FedEx says Fred Smith will step down as CEO and remain executive chairman

FedEx corp

FDX 1.54%

Founder Fred Smith is stepping down as CEO of the company he started more than 50 years ago with a few planes and grew into a global delivery network that moves millions of packages every day.

Mr. Smith, 77, is handing over the CEO role to President and Chief Operating Officer Raj Subramaniam.

Mr. Smith, who is also CEO of FedEx, will transition to CEO on June 1 when the leadership transition takes place.

Mr. Subramaniam, a company veteran with more than 30 years of experience, is immediately elected CEO. The 56-year-old steered FedEx’s acquisition of online shopping and was seen as a likely successor to Mr Smith after being named executive No. 2 and appointed to the board in early 2020.

In a letter to staff Monday, Mr. Smith said he scheduled the appointment of his successor at the company’s 50th anniversary and that the appointment of Mr. Subramaniam would allow the CEO-elect to begin developing the business plan for the next fiscal year monitor.

“While I am very proud of what we have created, I do not like to look back,” wrote Mr. Smith. “We always have to look ahead.”

Mr. Smith invented the concept of express delivery when he founded Federal Express in 1971 by creating an airline network that flew time-sensitive packages overnight.

The concept was formulated in a term paper during his time at Yale University.

Based in Memphis, Tennessee, the company employs more than 600,000 people and posted sales of $92 billion last year.

Lately, FedEx has been trying to capitalize on changing shopping habits driven by the e-commerce boom.

FedEx began separating from Amazon.com Inc. in 2019, which set up its own logistics operation.

Instead, FedEx focused on other merchants, turning its ground unit into a low-cost network that delivers everything from toothpaste to toilet paper to US homes and played a crucial role during the pandemic, when online shopping soared.

Mr. Smith has been CEO of FedEx for most of its history. The billionaire was preparing to hand over the reins ahead of the pandemic but extended his stay after two top executives, including his heir apparent, abruptly left, the Wall Street Journal reported.

The founder had more recently begun retiring from FedEx, withdrawing from some quarterly earnings calls and generally leaving investor questions to his executive team. He focuses on political issues such as trade. As Executive Chairman, Mr. Smith plans to focus on corporate governance and issues such as sustainability. After two years of limited travel, he also plans to visit employees around the world soon.

The FedEx board has been planning this succession for several months, said a person familiar with the matter, with the board focused on preparing Mr Subramaniam for a smooth internal transition of power.

In his letter, Mr. Smith said he had recommended to the board for the past few years that, in the event of his death or disability, Mr. Subramaniam should become CEO and that the board should appoint an independent chairman. He said the board approved the leadership change at a meeting last week.

One of his sons, Richard, is to take on a larger role in the company.

FedEx recently announced that Richard Smith, who has held various senior positions with the company since 2005, will lead the Express unit effective September.

FedEx said it will leave the chief operating officer role, traditionally seen as the next in line to CEO, vacant for the time being.

The company’s shares have fallen about 18% over the past year, compared with a roughly 14% rise in the S&P 500 and a 28% rise in shares of competitor United Parcel Service inc

FedEx’s stock price has also underperformed the market and UPS over the past five years.

FedEx’s financial results have come under pressure in recent quarters as the pandemic boom in package volumes slows and the company faces higher labor and fuel costs. The company recently reported that it shipped an average of 16.8 million packages per day in the three months ended Feb. 28, compared to 17.6 million in the year-ago quarter.

FedEx executives said profit margins have been hurt by expanding its delivery network and adding more customers in recent years — at a time when UPS is shedding some of its less profitable customers and pulling back significant network expansions.

FedEx is hosting an investor meeting in June where it plans to outline how it can improve profit margins and discuss its long-term strategy.

Mr. Smith is the latest in a line of company founders or longtime CEOs to advance to the position of Executive Chairman rather than step down altogether. That includes Amazon founder Jeff Bezos, who stepped down as CEO to become executive chairman in 2021.

write to Paul Ziobro at Paul.Ziobro@wsj.com

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