FedEx cuts CEO pay, to freeze hiring

ATLANTA - FedEx Corp. cut chief executive Fred Smith's pay by 20 percent and will trim smaller amounts from US salaried employees as the package shipper struggles with the longest recession in a quarter century.

About 12 percent of the workforce will be affected by the pay reductions, which will be 5 percent for US salaried employees and up to 10 percent for senior executives.

Hiring will be frozen and contributions to retirement accounts suspended for at least a year, FedEx said yesterday in a statement.

The moves are part of $200 million in new savings toward a goal of more than $1 billion for the year as Memphis-based FedEx confronts "some of the worst economic conditions" in its 35-year history. US air shipments fell 8 percent for the biggest drop in seven years last quarter as businesses and consumers curbed spending because of the recession.

FedEx chief financial officer Alan Graf said volume patterns deteriorated during the quarter ended Nov. 30 on declines in industrial production and consumer spending, and that "we don't believe we have reached the bottom."

The pay cuts accompanied FedEx's disclosure that net income in the second quarter climbed to $493 million, or $1.58 a share, matching the average estimate of 12 analysts in a Bloomberg survey. Profit a year earlier was $479 million, or $1.54. Revenue rose 1 percent to $9.54 billion.

FedEx shares have fallen 30 percent this year, compared with a 25 percent drop for United Parcel Service Inc.

Smith's base salary last fiscal year was $1.43 million, and his total compensation including options and other incentive pay was $10.9 million, FedEx's most recent proxy statement showed.

About 36,000 US employees are affected by the pay cuts, said Jess Bunn, a spokesman. FedEx has about 290,000 workers, including 13,000 independent contractors. Hourly workers won't get pay cuts.