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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

  Filed by the Registrant ý

 

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))

 

ý

 

Definitive Proxy Statement

 

o

 

Definitive Additional Materials

 

o

 

Soliciting Material Pursuant to §240.14a-12

FEDEX CORPORATION

(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):

ý

 

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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GRAPHIC


NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 29, 2008


To Our Stockholders:

        We cordially invite you to attend the 2008 annual meeting of FedEx's stockholders. The meeting will take place in The Grand Ballroom at The Peabody Hotel, 149 Union Avenue, Memphis, Tennessee 38103, on Monday, September 29, 2008, 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:

        Only stockholders of record at the close of business on August 4, 2008 may vote at the meeting or any postponements or adjournments of the meeting.

August 18, 2008

        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 the ticket accompanying your 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.


Table of Contents

2008 PROXY STATEMENT



TABLE OF CONTENTS

 
  Page  

INFORMATION ABOUT THE ANNUAL MEETING

    2  
 

What is the purpose of the annual meeting?

    2  
 

Who is entitled to vote?

    2  
 

Am I entitled to vote if my shares are held in "street name"?

    2  
 

How many shares must be present to hold the meeting?

    2  
 

What if a quorum is not present at the meeting?

    2  
 

How do I vote?

    3  
 

How do I vote my shares held in a FedEx benefit plan?

    3  
 

Who can attend the meeting?

    3  
 

Can I change my vote after I submit my proxy?

    4  
 

Will my vote be kept confidential?

    4  
 

Who will count the votes?

    4  
 

How does the Board of Directors recommend I vote on the proposals?

    4  
 

What if I do not specify how my shares are to be voted?

    4  
 

Will any other business be conducted at the meeting?

    4  
 

How many votes are required to elect each director nominee?

    5  
 

What happens if a director nominee does not receive the required majority vote?

    5  
 

What happens if a director nominee is unable to stand for election?

    5  
 

How many votes are required to adopt the amendment to FedEx's Incentive Stock Plan?

    5  
 

How many votes are required to ratify the appointment of FedEx's independent registered public accounting firm?

    5  
 

How many votes are required to approve each of the stockholder proposals?

    5  
 

How will abstentions be treated?

    5  
 

How will broker non-votes be treated?

    5  
 

Will the meeting be Webcast?

    6  

STOCK OWNERSHIP

    7  
 

Directors and Executive Officers

    7  
 

Section 16(a) Beneficial Ownership Reporting Compliance

    8  
 

Significant Stockholders

    8  

CORPORATE GOVERNANCE MATTERS

    9  
 

Corporate Governance Documents

    9  
 

Director Independence

    9  
 

Audit Committee Financial Expert

    10  
 

Director Mandatory Retirement

    10  
 

Stock Ownership Goal for Directors and Senior Officers

    10  
 

Policy on Poison Pills

    11  
 

Executive Sessions of Non-Management Directors

    11  
 

Communications with Directors

    11  
 

Nomination of Director Candidates

    11  
 

Majority-Voting Standard for Director Elections

    12  
 

Policy on Review and Preapproval of Related Person Transactions

    12  
 

Related Person Transactions

    13  

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

    14  
 

Meetings

    14  
 

Committees

    14  
 

Attendance at Annual Meeting of Stockholders

    15  

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TABLE OF CONTENTS
(continued)

 
  Page  

PROPOSAL 1 – ELECTION OF DIRECTORS

    16  

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

    19  

COMPENSATION DISCUSSION AND ANALYSIS

    19  
 

Executive Summary

    19  
 

Compensation Objectives and Design-Related Features

    24  
 

Role of the Compensation Committee, Its Compensation Consultant and the Chairman of the Board, President and Chief Executive Officer

    29  
 

Compensation Elements and Fiscal 2008 Amounts

    30  
 

Long-Term Equity Incentives – Stock Options and Restricted Stock

    35  
 

Other Elements of Executive Compensation

    37  
 

Tax Deductibility of Compensation

    38  

EXECUTIVE COMPENSATION

    39  
 

Summary Compensation Table

    39  

GRANTS OF PLAN-BASED AWARDS DURING FISCAL 2008

    45  

OUTSTANDING EQUITY AWARDS AT END OF FISCAL 2008

    47  

OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2008

    50  

FISCAL 2008 PENSION BENEFITS

    51  
 

Overview of Pension Plans

    51  
 

Traditional Pension Benefit

    52  
 

Portable Pension Account

    52  
 

Lump Sum Distribution

    53  
 

Taxes

    54  

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

    55  
 

Benefits Triggered by Retirement, Death or Permanent Disability – Stock Option and Restricted Stock Plans

    55  
 

Benefits Triggered by Change of Control or Termination After Change of Control – Stock Option and Restricted Stock Plans and Management Retention Agreements

    56  

DIRECTORS' COMPENSATION

    59  
 

Outside Directors' Compensation

    59  
 

Retirement Plan for Outside Directors

    59  
 

Fiscal 2008 Director Compensation

    60  

PROPOSAL 2 – ADOPTION OF AMENDMENT TO FEDEX'S INCENTIVE STOCK PLAN TO INCREASE THE NUMBER OF OPTION SHARES AND RESTRICTED SHARES ISSUABLE UNDER THE PLAN

    62  
 

Number of Shares That May Be Awarded and Outstanding Awards Under All Plans

    62  
 

Purpose of the Plan

    63  
 

Administration of the Plan

    63  
 

Types of Awards

    63  
 

Number of Shares That May Be Awarded

    64  
 

Term of the Plan

    64  
 

Eligibility to Receive Awards

    64  
 

Provisions Applicable to Restricted Stock Awards

    64  
 

Provisions Applicable to Stock Options

    65  
 

Stock Option Grants to Non-Employee Directors

    66  
 

Tax Withholding

    66  
 

Repricing and Discounting Prohibited

    66  
 

Loans Prohibited

    66  
 

Change of Control

    66  

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TABLE OF CONTENTS
(continued)

 
 
Page
 
 

Termination and Amendment of Plan

    66  
 

Benefits to Named Executive Officers and Others

    67  
 

New Plan Benefits

    67  
 

Foreign Jurisdictions

    67  
 

Federal Income Tax Consequences

    67  
 

Vote Required for Approval

    68  

EQUITY COMPENSATION PLANS

    69  
 

Equity Compensation Plans Approved by Stockholders

    69  
 

Equity Compensation Plans Not Approved by Stockholders

    69  
 

Summary Table

    69  

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

    71  

AUDIT AND NON-AUDIT FEES

    72  

PROPOSAL 3 – RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    73  
 

Appointment of Independent Registered Public Accounting Firm

    73  
 

Policies Regarding Independent Auditor

    73  
 

Vote Required for Ratification

    74  

PROPOSAL 4 – STOCKHOLDER PROPOSAL: INDEPENDENT BOARD CHAIRMAN

    75  
 

Board of Directors' Statement in Opposition

    75  
 

Vote Required for Approval

    77  

PROPOSAL 5 – STOCKHOLDER PROPOSAL: SHAREHOLDER VOTE ON EXECUTIVE PAY

    78  
 

Board of Directors' Statement in Opposition

    79  
 

Vote Required for Approval

    80  

OTHER MATTERS

    80  

ADDITIONAL INFORMATION

    80  
 

Proxy Solicitation

    80  
 

Householding

    80  
 

Stockholder Proposals for 2009 Annual Meeting

    81  

APPENDIX A – COMPANIES IN EXECUTIVE COMPENSATION COMPARISON SURVEY GROUP

    A-1  

APPENDIX B – INCENTIVE STOCK PLAN (AS AMENDED)

    B-1  

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FedEx Corporation

942 South Shady Grove Road
Memphis, Tennessee 38120

2008 PROXY STATEMENT

        FedEx's Board of Directors is furnishing you this proxy statement in connection with the solicitation of proxies on its behalf for the 2008 Annual Meeting of Stockholders. The meeting will take place in The Grand Ballroom at The Peabody Hotel, 149 Union Avenue, Memphis, Tennessee 38103, on Monday, September 29, 2008, at 10:00 a.m. local time. At the meeting, stockholders will vote on the election of twelve directors, the adoption of an amendment to FedEx's Incentive Stock Plan to increase the number of option shares and restricted shares issuable under the plan, the ratification of FedEx's independent registered public accounting firm and, if properly presented at the meeting, two 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, 2008, which includes FedEx's fiscal 2008 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 18, 2008.

        IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON SEPTEMBER 29, 2008. The following materials are available on the Investor Relations page of the FedEx Web site at http://www.fedex.com/us/investorrelations:

        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

What is the purpose of the annual meeting?

        At the annual meeting, the stockholders will be asked to:

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.


Who is entitled to vote?

        The record date for the meeting is August 4, 2008. 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 311,200,320 shares of FedEx common stock outstanding.


Am I entitled to vote if my shares are held in "street name"?

        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 voting instructions, your record holder 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 3). Absent your instructions, the record holder will not be permitted, however, to vote your shares on the adoption of the amendment to FedEx's Incentive Stock Plan (Proposal 2) or the adoption of the two stockholder proposals (Proposals 4 and 5) and your shares will be considered "broker non-votes" on those proposals. See "How will broker non-votes be treated?" on page 5.

        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.


How many shares must be present to hold the meeting?

        A quorum must be present at the meeting for any business to be conducted. The presence at the meeting, in person or represented 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.


What if a quorum is not present at the meeting?

        If a quorum is not present 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. The time and place of the adjourned meeting will be announced at the time the adjournment is taken, and no other notice will be given.

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How do I vote?

        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 28, 2008.

        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 the record holder of your shares. We recommend that you follow the instructions set forth on the voting instruction card provided to you.

        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.


How do I vote my shares held in a FedEx benefit plan?

        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 24, 2008. If your voting instructions are not received by that date, each plan trustee will vote your shares in the same proportion as the plan shares for which voting instructions have been received.


Who can attend the meeting?

        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.

        If your shares are held in street name, you must bring the "Admission Ticket" that accompanies 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.

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Can I change my vote after I submit my proxy?

        Yes, if you are a registered stockholder you may revoke your proxy and change your vote by:

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 the record holder of your shares 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.


Will my vote be kept confidential?

        Yes, your vote will be kept confidential and not disclosed to FedEx unless:


Who will count the votes?

        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.


How does the Board of Directors recommend I vote on the proposals?

        Your Board recommends that you vote:


What if I do not specify how my shares are to be voted?

        If you submit a proxy but do not indicate any voting instructions, your shares will be voted:


Will any other business be conducted at the meeting?

        We know of no other business to be conducted at the meeting. 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

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passed and we did not receive any such notice. If any other matter properly comes before the stockholders for a vote at the meeting, the proxy holders will vote your shares in accordance with their best judgment.


How many votes are required to elect each director nominee?

        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 12.


What happens if a director nominee does not receive the required majority vote?

        Each nominee is a current director who is standing for reelection. Accordingly, each nominee has tendered an irrevocable resignation from the Board of Directors that will take effect if the nominee does not receive the required majority vote and the Board accepts the resignation. If the Board accepts the resignation, the nominee will no longer serve on the Board of Directors, and if the Board rejects the resignation, the nominee 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 12.


What happens if a director nominee is unable to stand for election?

        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.


How many votes are required to adopt the amendment to FedEx's Incentive Stock Plan?

        The adoption of the amendment to FedEx's Incentive Stock Plan to increase the number of option shares and restricted shares issuable under the plan requires the affirmative vote of a majority of the shares present at the meeting, in person or represented by proxy, and entitled to vote.


How many votes are required to ratify the appointment of FedEx's independent registered public accounting firm?

        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 represented by proxy, and entitled to vote.


How many votes are required to approve each of the stockholder proposals?

        If the 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 represented by proxy, and entitled to vote. Approval of the stockholder proposal would merely serve as a recommendation to the Board to take the necessary steps to implement such proposal.


How will abstentions be treated?

        Abstentions will have no effect on the election of directors (Proposal 1). For each of the 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 the proposal.


How will broker non-votes be treated?

        If your shares are held in street name and you do not give voting instructions, your record holder 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 3). Your shares will be treated as broker non-votes on the other proposals.

        Broker non-votes will be treated as shares present for quorum purposes, but not entitled to vote. Thus, absent voting instructions from you, the record holder of your shares may not vote your shares on the

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adoption of the amendment to FedEx's Incentive Stock Plan (Proposal 2) or the two stockholder proposals (Proposals 4 and 5). A broker non-vote with respect to these proposals will not affect their outcome.


Will the meeting be Webcast?

        Yes, 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 29, 2008 to access the live Webcast of the meeting. An archived copy of the Webcast will be available on our Web site for at least 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

Directors and Executive Officers

        The following table sets forth the amount of FedEx's common stock beneficially owned by each director, each named executive officer included in the Summary Compensation Table on page 39 and all directors and executive officers as a group, as of August 4, 2008. Unless otherwise indicated, beneficial ownership is direct and the person shown has sole voting and investment power.

 
  Common Stock Beneficially Owned
Name of Beneficial Owner
  Number
of Shares
  Number of
Option Shares(1)
  Percent of
Class(2)

Frederick W. Smith

    19,809,435 (3)   2,318,750   7.06%

James L. Barksdale

    46,800     27,200   *

August A. Busch IV

    4,000     30,550   *

John A. Edwardson

    7,250     35,200   *

Judith L. Estrin

    26,000     67,200   *

Philip Greer

    94,912 (4)   51,200   *

J.R. Hyde, III

    111,600 (5)   67,200   *

Shirley A. Jackson

    7,000     29,200   *

Steven R. Loranger

    4,000 (6)   8,800   *

Gary W. Loveman

    10,414     4,400   *

Charles T. Manatt

    5,000     20,200   *

Joshua I. Smith

    5,086     32,200   *

Paul S. Walsh

    8,500     47,200   *

Peter S. Willmott

    106,690 (7)   35,200   *

David J. Bronczek

    85,885 (8)   456,211   *

T. Michael Glenn

    190,022 (9)   257,058   *

Alan B. Graf, Jr. 

    209,480 (10)   342,058   *

David F. Rebholz

    35,878 (11)   42,052   *

All directors and executive officers as a group (21 persons)

    20,903,209 (12)   4,229,206   7.97%

*
Less than 1% of FedEx's outstanding common stock.

(1)
Reflects the number of shares that can be acquired at August 4, 2008 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 311,200,320 shares outstanding on August 4, 2008.

(3)
Includes 15,459,285 shares owned by Mr. Smith (4,662,564 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 2,278 shares held in FedEx's retirement savings plan. Mr. Smith's business address is 942 South Shady Grove Road, Memphis, Tennessee 38120.

(4)
Excludes 37,634 shares owned by members of Mr. Greer's family, as to which Mr. Greer disclaims beneficial ownership, and includes 36,462 shares owned by Greer Investment 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.

(5)
Includes 11,600 shares owned by family trusts and 100,000 shares pledged as security by Mr. Hyde.

(6)
Owned by a family trust.

(7)
Includes 106,690 shares pledged as security by Mr. Willmott.

(8)
Includes 662 shares held in FedEx's retirement savings plan.

(9)
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 543 shares held in FedEx's retirement savings plan.

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(10)
Includes 7,400 shares owned by a family trust and 425 shares held in FedEx's retirement savings plan.

(11)
Includes 838 shares held in FedEx's retirement savings plan.

(12)
Includes 1,005 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 4,746 shares held in FedEx's retirement savings plan.


Section 16(a) Beneficial Ownership Reporting Compliance

        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 FedEx's directors and reporting officers that no additional reports were required, FedEx believes that its directors and reporting officers complied with all these filing requirements for the fiscal year ended May 31, 2008.


Significant Stockholders

        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, 2008.

 
  Amount and Nature of
Beneficial Ownership
  Percent of Class  

Dodge & Cox
555 California Street, 40th Floor
San Francisco, California 94104

    22,443,963 (1)   7.24 %

PRIMECAP Management Company
225 South Lake Avenue, Suite 400
Pasadena, California 91101

   
20,885,900

(2)
 
6.73

%

Capital World Investors
333 South Hope Street
Los Angeles, California 90071

   
17,077,000

(3)
 
5.51

%

(1)
Dodge & Cox, a registered investment advisor, had sole voting power over 21,252,071 shares and sole investment power over all 22,443,963 shares.

(2)
PRIMECAP Management Company, a registered investment advisor, had sole voting power over 3,453,131 shares and sole investment power over all 20,885,900 shares.

(3)
Capital World Investors, a registered investment advisor, had sole voting power over 2,147,000 shares and sole investment power over all 17,077,000 shares.

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CORPORATE GOVERNANCE MATTERS

Corporate Governance Documents

        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://ir.fedex.com/governance.cfm. The information on FedEx's Web site, however, is not incorporated by reference in, and does not form part of, this proxy statement.


Director Independence

        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, each of the Board's members (James L. Barksdale, August A. Busch IV, John A. Edwardson, Judith L. Estrin, J.R. Hyde, III, Philip Greer, Shirley A. Jackson, Steven R. Loranger, Gary W. Loveman, Charles T. Manatt, Joshua I. Smith, Paul S. Walsh and Peter S. Willmott) 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.

        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:

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        The Board broadly considered all relevant facts and circumstances, including the following immaterial transactions, relationships and arrangements:


Audit Committee Financial Expert

        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.


Director Mandatory Retirement

        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. Accordingly, Philip Greer and Charles T. Manatt are retiring as directors immediately before this year's annual meeting.


Stock Ownership Goal for Directors and Senior Officers

        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:

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        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 August 4, 2008, each director and executive officer owned sufficient shares to comply with this goal.


Policy on Poison Pills

        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 Bylaws and Corporate Governance Guidelines.


Executive Sessions of Non-Management Directors

        Non-management Board members meet without management present at least four times annually at regularly scheduled executive sessions in conjunction with each in-person meeting of the Board of Directors. 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.


Communications with 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.


Nomination of Director Candidates

        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 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 81, "Additional Information — Stockholder Proposals for 2009 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 has engaged a third-party executive search firm to assist in identifying potential board candidates. 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, search firm 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

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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:

        In addition, it is desirable 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.


Majority-Voting Standard for Director Elections

        FedEx's Bylaws require that we use a majority-voting standard in uncontested director elections and contain a resignation requirement for directors who fail to receive the required majority vote. The Bylaws also prohibit the Board from changing back to a plurality-voting standard without the approval of our stockholders. Under the 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. In accordance with the majority-voting standard and resignation requirement, each incumbent director who is standing for reelection at the annual meeting (in the case of this year's meeting, each nominee) 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.


Policy on Review and Preapproval of Related Person Transactions

        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

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person transaction or a material change to an existing related person transaction may not be preapproved if it would:

        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.


Related Person Transactions

        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:

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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

Meetings

        During fiscal 2008, the Board of Directors held five regular meetings and one special meeting. Each director attended at least 75% of the meetings of the Board and any committees on which he or she served.


Committees

        The Board of Directors has a standing Audit Committee, Compensation Committee, Information Technology Oversight Committee and Nominating & Governance Committee. Each committee's written charter, as adopted by the Board of Directors, is available on the FedEx Web site at http://ir.fedex.com/com_charters.cfm. Committee memberships are as follows:

Audit Committee
 
Information Technology
Oversight Committee
John A. Edwardson (Chairman)
Gary W. Loveman
Joshua I. Smith
Peter S. Willmott
  Judith L. Estrin (Chairwoman)
James L. Barksdale
J.R. Hyde, III
Shirley A. Jackson
Gary W. Loveman

Compensation Committee

 

Nominating &
Governance Committee
Philip Greer (Chairman)
August A. Busch IV
Steven R. Loranger
Paul S. Walsh
  Peter S. Willmott (Chairman)
James L. Barksdale
Shirley A. Jackson
Charles T. Manatt

        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:

Audit Committee
 
Information Technology
Oversight Committee
John A. Edwardson (Chairman)
Gary W. Loveman
Joshua I. Smith
Peter S. Willmott
  Judith L. Estrin (Chairwoman)
James L. Barksdale
J.R. Hyde, III
Gary W. Loveman

Compensation Committee

 

Nominating &
Governance Committee
Steven R. Loranger (Chairman)
August A. Busch IV
Shirley A. Jackson
Paul S. Walsh
  Peter S. Willmott (Chairman)
James L. Barksdale
Judith L. Estrin
Shirley A. Jackson

        The Audit Committee, which held eight meetings during fiscal 2008, performs the following functions:

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        The Compensation Committee, which held five meetings during fiscal 2008, performs the following functions:

        The Information Technology Oversight Committee, which held five meetings during fiscal 2008, performs the following functions:


        The Nominating & Governance Committee, which held five meetings during fiscal 2008, performs the following functions:


Attendance at Annual Meeting of Stockholders

        FedEx expects all Board members to attend annual meetings of stockholders. Each member of the Board of Directors attended the 2007 annual meeting of stockholders.

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PROPOSAL 1 – ELECTION OF DIRECTORS

        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. The Board of Directors currently consists of fourteen members. Mr. Philip Greer and Mr. Charles T. Manatt are retiring as directors immediately before the annual meeting and are not standing for reelection. Effective upon the retirement of Messrs. Greer and Manatt, the size of the Board will be reduced to twelve members. The Board proposes that each of the other current directors be reelected to the Board. Each of the nominees elected at this annual meeting will hold office until the annual meeting of stockholders to be held in 2009 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 FedEx's majority-voting standard, each of the twelve 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 Matters — Majority-Voting Standard for Director Elections" on page 12.

        YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE TWELVE 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
Elected as Director
  Age  
Principal Occupation,
Business and Directorships

Frederick W. Smith
    1971

    63   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

   
65
 

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.

August A. Busch IV
    2003

   
44
 

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.

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Director, Year First
Elected as Director
  Age  
Principal Occupation,
Business and Directorships

John A. Edwardson
    2003

    59   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.

Judith L. Estrin
    1989

   
53
 

Chief Executive Officer of JLABS, LLC (formerly known as Packet Design Management Company, LLC), a company focused on technology innovation, 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.

J.R. Hyde, III
    1977

   
65
 

Chairman of GTx, Inc., a biopharmaceutical company, since November 2000; 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

   
62
 

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.

Steven R. Loranger
    2006

   
56
 

Chairman of the Board, President and Chief Executive Officer of ITT Corporation, a diversified high-technology 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 businesses. Director, ITT Corporation.

Gary W. Loveman
    2007

   
48
 

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.

Joshua I. Smith
    1989

   
67
 

Chairman and Managing Partner, Coaching Group, LLC, a management 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.

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Director, Year First
Elected as Director
  Age  
Principal Occupation,
Business and Directorships

Paul S. Walsh
    1996

    53   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

   
71
 

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; 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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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

        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
Steven R. Loranger
Paul S. Walsh


COMPENSATION DISCUSSION AND ANALYSIS

        In this section we discuss and analyze the compensation of our principal executive and financial officers and our three other most highly compensated executive officers (the "named executive officers") for the fiscal year ended May 31, 2008. For additional information regarding compensation of the named executive officers, see "Executive Compensation" on page 39.


Executive Summary

        Each of the named executive officers has been a member of our management for over 25 years, and our Chairman of the Board, President and Chief Executive Officer, Frederick W. Smith, founded the company and pioneered the express transportation industry over 35 years ago.

        This long tenure plays a significant role in our executive compensation. As one example, we provide base salary merit increases each year, so each named executive officer has experienced many years of such increases. Also, annual bonus amounts are calculated as a percentage of base salary, so higher base salaries may result in higher annual bonuses if performance justifies a payout. More important than any formulaic effect, however, the long tenure of the named executive officers has made them especially knowledgeable about our business and our industry and thus particularly valuable to the company and our shareowners. We cannot afford to lose these long-tenured officers or their invaluable knowledge, particularly given how critical they are to the future performance of the company.

        At the same time, we face significant challenges in our efforts to retain these officers. Under the leadership of these officers, we have experienced strong long-term financial growth and shareowner return, and FedEx has become one of the most trusted and respected brands in the world. As a result, there is a significant risk that these leaders will be presented with other career opportunities, including more senior positions and at higher levels of compensation. We have a duty to our shareowners to overcome these obstacles and continue to retain these officers, and we design our compensation program to fulfill this important obligation.

        As with tenure, position and level of responsibility are important factors in the compensation level of any FedEx employee, including the named executive officers. There are internal salary ranges for each level, and annual target bonus percentages, long-term bonus amounts, and the number of options and restricted shares awarded are all closely tied to management level and responsibilities. For instance, all FedEx Corporation executive vice presidents have the same salary range and annual target bonus percentages and receive the same long-term bonus and the same number of options and restricted shares in the annual grant.

        Because retention is so imperative and tenure and management level are such determinative factors, we use external survey data as a guideline only. Thus, the target compensation levels of our named executive officers do not neatly correspond to a specified percentile of compensation in those surveys.

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        We design our executive compensation program to further FedEx's mission of producing superior financial returns for shareowners by pursuing the following objectives:


 

 
  How Pursued
 
 
 

Objective
  Generally
  Specifically
 
Retain and attract highly qualified and effective executive officers.   Pay competitively.   Use comparison survey data as a point of reference when setting target levels for total direct compensation, which includes both fixed and variable, at-risk components tied to stock price appreciation and short- and long-term financial performance.

 

 

 

 

 
 
Motivate executive officers to contribute to our future success and to build long-term shareowner value and reward them accordingly.   Link a significant part of compensation to FedEx's financial and stock price performance, especially long-term performance.   Weight executive compensation program in favor of incentive and equity-based compensation elements (rather than base salary), especially long-term incentive cash compensation and equity incentives in the form of stock options and restricted stock.

 

 

 

 

 
 
Further align executive officer and shareowner interests.   Encourage and facilitate long-term shareowner returns and significant ownership of FedEx stock by executives.   Make annual equity-based grants, tie long-term cash compensation to growth in our earnings per share ("EPS") because growth in our earnings per share strongly correlates to long-term stock price appreciation, and maintain a stock ownership goal for senior officers and encourage each officer to retain shares acquired upon stock option exercises until his or her goal is met.

 

 

 

 

 
 

        Our executive compensation 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 performance goals that support the company's core long-term financial goals of:

        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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        FedEx's compensation program for executive officers consists of the following elements, each of which is consistent with our executive compensation philosophy and helps to achieve our overall compensation-related objectives:


 

Element
  Key Features
  Primary Objective
 
Base salary   •  Reviewed and adjusted at least annually.

•  Independent Board members, upon the recommendation of the Compensation Committee, approve any changes to CEO's base salary.

•  CEO approves any annual merit increases to the base salaries of the other named executive officers within limits established by the Compensation Committee.
  Provide enough fixed pay in cash to retain and attract highly marketable executives in a competitive market for executive talent.

 

 

 

 

 
 
Cash payments under annual incentive compensation ("AIC") program   •  AIC payouts are tied to meeting internal annual financial performance goals (100% of target payout for CEO, and 70% of target payout for non-CEO named executive officers).

•  Independent Board members, upon the recommendation of the Compensation Committee, approve CEO's AIC payout opportunities and may adjust his payout upward or downward based upon their annual evaluation of his performance.

•  AIC payouts for non-CEO named executive officers are also tied to the achievement of individual objectives established at the beginning of the fiscal year for each executive (30% of the target payout), and achievement level is based upon CEO's evaluation at the conclusion of the fiscal year, which is reviewed by the Compensation Committee.

•  Payouts above target levels are based upon above-target achievement of annual financial performance objective, rather than individual objectives.

•  Maximum AIC payout represents three times the portion of the target payout that is based upon the achievement of annual financial performance objective (plus the portion that is based upon the achievement of individual performance objectives). See page 32 for an illustration of the fiscal 2008 AIC formulas and payout opportunities.
  Motivate executive officers to achieve our annual financial goals and other business objectives and reward them accordingly.

 

 

 

 

 
 

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Element
  Key Features
  Primary Objective
 
Cash payments under long-term incentive compensation ("LTI") program   •  LTI payouts are tied to meeting internal aggregate EPS goals over a three-fiscal-year period.

•  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.

•  No LTI payout is made unless the three-year average annual EPS growth rate is at least 5%.

•  Independent Board members, upon the recommendation of the Compensation Committee, approve CEO's LTI payout opportunities.
  Motivate executive officers to contribute to our future success and to build long-term shareowner value and reward them accordingly.

 

 

 

 

 
 
Stock options   •  Exercise price of stock options is equal to the fair market value of FedEx's common stock on the date of grant (defined as the average of the high and low trading prices of FedEx's stock on the New York Stock Exchange on that day).

•  Stock options are generally granted on an annual basis to executive officers.

•  Stock options granted to executive officers generally vest ratably over four years beginning on the first anniversary of the grant date.

•  Unvested stock options are forfeited upon termination of 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 retirement.

•  Independent Board members approve CEO's stock option compensation.
  Further align executive officer and shareowner interests by facilitating significant ownership of FedEx stock by the officers, which creates a direct link between their compensation and long-term shareowner return, and also further encourage retention of the officers.

 

 

 

 

 
 

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Element
  Key Features
  Primary Objective
 
Restricted stock   •  Restricted stock awards are generally made on an annual basis to executive officers.

•  Restricted stock granted to executive officers generally vests ratably over four years beginning on the first anniversary of the grant date.

•  Unvested restricted stock is forfeited upon termination of employment for any reason other than death, permanent disability or retirement.

•  As noted below, FedEx pays the taxes resulting from a restricted stock award on behalf of the recipient.
  Further align executive officer and shareowner interests by facilitating significant ownership of FedEx stock by the officers, which creates a direct link between their compensation and long-term shareowner return, and also further encourage retention of the officers.

When setting compensation levels, we establish the value of the restricted stock award by including the amount of the related tax reimbursement payment. Therefore, the officers receive fewer shares in each award than they otherwise would. The tax reimbursement payments are intended to prevent the need for the officer to sell a portion of a stock award to pay the corresponding tax obligation.

 

 

 

 

 
 
Other annual compensation, including perquisites and tax reimbursement payments   •  Includes personal use of corporate aircraft, though officers are required to reimburse FedEx for substantially all of the incremental cost to FedEx of such usage (pursuant to FedEx's written policy setting forth guidelines and procedures regarding personal use of FedEx corporate aircraft).

•  Includes security services and equipment pursuant to FedEx's executive security procedures, tax return preparation and financial counseling services and tax reimbursement payments relating to restricted stock awards, certain business-related use of corporate aircraft, certain perquisites and benefits accrued under our supplemental non-tax-qualified pension plan.

•  The Compensation Committee reviews the type and amount of this other compensation in light of market practices to ensure they remain appropriate and consistent with the overall executive compensation program.

•  Independent Board members, upon the recommendation of the Compensation Committee, approve CEO's perquisites, tax reimbursement payments and other annual compensation.
  Retain and attract highly qualified and effective executives and allow them to work more productively.

Alleviate safety and security concerns.

 

 

 

 

 
 

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Element
  Key Features
  Primary Objective
 
Post-employment and change-of-control payments and benefits, such as through our pension plans and management retention agreements   •  None of FedEx's named executive officers has an employment agreement, but they are entitled to receive certain payments and benefits upon termination of employment or a change of control of FedEx, including:

    •    Retirement benefits under a tax-qualified, defined benefit plan and a supplemental non-tax-qualified plan.

    •    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.

    •    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 reviews this post-employment compensation in light of market practices to ensure it remains appropriate.
  Retain and attract highly qualified and effective executives by providing them with a measure of financial security and stability.

The supplemental non-tax-qualified plan is designed to provide to the executives the additional benefits that would be paid under the tax-qualified plan but for certain benefit limits under laws applicable to that plan.

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.
 


Compensation Objectives and Design-Related Features

         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 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.

         Benchmarking.    Our executives are aggressively recruited and their relatively long tenure combined with the invaluable institutional and industry knowledge they have as a result make it particularly important that we retain them. In order to ensure that our compensation remains competitive, we refer to the 75th percentile of target compensation for comparable positions in comparison surveys when setting target levels for total direct compensation, which includes both fixed and variable, at-risk components tied to stock price appreciation and short- and long-term financial performance.

        For the fiscal 2008 executive compensation review, we considered data published by two major consulting firms: Towers Perrin and Hewitt Associates. Each consulting firm provided target compensation data on general industry companies (excluding financial services companies) in its respective database with annual revenues in excess of $10 billion. A list of these companies is attached to this proxy statement as Appendix A, and the annual revenues of FedEx in fiscal 2008 ($38 billion) were at the 70th percentile of the annual revenues of these companies in their respective most recently completed fiscal years. General industry is an appropriate comparison category because our executives are aggressively recruited by and from businesses outside FedEx's industry peer group. Using a robust data sample (206 companies) helps to mitigate the impact of outliers and the risk of selection bias (as noted below) and increases the likelihood of comparing with companies with executive officer positions similar to ours.

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        Because the annual revenues of these companies vary significantly, each consulting firm used regression analysis to make it possible to include data from a large number of both larger and smaller companies, thereby avoiding the selection bias inherent with using a small peer group of similar sized companies. Regression analysis is a statistical tool for examining the relationship between two or more variables — in this case, compensation and company size, as measured by annual revenues. As a result of this regression analysis, consistent with market practice, each consulting firm adjusted its compensation data to ensure that it most accurately reflected compensation for companies with revenues similar to ours. In addition, consistent with market practice, each firm increased, or "aged," the data to approximate the value of the compensation at the beginning of our fiscal 2008. The data results provided by each firm were then averaged to arrive at blended market compensation data for general industry executives.

        When we compare the elements of compensation of our executive officers to the benchmarking survey data, we group the elements into two categories:

        The TDC formula is illustrated below:

GRAPHIC

        Other elements of compensation (such as perquisites and retirement benefits) are not included in our TDC formula, consistent with our comparison survey information. Accordingly, these other elements are not benchmarked against survey data, and decisions as to these other elements do not influence decisions as to the elements of compensation that are included in the TDC formula. These other elements of compensation, however, are reviewed and approved by our Compensation Committee.

         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, as shown by the chart below, and this variable compensation is "at risk" and directly dependent upon the achievement of pre-established corporate goals or stock price appreciation:

        Accordingly, because our financial performance and stock price were down in fiscal year 2008:

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        The following chart illustrates for each named executive officer the allocation of fiscal 2008 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 2008 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

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        We include target AIC payouts and LTI payouts (discounted to present value) in the TCC and TDC formula, so the actual compensation paid may vary widely from targeted levels in the short term because compensation earned under the AIC and LTI programs is variable and commensurate with the level of achievement of 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. As an example, as shown by the chart below, the actual fiscal 2008 TDC of our named executive officers was below targeted levels because our fiscal 2008 financial performance fell short of our pre-established goals.


Comparison of
Fiscal 2008 Target TDC to 75th Percentile Market Reference Point
and of
Fiscal 2008 Actual TDC to Fiscal 2008 Target TDC

GRAPHIC

        Where target TDC is higher than our 75th percentile reference, it is because of specific retention concerns and the important role of tenure, management level and responsibilities on our compensation. For example, Mr. Glenn's fiscal 2008 compensation reflects the breadth and importance of his recently increased responsibilities, which far exceed those of the typical top sales and marketing executive. In addition to his duties as our top sales and marketing executive, Mr. Glenn is responsible for FedEx's investor relations and corporate communications functions. Additionally, Mr. Glenn is the head of the FedEx Services business segment, which has nearly 40,000 employees and includes the following FedEx companies, for which he is responsible: FedEx Services, as its chairman, president and chief executive officer; FedEx Office (formerly known as FedEx Kinko's), as its chairman; FedEx Customer Information Services, as its vice-chairman and co-chief executive officer; and FedEx Global Supply Chain Services, as its chairman. No single position in the comparison surveys fully captures the breadth of Mr. Glenn's responsibilities. Accordingly, consistent with market practice, we apply a premium to the survey data for the position of top sales and marketing executive to partially account for his additional responsibilities relative to that position.

        While we benchmark our targeted executive compensation levels against the comparison survey group of companies, we do not benchmark our AIC and LTI financial performance goals against these companies or any other group of companies. Rather, as discussed below, our AIC and LTI financial performance goals are based upon our internal business objectives. Accordingly, the relationship between our financial performance

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and the financial performance of the comparison survey group does not necessarily affect the relationship between our executive compensation and the executive compensation of that group in a given year.

        Our ten-year total shareholder return, or TSR, ranks in the top quartile of the companies in the comparison survey group, so our performance compares quite favorably with these companies over the long term. We believe that long-term performance is the most important measure of our success, as we manage FedEx's business and affairs for the long-term benefit of our shareowners. However, our business is highly cyclical and especially susceptible to trends in economic activity, such as the recent economic downturn and record high fuel prices. In addition, we face intense competition and our market is highly sensitive to price and service. Moreover, our business is capital intensive, and we continue to make long-term strategic investments in our business that may have short-term profit implications. As a result, our recent earnings and stock price performance do not compare as favorably with the companies in the comparison survey group. Reflecting this relatively weak financial performance and consistent with our pay for performance philosophy, our fiscal 2008 compensation was below targeted levels, as noted above.

         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 above, payout under our LTI 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.

        The following graph 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) from 1978 to 2008:

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

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appointed to his or her position, each officer own FedEx shares valued at the following multiple of his or her annual base salary:

        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 August 4, 2008, each executive officer exceeded the stock ownership goal.

        In addition, we generally prohibit all members of management, including the named executive officers, from engaging in certain types of transactions involving FedEx stock that may signal a lack of confidence in FedEx's prospects or may lead to inadvertent insider trading violations, such as transactions in publicly traded options, short sales, holding stock in a margin account or pledging it as collateral for a loan, and hedging or monetization transactions.


Role of the Compensation Committee, Its Compensation Consultant and the Chairman of the Board, President and Chief Executive Officer

        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:

        In furtherance of the Compensation Committee's responsibility, Towers Perrin was retained as the Committee's outside consultant to assist the Committee in evaluating FedEx's executive compensation during fiscal 2008. In connection with this engagement, the consultant reported directly and exclusively to the Committee. The consultant participated in Committee meetings, reviewed Committee materials and provided advice to the Committee upon its request. For example, the consultant updated the Committee on trends and issues in executive compensation and commented on the competitiveness and reasonableness of FedEx's executive compensation program. The consultant also assisted the Committee in the development and review of FedEx's AIC and LTI programs, including commenting on performance measures and the goal-setting process.

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        During fiscal 2008, Towers Perrin performed the following other services for the company unrelated to executive compensation:

        Because the fees paid by the company to Towers Perrin for these services and for providing the executive compensation benchmarking survey data described above are not material, either individually or in the aggregate, the Compensation Committee has determined Towers Perrin to be independent from FedEx. Compensation Committee preapproval is required for any services to be provided to the company by the Committee's independent compensation consultant. This helps ensure that the consultant maintains the highest level of independence from the company, in both appearance and fact.

        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:

        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.


Compensation Elements and Fiscal 2008 Amounts

Base Salary

        The base salaries of our executive officers are reviewed and adjusted at least annually to reflect, among other things, the executive compensation survey data discussed above for base salaries for comparable positions, the tenure of the officers, and the base salaries of the officers relative to one another, as well as the internal salary ranges for the officer's level.

        Effective July 2007, each named executive officer received an annual merit increase of 3.5% to his base salary. Effective October 2007, Mr. Glenn received an additional base salary increase of 3.74% based upon his increased responsibilities resulting from the realignment of FedEx Office under FedEx Services, which he leads. Effective December 2007, in connection with the elimination of Mr. Rebholz's vehicle allowance, he received an additional base salary increase in an amount equal to the annual car allowance, $6,955 (or less than 1% of his previous base salary). As a result of these increases, the annual base salaries of our named executive officers as of May 31, 2008 were as follows:

Name
  Annual Base Salary  

F.W. Smith

  $ 1,434,840  

A.B. Graf, Jr. 

    902,784  

D.J. Bronczek

    942,756  

T.M. Glenn

    832,188  

D.F. Rebholz

    875,016  

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Cash Payments Under Annual Incentive Compensation Plans

        Our AIC program provides an annual cash bonus opportunity to our employees, including the named executive officers, at the conclusion of each fiscal year based upon the achievement of AIC objectives for company and individual performance established at the beginning of the year, as illustrated below:

Annual
Base Salary
 
x
  Bonus Target
Percentage
 
x
  GRAPHIC   Company
Performance
Factor
 
+
  Individual
Performance
Factor
  GRAPHIC  
=
 
AIC Payout

        Target AIC payouts are established as a percentage of the executive officer's base salary. Payouts above target levels are based upon the company's performance, rather than achievement of individual objectives; accordingly, the executive officer receives above-target payouts only if the company exceeds the AIC target objective for annual financial performance. The maximum AIC payout represents three times the portion of the target payout that is based upon target annual financial performance (plus the portion of the target payout that is based upon the achievement of individual performance objectives).

        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 — for the fiscal 2008 AIC plan, consolidated pre-tax income. The company performance factor is a pre-established multiplier that corresponds, on a sliding scale, to the percentage achievement of the AIC target objective for annual financial performance. The multiplier matrix for company performance factors is designed so that if the AIC annual financial performance threshold (for fiscal 2008, consolidated pre-tax income of $3.677 billion) is achieved but is less than target (for fiscal 2008, consolidated pre-tax income of $3.738 billion), the multiplier decreases on a sliding scale based on the percentage achievement of the AIC target objective. On the other hand, if the company exceeds the AIC target objective, the multiplier increases on a sliding scale (up to the maximum, as described above) based on the percentage that the target objective is exceeded up to the AIC annual financial performance maximum (for fiscal 2008, consolidated pre-tax income of $4.418 billion).

        AIC objectives for company annual financial performance are typically 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 plans, as discussed below.

        Ordinarily our business plan objective for the financial performance measure becomes the target objective for company performance under our AIC plan. For the fiscal 2008 AIC plan, however, in order to further motivate management to improve the company's performance despite the expected weak economic conditions and continued high fuel prices, we used the business plan objective for consolidated pre-tax income as the threshold (rather than the target) under the AIC plan. In fact, for the fiscal 2009 AIC plan, because of the same motivational considerations, the company financial performance threshold under the AIC plan — which will be measured by EPS, rather than consolidated pre-tax income — will be even higher than the business plan objective for EPS. In addition, under the fiscal 2009 AIC plan, the AIC payout opportunity relating to individual performance will be contingent upon achievement of EPS objectives under the plan (as well as the achievement of individual performance objectives).

        The fiscal 2008 AIC target payouts for the named executive officers, as a percentage of base salary, were as follows:

Name
  Target Payout

F.W. Smith

  130%

A.B. Graf, Jr. 

    90%

D.J. Bronczek

  100%

T.M. Glenn

    90%

D.F. Rebholz

    80%

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        The following table illustrates for our named executive officers the fiscal 2008 AIC formulas and total AIC payout opportunities (as a percentage of the target payout described above):


Allocation of Goals

 
  Individual Objectives    
  Consolidated Pre-Tax Profit    
  Payout Opportunity  
 
  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 %       70 %   210 %       100 %   240 %

FedEx Ground CEO

    30 %   30 %       70 %   210 %       100 %   240 %

         Chairman of the Board, President and Chief Executive Officer.    Mr. Smith's AIC payout is tied to the achievement of our internal goals for company financial performance for the fiscal 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 our company financial performance goals.

        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:

        None of these factors is given any particular weight in determining whether to adjust Mr. Smith's bonus amount.

         Non-CEO Named Executive Officers.    The AIC payouts for the other named executive officers are 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) our internal goals for company 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.

        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):

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        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. The achievement level of each non-CEO named executive officer's individual objectives is based on Mr. Smith's evaluation at the conclusion of the fiscal year, which is reviewed by the Compensation Committee.

         Fiscal 2008 AIC Performance and Payouts.    The following table presents the consolidated pre-tax income threshold, target and maximum for the company performance factor under our fiscal 2008 AIC plan and our actual consolidated pre-tax income for fiscal 2008 (in millions):

Company Performance Measure
  Threshold   Target   Maximum   Actual  

Consolidated Pre-Tax Income

  $ 3,677   $ 3,738   $ 4,418   $ 2,016  

        Based upon the company's below-threshold actual performance and each non-CEO named executive officer's achievement of individual performance objectives, payouts to the named executive officers under the fiscal 2008 AIC plans were as follows (compared to the target and maximum payouts):

Name
  Target
AIC Payout
  Maximum
AIC Payout
  Actual
AIC Payout
 

F.W. Smith

  $ 1,865,292   $ 5,595,876   $ 0  

A.B. Graf, Jr. 

    812,506     1,950,014     231,564  

D.J. Bronczek

    942,756     2,262,614     254,544  

T.M. Glenn

    748,969     1,797,526     202,222  

D.F. Rebholz

    700,013     1,680,031     203,704  

        The independent Board members, upon the recommendation of the Compensation Committee, decided not to exercise their discretion (which is described above) to adjust the amount of Mr. Smith's fiscal 2008 AIC payout. Accordingly, he did not receive a payout under the fiscal 2008 AIC plan.

Cash Payments Under LTI 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.

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        The following chart illustrates the relationship between EPS growth and payout:

GRAPHIC

        As illustrated by the above chart, the LTI program provides for:

         Exclusion of Kinko's-Related Charge from LTI Program.    We acquired Kinko's, Inc. (now known as FedEx Office) in fiscal 2004. During the fourth quarter of fiscal 2008, we recorded a charge of approximately $891 million ($696 million, net of tax, or $2.23 per diluted share), predominantly for impairment of the value of the Kinko's trade name and the goodwill recorded as a result of the Kinko's acquisition — $515 million related to impairment of the trade name and $367 million related to reduction of the recorded value of the goodwill. In June 2008, the Board of Directors, upon the recommendation of the Compensation Committee, decided that it was in the best interests of the company and its shareowners to exclude the $891 million charge from fiscal 2008 EPS for purposes of (i) determining achievement levels under the FY2006-FY2008, FY2007-FY2009 and FY2008-FY2010 LTI plans, and (ii) setting EPS goals (by applying the above EPS growth rates) under the FY2009-FY2011 LTI plan. The Board based this decision upon its belief that including the charge in the calculation of EPS for purposes of the first three plans would result in substantially reduced payouts that would not accurately reflect the company's core financial performance during the relevant three-year period. The Board was also concerned that such an unfair result could adversely impact FedEx's ability to retain its highly qualified and effective management. With respect to the FY2009-FY2011 LTI plan, without excluding the charge, the goals would be substantially too low and too easily exceeded, thereby resulting in above-target or maximum payouts that would not accurately reflect the company's core financial performance during the three-year period.

         Fiscal 2008 LTI Performance and Payouts.    The following table presents the aggregate EPS threshold, target and maximum under our FY2006-FY2008 LTI plan, which was established by the Board of Directors in

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2005, and our actual aggregate EPS (excluding the Kinko's-related charge, as discussed above) for the three-year period ended May 31, 2008:

Performance Measure
  Threshold   Target   Maximum   Actual
(excluding charge)
 

FY2006-FY2008 Aggregate EPS

  $ 15.62   $ 18.00   $ 18.85   $ 18.14  

        Based upon this performance, payouts to the named executive officers under the FY2006-FY2008 LTI plan were as follows (compared to the threshold, target and maximum payouts):

Name
  Threshold LTI Payout   Target LTI Payout   Maximum LTI Payout   Actual LTI Payout  

F.W. Smith

  $ 625,500   $ 2,500,000   $ 3,750,000   $ 2,705,000  

A.B. Graf, Jr. 

    187,500     750,000     1,125,000     811,500  

D.J. Bronczek

    250,000     1,000,000     1,500,000     1,082,000  

T.M. Glenn

    187,500     750,000     1,125,000     811,500  

D.F. Rebholz

    154,168     616,666     925,000     667,233  

         LTI Payout Opportunities.    The Board of Directors has established LTI plans for the three- fiscal-year periods 2007 through 2009 and 2008 through 2010, providing cash payment opportunities for fiscal 2009 and 2010, respectively, if certain EPS goals are achieved with respect to those periods. The following table presents the aggregate EPS thresholds, targets and maximums under these two plans and our progress toward these goals as of May 31, 2008 (excluding the Kinko's-related charge, as discussed above):

Performance
Period
  Aggregate EPS
Threshold
  Aggregate EPS
Target
  Aggregate EPS
Maximum
  Actual Aggregate EPS
as of May 31, 2008
(excluding charge)
FY2007-FY2009   $ 19.30   $ 22.24   $ 23.28   $12.31
(with one year remaining)
FY2008-FY2010     21.44     24.72     25.88   5.83
(with two years remaining)

        The following table sets forth the threshold (minimum), target and maximum payouts for the named executive officers under these two plans:

 
   
  Estimated Future Payouts  
Name
  Performance
Period
  Threshold
($)
  Target
($)
  Maximum
($)
 

F.W. Smith

    FY2007-FY2009     875,000     3,500,000     5,250,000  

    FY2008-FY2010     875,000     3,500,000     5,250,000  

A.B. Graf, Jr. 

   

FY2007-FY2009

   
300,000
   
1,200,000
   
1,800,000
 

    FY2008-FY2010     300,000     1,200,000     1,800,000  

D.J. Bronczek

   

FY2007-FY2009

   
375,000
   
1,500,000
   
2,250,000
 

    FY2008-FY2010     375,000     1,500,000     2,250,000  

T.M. Glenn

   

FY2007-FY2009

   
300,000
   
1,200,000
   
1,800,000
 

    FY2008-FY2010     300,000     1,200,000     1,800,000  

D.F. Rebholz

   

FY2007-FY2009

   
250,000
   
1,000,000
   
1,500,000
 

    FY2008-FY2010     250,000     1,000,000     1,500,000  

Long-Term Equity Incentives – Stock Options and Restricted Stock

         Amount.    Stock options and restricted stock are generally granted on an annual basis to executive officers. As discussed above, an officer's position and level of responsibility are the primary factors that determine the number of option shares and shares of restricted stock awarded to the officer in the annual grant. For instance, all FedEx Corporation executive vice presidents receive the same number of options and restricted shares in the annual grant.

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        The number of stock options and restricted shares awarded at each management level can vary from year to year. In determining how many option shares and shares of restricted stock should be awarded at each level, the Compensation Committee may consider:

        Other factors that the Compensation Committee may consider, especially with respect to special grants outside of the annual-grant framework, 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 selecting dates for awarding equity-based compensation, we do not consider, nor have we ever considered, the price of FedEx's common stock 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.

        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. 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.    As noted below, 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 portion of a stock award to pay the corresponding tax obligation. We include the amount of this "tax gross-up" in the calculation of the recipient's TDC for purposes of setting target compensation levels. Therefore, the officers receive fewer shares in each award than they would in the absence of the tax reimbursement payment.

         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.

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         Fiscal 2008 Awards.    On July 9, 2007, the named executive officers were granted stock option and restricted stock awards as follows:

Name
  Number of
Stock Options
  Number of Shares
of Restricted Stock
 

F.W. Smith

    175,000      

A.B. Graf, Jr. 

    20,655     6,145  

D.J. Bronczek

    27,540     7,901  

T.M. Glenn

    20,655     6,145  

D.F. Rebholz

    13,770     5,267  

        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.

        On September 24, 2007, Mr. Glenn was granted 5,000 additional stock options in recognition of his increased responsibilities resulting from the realignment of FedEx Office under FedEx Services, and on January 14, 2008, Mr. Graf was granted 5,000 additional stock options in order to maintain internal pay equity.


Other Elements of Executive Compensation

         Perquisites, Tax Reimbursement Payments and Other Annual Compensation.    FedEx's named executive officers receive certain other annual compensation, including:

        We provide this other compensation to enhance the competitiveness of our executive compensation program and to increase the productivity (corporate aircraft travel, professional assistance with tax return preparation and financial planning), safety (security services and equipment) and health (annual physical examinations) of our executives so they can focus on producing superior financial returns for our shareowners. 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 executive security procedures prescribe the level of personal security to be provided to the Chairman, President and Chief Executive Officer and other executive officers, are based on bona fide business-related security concerns and are an integral part of FedEx's overall risk management and security program. These procedures have been assessed by an independent security consulting firm, and deemed necessary and appropriate for the protection of the officers and their families given the history of direct security threats against FedEx executives and the likelihood of additional threats against the officers. The security services and equipment provided to FedEx executive officers may be viewed as conveying personal benefits to the executives and, as a result, must be reported in the Summary Compensation Table on page 39.

        With respect to Mr. Smith, FedEx's founder, the FedEx Corporate Security Executive Protection Unit, which is composed of highly trained and experienced security professionals, provides comprehensive physical and personal security services, including on-site residential security, for Mr. Smith and his family. The Board of Directors believes that Mr. Smith's personal safety and security are of the utmost importance to FedEx and its shareowners and, therefore, the costs associated with such security are appropriate and necessary business expenses.

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         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:

        The Compensation Committee approves and recommends Board approval of all plans, agreements and arrangements that provide for these payments and benefits.

        In June 2008, the Board of Directors, upon the recommendation of the Compensation Committee, amended the FedEx Corporation Retirement Parity Pension Plan, the supplemental, non-tax-qualified plan, to maintain the interest rate and mortality assumptions that were used before the June 2008 effectiveness of the Pension Protection Act of 2006 for purposes of the lump sump payment of the traditional pension benefit under the plan. In the absence of the amendment, a participant's lump sum distribution could have been reduced by as much as 14%, depending on retirement age and year of retirement, because of the legislation. The Board based the decision to amend the plan on its belief that a significant reduction in plan benefits could have a material adverse impact on the retention of our long-tenured and valuable senior executives. The traditional pension benefits provided to employees, including the named executive officers, under the tax-qualified plan were not adversely affected by the legislation because only a minimal lump sum ($1,000 or less) may be distributed under that plan.


Tax Deductibility of Compensation

        Section 162(m) of the Internal Revenue Code (as 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.

        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 2008, we incurred approximately $4 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).

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EXECUTIVE COMPENSATION

        In this section we provide certain tabular and narrative information regarding the compensation of our principal executive and financial officers and our three other most highly compensated executive officers for the fiscal year ended May 31, 2008. For additional information regarding compensation of the named executive officers, see "Compensation Discussion and Analysis" on page 19.


Summary Compensation Table

Name and Principal Position
  Year   Salary
($)
  Bonus
($)
  Stock
Awards
($)(1)
  Option
Awards
($)(1)
  Non-Equity
Incentive Plan
Compensation
($)(2)
  Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(3)
  All Other
Compensation
($)(4)
  Total
($)
 

Frederick W. Smith

    2008     1,430,466       –         5,967,239     2,705,000         837,548     10,940,253  

    Chairman, President and Chief Executive Officer (Principal Executive Officer)

    2007     1,393,931       –         5,865,196     4,772,851     4,013,612     970,002     17,015,592  

Alan B. Graf, Jr. 

   
2008
   
900,240
   

  –

   
1,777,472
   
824,065
   
1,043,064
   
33,967
   
537,610
   
5,116,418
 

    Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

    2007     869,798       –     1,144,247     952,266     1,800,911     1,716,644     646,906     7,130,772  

David J. Bronczek

   
2008
   
940,096
   

  –

   
1,720,862
   
950,231
   
1,336,544
   

   
614,706
   
5,562,439
 

    President and Chief Executive Officer —
FedEx Express

    2007     908,305       –     1,315,507     1,131,664     2,203,193     2,332,755     668,600     8,560,024  

T. Michael Glenn

   
2008
   
819,927
   

  –

   
1,056,807
   
734,714
   
1,013,722
   

   
501,633
   
4,126,803
 

    Executive Vice President, Market Development and
Corporate Communications

    2007     772,872       –     933,500     852,551     1,713,035     1,438,519     540,942     6,251,419  

David F. Rebholz(5)

   
2008
   
869,090
   
50,000

(6)
 
1,794,706
   
475,146
   
870,937
   
60,837
   
496,898
   
4,617,614
 

    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 2008 and 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 the relevant fiscal year.

The value of restricted stock awards is based on 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. 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.

For FAS 123R purposes, we use the Black-Scholes option pricing model to calculate the fair value of stock options. The key assumptions for the Black-Scholes valuation method include the expected life of the option, stock price volatility, the risk-free interest rate, dividend yield and exercise price. The exercise price of stock options granted under FedEx's stock option plans is 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. The following table sets forth the FAS 123R assumptions used in the calculation of the amounts for stock option awards presented in the table:

   
  Fiscal Year Ended May 31,  
   
  2008   2007   2006   2005   2004  
 

Expected lives

    5 years     5 years     5 years     4 years     4 years  
 

Expected volatility

    19%     22%     25%     27%     32%  
 

Risk-free interest rate

    4.763%     4.879%     3.794%     3.559%     2.118%  
 

Dividend yield

    0.337%     0.302%     0.323%     0.322%     0.310%  

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        The following table sets forth each stock and option award represented in these columns for fiscal 2008 and the amount included for each such award in fiscal 2008.

   
  Stock Awards   Option Awards  
 
Name
  Date of
Award
  Total
Number of
Shares
Awarded
(#)
  Amount
Included
In Fiscal 2008
($)
  Date of
Award
  Total Number
of Shares
Underlying
Options
Awarded
(#)
  Amount
Included
in Fiscal 2008
($)
 
 

F.W. Smith

                6/2/2003     250,000     6,000  
 

                      6/1/2004     325,000     1,534,460  
 

                      6/1/2005     250,000     1,593,684  
 

                      6/1/2006     200,000     1,607,110  
 

                      7/9/2007     175,000     1,225,985  
                                       
 

                                  5,967,239  
                                       
 

A.B. Graf, Jr. 

   
8/14/2003
   
7,443
   
49,996
   
6/2/2003
   
65,000
   
1,447
 
 

    7/12/2004     6,145     196,315     6/1/2004     38,250     163,314  
 

    6/1/2005     6,145     220,836     6/1/2005     34,425     225,553  
 

    6/1/2006     6,145     481,709     6/1/2006     33,155     272,498  
 

    7/9/2007     6,145     828,616     7/9/2007     20,655     150,046  
 

                      1/14/2008     5,000     11,207  
                                     
 

                1,777,472                 824,065  
                                     
 

D.J. Bronczek

   
8/14/2003
   
9,924
   
66,662
   
6/2/2003
   
85,000
   
1,939
 
 

    7/12/2004     7,901     252,414     6/1/2004     51,000     224,271  
 

    6/1/2005     7,901     283,942     6/1/2005     45,900     298,384  
 

    6/1/2006     7,901     451,967     6/1/2006     27,540     227,575  
 

    7/9/2007     7,901     665,877     7/9/2007     27,540     198,062  
                                     
 

                1,720,862                 950,231  
                                     
 

T.M. Glenn

   
8/14/2003
   
7,443
   
49,996
   
6/2/2003
   
65,000
   
1,447
 
 

    7/12/2004     6,145     196,315     6/1/2004     38,250     163,314  
 

    6/1/2005     6,145     220,836     6/1/2005     34,425     225,553  
 

    6/1/2006     6,145     270,961     6/1/2006     20,655     172,509  
 

    7/9/2007     6,145     318,699     7/9/2007     20,655     150,046  
 

                      9/24/2007     5,000     21,845  
                                     
 

                1,056,807                 734,714  
                                     
 

D.F. Rebholz

   
8/14/2003
   
4,962
   
33,331
   
6/2/2003
   
30,000
   
586
 
 

    7/12/2004     4,389     140,216     6/1/2004     25,500     102,337  
 

    6/1/2005     4,389     157,730     6/1/2005     22,950     152,722  
 

    6/1/2006     4,389     370,233     6/1/2006     13,770     117,442  
 

    9/1/2006     878     81,832     7/9/2007     13,770     102,059  
 

    7/9/2007     5,267     1,011,364                    
                                     
 

                1,794,706                 475,146  
                                     

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(2)
Reflects cash payouts under FedEx's fiscal 2008 and 2007 annual incentive compensation plans and FY06-FY08 and FY05-FY07 long-term incentive plans, as follows (see pages 31-35 for further discussion of the fiscal 2008 annual incentive compensation plan and the FY06-FY08 long-term incentive plan):

 
Name
  Year   AIC Payout   LTI Payout   Total Non-Equity Incentive
Plan Compensation
 
 

F.W. Smith

    2008   $ 0   $ 2,705,000   $ 2,705,000  
 

    2007     1,397,851     3,375,000     4,772,851  
 

A.B. Graf, Jr. 

   
2008
   
231,564
   
811,500
   
1,043,064
 
 

    2007     675,911     1,125,000     1,800,911  
 

D.J. Bronczek

   
2008
   
254,544
   
1,082,000
   
1,336,544
 
 

    2007     703,193     1,500,000     2,203,193  
 

T.M. Glenn

   
2008
   
202,222
   
811,500
   
1,013,722
 
 

    2007     588,035     1,125,000     1,713,035  
 

D.F. Rebholz

   
2008
   
203,704
   
667,233
   
870,937
 
(3)
Reflects the actuarial increase in the present value of the named executive officer's benefits under the Pension Plan and the Parity Plan (as each such term is defined on page 51 under "Fiscal 2008 Pension Benefits — Overview of Pension Plans"). The present value of the benefits under the Pension Plan and the Parity Plan for Messrs. Smith, Bronczek and Glenn decreased by the following amounts between fiscal 2007 and 2008: Mr. Smith — $743,362; Mr. Bronczek — $40,782; and Mr. Glenn — $202,487. The amounts in the table and this footnote 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, 2008. See "Fiscal 2008 Pension Benefits" on page 51.

(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. Rebholz, accidental death and dismemberment 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 the Parity Plan using the cash balance formula.

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Table of Contents

Name
  Year   Perquisites
and Other
Personal
Benefits
  Umbrella
Insurance
Premiums
  Life
Insurance
Premiums
  Company
Contributions
Under
401(k) Plans
  Tax
Reimbursement
Payments
  Total  

F.W. Smith

    2008   $ 753,788   $ 2,338   $ 2,520   $ 7,174   $ 71,728   $ 837,548  

    2007     797,592     2,875     2,520         167,015     970,002  

A.B. Graf, Jr. 

   
2008
   
87,773
   
2,338
   
2,520
   
5,681
   
439,298
   
537,610
 

    2007     205,460     2,875     2,520     500     435,551     646,906  

D.J. Bronczek

   
2008
   
38,140
   
2,338
   
2,520
   
5,499
   
566,209
   
614,706
 

    2007     113,165     2,875     2,520     500     549,540     668,600  

T.M. Glenn

   
2008
   
33,805
   
2,338
   
2,520
   
7,923
   
455,047
   
501,633
 

    2007     91,063     2,875     2,520     500     443,984     540,942  

D.F. Rebholz

   
2008
   
36,693
   
2,338
   
2,268

(a)
 
9,724
   
445,875
   
496,898
 

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Name
  Year   Personal Use
of Corporate
Aircraft
($)(a)
  Security
Services and
Equipment
($)
  Tax Return
Preparation
Services
($)
  Financial
Counseling
Services
($)
  Personal Use
of Company
Cars/Car
Allowance
($)
  Other
($)(b)
  Total
($)
 

F.W. Smith

    2008     51,959     595,875     64,620     30,673     10,661         753,788  

    2007     234,427     427,262     64,883     37,383     32,235     1,402     797,592  

A.B. Graf, Jr. 

   
2008
   
60,028
   
9,009
   
6,231
   
12,505
   

   

   
87,773
 

    2007     184,374     10,181     5,197     2,138         3,570     205,460  

D.J. Bronczek

   
2008
   

   
6,040
   
7,100
   
25,000
   

   

   
38,140
 

    2007     92,684     6,201     4,950     7,500         1,830     113,165  

T.M. Glenn

   
2008
   
10,475
   
15,129
   
2,000
   
4,550
   

   
1,651
   
33,805
 

    2007     37,649     6,488     33,825     10,692         2,409     91,063  

D.F. Rebholz

   
2008
   
2,663
   
5,733
   
4,350
   
20,470
   
3,477
   

   
36,693
 
(5)
Mr. Rebholz was not a named executive officer for fiscal 2007. Accordingly, the table includes Mr. Rebholz's compensation for fiscal 2008 only.

(6)
Mr. Rebholz became the President and Chief Executive Officer of FedEx Ground on January 1, 2007. He received a $50,000 bonus during fiscal 2008 in connection with his promotion.

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GRANTS OF PLAN-BASED AWARDS DURING FISCAL 2008

        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, 2008:

 
   
   
   
   
   
   
  All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
  All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
   
   
   
 
 
   
   
   
  Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
  Exercise
or Base
Price of
Option
Awards
($/Sh)(1)
   
  Grant
Date Fair
Value of
Stock and
Option
Awards
($)(2)
 
 
   
   
   
  Closing
Price on
Grant
Date
($/Sh)
 
Name
  Type of
Plan/Award
  Grant Date   Approval
Date
  Threshold
($)
  Target
($)
  Maximum
($)
 

F.W. Smith

  Stock Option(3)     07/09/2007     07/08/2007                             175,000     114.740     116.17     5,461,575  

  FY08 AIC(4)                 0     1,865,292     5,595,876                                

  FY08-FY10 LTI(5)                 875,000     3,500,000     5,250,000                                

A.B. Graf, Jr. 

 

Restricted Stock(6)

   
07/09/2007
   
07/08/2007
                     
6,145
                     
705,077
 

  Stock Option(3)     07/09/2007     07/08/2007                             20,655     114.740     116.17     644,622  

  Stock Option(3)     01/14/2008     01/13/2008                             5,000     84.655     84.64     96,140  

  FY08 AIC(4)                 0     812,506     1,950,014                                

  FY08-FY10 LTI(5)                 300,000     1,200,000     1,800,000                                

D.J. Bronczek

 

Restricted Stock(6)

   
07/09/2007
   
07/08/2007
                     
7,901
                     
906,561
 

  Stock Option(3)     07/09/2007     07/08/2007                             27,540     114.74     116.17     859,496  

  FY08 AIC(4)                 0     942,756     2,262,614                                

  FY08-FY10 LTI(5)                 375,000     1,500,000     2,250,000                                

T.M. Glenn

 

Restricted Stock(6)

   
07/09/2007
   
07/08/2007
                     
6,145
                     
705,077
 

  Stock Option(3)     07/09/2007     07/08/2007                             20,655     114.74     116.17     644,622  

  Stock Option(3)     09/24/2007     09/23/2007                             5,000     103.35     102.86     127,661  

  FY08 AIC(4)                 0     748,969     1,797,526                                

  FY08-FY10 LTI(5)                 300,000     1,200,000     1,800,000                                

D.F. Rebholz

 

Restricted Stock(6)

   
07/09/2007
   
07/08/2007
                     
5,267
                     
604,336
 

  Stock Option(3)     07/09/2007     07/08/2007                             13,770     114.74     116.17     429,748  

  FY08 AIC(4)                 0     700,013     1,680,031                                

  FY08-FY10 LTI(5)                 250,000     1,000,000     1,500,000                                

(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 35-37 for further discussion of stock option awards.

(4)
In July 2007, the Compensation Committee (with respect to Messrs. Bronczek and Rebholz) and the Board of Directors (with respect to Messrs. Smith, Graf and Glenn) established these annual performance cash compensation plans, which provided a cash payment opportunity to the named executive officers at the conclusion of fiscal 2008. Payment amounts were based upon the achievement of company financial performance goals for fiscal 2008 and individual objectives established at the beginning of fiscal 2008 for each officer other than Mr. Smith. See pages 31-33 for further discussion of these plans.

(5)
The Board of Directors established this long-term performance cash compensation plan in July 2007. The plan provides a long-term cash payment opportunity to the named executive officers at the conclusion of fiscal 2010 if FedEx achieves an aggregate earnings-per-share goal established by the Board with respect to the three-fiscal-year period 2008 through 2010. No amounts can be earned under the plan until 2010 because achievement of the earnings-per-share goal can only be 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 (minimum) 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. See pages 33-35 for further discussion of this plan.

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(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 such shares and receive any dividends paid on FedEx common stock. 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 39). See pages 35-37 for further discussion of restricted stock awards.

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OUTSTANDING EQUITY AWARDS AT END OF FISCAL 2008

        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, 2008:

 
  Option Awards   Stock Awards  
 
  Number of
Securities
Underlying
Unexercised
Options
(#)
  Number of
Securities
Underlying
Unexercised
Options
(#)
   
   
   
   
 
 
   
   
  Number of
Shares or
Units of Stock
That Have
Not Vested
(#)(a)
   
 
 
   
   
  Market Value of
Shares or Units of
Stock That Have
Not Vested
($)(b)
 
 
  Option
Exercise
Price
($)
   
 
 
  Option
Expiration
Date
 
Name
  Exercisable   Unexercisable(a)  

F.W. Smith

    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              

    250,000         64.5300     06/02/2013              

    243,750     81,250 (1)   72.8450     06/01/2014              

    125,000     125,000 (2)   89.7000     06/01/2015              

    50,000     150,000 (3)   110.0600     06/01/2016              

        175,000 (4)   114.7400     07/09/2017              

A.B. Graf, Jr. 

   
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              

    65,000         64.5300     06/02/2013              

    28,687     9,563 (5)   72.8450     06/01/2014              

    17,212     17,213 (6)   89.7000     06/01/2015              

    8,288     24,867 (7)   110.0600     06/01/2016              

        20,655 (8)   114.7400     07/09/2017              

        5,000 (9)   84.6550     01/14/2018              

                            15,364 (10)   1,409,032  

D.J. Bronczek

   
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              

    85,000         64.5300     06/02/2013              

    38,250     12,750 (11)   72.8450     06/01/2014              

    22,950     22,950 (12)   89.7000     06/01/2015              

    6,885     20,655 (13)   110.0600     06/01/2016              

        27,540 (14)   114.7400     07/09/2017              

                            19,754 (15)   1,811,639  

T.M. Glenn

   
10,000
   
   
41.6563
   
01/21/2010
             

    56,250         40.4900     06/01/2011              

    45,000         53.7650     06/03/2012              

    65,000         64.5300     06/02/2013              

    28,687     9,563 (16)   72.8450     06/01/2014              

    17,212     17,213 (17)   89.7000     06/01/2015              

    5,163     15,492 (18)   110.0600     06/01/2016              

        20,655 (19)   114.7400     07/09/2017              

        5,000 (20)   103.3500     09/24/2017              

                            15,364 (21)   1,409,032  

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  Option Awards   Stock Awards  
 
  Number of
Securities
Underlying
Unexercised
Options
(#)
  Number of
Securities
Underlying
Unexercised
Options
(#)
   
   
   
   
 
 
   
   
  Number of
Shares or
Units of Stock
That Have
Not Vested
(#)(a)
   
 
 
   
   
  Market Value of
Shares or Units of
Stock That Have
Not Vested
($)(b)
 
 
  Option
Exercise
Price
($)
   
 
 
  Option
Expiration
Date
 
Name
  Exercisable   Unexercisable(a)  

D.F. Rebholz

    7,500         64.5300     06/02/2013              

    6,375     6,375 (22)   72.8450     06/01/2014              

    5,738     11,475 (23)   89.7000     06/01/2015              

    3,442     10,328 (24)   110.0600     06/01/2016              

        13,770 (25)   114.7400     07/09/2017              

                            12,511 (26)   1,147,384  

(a)
The following table sets forth the vesting dates of the options and restricted stock included in these columns:

 
   
  Date   Number    
   
  Date   Number  

F. W. Smith

  (1)     06/01/2008     81,250  

A. B. Graf, Jr. 

  (5)     06/01/2008     9,563  

 

(2)

   
06/01/2008
   
62,500
     

(6)

   
06/01/2008
   
8,606
 

        06/01/2009     62,500             06/01/2009     8,607  

 

(3)

   
06/01/2008
   
50,000
     

(7)

   
06/01/2008
   
8,289
 

        06/01/2009     50,000             06/01/2009     8,289  

        06/01/2010     50,000             06/01/2010     8,289  

 

(4)

   
07/09/2008
   
43,750
     

(8)

   
07/09/2008
   
5,163
 

        07/09/2009     43,750             07/09/2009     5,164  

        07/09/2010     43,750             07/09/2010     5,164  

        07/09/2011     43,750             07/09/2011     5,164  

                     

(9)

   
01/14/2009
   
1,250
 

                            01/14/2010     1,250  

                            01/14/2011     1,250  

                            01/14/2012     1,250  

                     

(10)

   
06/01/2008
   
3,072
 

                            07/09/2008     1,536  

                            07/12/2008     1,537  

                            06/01/2009     3,073  

                            07/09/2009     1,536  

                            06/01/2010     1,537  

                            07/09/2010     1,536  

                            07/09/2011     1,537  

D. J. Bronczek

 

(11)

   
06/01/2008
   
12,750
 

T. M. Glenn

 

(16)

   
06/01/2008
   
9,563
 

 

(12)

   
06/01/2008
   
11,475
     

(17)

   
06/01/2008
   
8,606
 

        06/01/2009     11,475             06/01/2009     8,607  

 

(13)

   
06/01/2008
   
6,885
     

(18)

   
06/01/2008
   
5,164
 

        06/01/2009     6,885             06/01/2009     5,164  

        06/01/2010     6,885             06/01/2010     5,164  

 

(14)

   
07/09/2008
   
6,885
     

(19)

   
07/09/2008
   
5,163
 

        07/09/2009     6,885             07/09/2009     5,164  

        07/09/2010     6,885             07/09/2010     5,164  

        07/09/2011     6,885             07/09/2011     5,164  

 

(15)

   
06/01/2008
   
3,950
     

(20)

   
09/24/2008
   
1,250
 

        07/09/2008     1,975             09/24/2009     1,250  

        07/12/2008     1,976             09/24/2010     1,250  

        06/01/2009     3,951             09/24/2011     1,250  

        07/09/2009     1,975                      

        06/01/2010     1,976       (21)     06/01/2008     3,072  

        07/09/2010     1,975             07/09/2008     1,536  

        07/09/2011     1,976             07/12/2008     1,537  

                            06/01/2009     3,073  

                            07/09/2009     1,536  

                            06/01/2010     1,537  

                            07/09/2010     1,536  

                            07/09/2011     1,537  

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  Date   Number    
   
   
   
 

D. F. Rebholz

  (22)     06/01/2008     6,375                      

 

(23)

   
06/01/2008
   
5,737
                     

        06/01/2009     5,738                      

 

(24)

   
06/01/2008
   
3,443
                     

        06/01/2009     3,442                      

        06/01/2010     3,443                      

 

(25)

   
07/09/2008
   
3,442
                     

        07/09/2009     3,443                      

        07/09/2010     3,442                      

        07/09/2011     3,443                      

 

(26)

   
06/01/2008
   
2,194
                     

        07/09/2008     1,316                      

        07/12/2008     1,098                      

        09/01/2008     220                      

        06/01/2009     2,195                      

        07/09/2009     1,317                      

        09/01/2009     219                      

        06/01/2010     1,098                      

        07/09/2010     1,317                      

        09/01/2010     220                      

        07/09/2011     1,317                      
(b)
Computed by multiplying the closing market price of FedEx's common stock on May 30, 2008 (which was $91.71) by the number of shares.

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OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2008

        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, 2008:

 
  Option Awards   Stock Awards  
Name
  Number of
Shares
Acquired
on Exercise
(#)
  Value
Realized
on Exercise
($)(1)
  Number of
Shares
Acquired
on Vesting
(#)
  Value
Realized
on Vesting
($)(2)
 

F.W. Smith

    700,000     39,518,120          

A.B. Graf, Jr. 

    50,000     2,915,945     6,469     720,896  

D.J. Bronczek

    50,000     3,007,560     8,406     936,526  

T.M. Glenn

    80,000     5,545,692     6,469     720,896  

D.F. Rebholz

            4,751     529,256  

(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.

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FISCAL 2008 PENSION BENEFITS

        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 page 55.

Name
  Plan Name   Number
of Years
Credited
Service
(#)
  Present
Value of
Accumulated
Benefit
($)(1)
  Payments
During
Fiscal 2008
($)
 
F.W. Smith   FedEx Corporation Employees' Pension Plan     36     1,164,464      
    FedEx Corporation Retirement Parity Pension Plan     36     26,411,752      

A.B. Graf, Jr. 

 

FedEx Corporation Employees' Pension Plan

 

 

28

 

 

790,063

 

 


 
    FedEx Corporation Retirement Parity Pension Plan     28     7,961,751      

D.J. Bronczek

 

FedEx Corporation Employees' Pension Plan

 

 

32

 

 

817,006

 

 


 
    FedEx Corporation Retirement Parity Pension Plan     32     9,738,922      

T.M. Glenn

 

FedEx Corporation Employees' Pension Plan

 

 

27

 

 

675,566

 

 


 
    FedEx Corporation Retirement Parity Pension Plan     27     6,342,196      

D.F. Rebholz

 

FedEx Corporation Employees' Pension Plan

 

 

32

 

 

878,749

 

 


 
    FedEx Corporation Retirement Parity Pension Plan     32     6,954,430      

(1)
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, 2008. The benefits are expressed as lump sum amounts, even though the benefits using the traditional pension benefit formula under the Pension Plan (as defined below) are generally not payable as a lump sum distribution (only $1,000 or less may be distributed as a lump sum under the Pension Plan). The present value of the accumulated benefit under the Parity Plan (as defined below) includes an amount to reflect FedEx's practice of paying FICA taxes on behalf of Parity Plan participants. This estimated tax amount, including the tax gross-up, equals 2.50% of the present value of the Parity Plan benefit excluding the Portable Pension Account (as defined below) benefit, for which FICA taxes have already been paid. See "— Taxes" below.


Overview of Pension Plans

        FedEx maintains a tax-qualified, defined benefit pension plan called the FedEx Corporation Employees' Pension Plan (the "Pension Plan"). For 2008, the maximum compensation limit under a tax-qualified pension plan is $230,000. The Internal Revenue Code also limits the maximum annual benefits that may be accrued under a tax-qualified, defined benefit pension plan. In order to provide 100% of the benefits that would otherwise be denied certain management-level participants in the Pension Plan due to these limitations, FedEx also maintains a supplemental non-tax-qualified plan called the FedEx Corporation Retirement Parity Pension Plan (the "Parity Plan"). Benefits under the Parity Plan are general, unsecured obligations of FedEx.

        Effective May 31, 2003, FedEx amended the Pension Plan and the Parity Plan to add a cash balance feature, which is called the Portable Pension Account. Eligible employees as of May 31, 2003 had the option to make a one-time election to accrue future pension benefits under either the cash balance formula or the traditional pension benefit formula. In either case, employees retained all benefits previously accrued under the traditional pension benefit formula and continued to receive the benefit of future compensation increases on benefits accrued as of May 31, 2003. Eligible employees hired after May 31, 2003 accrue benefits exclusively under the Portable Pension Account.

        Beginning June 1, 2008, eligible employees who participate in the Pension Plan and the Parity Plan, including the named executive officers, will accrue all future pension benefits under the Portable Pension Account. In addition, benefits previously accrued under the Pension Plan and the Parity Plan using the traditional pension benefit formula were capped as of May 31, 2008, and those benefits will be payable beginning at retirement. Effective June 1, 2008, each participant in the Pension Plan and the Parity Plan who was age 40 or older on that date and who has an accrued traditional pension benefit will receive a transition

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compensation credit, as described in more detail below. Employees who elected in 2003 to accrue future benefits under the Portable Pension Account will continue to accrue benefits under that formula.

        The named executive officers also participate in FedEx's tax-qualified, defined contribution 401(k) retirement savings plans. Beginning January 1, 2008, the annual matching company contribution under each of FedEx's 401(k) plans is a maximum of 3.5% of eligible earnings. In order to provide 100% of the benefits that would otherwise be denied participants in the tax-qualified 401(k) plans due to certain limitations imposed by United States tax laws, effective June 1, 2008, Parity Plan participants, including the named executive officers, will receive additional Portable Pension Account compensation credits equal to 3.5% of any eligible earnings above the maximum compensation limit for tax-qualified plans ($230,000 for 2008).

        Normal retirement age for the majority of participants, including the named executive officers, under the Pension Plan and the Parity Plan is age 60. The traditional pension benefit under the Pension Plan for a participant who retires between the ages of 55 and 60 will be reduced by 3% for each year the participant receives his or her benefit prior to age 60.


Traditional Pension Benefit

        Under the traditional pension benefit formula, the Pension Plan and the Parity Plan provide 2% of the average of the five calendar years (three calendar years for the Parity Plan) of highest earnings during employment multiplied by years of credited service for benefit accrual up to 25 years. Eligible compensation for the traditional pension benefit under the Pension Plan and the Parity Plan for the named executive officers includes salary and annual incentive compensation.

        A named executive officer's capped accrued traditional pension benefit will be calculated using his years of credited service as of either May 31, 2003 or May 31, 2008, depending on whether he chose to accrue future benefits under the cash balance formula or the traditional pension benefit formula in 2003, and his eligible earnings history as of May 31, 2008.


Portable Pension Account

        For employees accruing benefits under the Portable Pension Account, the pension benefit accrued after May 31, 2003 is expressed as a notional cash balance account. For each plan year in which a participant is credited with a year of service, compensation credits are added based on the participant's age and years of service as of the end of the prior plan year and the participant's eligible compensation for the prior calendar year based on the following table:

Age + Service on May 31
  Compensation Credit

Less than 55

  5%

55-64

  6%

65-74

  7%

75 or over

  8%

        On May 31, 2007, the sum of age plus years of service for the four named executive officers who elected the Portable Pension Account feature in 2003 was as follows: Mr. Smith — 97; Mr. Graf — 80; Mr. Bronczek — 83; and Mr. Rebholz — 85. Eligible compensation under the Portable Pension Account feature for the named executive officers includes salary and annual incentive compensation.

        Transition compensation credits are an additional compensation credit percentage to be granted to participants in the Pension Plan and the Parity Plan who were age 40 or older on June 1, 2008 and who have an accrued benefit under the traditional pension benefit formula. For each plan year in which an eligible participant is credited with a year of service, transition compensation credits will be added based on the

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participant's age and years of service as of the end of the prior plan year and the participant's eligible compensation for the prior calendar year based on the following table:

Age + Service on May 31
  Transition Compensation Credit*

Less than 55

  2%

55-64

  3%

65-74

  4%

75 or over

  5%

        An eligible participant will receive transition compensation credits for five years (through May 31, 2013) or until he or she has 25 years of credited service, whichever is longer. For participants with 25 or more years of service, transition compensation credits are 2% per year and will cease as of May 31, 2013. An eligible participant's first transition compensation credit will be added to his or her Portable Pension Account on May 31, 2009.

        Interest credits are added to a participant's Portable Pension Account benefit at the end of each fiscal quarter (August 31, November 30, February 28 and May 31). The May 31 interest credit is added prior to the May 31 compensation credit or transition compensation credit (or additional compensation credit under the Parity Plan). Interest credits are based on the Portable Pension Account notional balance and a quarterly interest crediting rate, which is equal to the greater of (a) 1/4 of the one-year Treasury constant maturities rate for April of the preceding plan year plus 0.25% and (b) 1% (1/4 of 4%). The quarterly interest crediting rate, when compounded quarterly, cannot produce an annual rate greater than the average 30-year Treasury rate for April of the preceding plan year. In no event, however, will the quarterly interest crediting rate be less than 0.765%. Interest credits will continue to be added until the last day of the month before plan benefits are distributed. The quarterly interest-crediting rate for the plan year ended May 31, 2007 was 1.2416%. The quarterly interest-crediting rate for the plan year ended May 31, 2008 was 1.1958%.


Lump Sum Distribution

        Upon a participant's retirement, the traditional pension benefit under the Pension Plan is payable as a monthly annuity. Upon a participant's retirement or other termination of employment, an amount equal to the vested Portable Pension Account notional balance under the Pension Plan is payable to the participant in the form of a lump sum payment or an annuity.

        Through December 31, 2008, Parity Plan participants can elect to receive benefits accrued through December 31, 2004 as a single lump sum distribution. If a participant does not elect to receive a lump sum distribution, benefits accrued under the Parity Plan through December 31, 2004 will be paid as an annuity. All benefits accrued after December 31, 2004 under the Parity Plan are required to be paid to participants as a lump sum distribution.

        The lump sum payment of the traditional pension benefit under the Parity Plan was previously calculated based on the interest rate assumption used in the Pension Plan — i.e., the average 30-year Treasury rate for April of the preceding plan year. The Pension Protection Act of 2006 requires the use of a higher interest rate assumption for the Pension Plan beginning on June 1, 2008. In order to prevent substantial erosion of the traditional pension lump sum benefit under the Parity Plan, in June 2008 the Board of Directors approved an amendment to the Parity Plan to maintain the use of the average 30-year Treasury rate for April of the preceding plan year as the interest rate assumption for the Parity Plan. The traditional pension benefit provided to employees, including the named executive officers, under the Pension Plan was not adversely affected by the legislation because only a minimal lump sum ($1,000 or less) may be distributed under that plan.

        In accordance with United States tax law, this amendment required the elimination of the option for Parity Plan participants to receive their pre-December 31, 2004 benefits as a single lump sum distribution or as an annuity. Accordingly, all Parity Plan benefits will be paid as a single lump sum distribution beginning January 1, 2009.

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Taxes

        FedEx pays the FICA taxes attributable to the Parity Plan benefit on behalf of the participant, and reimburses the participant for any taxes resulting from the payment of such taxes. Under current law, Parity Plan benefits are subject to FICA taxes when they are definitely determinable. Benefits accrued under the Portable Pension Account formula are definitely determinable each year that a participant receives a compensation credit. Accordingly, to the extent the FICA taxes relate to the Portable Pension Account under the Parity Plan, they are due and the tax reimbursement payments are made as the benefits are accrued, and such payments to the applicable named executive officers are included in the "All Other Compensation" column of the Summary Compensation Table on page 39. Otherwise, an estimate of such payments is reflected in the "Present Value of Accumulated Benefit" column of the Pension Benefits table above.

        Because the traditional pension benefit under the Parity Plan has been capped as of May 31, 2008, such benefit will be definitely determinable in 2008. As a result, the entire present value of the Parity Plan traditional pension benefit of a participant, including each of the named executive officers, will be subject to FICA taxes in 2008.

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

        This section provides information regarding payments and benefits to the named executive officers that would be triggered by termination of the officer's employment (including resignation, or voluntary termination; severance, or involuntary termination; and retirement) or a change of control of FedEx.

        Each of the named executive officers is an at-will employee and, as such, does not have an employment contract. In addition, if the officer's employment terminates for any reason other than retirement, death or permanent disability, any unvested stock options are automatically terminated and any unvested shares of restricted stock are automatically forfeited. Accordingly, there are no payments or benefits that are triggered by any termination event (including resignation and severance), other than retirement, death or permanent disability or termination after a change of control of FedEx.


Benefits Triggered by Retirement, Death or Permanent Disability – Stock Option and Restricted Stock Plans

         Retirement.    When an employee retires:

        The following table quantifies for each named executive officer the value of his unvested restricted shares, the vesting of which would be accelerated upon retirement:


Benefits Triggered By Retirement

Name
  Value of Unvested
Restricted Shares
($)(1)
 

F.W. Smith

     

A.B. Graf, Jr. 

    1,409,032  

D.J. Bronczek

    1,811,639  

T.M. Glenn

    1,409,032  

D.F. Rebholz

    1,147,384  

(1)
Computed by multiplying the price per share of FedEx's common stock by the number of unvested shares of restricted stock held by the officer (including 6,145 shares for each of Messrs. Graf and Glenn, 7,901 shares for Mr. Bronczek and 5,267 shares for Mr. Rebholz, which shares were granted on July 9, 2007 and could not otherwise vest in connection with the officer's retirement prior to July 9, 2008). The table assumes that the officer retired on May 31, 2008 (and that the officer was age 60 or above on such date) and that the price per share of FedEx's common stock was the closing market price on May 30, 2008 (which was $91.71).

        For information regarding retirement benefits under our pension plans, see "Fiscal 2008 Pension Benefits" on page 51.

         Death or Permanent Disability.    When an employee dies or becomes permanently disabled:

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        The following table quantifies for each named executive officer the value of his unvested restricted shares and stock options, the vesting of which would be accelerated upon death or permanent disability (assuming the officer died or became permanently disabled on May 31, 2008):


Benefits Triggered By Death or Permanent Disability

Name
  Value of Unvested
Restricted Shares
($)(1)
  Value of Unvested
Stock Options
($)(2)
  Total
($)
 

F.W. Smith

        1,784,031     1,784,031  

A.B. Graf, Jr. 

    1,409,032     250,279     1,659,311  

D.J. Bronczek

    1,811,639     286,658     2,098,297  

T.M. Glenn

    1,409,032     215,004     1,624,036  

D.F. Rebholz

    1,147,384     143,329     1,290,713  

(1)
Computed by multiplying the closing market price per share of FedEx's common stock on May 30, 2008 (which was $91.71) by the number of unvested shares of restricted stock held by the officer as of May 31, 2008 (including 6,145 shares for each of Messrs. Graf and Glenn, 7,901 shares for Mr. Bronczek and 5,267 shares for Mr. Rebholz, which shares were granted on July 9, 2007 and could not otherwise vest in connection with the officer's death or permanent disability prior to July 9, 2008).

(2)
Represents the difference between the closing market price per share of FedEx's common stock on May 30, 2008 (which was $91.71) and the exercise price of each unvested option held by the officer as of May 31, 2008.

        In addition, FedEx provides each named executive officer with:


Benefits Triggered by Change of Control or Termination After Change of Control – Stock Option and Restricted Stock Plans and Management Retention Agreements

         Stock Options and Restricted Stock.    Our stock option plans provide that, in the event of a change of control (as defined in the plans; see page B-7 in Appendix B for the "change of control" definition used in the plans), each holder of an unexpired option under any of the plans has the right to exercise such option without regard to the date such option would first be exercisable. This right continues, with respect to holders whose employment with FedEx terminates following a change of control, for a period of twelve months after such termination or until the option's expiration date, whichever is sooner.

        Our restricted stock plans provide that, in the event of a change of control (as defined in the plans; see page B-7 in Appendix B for the "change of control" definition used in the plans), depending on the change of control event, either (i) the restricted shares will be canceled and FedEx shall make a cash payment to each holder in an amount equal to the product of the highest price per share received by the holders of FedEx's common stock in connection with the change of control multiplied by the number of restricted shares held or (ii) the restrictions applicable to any such shares will immediately lapse.

        The following table quantifies for each named executive officer the value of his unvested restricted shares and stock options, the vesting of which would be accelerated upon a change of control (assuming that the change of control occurred on May 31, 2008 and that the highest price per share received by FedEx's

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stockholders in connection with the change of control was the closing market price on May 30, 2008, which was $91.71):


Benefits Triggered By Change of Control(1)

Name
  Value of Unvested
Restricted Shares
($)(2)
  Value of Unvested
Stock Options
($)(3)
  Total
($)
 

F.W. Smith

        1,784,031     1,784,031  

A.B. Graf, Jr. 

    1,409,032     250,279     1,659,311  

D.J. Bronczek

    1,811,639     286,658     2,098,297  

T.M. Glenn

    1,409,032     215,004     1,624,036  

D.F. Rebholz

    1,147,384     143,329     1,290,713  

(1)
As discussed below, the officer is also entitled under his MRA (as defined below) to a three-year employment agreement upon a change of control and certain guaranteed compensation and benefits during the term of the three-year employment period.

(2)
Computed by multiplying the closing market price per share of FedEx's common stock on May 30, 2008 (which was $91.71) by the number of unvested shares of restricted stock held by the officer as of May 31, 2008.

(3)
Represents the difference between the closing market price per share of FedEx's common stock on May 30, 2008 (which was $91.71) and the exercise price of each unvested option held by the officer as of May 31, 2008.

         Management Retention Agreements.    FedEx has entered into Management Retention Agreements ("MRAs") with each of its executive officers, including the named executive officers. The purpose of the MRAs is to secure the executives' continued services in the event of any threat or occurrence of a change of control (as defined in the MRAs; such term has the same meaning as used in FedEx's equity compensation plans — see page B-7 in Appendix B). The terms and conditions of the MRAs with the named executive officers are summarized below.

         Term.    Each MRA renews annually for consecutive two-year terms, unless FedEx gives six months' prior notice that the agreement will not be extended. The non-extension notice may not be given at any time when the Board of Directors has knowledge that any person has taken steps reasonably calculated to effect a change of control of FedEx.

         Employment Period.    Upon a change of control, the MRA immediately establishes a three-year employment agreement with the executive officer. During the employment period, the officer's position (including status, offices, titles and reporting relationships), authority, duties and responsibilities may not be materially diminished.

         Compensation.    During the three-year employment period, the executive officer receives base salary (no less than his highest base salary over the twelve-month period prior to the change of control) and annual incentive compensation (no less than his average annual incentive compensation over the three-year period prior to the change of control). The executive officer also receives incentive (including long-term performance bonus), savings and retirement plan benefits, expense reimbursement, fringe benefits, office and staff support, welfare plan benefits and vacation benefits. These benefits must be no less than the benefits the officer had during the 90-day period immediately prior to the change of control.

         Termination.    The MRA terminates immediately upon the executive officer's death, voluntary termination or retirement. FedEx may terminate the MRA for disability, as determined in accordance with the procedures under FedEx's long-term disability benefits