I’ve been reading about the death of FedEx founder Fred Smith for a couple of days now, and I have watched a few docs on him over the years and am always fascinated by the origin stories of great companies.
So when Fred Smith died this weekend I expected a spate of obits, and was not disappointed. The Times didn ‘t have one until today, and this part jumped out at me:
[Though Mr. Smith criticized President Donald Trump’s trade policy], the two found much else to agree on. The Times reported that, thanks to the corporate tax cuts Mr. Trump signed into law, which FedEx had lobbied for, [the company’s tax bill plunged] to zero, from $1.5 billion. Mr. Smith had said that businesses like FedEx would respond to the windfall with major new investments, yet FedEx reduced its capital expenditures and increased its spending on stock buybacks
Anyway, lots of places to read about it if you want, I just thought this part of the Times obit stuck out. True, but weird. Of course the Times’ aren’t hagiographies like some.
Mr. Smith was from “the old school” that built a business by productive investment. The managers who voted for the stock buybacks were probably younger managers from the “new school” of milking a business instead of growing it. Just because they were in the same sentence doesn’t necessarily mean that Mr. Smith approved of this.
Wendy
As a Management Consultant I had a professional interest in the origin stories of great companies and Fred Smith / FedEx was one of them.
Aside from seeing the need for national overnight delivery, Mr. Smith’s greatest innovation was a hub-and-spoke system of routes. He based the sorting of packages in Memphis, where he found an unused airplane hangar. He flew his planes at night, when the skies were relatively empty.
According to Mentour Pilot hub-and-spoke is losing interest, at least in passenger service, as modern airplanes offer better results with direct flights.
Possibly, but then why put forth the idea of new investments? Mr. Smith was not savvy enough to realize what his Board might do? I thought he might have been around the block a few times to know how his company works. Maybe he was just speaking off the cuff…
Sure there was if he was smart. He could have averaged 16% a year on the money for 8 years. It’s only math. Most people understand that 16 is more than 8.
No. You don’t understand how Social Security works. If you earn more than a minimal amount and start benefits at age 62, it starts getting clawed back. If you’re getting hundreds of thousands of dollars a year in Corporate Director’s fees, all of it would be clawed back, and you wouldn’t have anything left to invest until you reach age 67 (or your full retirement age).
That is true if your compensation is in dollars but if you are given stock as compensation and it vests after your full retirement age then you will receive your social security at 62 without any deduction.