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FedEx DEF 14A 2007
FedEx Corporation
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
 
 
Filed by the Registrant þ
 
Filed by a Party other than the Registrant o
 
Check the appropriate box:
 
o  Preliminary Proxy Statement
 
o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 
þ  Definitive Proxy Statement
 
o  Definitive Additional Materials
 
o  Soliciting Material Pursuant to §240.14a-12
 
 
(Name of Registrant as Specified In Its Charter)
 

 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
þ  No fee required.
 
o   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
  (1)   Title of each class of securities to which transaction applies:
 
 
  (2)   Aggregate number of securities to which transaction applies:
 
 
  (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
  (4)   Proposed maximum aggregate value of transaction:
 
 
  (5)   Total fee paid:
 
 
o   Fee paid previously with preliminary materials.
 
o   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
  (1)   Amount Previously Paid:
 
 
  (2)   Form, Schedule or Registration Statement No.:
 
 
  (3)   Filing Party:
 
 
  (4)   Date Filed:
 


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FEDEX LOGO
 
 
 
 
To Our Stockholders:
 
We cordially invite you to attend the 2007 annual meeting of FedEx’s stockholders. The meeting will take place in the Tennessee Grand Ballroom at the Hilton Hotel, 939 Ridge Lake Boulevard, Memphis, Tennessee 38120, on Monday, September 24, 2007, at 10:00 a.m. local time. We look forward to your attendance either in person or by proxy.
 
The purpose of the meeting is to:
 
  1.  Elect fourteen directors;
 
  2.  Ratify the appointment of Ernst & Young LLP as FedEx’s independent registered public accounting firm for fiscal year 2008;
 
  3.  Act upon four stockholder proposals, if properly presented at the meeting; and
 
  4.  Transact any other business that may properly come before the meeting.
 
Only stockholders of record at the close of business on July 30, 2007 may vote at the meeting or any postponements or adjournments of the meeting.
 
By order of the Board of Directors,
 
-s- Christine P. Richards
 
CHRISTINE P. RICHARDS
Secretary
August 13, 2007
 
HOW TO VOTE: Please complete, date, sign and return the accompanying proxy card or voting instruction card, or vote electronically via the Internet or by telephone. The enclosed return envelope requires no additional postage if mailed in the United States.
 
REDUCE MAILING COSTS: If you vote on the Internet, you may elect to have next year’s proxy statement and annual report to stockholders delivered to you electronically. We strongly encourage you to enroll in electronic delivery. It is a cost-effective way for us to provide you with proxy materials and annual reports.
 
ANNUAL MEETING ADMISSION: If you attend the annual meeting in person, you will need to present your admission ticket, or an account statement showing your ownership of FedEx common stock as of the record date, and a valid government-issued photo identification. The indicated portion of your proxy card or voting instruction card will serve as your admission ticket. If you are a registered stockholder and receive your proxy materials electronically, you should follow the instructions provided to print a paper admission ticket.
 
Your vote is very important. Please vote whether or not you plan to attend the meeting.


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2007 PROXY STATEMENT
 
 
 
 
 
         
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FedEx Corporation
 
942 South Shady Grove Road
Memphis, Tennessee 38120
 
 
 
FedEx’s Board of Directors is furnishing you this proxy statement in connection with the solicitation of proxies on its behalf for the 2007 Annual Meeting of Stockholders. The meeting will take place in the Tennessee Grand Ballroom at the Hilton Hotel, 939 Ridge Lake Boulevard, Memphis, Tennessee 38120, on Monday, September 24, 2007, at 10:00 a.m. local time. At the meeting, stockholders will vote on the election of fourteen directors, the ratification of FedEx’s independent registered public accounting firm and, if properly presented at the meeting, four stockholder proposals. Stockholders also will consider any other matters that may properly come before the meeting, although we know of no other business to be presented.
 
By submitting your proxy (either by signing and returning the enclosed proxy card or by voting electronically on the Internet or by telephone), you authorize Christine P. Richards, FedEx’s Executive Vice President, General Counsel and Secretary, and Alan B. Graf, Jr., FedEx’s Executive Vice President and Chief Financial Officer, to represent you and vote your shares at the meeting in accordance with your instructions. They also may vote your shares to adjourn the meeting and will be authorized to vote your shares at any postponements or adjournments of the meeting.
 
FedEx’s Annual Report to Stockholders for the fiscal year ended May 31, 2007, which includes FedEx’s fiscal 2007 audited consolidated financial statements, accompanies this proxy statement. Although the Annual Report is being distributed with this proxy statement, it does not constitute a part of the proxy solicitation materials and is not incorporated by reference into this proxy statement.
 
We are first sending the proxy statement, form of proxy and accompanying materials to stockholders on or about August 13, 2007.
 
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY VOTE YOUR SHARES EITHER BY MAIL, VIA THE INTERNET OR BY TELEPHONE.


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INFORMATION ABOUT THE ANNUAL MEETING
 
 
At the annual meeting, the stockholders will be asked to:
 
  •  elect fourteen directors;
 
  •  ratify the appointment of Ernst & Young LLP as FedEx’s independent registered public accounting firm; and
 
  •  act on four stockholder proposals, if properly presented.
 
Stockholders also will transact any other business that may properly come before the meeting. Members of FedEx’s management team will be present at the meeting to respond to appropriate questions from stockholders.
 
 
The record date for the meeting is July 30, 2007. Only stockholders of record at the close of business on that date are entitled to vote at the meeting. The only class of stock entitled to be voted at the meeting is FedEx common stock. Each outstanding share of common stock is entitled to one vote for all matters before the meeting. At the close of business on the record date there were 309,153,228 shares of FedEx common stock outstanding.
 
 
If your shares are held by a bank, brokerage firm or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If your shares are held in street name, these proxy materials are being forwarded to you by your bank, brokerage firm or other nominee (the “record holder”), along with a voting instruction card. As the beneficial owner, you have the right to direct your record holder how to vote your shares, and the record holder is required to vote your shares in accordance with your instructions. If you do not give instructions to your bank, brokerage firm or other nominee, it will nevertheless be entitled to vote your shares in its discretion on the election of directors (Proposal 1) and the ratification of the appointment of the independent registered public accounting firm (Proposal 2). Absent your instructions, the record holder will not be permitted, however, to vote your shares on the adoption of the four stockholder proposals (Proposals 3, 4, 5 and 6) and your shares will be considered “broker non-votes” on those proposals.
 
As the beneficial owner of shares, you are invited to attend the annual meeting. If you are a beneficial owner, however, you may not vote your shares in person at the meeting unless you obtain a legal proxy, executed in your favor, from the record holder of your shares.
 
 
A quorum must be present at the meeting for any business to be conducted. The presence at the meeting, in person or by proxy, of the holders of a majority of the shares of common stock outstanding on the record date will constitute a quorum. Proxies received but marked as abstentions or treated as broker non-votes will be included in the calculation of the number of shares considered to be present at the meeting.
 
 
If a quorum is not present or represented at the meeting, the holders of a majority of the shares entitled to vote at the meeting who are present in person or represented by proxy, or the chairman of the meeting, may adjourn the meeting until a quorum is present or represented. The time and place of


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the adjourned meeting will be announced at the time the adjournment is taken, and no other notice will be given.
 
 
1.  YOU MAY VOTE BY MAIL.  If you properly complete, sign and date the accompanying proxy card or voting instruction card and return it in the enclosed envelope, it will be voted in accordance with your instructions. The enclosed envelope requires no additional postage if mailed in the United States.
 
2.  YOU MAY VOTE BY TELEPHONE OR ON THE INTERNET.  If you are a registered stockholder (that is, if you hold your stock directly and not in street name), you may vote by telephone or on the Internet by following the instructions included on the proxy card. If you vote by telephone or on the Internet, you do not have to mail in your proxy card. If you wish to attend the meeting in person, however, you will need to bring your admission ticket. Internet and telephone voting are available 24 hours a day. Votes submitted through the Internet or by telephone must be received by 11:59 p.m. Eastern time on September 23, 2007.
 
If you are the beneficial owner of shares held in street name, you still may be able to vote your shares electronically by telephone or on the Internet. The availability of telephone and Internet voting will depend on the voting process of your bank, brokerage firm or other holder of record. We recommend that you follow the instructions set forth on the voting instruction card provided to you.
 
NOTE: If you vote on the Internet, you may elect to have next year’s proxy statement and annual report to stockholders delivered to you electronically. We strongly encourage you to enroll in electronic delivery. It is a cost-effective way for us to provide you with proxy materials and annual reports.
 
3.  YOU MAY VOTE IN PERSON AT THE MEETING.  If you are a registered stockholder and attend the meeting, you may deliver your completed proxy card in person. Additionally, we will pass out ballots to registered stockholders who wish to vote in person at the meeting. If you are a beneficial owner of shares held in street name who wishes to vote at the meeting, you will need to obtain a legal proxy from your record holder and bring it with you to the meeting.
 
 
If you own shares of FedEx common stock through a FedEx or subsidiary benefit plan, you can direct the trustee or the record holder to vote the shares held in your account in accordance with your instructions by completing the proxy card and returning it in the enclosed envelope or by registering your instructions via the Internet or telephone as directed on the proxy card. If you register your voting instructions by telephone or on the Internet, you do not have to mail in the proxy card. If you wish to attend the meeting in person, however, you will need to bring the admission ticket attached to the proxy card with you. In order to instruct a plan trustee or record holder on the voting of shares held in your account, your instructions must be received by September 19, 2007. If your voting instructions are not received by that date, each plan trustee will vote your shares in the same proportion as the shares for which voting instructions have been received.
 
 
Only stockholders eligible to vote or their authorized representatives will be admitted to the meeting. If you plan to attend the meeting, detach and bring with you the stub portion of your proxy card, which is marked “Admission Ticket.” You also must bring a valid government-issued photo identification, such as a driver’s license or a passport. If you received your proxy materials through the Internet, you should follow the instructions provided to print a paper admission ticket.


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If your shares are held in street name, you must bring the indicated portion of your voting instruction card. Alternatively, you may bring other proof of ownership, such as a brokerage account statement, which clearly shows your ownership of FedEx common stock as of the record date. In addition, you must bring a valid government-issued photo identification, such as a driver’s license or a passport.
 
Security measures will be in place at the meeting to help ensure the safety of attendees. Metal detectors similar to those used in airports will be located at the entrance to the meeting room and briefcases, handbags and packages will be inspected. No cameras or recording devices of any kind, or signs, placards, banners or similar materials, may be brought into the meeting. Anyone who refuses to comply with these requirements will not be admitted.
 
 
Yes, if you are a registered stockholder you may revoke your proxy and change your vote by:
 
  •  submitting a valid, later-dated proxy card or a later-dated vote by telephone or on the Internet (the latest-dated, properly completed proxy that you submit, whether by mail, by telephone or on the Internet, will count as your vote); or
 
  •  giving written notice of such revocation to the Secretary of FedEx prior to or at the meeting or by voting in person at the meeting.
 
Your attendance at the meeting itself will not revoke your proxy unless you give written notice of revocation to the Secretary before your proxy is voted or you vote in person at the meeting.
 
If your shares are held in street name, you should contact your bank, brokerage firm or other nominee and follow its procedures for changing your voting instructions. You may also vote in person at the meeting if you obtain a legal proxy from your record holder.
 
 
Yes, your vote will be kept confidential and not disclosed to FedEx unless:
 
  •  required by law;
 
  •  you expressly request disclosure on your proxy; or
 
  •  there is a proxy contest.
 
 
FedEx’s transfer agent, Computershare Trust Company, N.A., will tabulate and certify the votes. A representative of the transfer agent will serve as the inspector of election.
 
 
Your Board recommends that you vote:
 
  •  FOR the election of each of the fourteen nominees to the Board of Directors;
 
  •  FOR the ratification of the appointment of Ernst & Young LLP as FedEx’s independent registered public accounting firm; and
 
  •  AGAINST each of the stockholder proposals.


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If you submit a proxy but do not indicate any voting instructions, your shares will be voted:
 
  •  FOR the election of each of the fourteen nominees to the Board of Directors;
 
  •  FOR the ratification of the appointment of Ernst & Young LLP as FedEx’s independent registered public accounting firm; and
 
  •  AGAINST each of the stockholder proposals.
 
 
FedEx’s Bylaws require stockholders to give advance notice of any proposal intended to be presented at the meeting. The deadline for this notice has passed and we have not received any such notices. If any other matter properly comes before the stockholders for a vote at the meeting, however, the proxy holders will vote your shares in accordance with their best judgment.
 
 
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. See “Corporate Governance Matters — Majority-Voting Standard for Director Elections” on page 14.
 
 
A nominee who is not already serving as a director and who fails to receive the required majority vote will not be elected and thus will not serve on the Board of Directors.
 
Each current director who is standing for reelection at the annual meeting has tendered an irrevocable resignation from the Board that will take effect if the director does not receive the required majority vote and the Board accepts the resignation. If the Board of Directors accepts the resignation, the director will no longer serve on the Board, and if the Board rejects the resignation, the director will continue to serve until his or her successor has been duly elected and qualified or until his or her earlier disqualification, death, resignation or removal. See “Corporate Governance Matters — Majority-Voting Standard for Director Elections” on page 14.
 
 
If a nominee is unable to stand for election, the Board of Directors may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the proxy holders may vote your shares for the substitute nominee.
 
 
The ratification of the appointment of Ernst & Young LLP as FedEx’s independent registered public accounting firm requires the affirmative vote of a majority of the shares present at the meeting in person or by proxy and entitled to vote.
 
 
If a stockholder proposal is properly presented at the meeting, approval of the proposal requires the affirmative vote of a majority of the shares present at the meeting in person or by proxy and entitled to vote. Approval of a stockholder proposal would merely serve as a recommendation to the Board to take the necessary steps to implement such proposal.


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Abstentions will have no effect on the election of directors (Proposal 1). For all other proposals, abstentions will be treated as shares present for quorum purposes and entitled to vote, so they will have the same practical effect as votes against a proposal.
 
 
Broker non-votes will be treated as shares present for quorum purposes, but not entitled to vote. Absent instructions from you, your broker may not vote your shares on the adoption of the four stockholder proposals (Proposals 3, 4, 5 and 6). A broker non-vote with respect to these proposals will not affect their outcome.
 
Your broker will be entitled to vote your shares in its discretion on the election of directors (Proposal 1) and the ratification of the appointment of the independent registered public accounting firm (Proposal 2), without your voting instructions on these items.
 
 
The meeting will be Webcast on September 24, 2007. You are invited to visit the Investor Relations page of our Web site (http://www.fedex.com/us/investorrelations) at 10:00 a.m. Central time on September 24, 2007 to access the live Webcast of the meeting. An archived copy of the Webcast will be available on our Web site for one year. The information on FedEx’s Web site, however, is not incorporated by reference in, and does not form part of, this proxy statement.


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STOCK OWNERSHIP
 
 
The following table sets forth the amount of FedEx’s common stock beneficially owned by each director or nominee, each named executive officer included in the Summary Compensation Table on page 36 and all directors, nominees and executive officers as a group, as of July 30, 2007. Unless otherwise indicated, beneficial ownership is direct and the person indicated has sole voting and investment power.
 
                         
    Common Stock Beneficially Owned  
    Number
    Number of
    Percent of
 
Name of Beneficial Owner
  of Shares     Option Shares(1)     Class(2)  
 
Frederick W. Smith
    19,285,224 (3)     2,781,250       7.07 %
James L. Barksdale
    46,800 (4)     22,800       *  
August A. Busch IV
    4,000       26,150       *  
John A. Edwardson
    2,250       30,800       *  
Judith L. Estrin
    22,000       66,800       *  
J. Kenneth Glass
    5,000       22,800       *  
Philip Greer
    83,812 (5)     62,800       *  
J.R. Hyde, III
    107,600 (6)     66,800       *  
Shirley A. Jackson
    7,000       24,800       *  
Steven R. Loranger
    2,000 (7)     4,400       *  
Gary W. Loveman
                 
Charles T. Manatt
    5,000       15,800       *  
Joshua I. Smith
    5,086       32,600       *  
Paul S. Walsh
    8,500       42,800       *  
Peter S. Willmott
    128,690 (8)     30,800       *  
David J. Bronczek
    90,332 (9)     468,216       *  
Robert B. Carter
    45,936       149,269       *  
T. Michael Glenn
    182,990 (10)     227,312       *  
Alan B. Graf, Jr. 
    202,448 (11)     360,437       *  
Daniel J. Sullivan
    110,469 (12)     76,241       *  
All directors, nominees and executive officers as a group (23 persons)(13)
    20,384,203 (14)     4,671,123       7.98 %
 
 
* Less than 1% of FedEx’s outstanding common stock.
 
(1) Reflects the number of shares that can be acquired at July 30, 2007 or within 60 days thereafter through the exercise of stock options. These shares are excluded from the column headed “Number of Shares,” but included in the ownership percentages reported in the column headed “Percent of Class.”
 
(2) Based on 309,153,228 shares outstanding on July 30, 2007.
 
(3) Includes 14,935,085 shares owned by Mr. Smith (2,819,692 of such shares have been pledged as security by Mr. Smith), 4,141,280 shares owned by Frederick Smith Enterprise Company, Inc. (“Enterprise”), a family holding company (496,000 of such shares have been pledged as security by Enterprise), 736 shares owned by Mr. Smith’s spouse and 205,856 shares held in trust for the benefit of Mr. Smith’s children. Regions Morgan Keegan Trust, FSB, Memphis, Tennessee, as trustee of a trust of which Mr. Smith is the lifetime beneficiary, holds 55% of Enterprise’s outstanding stock and Mr. Smith owns 45% directly. Includes 2,267 shares held in FedEx’s retirement savings plan. Mr. Smith’s business address is 942 South Shady Grove Road, Memphis, Tennessee 38120.
 
(4) Includes 2,000 shares held in a managed account of which Mr. Barksdale is trustee and 44,800 shares held in other managed accounts.
 
(5) Excludes 36,784 shares owned by members of Mr. Greer’s family, as to which Mr. Greer disclaims beneficial ownership, and includes 37,312 shares owned by Greer Investment


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Partners II, L.P. Mr. Greer disclaims beneficial ownership of the shares owned by the partnership except to the extent of his pecuniary interest therein.
 
(6) Includes 11,600 shares owned by family trusts and 80,000 shares pledged as security by Mr. Hyde.
 
(7) Owned by a family trust.
 
(8) Includes 128,690 shares pledged as security by Mr. Willmott.
 
(9) Includes 659 shares held in FedEx’s retirement savings plan.
 
(10) Includes 88,750 shares owned by Glenn Family Partners, L.P. Mr. Glenn disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein. Also includes 541 shares held in FedEx’s retirement savings plan.
 
(11) Includes 7,400 shares owned by a family trust and 423 shares held in FedEx’s retirement savings plan.
 
(12) Includes 25,484 shares held in a 401(k) plan and 29,911 stock units held in deferred compensation plans. These stock units are payable in shares of FedEx common stock on a one-for-one basis.
 
(13) Does not include Mr. Sullivan, who retired as FedEx Ground’s President and Chief Executive Officer on December 31, 2006.
 
(14) Includes 1,000 stock units held in a deferred compensation plan. These stock units are payable in shares of FedEx common stock on a one-for-one basis. Also includes an aggregate 4,899 shares held in FedEx’s retirement savings plan.
 
 
Section 16(a) of the Securities Exchange Act of 1934 requires directors and certain officers of FedEx and persons who own more than ten percent of FedEx’s common stock to file with the Securities and Exchange Commission initial reports of beneficial ownership (Form 3) and reports of subsequent changes in their beneficial ownership (Form 4 or Form 5) of FedEx’s common stock. Such directors, officers and greater-than-ten-percent stockholders are required to furnish FedEx with copies of the Section 16(a) reports they file. The Securities and Exchange Commission has established specific due dates for these reports, and FedEx is required to disclose in this proxy statement any late filings or failures to file.
 
Based solely upon a review of the copies of the Section 16(a) reports (and any amendments thereto) furnished to FedEx and written representations from certain reporting persons that no additional reports were required, FedEx believes that its directors, reporting officers and greater-than-ten-percent stockholders complied with all these filing requirements for the fiscal year ended May 31, 2007.


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The following table lists certain persons known by FedEx to own beneficially more than five percent of FedEx’s outstanding shares of common stock as of March 31, 2007.
 
                 
    Amount and Nature of
       
    Beneficial Ownership     Percent of Class  
 
Dodge & Cox
    21,783,878 (1)     7.08 %
555 California Street, 40th Floor
San Francisco, California 94014
               
                 
PRIMECAP Management Company
    20,759,929 (2)     6.74 %
225 South Lake Avenue, Suite 400
Pasadena, California 91101
               
                 
Marsico Capital Management, LLC
    20,479,243 (3)     6.65 %
1200 17th Street, Suite 1600
Denver, Colorado 80202
               
 
 
(1) Dodge & Cox, a registered investment advisor, had sole voting power over 20,306,086 shares and sole investment power over all 21,783,878 shares.
 
(2) PRIMECAP Management Company, a registered investment advisor, had sole voting power over 3,482,385 shares and sole investment power over all 20,759,929 shares.
 
(3) Marsico Capital Management, LLC, a registered investment advisor, had sole voting power over 17,097,797 shares and sole investment power over all 20,479,243 shares.


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CORPORATE GOVERNANCE MATTERS
 
 
In furtherance of its longstanding goals of providing effective governance of FedEx’s business and affairs for the long-term benefit of stockholders and promoting a culture and reputation of the highest ethics, integrity and reliability, the Board of Directors has adopted Corporate Governance Guidelines, charters for each of its Board committees and a Code of Business Conduct & Ethics for directors, officers and employees of FedEx. Each of these documents is available, free of charge, in print to any stockholder who requests it and in the corporate governance section of the Investor Relations page of our Web site at http://www.fedex.com/us/investorrelations/corpgov. The information on FedEx’s Web site, however, is not incorporated by reference in, and does not form part of, this proxy statement.
 
 
The Board of Directors has determined that each member of the Audit, Compensation and Nominating & Governance Committees and, with the exception of Frederick W. Smith and J.R. Hyde, III, each of the Board’s current members (James L. Barksdale, August A. Busch IV, John A. Edwardson, Judith L. Estrin, J. Kenneth Glass, Philip Greer, Shirley Ann Jackson, Steven R. Loranger, Charles T. Manatt, Joshua I. Smith, Paul S. Walsh and Peter S. Willmott), as well as Gary W. Loveman, is independent and meets the applicable independence requirements of the New York Stock Exchange (including the additional requirements for Audit Committee members) and the Board’s more stringent standards for determining director independence. Mr. Smith is FedEx’s Chairman of the Board, President and Chief Executive Officer. Mr. Hyde has an ownership interest in HOOPS, L.P., with which FedEx has a relationship. For more information, please see “— Related Person Transactions” below.
 
Under the Board’s standards of director independence, which are included in FedEx’s Corporate Governance Guidelines, a director will be considered independent only if the Board affirmatively determines that the director has no direct or indirect material relationship with FedEx, other than as a director. The standards set forth certain categories or types of transactions, relationships or arrangements with FedEx, as follows, each of which (i) is deemed not to be a material relationship with FedEx, and thus (ii) will not, by itself, prevent a director from being considered independent:
 
  •  Prior Employment of Director.  The director was employed by FedEx or was personally working on FedEx’s audit as an employee or partner of FedEx’s independent auditor, and over five years have passed since such employment, partner or auditing relationship ended.
 
  •  Prior Employment of Immediate Family Member.  An immediate family member was an officer of FedEx or was personally working on FedEx’s audit as an employee or partner of FedEx’s independent auditor, and over five years have passed since such employment, partner or auditing relationship ended.
 
  •  Current Employment of Immediate Family Member.  An immediate family member is employed by FedEx in a non-officer position, or by FedEx’s independent auditor not as a partner and not participating in the firm’s audit, assurance or tax compliance practice.
 
  •  Interlocking Directorships.  An executive officer of FedEx served on the board of directors of a company that employed the director or employed an immediate family member as an executive officer, and over five years have passed since either such relationship ended.
 
  •  Business Relationships.  The director or an immediate family member is a partner, greater than 10% shareholder, director or officer of a company that makes or has made payments to, or receives or has received payments (other than contributions, if the company is a tax-exempt organization) from, FedEx for property or services, and the amount of such payments has not within any of such other company’s three most recently completed fiscal


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  years exceeded one percent (or $1 million, whichever is greater) of such other company’s consolidated gross revenues for such year.
 
  •  Indebtedness.  The director or an immediate family member is a partner, greater than 10% shareholder, director or officer of a company that is indebted to FedEx or to which FedEx is indebted, and the aggregate amount of such debt is less than one percent (or $1 million, whichever is greater) of the total consolidated assets of the indebted company.
 
  •  Charitable Contributions.  The director is a trustee, fiduciary, director or officer of a tax-exempt organization to which FedEx contributes, and the contributions to such organization by FedEx have not within any of such organization’s three most recently completed fiscal years exceeded one percent (or $250,000, whichever is greater) of such organization’s consolidated gross revenues for such year.
 
In making its independence determinations, the Board broadly considered all relevant facts and circumstances, including the following immaterial transactions, relationships and arrangements:
 
  •  Messrs. Barksdale and Willmott each served as officers of FedEx, but they left the company well over five years ago (Mr. Barksdale’s employment at FedEx ended in 1992, and Mr. Willmott’s employment at FedEx ended in 1983).
 
  •  FedEx has made charitable contributions to tax-exempt organizations for which each of the following independent directors serves as a trustee or director: Messrs. Barksdale, Glass, Greer and Manatt. The contributions by FedEx to each such organization have not within any of the other organization’s three most recently completed fiscal years exceeded one percent (or $250,000, whichever is greater) of the other organization’s consolidated gross revenues for such year. In addition, David J. Bronczek, a FedEx executive officer, and Mr. Glass serve together on the board of a Memphis-based non-profit organization.
 
  •  In the ordinary course of business, FedEx makes purchases from entities for which each of the following independent directors serves as an officer: Messrs. Edwardson and Loranger. The amount of the payments made by FedEx to each such entity has not within any of the other entity’s three most recently completed fiscal years exceeded one percent (or $1 million, whichever is greater) of the other entity’s consolidated gross revenues for such year.
 
  •  Robert B. Carter, a FedEx executive officer, serves as an advisor to a venture capital firm for which Mr. Greer is a limited partner.
 
  •  Frederick W. Smith is a passive investor (holding a less-than-2% interest) in Packet Design, LLC, an Internet technology company, and Ms. Estrin is an executive officer of Packet Design and beneficially owns approximately 18% of its outstanding capital stock.
 
 
The Board of Directors has determined that at least one member of the Audit Committee, John A. Edwardson, is an audit committee financial expert as such term is defined in Item 407(d)(5) of Regulation S-K, promulgated by the Securities and Exchange Commission.
 
 
A director must retire immediately before the annual meeting of FedEx’s stockholders during the calendar year in which he or she attains age 72. There are no directors retiring under this provision at the annual meeting.


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In order to encourage significant stock ownership by our directors and senior officers, and to further align their interests with the interests of FedEx’s stockholders, the Board of Directors has established a goal that (i) within three years after joining the Board, each non-management director own FedEx shares valued at three times his or her annual retainer fee, and (ii) within four years after being appointed to his or her position, each member of senior management own FedEx shares valued at the following multiple of his or her annual base salary:
 
  •  5x for the Chairman of the Board, President and Chief Executive Officer;
 
  •  3x for the other FedEx executive officers;
 
  •  2x for executive vice presidents of FedEx’s core operating companies; and
 
  •  1x for certain other senior officers.
 
For purposes of meeting this goal, unvested restricted stock is counted, but unexercised stock options are not. The Board also recommends that each director and senior officer retain shares acquired upon stock option exercises until his or her goal is met. The stock ownership goal is included in FedEx’s Corporate Governance Guidelines. As of July 30, 2007, each FedEx director who had been on the Board for over three years and each executive officer owned sufficient shares to comply with this goal.
 
 
The Board of Directors has adopted a policy requiring stockholder approval for any future “poison pill” prior to or within twelve months after adoption of the poison pill. (A poison pill is a device used to deter a hostile takeover. Note that FedEx does not currently have, nor have we ever had, a poison pill.) The policy on poison pills is included in FedEx’s Corporate Governance Guidelines.
 
 
Non-management Board members meet without management present at least four times annually at regularly scheduled executive sessions. At least once a year, such meetings include only the independent members of the Board. The Chairman of the Nominating & Governance Committee presides over meetings of the non-employee and independent directors.
 
 
You may communicate directly with any member or committee of the Board of Directors by writing to: FedEx Corporation Board of Directors, c/o Corporate Secretary, 942 South Shady Grove Road, Memphis, Tennessee 38120. Please specify to whom your letter should be directed. The Corporate Secretary of FedEx will review all such correspondence and regularly forward to the Board a summary of all such correspondence and copies of all correspondence that, in her opinion, deals with the functions of the Board or its committees or that she otherwise determines requires the attention of any member, group or committee of the Board of Directors. Board members may at any time review a log of all correspondence received by FedEx that is addressed to Board members and request copies of any such correspondence.
 
 
The Nominating & Governance Committee will consider director nominees proposed by stockholders. To recommend a prospective director candidate for the Nominating & Governance Committee’s consideration, stockholders may submit the candidate’s name, qualifications, including whether the candidate satisfies the requirements set forth below, and other relevant biographical information in writing to: FedEx Corporation Nominating & Governance Committee, c/o Corporate


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Secretary, 942 South Shady Grove Road, Memphis, Tennessee 38120. FedEx’s Bylaws require stockholders to give advance notice of stockholder proposals, including nominations of director candidates. For more information, please see page 77, “Additional Information — Stockholder Proposals for 2008 Annual Meeting.”
 
The Board is responsible for recommending director candidates for election by the stockholders and for electing directors to fill vacancies or newly created directorships. The Board has delegated the screening and evaluation process for director candidates to the Nominating & Governance Committee, which identifies, evaluates and recruits highly qualified director candidates and recommends them to the Board. The Nominating & Governance Committee considers potential candidates for director, which may come to the attention of the Nominating & Governance Committee through current directors, management, professional search firms, stockholders or other persons. The Nominating & Governance Committee considers and evaluates a director candidate recommended by a stockholder in the same manner as a nominee recommended by a Board member, management or other sources.
 
If the Nominating & Governance Committee determines that an additional or replacement director is necessary or advisable, the Nominating & Governance Committee may take such measures that it considers appropriate in connection with its evaluation of a potential director candidate, including interviewing the candidate, engaging an outside firm to gather additional information and making inquiries of persons with knowledge of the candidate’s qualifications and character. In its evaluation of potential director candidates, including the members of the Board of Directors eligible for reelection, the Nominating & Governance Committee considers the current size, composition and needs of the Board of Directors and each of its committees.
 
Candidates nominated for election or reelection to the Board of Directors must possess the following minimum qualifications:
 
  •  The highest level of personal and professional ethics, integrity and values;
 
  •  An inquiring and independent mind;
 
  •  Practical wisdom and mature judgment;
 
  •  Broad training and experience at the policy-making level in business, finance and accounting, government, education or technology;
 
  •  Expertise that is useful to FedEx and complementary to the background and experience of other Board members, so that an optimal balance of Board members can be achieved and maintained;
 
  •  Willingness to devote the required time to carrying out the duties and responsibilities of Board membership;
 
  •  Commitment to serve on the Board for several years to develop knowledge about FedEx’s business;
 
  •  Willingness to represent the best interests of all stockholders and objectively appraise management performance; and
 
  •  Involvement only in activities or interests that do not conflict with the director’s responsibilities to FedEx and its stockholders.
 
In addition, it is expected that the following qualities or skills be possessed by one or more of FedEx’s Board members: transportation industry experience; international experience; financial expertise; marketing expertise; technological expertise; energy expertise; and government experience.


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Gary W. Loveman is the only nominee who is not an executive officer of FedEx or a current director standing for reelection. Frederick W. Smith, FedEx’s Chairman of the Board, President and Chief Executive Officer, and Peter S. Willmott, Chairman of the Nominating & Governance Committee, recommended Mr. Loveman as a nominee for election at the annual meeting.
 
The Nominating & Governance Committee has engaged a third-party executive search firm to assist in identifying potential board candidates, including Mr. Loveman.
 
 
Effective March 12, 2007, the Board of Directors amended FedEx’s Bylaws to adopt a majority-voting standard in uncontested director elections and a resignation requirement for directors who fail to receive the required majority vote. The amended Bylaws also prohibit the Board from changing back to a plurality-voting standard without the approval of our stockholders. Under the new majority-voting standard, a director nominee must receive more votes cast “for” than “against” his or her election in order to be elected to the Board. Previously, our directors were elected under a plurality-voting standard, in which candidates receiving the most votes were elected regardless of whether those votes constituted a majority.
 
In accordance with this majority-voting standard and resignation requirement, each incumbent director who is standing for reelection at the annual meeting has tendered an irrevocable resignation from the Board of Directors that will take effect if (i) the director does not receive more votes cast “for” than “against” his or her election at the annual meeting, and (ii) the Board accepts the resignation. FedEx’s Bylaws require the Board of Directors, within 90 days after certification of the election results, to accept the director’s resignation unless there is a compelling reason not to do so and to promptly disclose its decision (including, if applicable, the reasons for rejecting the resignation) in a filing with the Securities and Exchange Commission.
 
 
The Board of Directors has adopted a Policy on Review and Preapproval of Related Person Transactions, which is included in FedEx’s Corporate Governance Guidelines. The policy requires that all proposed related person transactions (as defined in the policy) and all proposed material changes to existing related person transactions be reviewed and preapproved by the Nominating & Governance Committee. To the extent the related person (as defined in the policy) is a director or immediate family member of a director, the transaction or change must also be reviewed and preapproved by the full Board. The policy provides that a related person transaction or a material change to an existing related person transaction may not be preapproved if it would:
 
  •  interfere with the objectivity and independence of any related person’s judgment or conduct in carrying out his or her duties and responsibilities to FedEx;
 
  •  not be fair as to FedEx; or
 
  •  otherwise be opposed to the best interests of FedEx and its stockholders.
 
The policy requires the Nominating & Governance Committee to annually (i) review each existing related person transaction that has a remaining term of at least one year or remaining payments of at least $120,000, and (ii) determine, based upon all material facts and circumstances and taking into consideration our contractual obligations, whether it is in the best interests of FedEx and our stockholders to continue, modify or terminate the transaction or relationship.
 


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In accordance with the policy described above, the Nominating & Governance Committee has reviewed the following related person transactions and determined that they remain in the best interests of FedEx and our stockholders:
 
  •  In July 2005, FedEx Ground entered into a five-year lease for a FedEx Home Delivery facility near Milwaukee, Wisconsin. FedEx Ground has the option to extend the lease through September 30, 2012. Under the lease, FedEx Ground’s initial gross lease payments are $345,707 per year, which amount will increase to $361,369 per year after the third year of the lease. The gross lease payment includes taxes, common area maintenance and insurance up to a specified dollar amount per square foot. John A. Edwardson is a passive investor with an 11.67% ownership interest in the real estate development company that owns the facility.
 
  •  J.R. Hyde, III and his wife together own approximately 13% of HOOPS, L.P., the owner of the NBA Memphis Grizzlies professional basketball team. Mr. Hyde, through one of his companies, also is the general partner of the minority limited partner of HOOPS. During fiscal 2002, FedEx entered into a multi-year, $90 million naming rights agreement with HOOPS. Under this agreement, FedEx has certain marketing rights, including the right to name the arena where the Grizzlies play “FedExForum.” Pursuant to a separate agreement with HOOPS, the City of Memphis and Shelby County, FedEx has agreed to pay $2.5 million a year for the balance of the twenty-five year term of the agreement if HOOPS terminates its lease for the arena after 17 years.
 
  •  In November 1999, FedEx entered into a multi-year, $205 million naming rights agreement with the NFL Washington Redskins professional football team. Under this agreement, FedEx has certain marketing rights, including the right to name the Redskins’ stadium “FedExField.” In August 2003, Frederick W. Smith acquired an approximate 10% ownership interest in the Washington Redskins and joined its Leadership Council, or board of directors.
 
 
Messrs. Greer, Barksdale, Busch, Glass, Manatt and Walsh served on FedEx’s Compensation Committee during fiscal 2007. Mr. Barksdale, who ceased being a member of the Compensation Committee on September 25, 2006, is a former officer of FedEx Express (FedEx’s predecessor). His employment with FedEx Express ended in 1992.


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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
 
 
During fiscal 2007, the Board of Directors held six regular meetings and two special meetings. Each director attended at least 75% of the meetings of the Board and any committees on which he or she served.
 
 
The Board of Directors has a standing Audit Committee, Compensation Committee, Information Technology Oversight Committee and Nominating & Governance Committee. Each committee’s written charter is available on the FedEx Web site at http://ir.fedex.com/governance/committeechar.cfm. Committee memberships are as follows:
 
     
    Information Technology
Audit Committee
 
Oversight Committee
 
John A. Edwardson (Chairman)
  Judith L. Estrin (Chairwoman)
Steven R. Loranger
  James L. Barksdale
Joshua I. Smith
  J.R. Hyde, III
Peter S. Willmott
  Shirley A. Jackson
 
     
    Nominating &
Compensation Committee
 
Governance Committee
 
Philip Greer (Chairman)
  Peter S. Willmott (Chairman)
August A. Busch IV
  James L. Barksdale
J. Kenneth Glass
  J. Kenneth Glass
Charles T. Manatt
  Shirley A. Jackson
Paul S. Walsh
   
 
 
The Board of Directors has approved reconstituting the committees so that, immediately following the annual meeting, if all of the director nominees are elected, committee memberships will be as follows:
 
     
    Information Technology
Audit Committee
 
Oversight Committee
 
John A. Edwardson (Chairman)
  Judith L. Estrin (Chairwoman)
Gary W. Loveman
  James L. Barksdale
Joshua I. Smith
  J.R. Hyde, III
Peter S. Willmott
  Shirley A. Jackson
    Gary W. Loveman
 
     
    Nominating &
Compensation Committee
 
Governance Committee
 
Philip Greer (Chairman)
  Peter S. Willmott (Chairman)
August A. Busch IV
  James L. Barksdale
Steven R. Loranger
  Shirley A. Jackson
Paul S. Walsh
  Charles T. Manatt
 
 
The Audit Committee, which held ten meetings during fiscal 2007, performs the following functions:
 
  •  oversees the independent registered public accounting firm’s qualifications, independence and performance;
 
  •  assists the Board of Directors in its oversight of (i) the integrity of FedEx’s financial statements; (ii) the effectiveness of FedEx’s disclosure controls and procedures and internal control over financial reporting; (iii) the performance of the internal auditors; and (iv) FedEx’s compliance with legal and regulatory requirements; and


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  •  preapproves all audit and allowable non-audit services to be provided by FedEx’s independent registered public accounting firm.
 
The members of the Audit Committee meet all independence and qualification requirements of the New York Stock Exchange. The Board of Directors has determined that at least one member of the Audit Committee, John A. Edwardson, is an audit committee financial expert.
 
The Compensation Committee, which held six meetings during fiscal 2007, performs the following functions:
 
  •  evaluates the performance and recommends to the independent members of the Board the compensation of FedEx’s Chairman of the Board, President and Chief Executive Officer;
 
  •  discharges the Board’s responsibilities relating to the compensation of executive management;
 
  •  reviews and discusses with management the Compensation Discussion and Analysis and produces a report recommending whether the Compensation Discussion and Analysis should be included in the proxy statement; and
 
  •  oversees the administration of FedEx’s equity compensation plans and employee benefit and fringe-benefit plans and programs.
 
The members of the Compensation Committee meet all independence requirements of the New York Stock Exchange.
 
The Information Technology Oversight Committee, which held six meetings during fiscal 2007, performs the following functions:
 
  •  appraises major information technology (“IT”) related projects and technology architecture decisions;
 
  •  ensures that FedEx’s IT programs effectively support FedEx’s business objectives and strategies; and
 
  •  advises FedEx’s senior IT management team and the Board of Directors on IT related matters.
 
The Nominating & Governance Committee, which held six meetings during fiscal 2007, performs the following functions:
 
  •  identifies individuals qualified to become Board members;
 
  •  recommends to the Board director nominees to be proposed for election at the annual meeting of stockholders;
 
  •  recommends to the Board directors for appointment to Board committees; and
 
  •  assists the Board in developing and implementing effective corporate governance, compliance and ethics programs.
 
The members of the Nominating & Governance Committee meet all independence requirements of the New York Stock Exchange.
 
 
FedEx expects all board members to attend annual meetings of stockholders. Each member of the Board of Directors attended the 2006 annual meeting of stockholders.


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The Board of Directors currently consists of fourteen members. All of FedEx’s directors are elected at each annual meeting of stockholders and hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified. Mr. J. Kenneth Glass is retiring as a director at the annual meeting and is not standing for reelection. The Board proposes that each of the current directors, other than Mr. Glass, be reelected to the Board. In addition, the Board of Directors has nominated Gary W. Loveman for election as a director. Each of the directors elected at this annual meeting will hold office until the annual meeting of stockholders to be held in 2008 and until his or her successor is duly elected and qualified.
 
Each nominee has consented to being named in this proxy statement and has agreed to serve if elected. If a nominee is unable to stand for election, the Board of Directors may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the proxy holders may vote your shares for the substitute nominee.
 
Under the new majority-voting standard, each of the fourteen director nominees must receive more votes cast “for” than “against” his or her election in order to be elected to the Board. For more information, please see “Corporate Governance Guidelines — Majority-Voting Standard for Director Elections” on page 14.
 
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE FOURTEEN NOMINEES.
 
The following table sets forth, with respect to each nominee, his or her name, age, principal occupation and employment during at least the past five years, the year in which he or she first became a director of FedEx (or its predecessor, FedEx Express) and directorships held in other public companies.
 
NOMINEES FOR ELECTION TO THE BOARD
 
             
Director, Year First
      Principal Occupation,
Elected as Director
 
Age
 
Business and Directorships
 
Frederick W. Smith
1971
  62   Chairman, President and Chief Executive Officer of FedEx since January 1998; Chairman of FedEx Express since 1975; Chairman, President and Chief Executive Officer of FedEx Express from 1983 to January 1998; Chief Executive Officer of FedEx Express from 1977 to January 1998; President of FedEx Express from 1971 to 1975.
           
James L. Barksdale
1999
  64   Chairman and President, Barksdale Management Corporation, an investment management company, since April 1999; Managing Partner, The Barksdale Group, a venture capital firm, since April 1999; President and Chief Executive Officer of Netscape Communications Corporation, a provider of software, services and Web site resources to Internet users, from January 1995 to March 1999; various senior management positions at FedEx Express from 1979 to 1992, including Executive Vice President and Chief Operating Officer. Former director of FedEx Express from 1983 to 1991. Director, Sun Microsystems, Inc. and Time Warner Inc.


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Director, Year First
      Principal Occupation,
Elected as Director
 
Age
 
Business and Directorships
 
           
August A. Busch IV
2003
  43   President and Chief Executive Officer of Anheuser-Busch Companies, Inc., a brewing organization, since December 2006; Vice President and Group Executive of Anheuser-Busch Companies, Inc. from August 2000 to November 2006; President of Anheuser-Busch, Inc. since July 2002; Group Vice President – Marketing of Anheuser-Busch, Inc. from August 2000 to July 2002; Vice President – Marketing & Wholesaler Operations of Anheuser-Busch, Inc. from November 1996 to August 2000. Director, Anheuser-Busch Companies, Inc.
           
John A. Edwardson
2003
  58   Chairman and Chief Executive Officer of CDW Corporation, a provider of technology products and services, since January 2001; Chairman and Chief Executive Officer of Burns International Services Corporation, a provider of security services, from 1999 to 2000; President and Chief Operating Officer of UAL Corporation, an airline, from 1995 to 1998. Director, CDW Corporation.
           
Judith L. Estrin
1989
  52   President and Chief Executive Officer of Packet Design, LLC, an Internet technology company, since May 2000; Senior Vice President and Chief Technology Officer of Cisco Systems, Inc., a networking systems company, from April 1998 to April 2000; President and Chief Executive Officer of Precept Software, Inc., a computer software company, from March 1995 to April 1998. Director, The Walt Disney Company.
           
Philip Greer
1974
  71   Managing Director, Greer Family Consulting and Investments, LLC, an investment management firm, since April 2002; Senior Managing Director of Weiss, Peck & Greer L.L.C., an investment management firm, from 1995 to April 2002; General Partner of Weiss, Peck & Greer from 1970 to 1995.
           
J.R. Hyde, III
1977
  64   Chairman of GTx, Inc., a biopharmaceutical company specializing in serious men’s health issues, since March 2001; Chairman of AutoZone, Inc., an auto parts retail chain, from March 2005 to June 2007 and from May 1986 to March 1997; Chief Executive Officer of AutoZone, Inc. from May 1986 to December 1996; Chairman of Pittco Management, LLC, an investment management company, since January 1998; President of Pittco, Inc., an investment company, since April 1989. Director, AutoZone, Inc. and GTx, Inc.
           
Shirley A. Jackson
1999
  61   President of Rensselaer Polytechnic Institute, a technological research university, since July 1999; Chairwoman and Commissioner of the United States Nuclear Regulatory Commission from July 1995 to June 1999; Commissioner of the United States Nuclear Regulatory Commission from May 1995 to July 1995. Director, International Business Machines Corporation, Marathon Oil Corporation, Medtronic, Inc., NYSE Euronext and Public Service Enterprise Group Incorporated.

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Director, Year First
      Principal Occupation,
Elected as Director
 
Age
 
Business and Directorships
 
           
Steven R. Loranger
2006
  55   Chairman of the Board, President and Chief Executive Officer of ITT Corporation, a global multi-industry engineering and manufacturing company, since December 2004; President and Chief Executive Officer of ITT Corporation from June 2004 to December 2004; Executive Vice President and Chief Operating Officer of Textron, Inc., a global aircraft, industrial and finance company, from 2002 to 2004; various executive positions at Honeywell International Inc. and its predecessor, AlliedSignal, Inc., a technology and manufacturing company, from 1981 to 2002, including President and Chief Executive Officer of its Engines, Systems and Services divisions. Director, ITT Corporation.
           
Gary W. Loveman
(New Nominee)
  47   Chairman of the Board, Chief Executive Officer and President of Harrah’s Entertainment, Inc., a provider of branded gaming entertainment, since January 2005; Chief Executive Officer and President of Harrah’s Entertainment, Inc. since January 2003; President of Harrah’s Entertainment, Inc. since April 2001; various executive positions at Harrah’s Entertainment, Inc. from May 1998 to April 2001; Associate Professor of Business Administration, Harvard University Graduate School of Business Administration from 1994 to 1998. Director, Harrah’s Entertainment, Inc. and Coach, Inc.
           
Charles T. Manatt
2004
  71   Partner and co-founder of Manatt, Phelps & Phillips, LLP, a diversified law firm, since 1965; Co-Chair of ManattJones Global Strategies LLC, a global consulting firm providing international business, government and public affairs strategies and solutions, since October 2001; U.S. Ambassador to the Dominican Republic from 1999 to 2001. Former director of FedEx from 1989 to 1999.
           
Joshua I. Smith
1989
  66   Chairman and Managing Partner, Coaching Group, LLC, a consulting firm, since June 1998; Vice Chairman and President of iGate, Inc., a broadband networking company, from June 2000 to June 2001. Director, The Allstate Corporation and Caterpillar Inc.
           
Paul S. Walsh
1996
  52   Chief Executive Officer of Diageo plc, a beverage company, since September 2000; Group Chief Operating Officer of Diageo plc from January 2000 to September 2000; Chairman, President and Chief Executive Officer of The Pillsbury Company, a wholly owned subsidiary of Diageo plc, from April 1996 to January 2000; Chief Executive Officer of The Pillsbury Company from January 1992 to April 1996. Director, Centrica plc and Diageo plc.
           
Peter S. Willmott
1974
  70   Chairman and Chief Executive Officer of Willmott Services, Inc., a retail and consulting firm, since June 1989; Interim President and Chief Executive Officer of Fleming Companies, Inc., a wholesale distributor of consumable goods, from March 2003 to August 2003 (Fleming Companies, Inc. filed for reorganization in federal bankruptcy court in April 2003); Chief Executive Officer and President of Zenith Electronics Corporation, an electronics manufacturing company, from July 1996 to January 1998; various senior management positions at FedEx Express from 1974 to 1983, including President and Chief Operating Officer.

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The Compensation Committee has reviewed and discussed with management the following Compensation Discussion and Analysis. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors, and the Board approved, that the Compensation Discussion and Analysis be included in this proxy statement.
 
Compensation Committee Members
Philip Greer – Chairman
August A. Busch IV
J. Kenneth Glass
Charles T. Manatt
Paul S. Walsh
 
COMPENSATION DISCUSSION AND ANALYSIS
 
 
FedEx’s mission is to produce superior financial returns for shareowners by providing high value-added transportation, supply chain, business and related information services through focused operating companies that compete collectively, operate independently and manage collaboratively. We design our executive compensation program to further FedEx’s mission by:
 
  •  Retaining and attracting highly qualified and effective executive officers by paying them competitively;
 
  •  Motivating executive officers to contribute to our future success and to build long-term shareowner value (and rewarding them accordingly) by linking a significant part of their compensation to the company’s financial and stock price performance, especially long-term performance; and
 
  •  Further aligning executive officer and shareowner interests by encouraging and facilitating significant ownership of FedEx stock by the officers.
 
We reward our executive officers for contributing to FedEx’s success for the long-term benefit of shareowners. Our executive compensation program is designed to pay executives in the top quartile of our peer group when we achieve long-term top-quartile results compared to the peer group.
 
FedEx’s compensation program for executive officers consists of four key elements:
 
  •  Base salary;
 
  •  Cash payments under our annual incentive compensation (“AIC”) program;
 
  •  Cash payments under our long-term incentive (“LTI”) compensation program; and
 
  •  Long-term equity incentives in the form of stock options and restricted stock.
 
Executive officers also receive certain other annual compensation, including perquisites and tax reimbursement payments. In addition, while we do not have any employment agreements with our executive officers, the officers are entitled to receive certain post-employment and change-of-control payments and benefits, such as through our pension plans and management retention agreements.
 
Duty to Retain and Attract.  FedEx is widely acknowledged as one of the world’s most admired and respected companies, and it is our people — our greatest asset — that give us our strong reputation. Because FedEx operates a global enterprise in a highly competitive business environment, we compete for talented management with some of the largest companies in the world — in our industry and in others. Our global recognition and reputation for excellence in management and


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leadership make our employees attractive targets for other companies, and our key employees are aggressively recruited. Accordingly, we have a duty to our shareowners to ensure that our overall compensation program competes well against all types of companies and continues to retain and attract the right people. Each element of compensation is intended to fulfill this important obligation.
 
In order to ensure that our compensation remains competitive, we rely on comparison survey information and design our executive compensation program to target the 75th percentile of compensation for comparable positions in the comparison surveys. We target our compensation at the 75th percentile to retain and attract highly qualified and effective executives.
 
For the fiscal 2007 executive compensation review, we considered data published by two major consulting firms: Towers Perrin and Hewitt Associates. Each consulting firm provided compensation data on all general industry companies in its respective database with annual revenues in excess of $10 billion (over 100 companies from each firm), a majority of which are Fortune 200 companies. The data results provided by each firm are averaged to arrive at blended market compensation data for general industry executives.
 
We believe that general industry is the appropriate comparison category because our executives are aggressively recruited by and from businesses outside FedEx’s industry peer group. In addition, we do not have many similarly sized industry peers, so an industry peer group would not produce a meaningful statistical sample. The Compensation Committee of our Board of Directors has reviewed with its outside consultant (Towers Perrin) alternative criteria for selecting companies for our benchmarking survey data and concluded that our use of general industry companies with revenues greater than $10 billion is the most appropriate approach.
 
When we compare the elements of compensation of our executive officers to the benchmarking survey data, we group the elements into two categories:
 
  •  Annual base salary plus target AIC payout (i.e., assuming achievement of all individual and corporate objectives), the sum of which we call total cash compensation (“TCC”).
 
  •  TCC plus target LTI payout plus long-term equity incentive awards (stock options and restricted stock) plus tax reimbursement payments on restricted stock awards, the sum of which we call total direct compensation (“TDC”).
 
The TDC formula is illustrated below:
 
(GRAPHIC)
 
* Includes related tax reimbursement payments.
 
Other elements of compensation (such as perquisites and retirement benefits) are not included in our TDC formula because the comparison survey information does not include these items. While these other elements are not benchmarked against survey data, they are reviewed and approved by our Compensation Committee. In addition, we consider other factors besides our benchmarking analysis when determining the appropriate total compensation level for our executive officers, including the tenure, responsibilities and experience levels of the officers, as well as the compensation of the officers relative to one another.
 
The TCC and TDC of our named executive officers are each targeted at the 75th percentile of the corresponding categories of compensation for comparable positions in the comparison surveys. For


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benchmarking purposes, we include target AIC and LTI payouts in the TCC and TDC formulas. Therefore, the actual compensation paid may vary widely from the targeted 75th percentile in the short term because compensation earned under the AIC and LTI programs is variable and commensurate with the level of achievement of aggressive pre-established financial performance goals. When we achieve superior results, we reward our executives accordingly under the terms of these programs. Conversely, when we fall short of our business objectives, payments under these variable programs decrease accordingly.
 
Pay for Performance.  Our executive compensation program is intended not only to retain and attract highly qualified and effective managers, but also to motivate them to substantially contribute to FedEx’s future success for the long-term benefit of shareowners and reward them for doing so. Accordingly, we believe that there should be a strong relationship between pay and corporate performance (both financial results and stock price), and our executive compensation program reflects this belief. In particular, AIC payments, LTI payments and stock options represent a significant portion of our executive compensation program, and this variable compensation is “at risk” and directly dependent upon the achievement of pre-established corporate goals or stock price appreciation.
 
  •  AIC payouts are tied to meeting aggressive business plan goals for consolidated pre-tax income and segment operating profit. For example, even though the company’s fiscal 2007 performance improved year-over-year, AIC payouts for 2007 were lower than for 2006.
 
  •  LTI payouts are tied to meeting aggregate earnings-per-share (“EPS”) goals over a three-fiscal-year period. Our fiscal 2007 LTI payouts were relatively high because the company’s financial performance has been particularly strong for the past few years. By contrast, no LTI compensation was paid earlier in the decade (in 2001, 2002 and 2003) because corporate EPS goals were not met for the relevant years.
 
  •  Because the exercise price of stock options granted under our equity incentive plans is equal to the fair market value of our common stock on the date of grant, the options have value to the executive only if the stock price appreciates.
 
In summary, our philosophy is to (i) closely align the compensation paid to our executives with the performance of the company on both a short-term and long-term basis, and (ii) set aggressive performance goals that support the company’s core long-term financial goals of:
 
  •  Growing revenue by 10% per year;
 
  •  Achieving a 10%+ operating margin;
 
  •  Increasing EPS by 10% to 15% per year;
 
  •  Improving cash flow; and
 
  •  Increasing returns, such as return on invested capital.
 
Our executive compensation is thus, in large measure, highly variable and directly linked in the planning process to the above goals and increases in the FedEx stock price over time.


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The following chart illustrates for each named executive officer the allocation of fiscal 2007 target TDC between base salary and incentive and equity-based compensation elements:
 
(GRAPHIC)
 
Not only is our executive compensation program weighted towards variable, at-risk pay components, but we emphasize incentives that are dependent upon long-term corporate performance and stock price appreciation. These long-term incentives include LTI cash compensation and equity-based awards (stock options and restricted stock), and they comprise a significant portion of an executive officer’s total compensation. These incentives are designed to motivate and reward the executive officers for achieving long-term corporate financial performance goals and maximizing long-term shareowner value. These incentives also encourage the retention of the executive officers.
 
The following chart illustrates for each named executive officer the allocation of fiscal 2007 target TDC between long-term incentives (LTI, stock options and restricted stock, including the related tax reimbursement payment) and short-term components (base salary and AIC):
 
(GRAPHIC)
 
Align Management and Shareowner Interests.  We award stock options and restricted stock to create and maintain a long-term economic stake in the company for the officers, thereby aligning their interests with the interests of our shareowners.
 
In addition, as discussed below, payout under our LTI compensation program is dependent upon achievement of an aggregate EPS goal for a three-fiscal-year period. EPS was selected as the financial measure for the LTI plan because growth in our EPS strongly correlates to long-term stock price appreciation.


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The following chart illustrates the relationship between FedEx’s EPS growth and stock price appreciation (based on the fiscal year-end stock price and adjusted for stock splits):
 
(GRAPHIC)
 
In order to encourage significant stock ownership by FedEx’s senior management, including the named executive officers, and to further align their interests with the interests of our shareowners, the Board of Directors has adopted a stock ownership goal for senior officers, which is included in FedEx’s Corporate Governance Guidelines. With respect to our executive officers, the goal is that within four years after being appointed to his or her position, each officer own FedEx shares valued at the following multiple of his or her annual base salary:
 
  •  5x for the Chairman of the Board, President and Chief Executive Officer; and
 
  •  3x for the other executive officers.
 
For purposes of meeting this goal, unvested restricted stock is counted, but unexercised stock options are not. Until the ownership goal is met, the officer is encouraged to retain (but is not required to do so) “net profit shares” resulting from the exercise of stock options. Net profit shares are the shares remaining after payment of the option exercise price and taxes owed upon the exercise of options.
 
As of July 30, 2007, each executive officer exceeded the stock ownership goal.


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Our Board of Directors is responsible for the compensation of our executive management. The purpose of the Board’s Compensation Committee, which is composed solely of independent directors, is to help discharge this responsibility by, among other things:
 
  •  Reviewing and discussing with management the factors underlying our compensation policies and decisions, including overall compensation objectives;
 
  •  Reviewing and approving all company goals and objectives (both financial and non-financial) relevant to the compensation of the Chairman of the Board, President and Chief Executive Officer;
 
  •  Evaluating, together with the other independent directors, the performance of the Chairman of the Board, President and Chief Executive Officer in light of these goals and objectives and the quality and effectiveness of his leadership;
 
  •  Recommending to the Board for approval by the independent directors each element of the compensation of the Chairman of the Board, President and Chief Executive Officer;
 
  •  Reviewing the performance evaluations of all other members of executive management (the Chairman of the Board, President and Chief Executive Officer is responsible for the performance evaluations of the non-CEO executive officers); and
 
  •  Reviewing and approving each element of the compensation, as well as the terms and conditions of employment, of these other members of executive management.
 
In furtherance of its responsibility, the Compensation Committee has retained an outside consultant (Towers Perrin) to assist the Committee in evaluating FedEx’s executive compensation. The consultant reports directly to the Committee, and the Committee has determined the consultant to be independent from FedEx. The consultant attends Committee meetings, reviews Committee materials and provides advice to the Committee upon its request. For example, the consultant updates the Committee on trends and issues in executive compensation and comments on the competitiveness and reasonableness of FedEx’s executive compensation program. The consultant also assists the Committee in the development and review of FedEx’s AIC and LTI compensation programs, including commenting on performance measures and the goal-setting process.
 
The Chairman of the Board, President and Chief Executive Officer, who attends most meetings of the Compensation Committee, assists the Committee in determining the compensation of all other executive officers by, among other things:
 
  •  Setting the base salaries of the other executive officers within limits established by the Committee;
 
  •  Establishing annual individual performance objectives for the other executive officers and evaluating their performance against such objectives (the Committee reviews these performance evaluations); and
 
  •  Making recommendations, from time to time, for special stock option and restricted stock grants (e.g., for motivational or retention purposes) to other executive officers.
 
The other executive officers do not have a role in determining their own compensation, other than discussing their annual individual performance objectives with the Chairman of the Board, President and Chief Executive Officer.


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As discussed above, we believe that a significant portion of executive compensation should be based upon the company’s financial and stock price performance — that is, “at risk.” Through our approach to base salary, we attempt to strike an appropriate balance. Accordingly, the annual base salaries of the named executive officers are targeted at the 50th percentile for comparable positions in the two comparison surveys described above. Targeting the median level for base salary allows us to allocate a larger portion of total compensation to variable performance-based compensation elements (since TDC is targeted at the 75th percentile), but still provide enough fixed pay in cash to retain and attract highly marketable executives in a competitive market for executive talent.
 
The base salary of each named executive officer is reviewed and adjusted at least annually to reflect, among other things:
 
  •  varying levels of experience and responsibilities;
 
  •  individual competencies, skills and contributions;
 
  •  executive compensation survey data for base salaries for comparable positions;
 
  •  the internal salary ranges for the officer’s level;
 
  •  individual performance; and
 
  •  internal equity issues.
 
The independent members of the Board, upon the recommendation of the Compensation Committee, approve any changes to Mr. Smith’s base salary. Mr. Smith approves any changes to the base salaries of the other named executive officers within limits established by the Compensation Committee.
 
Chairman of the Board, President and Chief Executive Officer.  Effective June 2006, the independent Board members approved an ad hoc base salary increase of 2% for Mr. Smith based upon CEO compensation market data. Effective July 2006, the independent Board members approved an annual increase of 3.5% to Mr. Smith’s base salary.
 
Other Named Executive Officers.  Effective June 2006, Mr. Graf received an ad hoc base salary increase of 8% based upon CFO total compensation market data, and Messrs. Carter and Glenn each received ad hoc base salary increases of 3% based upon their increased responsibilities. Effective July 2006, each non-CEO named executive officer received an annual base salary increase of 3.5%.
 
 
Our AIC program provides a cash bonus opportunity to our employees, including the named executive officers, at the conclusion of each fiscal year based upon the achievement of company financial and individual performance objectives established at the beginning of the year, as illustrated below:
 
(GRAPH)
 
The AIC program reflects our belief that a significant portion of an executive officer’s compensation should be “at risk” and directly dependent upon the achievement of pre-established performance goals. Target AIC payouts are established as a percentage of the executive officer’s base


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salary. Payouts above target levels are based upon above-target achievement of company financial performance objectives, rather than individual objectives; accordingly, the executive officer receives above-target payouts if and only if the company exceeds its financial performance goals. The maximum AIC payout represents three times the portion of the target payout that is based upon the achievement of company financial performance objectives (plus the portion of the target payout that is based upon the achievement of individual performance objectives).
 
The company performance factor is a pre-established multiplier that corresponds, on a sliding scale, to the percentage achievement of the applicable company financial performance target objective. The multiplier matrix for company performance factors is designed so that if the financial performance threshold is achieved but is less than target, the multiplier decreases exponentially based on the percentage achievement of the target objective. On the other hand, if the company exceeds its financial performance target objective, the multiplier increases exponentially (up to the maximum, as described above) based on the percentage that such goal is exceeded.
 
The fiscal 2007 AIC target payouts for the named executive officers, as a percentage of base salary, were as follows:
 
         
Named Executive Officer
  Target Payout  
 
F.W. Smith
    130 %
A.B. Graf, Jr. 
    90 %
D.J. Bronczek
    100 %
T.M. Glenn
    90 %
R.B. Carter
    90 %
D.J. Sullivan
    80 %
 
The following table illustrates for our named executive officers the fiscal 2007 AIC formulas and total AIC payout opportunities (as a percentage of the target payout described above):
 
Allocation of Goals
 
                                                                                 
    Individual
        Consolidated
        Segment
                   
    Objectives         Pre-Tax Profit         Operating Profit           Payout Opportunity  
    Target     Maximum     +
  Target     Maximum     +
  Target     Maximum     =
    Target     Maximum  
 
FedEx Corporation CEO
                    100 %     300 %                             100 %     300 %
FedEx Corporation EVPs
    30%       30%           70 %     210 %                             100 %     240 %
FedEx Express CEO
    30%       30%           40 %     120 %         30%       90%               100 %     240 %
FedEx Ground CEO
    30%       30%           40 %     120 %         30%       90%               100 %     240 %
 
Chairman of the Board, President and Chief Executive Officer.  Mr. Smith’s AIC payout is tied to the achievement of corporate objectives for consolidated pre-tax income for the fiscal year, which are based on the corporate business plan for the year. Mr. Smith’s threshold (minimum) AIC payout is zero. His target AIC payout is set as a percentage of his base salary, and his maximum AIC payout is set as a multiple of the target payout. The independent members of the Board of Directors, upon the recommendation of the Compensation Committee, approve these percentages. The actual AIC payout ranges, on a sliding scale, from the threshold to the maximum based upon the performance of the company against the consolidated pre-tax income objectives.
 
In addition, the independent Board members, upon the recommendation of the Compensation Committee, may adjust this amount upward or downward based on their annual evaluation of Mr. Smith’s performance, including the quality and effectiveness of his leadership and the following corporate performance measures:
 
  •  FedEx’s stock price performance relative to the Standard & Poor’s 500 Composite Index, the Dow Jones Transportation Average and the Dow Jones Industrial Average;
 
  •  FedEx’s revenue and operating income growth relative to competitors;


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  •  FedEx’s cash flow;
 
  •  FedEx’s return on invested capital;
 
  •  FedEx’s U.S. revenue market share; and
 
  •  FedEx’s reputation rankings by various publications and surveys.
 
None of these factors is given any particular weight in determining whether to adjust Mr. Smith’s bonus amount.
 
Non-CEO Named Executive Officers.  FedEx Corporation executive vice presidents, including Messrs. Graf, Glenn and Carter, participate in the AIC plan for corporate employees, and presidents and chief executive officers of FedEx operating segments, including Messrs. Bronczek and Sullivan (until his retirement), participate in the AIC plan for their respective segment. Under these plans, the AIC payout is tied to the achievement of (i) individual objectives established at the beginning of the fiscal year for each executive (30% of the target payout), and (ii) company objectives for financial performance for the fiscal year (70% of the target payout). The threshold (minimum) AIC payout is zero. The target AIC payout is set as a percentage of the executive’s base salary, and the maximum AIC payout is set as a multiple of the target payout (the Compensation Committee approves these percentages). The actual AIC payout ranges, on a sliding scale, from the threshold to the maximum based upon the performance of the individual and the company against the objectives.
 
The achievement level of each non-CEO named executive officer’s individual objectives was based on Mr. Smith’s evaluation at the conclusion of the fiscal year, which is reviewed by the Compensation Committee. The company objectives for financial performance are based upon the corporate business plan for the year.
 
Discussion of Individual and Company Objectives.  Individual performance objectives for the non-CEO named executive officers vary by management level and by operating segment and include (but are not limited to):
 
  •  Provide leadership to support the achievement of financial goals;
 
  •  Support and develop key strategic initiatives;
 
  •  Maintain the highest standards of corporate governance; and
 
  •  Support diversity for our customers, our employees and our community.
 
Individual performance objectives are designed to further the company’s business objectives. Achievement of individual performance objectives is generally within each officer’s control or scope of responsibility, and the objectives are intended to be achieved with an appropriate level of effort and effective leadership by the officer.
 
As an example of our commitment to compete collectively and manage collaboratively, the AIC payout for all named executive officers, including the operating segment CEOs, is tied to the performance of FedEx as a whole — consolidated pre-tax income. We use consolidated pre-tax income as the only corporate performance measure for FedEx Corporation employees, including Messrs. Smith, Graf, Glenn and Carter, because corporate employees have broad responsibilities for financing and other non-operating decisions and are held accountable for those decisions.
 
As an example of our commitment to operate independently, the fiscal 2007 AIC payout for operating segment CEOs, including Messrs. Bronczek and Sullivan, was tied in part to the operating income of their respective operating segments. We measured segment performance against operating income objectives because segment operating income is largely controllable by the segment CEO.
 
While the fiscal 2007 operating segment AIC plans had both consolidated pre-tax income (40% of the target payout) and the respective segment’s operating income (30% of the target payout) as


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company performance measures, consolidated pre-tax income will be the only company performance measure for all fiscal 2008 AIC plans, including the operating segment plans. This change reflects our desire to focus all of our executives and employees on the performance of FedEx as a whole given our uncertainty about the strength of the economy during fiscal 2008.
 
AIC objectives for company financial performance are based upon our business plan for the fiscal year, which is reviewed and approved by the Board of Directors. Consistent with our long-term focus, we measure performance against our business plan, rather than a stipulated growth rate or an average of growth rates from prior years, to account for short-term economic and competitive conditions and anticipated strategic investments that may have short-term profit implications. We address year-over-year improvement targets through our LTI compensation plans, as discussed below. Our business planning process is extremely thorough and sets aggressive goals that are intended to result in superior company performance. Accordingly, the AIC program targets strong financial performance.
 
Fiscal 2007 AIC Performance and Payouts.  The following table presents target and actual FedEx consolidated pre-tax income and FedEx Express and FedEx Ground segment operating income for fiscal 2007 (in millions):
 
                 
Performance Measure
  Target     Actual  
 
Consolidated Pre-Tax Income
  $ 3,345     $ 3,215  
FedEx Express Segment Operating Income
    2,092       1,955  
FedEx Ground Segment Operating Income
    815       813  
 
Based upon the company’s actual performance and each officer’s achievement of individual performance objectives, payouts to the named executive officers under the fiscal 2007 AIC plans were as follows (compared to the target payouts):
 
                 
    Target
    Actual
 
Named Executive Officer
  AIC Payout     AIC Payout  
 
F.W. Smith
  $ 1,819,802     $ 1,397,851  
A.B. Graf, Jr. 
    785,030       675,911  
D.J. Bronczek
    910,872       703,193  
T.M. Glenn
    697,550       588,035  
R.B. Carter
    640,516       528,426  
D.J. Sullivan*
    421,047       383,153  
 
 
* Mr. Sullivan, who retired on December 31, 2006, received a prorated payout based on the proportion of the 2007 fiscal year during which he was employed.


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Cash Payments Under Long-Term Incentive Compensation Program
 
The LTI program provides a long-term cash payment opportunity to members of management, including the named executive officers, based upon achievement of aggregate EPS goals for the preceding three-fiscal-year period. The LTI plan design provides for payouts that correspond to specific EPS goals established by the Board of Directors. The EPS goals represent total growth in EPS (over a base year) for the three-year term of the LTI plan.
 
The following chart illustrates the relationship between EPS growth and payout:
 
(GRAPHIC)
 
Over its twelve-year history, the LTI program has paid out at an average of 101% of target. As illustrated by the above chart, the LTI program provides for target payouts if the three-year average annual EPS growth rate is 12.5% and maximum payouts (equal to 150% of the target payouts) if the growth rate is 15% or higher. Our LTI target three-year average annual EPS growth rate has always been 12.5%, which substantially exceeds the average annual EPS growth rate over the past ten years of the companies in the comparison surveys discussed previously. We set an aggressive target growth rate to motivate management to achieve exceptional results. On the other hand, we believe that a compensation program that frequently fails to pay out loses its motivating power. Accordingly, we still make payouts under the LTI program for below-target achievement. No LTI payment is made, however, unless the three-year average annual EPS growth is at least 5%.
 
Fiscal 2007 LTI Performance and Payouts.  In July 2007, maximum payouts were awarded under the LTI program to all eligible participants, including the named executive officers, because FedEx’s performance significantly exceeded the aggregate EPS target for the three-year period ended May 31, 2007. In particular, aggregate EPS for the period was $17.03, compared to the plan’s aggregate EPS target of $12.70.


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The following table sets forth for each named executive officer the target and actual payouts under the FY2005-2007 LTI plan, which was established by the Board of Directors in 2004:
 
                 
Named Executive Officer
  Target LTI Payout     Actual LTI Payout  
 
F.W. Smith
  $ 2,250,000     $ 3,375,000  
A.B. Graf, Jr. 
    750,000       1,125,000  
D.J. Bronczek
    1,000,000       1,500,000  
T.M. Glenn
    750,000       1,125,000  
R.B. Carter
    750,000       1,125,000  
D.J. Sullivan*
    516,000       774,000  
 
 
* Mr. Sullivan, who retired on December 31, 2006, received a prorated payout based on the proportion of the three-year period during which he was employed.
 
 
LTI Payout Opportunities.  The Board of Directors has established LTI plans for the three-fiscal-year periods 2006 through 2008 and 2007 through 2009, providing cash payment opportunities for fiscal 2008 and 2009, respectively, if certain EPS goals are achieved with respect to those periods. The following table sets forth the aggregate EPS targets under these two plans:
 
         
Performance Period
  Aggregate EPS Target  
 
FY2006-FY2008
  $18.00  
FY2007-FY2009
    22.24  
 
The following table sets forth the threshold (minimum), target and maximum payouts for the named executive officers under these two plans:
 
                                 
          Estimated Future Payouts  
    Performance
    Threshold
    Target
    Maximum
 
Name
  Period     ($)     ($)     ($)  
 
F.W. Smith
    FY2006-FY2008       625,000       2,500,000       3,750,000  
      FY2007-FY2009       875,000       3,500,000       5,250,000  
                                 
A.B. Graf, Jr. 
    FY2006-FY2008       187,500       750,000       1,125,000  
      FY2007-FY2009       300,000       1,200,000       1,800,000  
                                 
D.J. Bronczek
    FY2006-FY2008       250,000       1,000,000       1,500,000  
      FY2007-FY2009       375,000       1,500,000       2,250,000  
                                 
T.M. Glenn
    FY2006-FY2008       187,500       750,000       1,125,000  
      FY2007-FY2009       300,000       1,200,000       1,800,000  
                                 
R.B. Carter
    FY2006-FY2008       187,500       750,000       1,125,000  
      FY2007-FY2009       300,000       1,200,000       1,800,000  
                                 
D. J. Sullivan*
    FY2006-FY2008       92,167       368,666       553,000  
      FY2007-FY2009       48,333       193,333       290,000  
 
 
* Mr. Sullivan, who retired on December 31, 2006, is eligible for payouts under each of these plans based on the proportion of the applicable three-fiscal-year period during which he was employed.


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Our equity-based compensation, which is provided in the form of stock options and restricted stock, is intended to align the interests of executive officers with shareowner interests and ensure that the executive officers have a continuing stake in the long-term success of FedEx. The equity awards encourage and facilitate significant ownership of FedEx stock by executive officers, which creates a direct link between compensation and long-term shareowner return.
 
Amount.  We include the total value of all equity-based awards (including tax reimbursement payments for restricted stock awards, as discussed below) in our calculation of TDC, and we target the TDC of the named executive officers at the 75th percentile of the TDC for comparable positions in the comparison surveys. Accordingly, the number of stock options and restricted shares awarded varies from year to year. For example, over the past few years, as our stock price and the value of our stock option awards have increased, the number of options awarded to our executives has decreased.
 
In determining the number of option shares and shares of restricted stock to award to executive officers each year, the Compensation Committee also considers the officer’s position and level of responsibility, the total number of shares then available to be granted and potential shareowner dilution. Other factors that the Compensation Committee may consider with respect to stock option and restricted stock awards include the promotion of an officer to a more senior position or the desire to retain a valued executive or recognize a particular officer’s contributions. None of these factors is given any particular weight and the specific factors used may vary among individual executives.
 
Timing.  In awarding equity-based compensation, we do not consider, nor have we ever considered, the price of FedEx’s common stock (except to determine the value of the awards when calculating TDC for benchmarking purposes, as discussed above) or the timing of the release of material, non-public information about the company. Stock option and restricted stock awards are generally made on an annual basis to executive officers. For the past two years, the grant date for the annual grant has been the first business day of our fiscal year, which begins in June, and the Compensation Committee approved the annual grant at a regularly scheduled meeting that occurred in late May.
 
When the Compensation Committee approves a special grant outside of the annual-grant framework, such grants are made at a regularly scheduled meeting and the grant date of the awards is the approval date or the next business day, if the meeting does not fall on a business day. If the grant is made in connection with the promotion of an individual or the election of an officer, the grant date may be the effective date of the individual’s promotion or the officer’s election, if such effective date is after the approval date.
 
Pricing.  The exercise price of stock options granted under our equity incentive plans is equal to the fair market value of FedEx’s common stock on the date of grant. This design encourages executive officers to focus on the enhancement of long-term shareowner value. Under the terms of our equity incentive plans, the fair market value on the grant date is defined as the average of the high and low trading prices of FedEx’s stock on the New York Stock Exchange on that day. We believe this methodology is the most equitable method for determining the exercise price of our stock option awards given the intra-day price volatility often shown by our stock.
 
Vesting.  Stock options and restricted stock granted to executive officers generally vest ratably over four years beginning on the first anniversary of the grant date. This four-year vesting period is intended to further encourage the retention of the executive officers, since unvested stock options and restricted stock are forfeited upon termination of the officer’s employment for any reason other than death, permanent disability or retirement. In addition, unvested stock options granted on or after June 1, 2006 terminate upon the officer’s retirement.
 
Tax Reimbursement Payments for Restricted Stock Awards.  FedEx pays the taxes resulting from a restricted stock award on behalf of the recipient. This prevents the need for the officer to sell a


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portion of a stock award to pay the corresponding tax obligation. As described above, the Compensation Committee considers the amount of this “tax gross-up” in its determination of the recipient’s TDC for purposes of our benchmarking analysis. Therefore, absent the provision to gross up the taxes on these awards, the officers would receive a larger number of shares in each award.
 
Voting and Dividend Rights on Restricted Stock.  Holders of restricted shares are entitled to vote and receive any dividends on such shares. The dividend rights are included in the computation of the value of the restricted stock award for purposes of determining the recipient’s total compensation.
 
Fiscal 2007 Awards.  On June 1, 2006, the named executive officers were granted stock option and restricted stock awards as follows:
 
                 
    Number of
    Number of Shares
 
Name
  Stock Options     of Restricted Stock  
 
F.W. Smith
    200,000        
A.B. Graf, Jr. 
    33,155       6,145  
D.J. Bronczek
    27,540       7,901  
T.M. Glenn
    20,655       6,145  
R.B. Carter
    20,655       6,145  
D.J. Sullivan
    13,770 (1)     5,267 (2)
 
 
(1) These options were forfeited upon Mr. Sullivan’s retirement.
 
(2) In connection with Mr. Sullivan’s retirement, the restrictions applicable to these shares lapsed on June 1, 2007, in accordance with the terms of FedEx’s restricted stock plans.
 
As in previous years, at the request of Mr. Smith and in light of his significant stock ownership, the Compensation Committee did not award him any restricted stock. Instead, his equity awards were in the form of stock options, which have value only as the stock price increases from the date of grant.
 
 
Perquisites, Tax Reimbursement Payments and Other Annual Compensation.  FedEx’s named executive officers receive certain other annual compensation, including:
 
  •  certain perquisites and other personal benefits, such as personal use of corporate aircraft, security services and equipment, tax return preparation and financial counseling services and physical examinations;
 
  •  umbrella insurance, group term life insurance and matching 401(k) contributions; and
 
  •  tax reimbursement payments relating to restricted stock awards, certain business-related use of corporate aircraft and certain perquisites, umbrella insurance premiums and benefits accrued under our supplemental non-tax-qualified pension plan using the cash balance formula.
 
The Compensation Committee reviews and approves each of these elements of compensation, and all of the independent directors approve each element as it relates to Mr. Smith. The Committee also reviews and approves FedEx’s policies and procedures regarding perquisites and other personal benefits and tax reimbursement payments, including:
 
  •  FedEx’s written policy setting forth guidelines and procedures regarding personal use of FedEx corporate aircraft; and
 
  •  FedEx’s executive security procedures, which (i) prescribe the level of personal security to be provided to the named executive officers, and (ii) have been assessed by an independent security consulting firm and deemed necessary for the protection of the officers.


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We believe this other compensation serves the beneficial purpose of retaining and attracting the executives and allowing them to work more productively. The Compensation Committee reviews the type and amount of this other compensation in light of best practices to ensure they remain appropriate and consistent with the overall executive compensation program. As an example, during fiscal 2007 the Committee amended the company’s policy on personal use of corporate aircraft to require the officers to reimburse FedEx for substantially all of the incremental cost to FedEx of such usage.
 
Post-Employment Compensation.  While none of FedEx’s named executive officers has an employment agreement, they are entitled to receive certain payments and benefits upon termination of employment or a change of control of FedEx, including:
 
  •  Retirement benefits under FedEx’s pension plans, including a tax-qualified, defined benefit pension plan called the FedEx Corporation Employees’ Pension Plan and a supplemental non-tax-qualified plan called the FedEx Corporation Retirement Parity Pension Plan — which is designed generally to provide to the executives the additional benefits that would be paid under the tax-qualified plan but for certain benefit limits contained in the tax laws;
 
  •  Accelerated vesting of restricted stock upon the executive’s retirement (at or after age 60), death or permanent disability or a change of control of FedEx;
 
  •  Accelerated vesting of stock options upon the executive’s death or permanent disability or a change of control of FedEx; and
 
  •  Lump sum cash payments and post-employment insurance coverage under the executives’ Management Retention Agreements (“MRAs”) upon a qualifying termination of the executive after a change of control of FedEx.
 
The Compensation Committee approves and recommends Board approval of all plans, agreements and arrangements that provide for these payments and benefits and reviews this post-employment compensation in light of best practices to ensure it remains appropriate. We believe this potential compensation serves the beneficial purpose of retaining and attracting the executives by providing them with a measure of financial security and stability. In addition, the MRAs are intended to secure the executives’ continued services in the event of any threat or occurrence of a change of control, which further aligns their interests with those of our shareowners when evaluating any such potential transaction.
 
 
Section 162(m) of the Internal Revenue Code (as recently clarified by IRS Notice 2007-49) limits the income tax deduction by FedEx for compensation paid to the Chief Executive Officer and the three other highest-paid executive officers (other than the Chief Financial Officer) to $1,000,000 per year, unless the compensation is “qualified performance-based compensation” or qualifies under certain other exceptions.
 
  •  Mr. Smith’s base salary is not designed to meet the requirements of Section 162(m) and, therefore, is subject to the $1,000,000 deductibility limit.
 
  •  FedEx’s equity compensation plans satisfy the requirements of Section 162(m) with respect to stock options, but not with respect to restricted stock awards. Accordingly, compensation recognized by the four highest-paid executive officers (excluding Mr. Graf) in connection with stock options is fully deductible, but compensation with respect to restricted stock awards is subject to the $1,000,000 deductibility limit.
 
  •  FedEx’s AIC and LTI compensation plans do not meet all of the conditions for qualification under Section 162(m). Compensation received by the four highest paid executive officers (excluding Mr. Graf) under each of these plans is subject, therefore, to the $1,000,000 deductibility limit.


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We do not require all of our compensation programs to be fully deductible under Section 162(m) because doing so would restrict our discretion and flexibility in designing competitive compensation programs to promote varying corporate goals. We believe that our Board of Directors should be free to make compensation decisions to further and promote the best interests of our shareowners, rather than to qualify for corporate tax deductions. In fiscal 2007, we incurred approximately $5 million of additional tax expense as a result of the Section 162(m) deductibility limit for compensation paid to the Chief Executive Officer and the three other highest-paid executive officers (other than Mr. Graf).
 
 
In this section we provide certain tabular and narrative information regarding the compensation of our principal executive and financial officers, our three other most highly compensated executive officers and Daniel J. Sullivan (who retired as President and Chief Executive Officer of FedEx Ground on December 31, 2006) for the fiscal year ended May 31, 2007. For additional information regarding compensation of the named executive officers, see “Compensation Discussion and Analysis” on page 21.
 
 
                                                                 
                        Change in
       
                        Pension
       
                        Value and
       
                        Nonqualified
       
                    Non-Equity
  Deferred
       
            Stock
  Option
  Incentive Plan
  Compensation
  All Other
   
        Salary
  Awards
  Awards
  Compensation
  Earnings
  Compensation
  Total
Name and Principal Position
  Year   ($)   ($)(1)   ($)(1)   ($)(2)   ($)(3)   ($)(4)   ($)
 
Frederick W. Smith
    2007       1,393,931             5,865,196       4,772,851       4,013,612       969,764       17,015,354  
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
                                                               
                                                                 
Alan B. Graf, Jr. 
    2007       869,798       1,144,247       952,266       1,800,911       1,716,644       646,906       7,130,772  
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
                                                               
                                                                 
David J. Bronczek
    2007       908,305       1,315,507       1,131,664       2,203,193       2,332,755       668,600       8,560,024  
President and Chief Executive Officer – FedEx Express
                                                               
                                                                 
T. Michael Glenn
    2007       772,872       933,500       852,551       1,713,035       1,438,519       540,942       6,251,419  
Executive Vice President,
Market Development and
Corporate Communications
                                                               
                                                                 
Robert B. Carter
    2007       709,678       933,500       852,551       1,653,426       780,422       531,692       5,461,269  
Executive Vice President,
FedEx Information Services
and Chief Information Officer
                                                               
                                                                 
Daniel J. Sullivan(5)
    2007       523,766       2,202,561       803,738       1,157,153       1,061,282       889,960       6,638,460  
Former President and Chief Executive Officer – FedEx Ground
                                                               
 
 
(1) The amounts included in these columns reflect the value of restricted stock and option awards that were recognized as an expense for financial statement reporting purposes in fiscal 2007, calculated pursuant to Statement of Financial Accounting Standards (“FAS”) 123R, “Share-Based Payment,” excluding, however, any estimate of forfeitures. Accordingly, the columns include amounts relating to awards granted during and prior to fiscal 2007. The entire value of any stock award granted on or after June 1, 2006 (the date of our adoption of FAS 123R) to a retirement-eligible named executive officer is recognized as an expense in the year of grant. Otherwise, the expense is recognized over the shorter of the four-year vesting period or the period ending at the point in the vesting period when the officer becomes eligible for retirement.


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The following table sets forth each stock and option award represented in these columns and the amount included for each such award. Assumptions used in the calculation of these amounts are included in note 9 to the audited consolidated financial statements included in our annual report on Form 10-K for the fiscal year ended May 31, 2007.
 
                                                 
    Stock Awards     Option Awards  
                            Total Number
       
          Total
                of Shares
       
          Number of
    Amount
          Underlying
    Amount
 
          Shares
    Included
          Options
    Included
 
    Date of
    Awarded
    in Fiscal 2007
    Date of
    Awarded
    in Fiscal 2007
 
Name
  Award     (#)     ($)     Award     (#)     ($)  
 
F.W. Smith
                      6/3/2002       375,000       13,179  
                              6/2/2003       250,000       1,095,088  
                              6/1/2004       325,000       1,560,600  
                              6/1/2005       250,000       1,593,653  
                              6/1/2006       200,000       1,602,676  
                                                 
                                              5,865,196  
                                                 
                                                 
A.B. Graf, Jr. 
    8/14/2002       9,000       45,402       6/3/2002       45,000       1,347  
      8/14/2003       7,443       199,986       6/2/2003       65,000       264,244  
      7/12/2004       6,145       196,315       6/1/2004       38,250       189,446  
      6/1/2005       6,145       220,836       6/1/2005       34,425       225,532  
      6/1/2006       6,145       481,708       6/1/2006       33,155       271,697  
                                                 
                      1,144,247                       952,266  
                                                 
                                                 
D.J. Bronczek
    8/14/2002       12,000       60,536       6/3/2002       60,000       1,885  
      8/14/2003       9,924       266,648       6/2/2003       85,000       354,065  
      7/12/2004       7,901       252,414       6/1/2004       51,000       250,421  
      6/1/2005       7,901       283,942       6/1/2005       45,900       298,362  
      6/1/2006       7,901       451,967       6/1/2006       27,540       226,931  
                                                 
                      1,315,507                       1,131,664  
                                                 
                                                 
T.M. Glenn
    8/14/2002       9,000       45,402       6/3/2002       45,000       1,347  
      8/14/2003       7,443       199,986       6/2/2003       65,000       264,244  
      7/12/2004       6,145       196,315       6/1/2004       38,250       189,446  
      6/1/2005       6,145       220,836       6/1/2005       34,425       225,532  
      6/1/2006       6,145       270,961       6/1/2006       20,655       171,982  
                                                 
                      933,500                       852,551  
                                                 
                                                 
R.B. Carter
    8/14/2002       9,000       45,402       6/3/2002       45,000       1,347  
      8/14/2003       7,443       199,986       6/2/2003       65,000       264,244  
      7/12/2004       6,145       196,315       6/1/2004       38,250       189,446  
      6/1/2005       6,145       220,836       6/1/2005       34,425       225,532  
      6/1/2006       6,145       270,961       6/1/2006       20,655       171,982  
                                                 
                      933,500                       852,551  
                                                 
                                                 
D.J. Sullivan*
    8/14/2002       8,000       42,022       6/3/2002       30,000       809  
      8/14/2003       6,616       231,365       6/2/2003       37,500       141,511  
      7/12/2004       5,267       366,073       6/1/2004       25,500       231,106  
      6/1/2005       5,267       592,988       6/1/2005       22,950       430,312  
      6/1/2006       5,267       970,113       6/1/2006       13,770       0  
                                                 
                      2,202,561                       803,738  
                                                 
 
 
* The entire June 1, 2006 option award to Mr. Sullivan was forfeited upon his retirement. All other previously awarded unvested stock options held by Mr. Sullivan, however, will continue to vest according to the terms of the award after his retirement. The expense associated with those awards,


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however, was fully recognized in fiscal 2007. In addition, the restrictions applicable to Mr. Sullivan’s June 1, 2006 stock award lapsed on June 1, 2007, and the restrictions applicable to Mr. Sullivan’s other shares of restricted stock lapsed upon his retirement.
 
(2) Reflects cash payouts under FedEx’s fiscal 2007 annual and FY05-FY07 long-term incentive compensation plans, as follows (see pages 27-32 for further discussion of these plans and payouts):
 
                         
    FY07
    FY05-FY07
    Total Non-Equity Incentive
 
Name
  AIC Payout     LTI Payout     Plan Compensation  
 
F.W. Smith
  $ 1,397,851     $ 3,375,000     $4,772,851  
A.B. Graf, Jr. 
    675,911       1,125,000       1,800,911  
D.J. Bronczek
    703,193       1,500,000       2,203,193  
T.M. Glenn
    588,035       1,125,000       1,713,035  
R.B. Carter
    528,426       1,125,000       1,653,426  
D.J. Sullivan*
    383,153       774,000       1,157,153  
 
 
* Mr. Sullivan, who retired on December 31, 2006, received payouts under each of these plans based on the proportion of the applicable period during which he was employed.
 
(3) Reflects the actuarial increase in the present value of the named executive officer’s benefits under all pension plans sponsored by FedEx. These amounts were determined using assumptions (e.g., for interest rates and mortality rates) consistent with those used in the audited consolidated financial statements included in our annual report on Form 10-K for the fiscal year ended May 31, 2007. The amount shown for Mr. Sullivan reflects the actuarial increase in the present value of his pension plan benefits through December 31, 2006, the date of his retirement.
 
(4) Includes:
 
•      the aggregate incremental cost to FedEx of providing perquisites and other personal benefits;
 
•      umbrella insurance premiums paid on the officer’s behalf;
 
•      group term life insurance premiums paid by FedEx (and with respect to Mr. Sullivan, long-term disability insurance premiums paid by FedEx);
 
•      company matching contributions under 401(k) plans; and
 
•      tax reimbursement payments relating to restricted stock awards, certain business-related use of corporate aircraft and certain perquisites, umbrella insurance premiums and benefits accrued under our supplemental non-tax-qualified pension plan using the cash balance formula.
 
The following table shows the amounts included for each such item:
 
                                                         
    Perquisites
                Company
                   
    and Other
    Umbrella
    Life
    Contributions
    Tax
             
    Personal
    Insurance
    Insurance
    Under
    Reimbursement
             
Name
  Benefits     Premiums     Premiums     401(k) Plans     Payments     Other     Total  
 
F.W. Smith
  $ 797,354     $ 2,875     $ 2,520     $     –     $167,015     $     $ 969,764  
A.B. Graf, Jr. 
    205,460       2,875       2,520       500       435,551             646,906  
D.J. Bronczek
    113,165       2,875       2,520       500       549,540             668,600  
T.M. Glenn
    91,063       2,875       2,520       500       443,984             540,942  
R.B. Carter
    103,069       2,875       2,520       500       422,728             531,692  
D.J. Sullivan
    103,852       2,875       1,465 (a)           437,462       344,306 (b)     889,960  
 
 
(a) Includes $987 of group term life insurance premiums and $478 of long-term disability insurance premiums.
 
(b) Includes $181,610 of compensation for services rendered under the consulting agreement referred to in note 5 below, which is discussed further under the caption “Consulting Agreement and Non-Competition Agreement with Daniel J. Sullivan — Consulting Agreement”


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on page 56. Also includes $103,703 of compensation representing (i) the aggregate incremental cost of retirement gifts for Mr. Sullivan ($60,490), and (ii) related tax reimbursement payments ($43,213). Also includes $58,993 of unused vacation pay.
 
During fiscal 2007, FedEx provided the following perquisites and other personal benefits to the named executive officers:
 
  •       Personal use of corporate aircraft:  FedEx maintains a fleet of corporate aircraft that is used primarily for business travel by FedEx employees. FedEx has a written policy that sets forth guidelines and procedures regarding personal use of FedEx corporate aircraft. Effective March 1, 2007, the policy requires officers to pay FedEx two times the cost of fuel for personal trips, plus applicable passenger ticket taxes and fees. These payments are intended to approximate the incremental cost to FedEx of personal corporate aircraft usage. Beginning in fiscal 2006 and through February 28, 2007, the policy allowed personal use of FedEx corporate aircraft by the named executive officers and their family members and guests without charge, subject to various annual caps.
 
  •        Mr. Smith is not required to pay FedEx for any travel on corporate aircraft by his family members or guests when they are accompanying him and he is on business travel. Mr. Smith is required to pay FedEx, however, for any personal travel by him and any personal travel by his family members or guests when they are accompanying him and he is on personal travel or when they are traveling without him.
 
  •        Compensation is included in the table above for personal corporate aircraft travel (which for this purpose includes travel to attend a board or stockholder meeting of an outside company or entity for which the officer serves as a director or trustee) by a named executive officer and his family members and guests to the extent, if any, that the aggregate incremental cost to FedEx of all such travel exceeds the amount the officer paid FedEx for such travel. The incremental cost to FedEx of personal use of corporate aircraft is calculated based on the variable operating cost to FedEx, which includes the cost of fuel, aircraft maintenance, crew travel, landing fees, ramp fees and other smaller variable costs. Because FedEx corporate aircraft are used primarily for business travel, fixed costs that do not change based on usage, such as pilots’ salaries and purchase and lease costs, are excluded from this calculation.
 
  •        In addition, when the aircraft are already flying to a destination for business purposes and the officers or their family members or guests ride along on the aircraft for personal travel, there is no additional variable operating cost to FedEx associated with the additional passengers, and thus no compensation is included in the table above for such personal travel. With the exception of Mr. Smith, the officer is still required to pay FedEx for such personal travel, however, if persons on business travel occupy less than 50% of the total available seats on the aircraft. The amount of such payment is a pro rata portion (based on the total number of passengers) of the fuel cost for the flight, multiplied by two, plus applicable passenger ticket taxes and fees.
 
  •        For tax purposes, income is imputed to each named executive officer for personal travel and “business-related” travel (travel by the officer’s spouse or adult guest who accompanies the officer on a business trip for the primary purpose of assisting the officer with the business purpose of the trip) for the excess, if any, of the Standard Industrial Fare Level (SIFL) value of all such flights during a calendar year over the aggregate fuel payments made by the officer during that calendar year. Pursuant to FedEx’s executive security procedures, Mr. Smith is required to use FedEx corporate aircraft for all travel, including personal travel. Accordingly, FedEx reimburses Mr. Smith for taxes relating to any imputed income for his personal travel


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  and the personal travel of his family members and guests when they are accompanying him. FedEx reimburses the other named executive officers for taxes relating to imputed income for business-related travel.
 
  •       Security services and equipment:  Pursuant to FedEx’s executive security procedures, the named executive officers are provided security services and equipment. To the extent the services and equipment are provided by third parties (e.g., home security system installation, maintenance and monitoring), we have included in the table above the amounts paid by FedEx for such services and equipment. For Mr. Smith, these amounts totaled $23,857. To the extent the security services are provided by FedEx employees, we have included amounts representing: (a) the number of hours of service provided to the officer by each such employee multiplied by (b) the total hourly compensation cost of the employee (including, among other things, pension and other benefit costs). For Mr. Smith, these amounts totaled $403,405.
 
  •       Tax return preparation services:  FedEx requires officers to have their income tax returns prepared by a qualified third party (other than our independent registered public accounting firm) and pays all reasonable and customary costs for such services. FedEx also makes tax reimbursement payments relating to the income imputed to the officers for these services.
 
  •       Financial counseling services:  FedEx reimburses officers for certain financial counseling services, subject to various caps. FedEx also makes tax reimbursement payments relating to the income imputed to the officers for these services.
 
  •       Personal use of company cars/car allowance:  FedEx does not provide vehicles to any of the named executive officers, except Mr. Smith. FedEx provides a midsize sport-utility vehicle to Mr. Smith for personal use. The vehicle manufacturer provides the vehicle to FedEx at no additional cost in consideration of the companies’ business relationship. Prior to January 22, 2007, FedEx provided two other vehicles to Mr. Smith for personal use. Those two vehicles were also provided to FedEx at no additional cost in consideration of FedEx’s business relationship with another vehicle manufacturer. Even though FedEx did not incur any actual monetary costs with respect to the vehicles, compensation is included in the table above for Mr. Smith in an amount equal to the fair market lease value of the vehicles (which is also the amount of income that was imputed to Mr. Smith for tax purposes) for the portion of fiscal 2007 during which he had them. In fiscal 2007, FedEx made tax reimbursement payments to Mr. Smith relating to the income imputed to him for the vehicles in calendar 2006. Beginning with the 2007 calendar year, however, FedEx will no longer make such tax reimbursement payments. While he was employed, Mr. Sullivan received a vehicle allowance.
 
  •       Physical examinations:  FedEx pays for officers to have comprehensive annual physical examinations.
 
  •       Nominal hospitality gifts at company-sponsored events:  FedEx occasionally provides officers with nominal hospitality gifts at FedEx-sponsored events.


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     The following table shows the amounts included in the table (the aggregate incremental cost to FedEx) for each such item:
 
                                                         
                            Personal Use
             
    Personal Use
    Security
    Tax Return
    Financial
    of Company
             
    of Corporate
    Services and
    Preparation
    Counseling
    Cars/Car
             
    Aircraft
    Equipment
    Services
    Services
    Allowance
    Other
    Total
 
Name
  ($)(a)     ($)     ($)     ($)     ($)     ($)(b)     ($)  
 
F.W. Smith
    234,427       427,262       64,883       37,383       31,997       1,402       797,354  
A.B. Graf, Jr. 
    184,374       10,181       5,197       2,138             3,570       205,460  
D.J. Bronczek
    92,684       6,201       4,950       7,500             1,830       113,165  
T.M. Glenn
    37,649       6,488       33,825       10,692             2,409       91,063  
R.B. Carter
    81,292       4,713       2,850       7,500             6,714       103,069  
D.J. Sullivan
    68,127       570             27,960       4,057       3,138       103,852  
 
 
(a) Includes the following amounts for use of corporate aircraft to attend board or stockholder meetings of outside companies or organizations for which the officers serve as directors: Mr. Graf ($96,963); Mr. Bronczek ($3,475); Mr. Glenn ($23,958); Mr. Carter ($25,967); and Mr. Sullivan ($4,190).
 
(b) Includes physical examinations and nominal hospitality gifts at company-sponsored events.
 
(5) Mr. Sullivan retired on December 31, 2006. In connection with Mr. Sullivan’s retirement, he entered into a consulting agreement, which is discussed under the caption “Consulting Agreement and Non-Competition Agreement with Daniel J. Sullivan — Consulting Agreement” on page 56.


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The following table sets forth information regarding grants of plan-based awards made to the named executive officers during the fiscal year ended May 31, 2007:
 
                                                                                     
                            All Other
  All Other
           
                            Stock
  Option
          Grant
                            Awards:
  Awards:
  Exercise
      Date Fair
                            Number
  Number of
  or Base
  Closing
  Value of
                Estimated Future Payouts Under
  of Shares
  Securities
  Price of
  Price on
  Stock and
                Non-Equity Incentive Plan Awards   of Stock
  Underlying
  Option
  Grant
  Option
    Type of
      Approval
  Threshold
  Target
  Maximum
  or Units
  Options
  Awards
  Date
  Awards
Name
  Plan/Award   Grant Date   Date   ($)   ($)   ($)   (#)   (#)   ($/Sh)(1)   ($/Sh)   ($)(2)
 
F.W. Smith
  Stock Option(3)     06/01/2006       05/25/2006                                     200,000       110.06       111.35       6,399,280  
    FY07 AIC(4)                     0       1,819,802       5,459,406                                          
    FY07-FY09 LTI(5)                     875,000       3,500,000       5,250,000                                          
                                                                                     
A.B. Graf, Jr. 
  Restricted Stock(6)     06/01/2006       05/25/2006                               6,145                               676,319  
    Stock Option(3)     06/01/2006       05/25/2006                                       33,155       110.06       111.35       1,060,841  
    FY07 AIC(4)                     0       785,030       1,884,072                                          
    FY07-FY09 LTI(5)                     300,000       1,200,000       1,800,000                                          
                                                                                     
D.J. Bronczek
  Restricted Stock(6)     06/01/2006       05/25/2006                               7,901                               869,584  
    Stock Option(3)     06/01/2006       05/25/2006                                       27,540       110.06       111.35       881,181  
    FY07 AIC(4)                     0       910,872       2,186,093                                          
    FY07-FY09 LTI(5)                     375,000       1,500,000       2,250,000                                          
                                                                                     
T.M. Glenn
  Restricted Stock(6)     06/01/2006       05/25/2006                               6,145                               676,319  
    Stock Option(3)     06/01/2006       05/25/2006                                       20,655       110.06       111.35       660,886  
    FY07 AIC(4)                     0       697,550       1,674,120                                          
    FY07-FY09 LTI(5)                     300,000       1,200,000       1,800,000                                          
                                                                                     
R.B. Carter
  Restricted Stock(6)     06/01/2006       05/25/2006                               6,145                               676,319  
    Stock Option(3)     06/01/2006       05/25/2006                                       20,655       110.06       111.35       660,886  
    FY07 AIC(4)                     0       640,516       1,537,238                                          
    FY07-FY09 LTI(5)                     300,000       1,200,000       1,800,000                                          
                                                                                     
D.J. Sullivan
  Restricted Stock(6)     06/01/2006       05/25/2006                               5,267 (7)                             579,686  
    Stock Option(3)     06/01/2006       05/25/2006                                       13,770 (8)     110.06       111.35       440,590  
    FY07 AIC(4)                     0       421,047       1,010,513                                          
    FY07-FY09 LTI(5)                     48,333       193,333       290,000                                          
 
 
(1) The exercise price of the options granted to the individuals shown above was the fair market value of FedEx’s common stock (the average of the high and low prices of the stock on the New York Stock Exchange) on the date of grant.
 
(2) Represents the full grant date fair value of each equity-based award, computed in accordance with FAS 123R.
 
(3) Stock options granted to the named executive officers vest ratably over four years beginning on the first anniversary of the grant date. The options may not be transferred in any manner other than by will or the laws of descent and distribution and may be exercised during the lifetime of the optionee only by the optionee. See pages 33-34 for further discussion of stock option awards.
 
(4) In May 2006, the Compensation Committee established these annual performance cash compensation plans, which provided a cash payment opportunity to the named executive officers at the conclusion of fiscal 2007. Payment amounts were based upon the achievement of company financial performance goals for fiscal 2007 and individual objectives established at the beginning of fiscal 2007 for each officer other than Mr. Smith. Mr. Sullivan, who retired on December 31, 2006, received a prorated payout based on the proportion of the 2007 fiscal year during which he was employed. See pages 27-30 for further discussion of these plans.
 
(5) The Board of Directors established this long-term performance cash compensation plan in May 2006. The plan provides a long-term cash payment opportunity to the named executive officers at the conclusion of fiscal 2009 if FedEx achieves an aggregate earnings-per-share goal established by the Board with respect to the three-fiscal-year period 2007 through 2009. No amounts can be earned under the plan until 2009 because achievement of the earnings-per-share goal can only be


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determined following the conclusion of the three-fiscal-year period. The estimated individual future payouts under the plan are set dollar amounts ranging from threshold amounts, if the earnings-per-share goal achieved is less than target, up to maximum amounts, if the plan goal is substantially exceeded. There is no assurance that these estimated future payouts will be achieved. Mr. Sullivan, who retired on December 31, 2006, is eligible for a payout under the FY07-FY09 plan based on the proportion of the three-year-period during which he was employed. See pages 31-32 for further discussion of this plan.
 
(6) Shares of restricted stock awarded to the named executive officers vest ratably over four years beginning on the first anniversary of the grant date. Holders of restricted shares are entitled to vote and receive any dividends paid on such shares. FedEx pays the taxes resulting from a restricted stock award on behalf of the recipient (these tax reimbursement payments are not included in the computation of the grant date fair value of the awards shown in the table above; the payments are reflected in “All Other Compensation” in the Summary Compensation Table on page 36). See pages 33-34 for further discussion of restricted stock awards.
 
(7) In connection with Mr. Sullivan’s retirement, the restrictions applicable to these shares lapsed on June 1, 2007.
 
(8) These options were forfeited upon Mr. Sullivan’s retirement.


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The following table sets forth for each named executive officer certain information about unexercised stock options and unvested shares of restricted stock held at the end of the fiscal year ended May 31, 2007:
 
                                                 
    Option Awards     Stock Awards  
    Number of
    Number of
                         
    Securities
    Securities
                Number of
       
    Underlying
    Underlying
                Shares or
    Market Value of
 
    Unexercised
    Unexercised
    Option
          Units of Stock
    Shares or Units of
 
    Options
    Options
    Exercise
    Option
    That Have
    Stock That Have
 
    (#)     (#)     Price
    Expiration
    Not Vested
    Not Vested
 
Name
  Exercisable     Unexercisable(a)     ($)     Date     (#)(a)     ($)(b)  
 
F.W. Smith
    400,000             32.1250       01/27/2008                  
      300,000             31.9844       06/01/2008                  
      300,000             55.9375       06/01/2009                  
      300,000             36.0000       06/01/2010                  
      437,500             40.4900       06/01/2011                  
      375,000             53.7650       06/03/2012                  
      187,500       62,500 (1)     64.5300       06/02/2013                  
      162,500       162,500 (2)     72.8450       06/01/2014                  
      62,500       187,500 (3)     89.7000       06/01/2015                  
            200,000 (4)     110.0600       06/01/2016                  
                                                 
A.B. Graf, Jr. 
    50,000             31.9844       06/01/2008                  
      40,000             55.9375       06/01/2009                  
      10,000             41.6563       01/21/2010                  
      40,000             36.0000       06/01/2010                  
      56,250             40.4900       06/01/2011                  
      45,000             53.7650       06/03/2012                  
      48,750       16,250 (5)     64.5300       06/02/2013                  
      19,125       19,125 (6)     72.8450       06/01/2014                  
      8,606       25,819 (7)     89.7000       06/01/2015                  
            33,155 (8)     110.0600       06/01/2016                  
                                      15,688 (9)     1,751,095  
                                                 
D.J. Bronczek
    50,000               31.9844       06/01/2008                  
      40,000             55.9375       06/01/2009                  
      20,000             40.4688       12/07/2009                  
      12,600             41.6563       01/21/2010                  
      60,000             36.0000       06/01/2010                  
      72,531             40.4900       06/01/2011                  
      60,000             53.7650       06/03/2012                  
      63,750       21,250 (10)     64.5300       06/02/2013                  
      25,500       25,500 (11)     72.8450       06/01/2014                  
      11,475       34,425 (12)     89.7000       06/01/2015                  
            27,540 (13)     110.0600       06/01/2016                  
                                      20,259 (14)     2,261,310  
                                                 
T.M. Glenn
    40,000             55.9375       06/01/2009                  
      10,000             41.6563       01/21/2010                  
      40,000             36.0000       06/01/2010                  
      56,250             40.4900       06/01/2011                  
      45,000             53.7650       06/03/2012                  
      48,750       16,250 (15)     64.5300       06/02/2013                  
      19,125       19,125 (16)     72.8450       06/02/2014                  
      8,606       25,819 (17)     89.7000       06/01/2015                  
            20,655 (18)     110.0600       06/01/2016                  
                                      15,688 (19)     1,751,095  


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    Option Awards     Stock Awards  
    Number of
    Number of
                         
    Securities
    Securities
                Number of
       
    Underlying
    Underlying
                Shares or
    Market Value of
 
    Unexercised
    Unexercised
    Option
          Units of Stock
    Shares or Units of
 
    Options
    Options
    Exercise
    Option
    That Have
    Stock That Have
 
    (#)     (#)     Price
    Expiration
    Not Vested
    Not Vested
 
Name
  Exercisable     Unexercisable(a)     ($)     Date     (#)(a)     ($)(b)  
 
R.B. Carter
    6,235             55.9375       06/01/2009                  
      14,211             36.0000       06/01/2010                  
      27,945             40.4900       06/01/2011                  
      22,233             53.7650       06/03/2012                  
      25,012       16,250 (20)     64.5300       06/02/2013                  
      9,749       19,125 (21)     72.8450       06/01/2014                  
      4,303       25,819 (22)     89.7000       06/01/2015                  
            20,655 (23)     110.0600       06/01/2016                  
                                      15,688 (24)     1,751,095  
                                                 
D.J. Sullivan
    23,141             53.7650       06/03/2012                  
      28,125       9,375 (25)     64.5300       06/02/2013                  
      12,750       12,750 (26)     72.8450       06/01/2014                  
      5,737       17,213 (27)     89.7000       06/01/2015                  
                                      5,267 (28)     587,903  
 
 
 
(a) The following table sets forth the vesting dates of the options and restricted stock included in these columns:
 
                         
        Date   Number
 
F. W. Smith
    (1 )     06/02/2007       62,500  
      (2 )     06/01/2007       81,250  
              06/01/2008       81,250  
      (3 )     06/01/2007       62,500  
              06/01/2008       62,500  
              06/01/2009       62,500  
      (4 )     06/01/2007       50,000  
              06/01/2008       50,000  
              06/01/2009       50,000  
              06/01/2010       50,000  
                         
A. B. Graf, Jr. 
    (5 )     06/02/2007       16,250  
      (6 )     06/01/2007       9,562  
              06/01/2008       9,563  
      (7 )     06/01/2007       8,606  
              06/01/2008       8,606  
              06/01/2009       8,607  
      (8 )     06/01/2007       8,288  
              06/01/2008       8,289  
              06/01/2009       8,289  
              06/01/2010       8,289  
      (9 )     06/01/2007       3,072  
              07/12/2007       1,536  
              08/14/2007       1,861  
              06/01/2008       3,072  
              07/12/2008       1,537  
              06/01/2009       3,073  
              06/01/2010       1,537  

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        Date   Number
 
D. J. Bronczek
    (10 )     06/02/2007       21,250  
      (11 )     06/01/2007       12,750  
              06/01/2008       12,750  
      (12 )     06/01/2007       11,475  
              06/01/2008       11,475  
              06/01/2009       11,475  
      (13 )     06/01/2007       6,885  
              06/01/2008       6,885  
              06/01/2009       6,885  
              06/01/2010       6,885  
      (14 )     06/01/2007       3,950  
              07/12/2007       1,975  
              08/14/2007       2,481  
              06/01/2008       3,950  
              07/12/2008       1,976  
              06/01/2009       3,951  
              06/01/2010       1,976  
                         
T. M. Glenn
    (15 )     06/02/2007       16,250  
      (16 )     06/01/2007       9,562  
              06/01/2008       9,563  
      (17 )     06/01/2007       8,606  
              06/01/2008       8,606  
              06/01/2009       8,607  
      (18 )     06/01/2007       5,163  
              06/01/2008       5,164  
              06/01/2009       5,164  
              06/01/2010       5,164  
      (19 )     06/01/2007       3,072  
              07/12/2007       1,536  
              08/14/2007       1,861  
              06/01/2008       3,072  
              07/12/2008       1,537  
              06/01/2009       3,073  
              06/01/2010       1,537  
                         
R. B. Carter
    (20 )     06/02/2007       16,250  
      (21 )     06/01/2007       9,562  
              06/01/2008       9,563  
      (22 )     06/01/2007       8,606  
              06/01/2008       8,606  
              06/01/2009       8,607  
      (23 )     06/01/2007       5,163  
              06/01/2008       5,164  
              06/01/2009       5,164  
              06/01/2010       5,164  
      (24 )     06/01/2007       3,072  
              07/12/2007       1,536  
              08/14/2007       1,861  
              06/01/2008       3,072  
              07/12/2008       1,537  
              06/01/2009       3,073  
              06/01/2010       1,537  
                         
D. J. Sullivan
    (25 )     06/02/2007       9,375  
      (26 )     06/01/2007       6,375  
              06/01/2008       6,375  
      (27 )     06/01/2007       5,738  
              06/01/2008       5,737  
              06/01/2009       5,738  
      (28 )     06/01/2007       5,267  
 
(b) Computed by multiplying the closing market price of FedEx’s common stock on May 31, 2007 (which was $111.62) by the number of shares.


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The following table sets forth for each named executive officer certain information about stock options that were exercised and restricted stock that vested during the fiscal year ended May 31, 2007:
 
                                 
    Option Awards     Stock Awards  
    Number of
          Number of
       
    Shares
    Value
    Shares
    Value
 
    Acquired
    Realized
    Acquired
    Realized
 
    on Exercise
    on Exercise
    on Vesting
    on Vesting
 
Name
  (#)     ($)(1)     (#)     ($)(2)  
 
F.W. Smith
    300,000       25,072,384              
A.B. Graf, Jr. 
                7,183       752,184  
D.J. Bronczek
                9,431       986,539  
T.M. Glenn
                7,183       752,184  
R.B. Carter
    35,286 (3)     2,010,786 (3)     7,183       752,184  
D.J. Sullivan
    1,859       102,561       14,526       1,562,794  
 
 
(1) If the shares were sold immediately upon exercise, the value realized on exercise of an option is the difference between the actual sales price and the exercise price of the option. Otherwise, the value realized is the difference between the fair market value of FedEx’s common stock (the average of the high and low prices of the stock on the New York Stock Exchange) on the date of exercise and the exercise price of the option.
 
(2) Represents the fair market value of the shares on the vesting date.
 
(3) Of this total amount, 22,835 shares and realized value in the amount of $1,053,355 represent the exercise of options for which the economic benefit had been transferred to Mr. Carter’s former spouse pursuant to a domestic relations order.


47


Table of Contents

 
 
The following table sets forth for each named executive officer certain information with respect to each plan that provides for payments or other benefits at, following or in connection with retirement, other than our stock option and restricted stock plans. For information regarding benefits triggered by retirement under our stock option and restricted stock plans, see pages 52-53.
 
                                 
          Number
    Present
       
          of Years
    Value of
    Payments
 
          Credited
    Accumulated
    During
 
          Service
    Benefit
    Fiscal 2007
 
Name
  Plan Name     (#)     ($)(1)     ($)  
 
F.W. Smith
    FedEx Corporation Employees’ Pension Plan       35       1,218,808        
      FedEx Corporation Retirement Parity Pension Plan       35       27,100,770        
                                 
A.B. Graf, Jr. 
    FedEx Corporation Employees’ Pension Plan       27       806,526        
      FedEx Corporation Retirement Parity Pension Plan       27       7,911,321        
                                 
D.J. Bronczek
    FedEx Corporation Employees’ Pension Plan       31       840,372        
      FedEx Corporation Retirement Parity Pension Plan       31       9,756,338        
                                 
T.M. Glenn
    FedEx Corporation Employees’ Pension Plan       26       719,633        
      FedEx Corporation Retirement Parity Pension Plan       26       6,500,616        
                                 
R.B. Carter
    FedEx Corporation Employees’ Pension Plan       14       323,756        
      FedEx Corporation Retirement Parity Pension Plan       14       2,645,107        
                                 
D.J. Sullivan(2)
    FedEx Corporation Employees’ Pension Plan       34       1,170,207       43,125  
      FedEx Corporation Retirement Parity Pension Plan       34