technology that makes our deliveries more efficient, particularly in residential areas.
FedEx Freight is the less-than-truckload market leader and continues to reshape the LTL industry, just as FedEx did in both the Express and Ground segments. We're offering customers more convenient shipping solutions, such as zone-based pricing, which allows customers to quickly find a rate for their shipment. The new FedEx Freight Box is a simplified way to ship LTL that increases security and shipment protection. To more accurately cost and price LTL shipments, we continue to expand our use of dimensional scanners. At FedEx Services, we continue to sharpen our revenue management and pricing science, as well as revamping our information technology. For example, we're currently evaluating and executing a number of pricing initiatives to help us increase margins and profitability. We are also concentrating on simplifying and modernizing our IT systems to spend less on infrastructure and upgrades and to lower costs over time....
Our team members around the world enable these achievements by delivering the FedEx Purple Promise, which states simply, "I will make every FedEx experience outstanding." We thank them for their commitment and hard work. These efforts, I might add, resulted in FedEx placing number 8 on Fortune's Most Admired Companies list. We intend to continue to improve the efficiency and reliability of our global networks, which position FedEx to better provide innovative solutions to meet the growing demands of e-commerce. In this regard, if e-commerce trends continue, 2016 will be the 7th consecutive year that online sales grew about 15% year-over-year. In 2018, e-commerce is forecasted to reach a worldwide merchandise value of $2.4 trillion, a 26% increase over this year. In turn, we're constantly expanding FedEx network capacity to handle such increases in e-commerce-generated shipments.
Our operating companies are positioned to smoothly handle the upcoming peak season and ongoing e-commerce growth. For example, FedEx Office is preparing for large volumes of e-commerce shipments while making it easier for customers to pack, ship, and pick up packages. We're also piloting neighborhood third-party retail locations for additional customer convenience. With acquisitions and network growth, we've expanded our presence in the world, and we recently announced that our original color scheme of purple and orange will now be applied to all our operating companies' logos. Coincidence, I might add, had TNT using the exact color purple that FedEx uses. Research has shown that this is the color combination most customers associate with FedEx, and we'll complete this transition to the standard purple and orange logo in phases over the next five years.
Summarizing FY 2016 in a sentence, I think we could say we've done what we said we'd do in terms of financial performance and acquisitions, along with networks, enhancements, and technology improvements. At FedEx, we have the ability to pick up, transport, and deliver an item to and from 95% of the human beings on the globe within 1-2 business days. Every time we add a node to our network, a hub, a station, that node is connected to every other node, resulting in an exponential increase in the number of potential connections. After all, as we often say, the business of FedEx is to connect people and possibilities around the world. With all we've accomplished in FY 2016, we're now ready to build on our achievements to create even greater success for our shareowners, our customers, and our teammates.
Let me now turn to a few organizational items. First, as I mentioned earlier, Gary Loveman is retiring from our board today after nine years of service. He was here yesterday doing his duty on his committee assignments. Let me again thank Gary for his contributions and unwavering focus on increasing shareholder value over his nine years of service. We wish him great success in his new position at Aetna. Mike Glenn, our Executive Vice President of Marketing, Sales, and Corporate Communications and CEO of FedEx Services, has advised us he will retire on 31 December of this year. Now, Mike has worked for FedEx for 35 years and with me directly for 25 years. I have to tell you, our association has been one of the most pleasant and enjoyable of my business career. I will miss Mike greatly.
His office is next to mine, and the almost daily interactions have been a source of great intellectual interest and enjoyment for me. No one has been more responsible for FedEx's growth and success than Mike, and he is admired and respected throughout the FedEx ranks, within our industry, and in the overall business community. Mike was the architect of many of the FedEx strategies, initiatives, and programs that have literally changed the world's commerce. There is no one I admire more as a colleague and as a man. Mike's integrity, intelligence, work ethic, professional knowledge, team orientation, and commitment to the highest values are simply inspirational.
In this regard, as many within FedEx and outside the company know, Mike and his wife, Donna, who's sitting here in the audience, have, for many years, dealt with the significant challenge of raising a special needs child. Tucker, Mike and Donna's oldest son, is here, and of course, the requirements of dealing with his sister have been a great challenge to this family. It is a measure of the man that Mike has decided he must devote even more time to his child's well-being and care. I think no other thing Mike has done demonstrates his great character than this commitment to his family. I will have more to say about Mike on his last analyst call in December.
I can assure you, Mike will stay involved with FedEx in some meaningful way, but his unique skills require we make related organizational changes when he leaves active FedEx service. Before I announce those, though, I'd like for Mike to stand up here. Where is he? Now, regarding the organizational changes related to Mike's retirement in a few months, first, our Executive Vice President and Chief Information Officer and the current co-CEO of FedEx Services, Rob Carter, will become the FedEx Services CEO and then oversee the administration of the common IT, sales solutions, marketing, and corporate communications services that are provided for our operating companies.
Second, given the increased breadth of FedEx Global Operations, given the TNT acquisition, Raj Subramaniam, our EVP of Marketing and Corporate Communications, and Don Colleran, EVP of Sales and Solutions, both of whom now report to Mike Glenn, will become members of the Strategic Management Committee, increasing that group from 10 to 11 officers. That will be effective on January 1, 2017. David Bronczek, the President and CEO of FedEx Express, will become President and Chief Operating Officer of FedEx Corporation in 15 months, on January 1, 2018. In the interim, Dave will chair our Revenue Management Committee upon Mike Glenn's retirement, December 31. When Dave assumes the FedEx Corporation President and COO role, the FedEx Express, FedEx Ground, and FedEx Freight CEOs will report to him, along with Raj, Don Colleran, and Gloria Boyland, our Corporate Vice President of Operations, Support, and Services.
At that time, Finance, Legal, IT, and our Corporate Vice President of HR will continue to report to me as the Chairman and CEO. These sequential changes will ensure continuity of our most important project within FedEx at present, the integration of TNT, which Dave Bronczek has overseen and will continue to do so over the critical 18 months following the acquisition, which was made, I think, on June 4 of last June. This will also allow Dave to ensure the new combined FedEx TNT executive team is functioning well before handing over FedEx Express to its new CEO, who will be named in the fall of 2017.
So thank you very much for those 35 years of incomparable service, Mike, and I just—words can't express the appreciation we have for you and Donna and all the things you've meant to FedEx. So now let me turn the floor over to any questions from anybody in the audience. State your name and who you represent, please.
Okay, Mr. Chairman, my name is Robert Barry. I am proxy for the International Brotherhood of Teamsters Local 710 Pension Fund, but I am also a Charlotte FedEx Freight employee of seven years.
Not from Charlotte, I take it?
I'm from Charlotte, yes.
Are you?
Yes, Charlotte FedEx Freight employee, seven years. Currently, 238-8567. I'm here today to raise to the board of directors and the shareholders a serious issue that I believe affects all of us at FedEx. It's the lack of affordable healthcare. As a cancer survivor who is 151 days in remission, it is an issue close to my heart and my family's heart. Your high deductible plan, implemented in 2014, has caused a burden on me and my coworkers' families. It has been noted in the Commercial Appeal, a Memphis newspaper, that the change was designed to slow down one of the company's fastest-growing expenses. The article is called FedEx Shifts Gears on Healthcare.
We are the people who helped this $50 billion corporation be so successful, and what was once a benefit is now a burden to me and more of your coworkers than you know about. I have incurred over $13,900 in the last two years in medical expenses, including out-of-pocket costs and payroll deductions of our, of our weekly paychecks. Our, our weekly, payroll deduction have risen 76% since 2010. This is a concession of 76%, and in 2017, that will rise to 84% concession being deducted out of our weekly paychecks. Deductibles have risen 380% since 2010, another employee concession here at FedEx.
Mr. Chairman, you seem to find plenty of money to support, to support a race car, a race team, a major golf tournament, a football stadium, of which you have a conflict of interest by being part owner of that team. But taking care of your employees, you can't seem to find the resources. Thank God I voted for the Teamsters, and we won our election in Charlotte, because the Teamsters helped me in a time of need by raising money for me and my family to help me with that $13,000 that FedEx let me down on. Your health plan. Let me down, and when are you going to start putting people first, Mr. Chairman?
So let me, that's thank you. You can sit down now if you want to. Thank you. That, I'm certainly sorry you have the illness in your family, but, as I said last year at this meeting, the basic reason that companies like FedEx, and we are just one among thousands and thousands who have moved to higher deductible plans, is because of the Affordable Care Act that was passed several years ago, with the support, I might add, of the International Brotherhood of Teamsters. The Affordable Care Act was designed to do something very simple. It was designed to take money from people who had good health care plans or could afford them and chose not to buy them, particularly young, healthy people, and move that money over to people who could not afford health care or could not get it.
It's just that simple. Second, you leave out an important aspect of our health care plan, and that is the savings accounts, which we put in place every year, that allow you to help mitigate some of those deductible expenses. Now, to the comment. You had your two minutes. That's the rules of the meeting.
Now, the most important thing, presuming that you want to continue to work at FedEx, and I presume you do because you had the interest to come here, the most important thing that we can do for you and the people of FedEx is to generate lots of freight, lots of packages, and lots of revenue that provide the wages and benefits that allow us to do things like, over the last two years, we had no increase last year in our healthcare costs borne by employees, and this year. Where's Judy Edge here? How much is it? 4.3% this year. So I am sure. Are you a driver? Well, I'm sure you're a great driver. We're doing our best to give you the best technology, the safest equipment, and so forth.
So please give us the credit that we're not idiots on spending money on race cars, on sports sponsorships, or whatever the things that you just listed for no good reason. Mike Glenn, who's one of the greatest marketeers in current American history and the most expert person in sports marketing, will tell you that every dollar that we spend on those sports marketing is designed to produce the traffic that you transport in your trucks. So that is simply unknown. You do not know how business operates if you want us to quit having customer hosting and, and advertising. So within the context of the Affordable Care Act, we think we have done a good job of trying to balance the needs of our employees with the needs of the company. So that's the answer to your question. Next question.
Mr. Chairman, Mike Thiemer, FedEx road driver, South Brunswick, New Jersey, representing the proxy of Amalgamated Trust Company, 145 shares. As far as a follow-up to Mr. Barry there-
Not a salvo, it's an answer to the question.
The Affordable Care Act, sir. Okay, we're self-insured. My name is Mike Thiemer, 14 years-
Wait a minute. I'm not sure you understand what I just said. The Affordable Care Act... Well, you go ahead and make your point here.
Do I get my time back?
You can get your time back. I'll give you 15 seconds more. How about that?
Thank you. We would like to know why our healthcare is driving so many employees into bankruptcy. We are a Fortune 500 company and a top 100 company to work for. With that being said, we must ask ourselves why the average tenure with FedEx Freight is only 7-10 years. Why are there so many fundraisers going on for coworkers if our healthcare is so good? That being said, the word around FedEx is, FedEx gives, and FedEx takes back. Every time we get a raise, our healthcare costs go up. For us to be considered a Cadillac plan, we would exceed $27,000. The average cost by the company per driver is $14,000. That gives the company a $13,000 leeway to raise our healthcare better and lower our deductible. If the union carriers can do this, why can't FedEx?
I have a coworker who recently was diagnosed with multiple myeloma. Along with a heavy dose of chemotherapy once a week, his kidneys have also been affected, and he undergoes 5 hours of dialysis procedure 3 times a week. Disability is 60% of his pay, which already makes a loss of 40%. His wife does not work, and even if she did, she would have to go on FMLA to take care of him. Then the bills come in before he even leaves the hospital. That's when people start putting these charges on a charge card and getting into trouble with the credit card companies and filing bankruptcy.
That's your 2 minutes, plus your 15 seconds.... Thank you very much. Thank you. So let me go to the comment that he made about the Affordable Care Act. When the Affordable Care Act was originally passed, again, with the strong support of organized labor, including the International Brotherhood of Teamsters, they put in a provision called the Cadillac Tax. And what that meant was the Cadillac tax kicked in as an excise tax when healthcare plans reached a certain level. So the design of our healthcare plan after the ACA was done on the assumption that that would be put in place in 2018, and the cost of the program would be related to our hitting the Cadillac healthcare excise tax in 2018, which is a 40% tax.
The Congress, last year, changed the bar and moved that to 2020, which is one of the reasons that we had no healthcare increases last year and a very small healthcare increase this year. The examples you had are absolutely tragic, but our statistics show that the people who use up the maximum healthcare of their family and their deductibles and maximum out-of-pocket is 0.007. 0.007. So it is a tiny percentage. We, every year, look at our Benefit Steering Board, looks at these benefits, cost and benefits trade-off, and we'll continue to do so. But it's incorrect to say that the wage increases, which we are providing for our employees on average, are being eaten up by the healthcare plans. That's just factually incorrect.
So, of course, again, a tragic situation like you described, our hearts go out to them, and you know, we all wish that human life didn't have the kind of bad draws of the card that that person had. But again, the Affordable Care Act has driven all of this. One of the things that you don't hear, you're talking about spending money one way or another. Alan Graf, our CFO, how much did we pay in new taxes as a result of the Affordable Care Act into that provision? Wasn't it $60 million?
$60 million.
It's tens of millions of dollars. So that money went from FedEx to pay for people who didn't have healthcare or couldn't afford it. Maybe the busi-- the Benefit Steering Committee, if it had. I think the number is $60 million, it sticks in my mind. Now, maybe it's not far off. That's about right, our Chief of Accounting. If we had that $60 million back, then maybe we'd have put it into a lower deductible or whatever the case may be. So it's just not as simple as you say, and many of the plans that you're comparing it to are legacy plans, which I can assure you, if the Cadillac tax comes into effect, are not going to stand any more than the Central States Teamsters pension plan stood, which is underfunded to an incredible degree.
Stuff happens, and you have to manage events the way they're dealt to you, and we've done the best job that we can, and I think we've done a fair job. Other questions?
Mr. Chairman, my name is Jorge Lopez, and I'm proxy for SEIU General Fund. I am a seven-year FedEx Freight driver from Stockton, California. The issue I would like to address to the shareholders and board of directors, board of directors, is a serious issue at our facility. Back in 2015, in March, my coworkers and I chose to exercise our federal right to unionize and won overwhelmingly our election. It's been a year and a half, and we have yet been able to sit down and bargain a fair contract. During that time, Stockton FedEx Freight Management has accrued numerous unfair labor charges filed with the National Labor Relations Board, to which we have prevailed on every count. Mr. Chairman, will you commit management to seriously engage the union and bargain in good faith, as it is required by federal law?
You are discussing a legal issue, and accordingly, I'll ask the general counsel to answer it.
All of our actions in connection with the actions at Stockton are in accordance with the requirements of the law under the National Labor Relations Act. We have proceeded through the process. We have responded to every unfair labor charge that has been made, and I respectfully disagree with your characterization of the outcome of those matters. The company stands ready and willing to bargain in good faith, but we are proceeding through the process to exercise our rights as permitted under that law. We appreciate you coming today and making this question.
Any other questions?
Mr. Chairman, my name is Patrick Harrington. I am a proxy for the Southwest Carpenters Pension Fund. I am a 21-year road driver for FedEx Freight in Charlotte, North Carolina. I want, I want to raise an issue that is deeply troubling to me, my coworkers and I, our retirement security. Our portable pension, which we started in 2008, is calculated on a minimum of six factors by FedEx, which includes the performance of the company, which allows for reductions, but as far as I can tell, not increases. There is absolutely no healthcare benefit available to us in retirement.
We have drivers and dock workers that because of this lack of medical coverage, medical bills could easily drown out our monthly pension checks, which incredibly, could be as low as $355 per month for an employee with 30 years of service to this company. My own pension benefit, as of last week, is $142 a month after 21 years of service. Mr. Chairman, will this company commit to reinstalling a defined pension plan or working with employees to set new parameters to our existing plan that will allow employees to retire with dignity and respect for the jobs we perform safely every day?
Let me ask you one question. Are you a former Watkins driver?
No, sir. I'm an American Freightways driver.
American Freightways driver. Well, I can't answer the particular question about the $300 you're talking about. You're taking an isolated example, which is the same situation over here. We unfortunately can't manage a company with 470,000 people by anecdote and you know, untoward issue. But to the best of my knowledge, our pension plan is extremely well-funded. It's an excellent plan. And again, I point out, you compare that to the Central States Teamster plan, which is going to run out of money in 10 years, and people are looking at anything, at getting 40% of their value. So if you'll send your particular inquiry in, we'll be glad to answer it to you, but I can't answer a specific question like that standing up here today. Sorry.
Thank you, sir.
Good morning. My name is Michael Thomas. I'm a ramp agent in the Indianapolis hub. My question is not about healthcare. With the acquisition of TNT that you talked about, do you know if there will be any expansions going on within the US network to compensate for that additional volume, or will most of that stay over there, or is it too soon to tell?
No, there'll be significant expansions in the U.S. because of that, and specifically in Indianapolis. As you may know, we've asked for a pilot for a significant expansion of the equipment installed in Indianapolis. I think $170 million and related facility expenses will make that expansion, if it's approved, $300 million. So that's on the griddle right now and exactly where you work. The acquisition of TNT is designed to do exactly what you said. It's designed to produce more volume for, in this particular case, with FedEx Express. That's what business is all about. That's why we sponsor NASCAR. That's why we acquired TNT. We're trying to make business decisions that allow us to grow the company, increase profitability, and we are committed to making that something that's good for our teammates, too.
So it will definitely be a good thing for Indianapolis, that I can assure you.
Thank you.
Mr. Chairman, my name is Mel Mendieta. I'm a proxy for Service Employees International Union Pension Masters Trust. I'm a 26-year city driver out of Stockton, California. I'm here to address the shareholder and members of the board about management's lack of respect for freight drivers on a day-to-day basis. For example, they're forcing us to use our personal cell phones to conduct day-to-day businesses. Another one that's kind of disturbing is our service center manager. Just a couple weeks ago, on Employee Appreciation Week, he barbecued expired hamburgers, causing some of our drivers to get sick.
That's rough, I tell you.
While the surrounding-
I had a lot of bad food in the Marine Corps, but I can tell you, a bad hamburger is no good. Go ahead.
Especially while the surrounding service centers are having barbecued steak, chicken, taco bar, et cetera. This is one of the main reasons I voted for the union representation, to sit down and hammer out a fair agreement and address the needs of the drivers and the company. To date, my coworkers and I have been frustrated by management's lack of commitment to collective bargaining. First, through not recognizing a majority election for Teamster representation by exhausting legal channels to overturn our vote, and then making it difficult for drivers to participate in negotiations by making it impossible schedules, demands, and barely spending any time at the actual table to discuss proposals. I have here over 1,000, maybe 1,500 signatures across the country, if I can leave them with you. Mr.
Chairman, will you commit management and seriously engage in the union bargain in good faith as required by federal law?
Well, first of all, I'm not going to accept any thousand signatures from anybody in this room. If you want to get me, you can email me. There are all kinds of channels to do that. The corporate secretary has already answered the question that you just posed.
... Christopher Buchmeyer, representing Chevy Chase Trust and 89,605 shares. The question is to the general counsel. It was alluded to by one of the employees about the anti-worker, anti-union campaign. It is accurate that our company has not prevailed at any level of any litigation or anything in reference to the collective rights and the collective bargaining of the employees. We've spent $ millions and $ millions and $ millions on this, and it's to the point where, just on September twenty-second, the NLRB put a decision that said, "The real damage is done by permitting the kind of sandbagging that FedEx has gotten away with here." When will we stop sandbagging our employees' rights to their freedom of speech and freedom of association and put those $ millions back into the company and invest in our employees?
That question has been asked to preceding people and answered. I mean, you're certainly welcome to make these questions. They're political statements, and we're gonna give you the same answer. You're involved in a legal process, and the legal process always has two sides. So Ms. Richards represents the company side, presumably, you're the IBT represents the other side, so it is where it is. Next question.
Hello, my name is John Kern. I represent New York Carpenters Pension Fund. Over the past six years, shareholders have provided over $2.7 million in personal security benefits to our top executives. This is over and above nearly $1 million for personal use of corporate aircraft. The $300,000 or so that CEO receives annually is the largest security perks in corporate America. While our named executives are paid amounts above the median S&P 500 CEO, worth nearly $4 billion, I'm sure the CEO has more to lose than the average person from a burglary, but it's less than clear why shareholders should be paying to keep his billion safe. Accordingly, can the Compensation Committee explain why the payments are vital to attracting and retaining executives when our closest competitor, UPS, provides no such benefits?
Well, a couple of things here. First of all, a famous man one time said, "Anybody's entitled to their own opinion, but nobody's entitled to their own set of facts," and the facts you just relayed are incorrect. I pay out of my pocket, as described in the proxy, for personal use of the airplane. The only exception to that, if somebody is accompanying with me and the tax department concludes that that person, usually my wife, to an event, for a company matter, is subject to the U.S. Federal Aviation tax for tickets. But any purely personal use for the airplane, I pay for, and I think that was $367,000. Second, as to the personal security and the compensation, let me get to the latter first. As I mentioned, our compensation committee is composed of completely independent directors.
We have no relationship other than the fact that they govern the compensation of the executives. Despite the Teamsters putting a letter out to attempt to persuade shareholders to vote against say on pay, our compensation programs, do you know what the percentage of votes was for our compensation program? It's about 95% as of the votes a few minutes ago. 95%. Third, in terms of the personal security situation, most of that is security that has to, under the rules, be provided when somebody is driving me around from one place to another, including today. We have 35,000 employees in the local area and around. That's what the security department says they want to do. It's done with the advice of a professional security firm, and that's what I agree to let them do.
It's as simple as that. And last, we don't have compensation any place close to the levels that you're talking about. Our base compensation for our named executive officers, and we looked at this just yesterday in the comp committee, is about at the 50 percentile of the market for our company. Now, we can make it up to the 75 percentile or get up to the 100 percentile, but your facts are just incorrect. So that's the answer to your question. Other things? Okay, well, we appreciate everybody being here today, and with that, we'll adjourn the meeting. Thank you. See you next year, God willing.