The unexpected news yesterday that David J. Bronczek would retire Feb. 28 as FedEx Corp.’s (NYSE:FDX) president and COO, as well as his departure the same day from the company’s board less than three weeks after being named a director, has left people searching for answers.
A sentence buried at the end of a Jan. 28 Securities and Exchange Commission filing, which disclosed Bronczek’s elevation to the board, may offer a clue. In the filing, the company said that, effective immediately, its mandatory retirement age of 75 would apply only to non-management directors. Frederick W. Smith, the company’s chairman, CEO and a management board member, turns 75 on Aug. 11.
To connect the dots, one must understand the stature held by Bronczek at the $69 billion Memphis-based giant. A 42-year FedEx veteran, Bronczek was held in such high esteem, especially by Smith, that when the legendary founder relinquished the president’s role in 2016, Bronczek was tapped to succeed him. The 64-year-old Bronczek was also the only management member besides Smith to serve on the board.
With Smith approaching mandatory retirement age, there was a sense that Bronczek, who according to one source is treated like a celebrity in Memphis business and cultural circles, would be elevated to at least one of the top two positions. Then came the change in governance policy, which would allow Smith to stay on beyond 75 if he so chose.
The company did not return a request for comment on whether Bronczek left because the policy change would mean he would not be succeeding Smith any time soon. A statement issued late yesterday said Bronczek made a “personal decision” to retire. In an SEC filing yesterday, FedEx said Bronczek’s decision was not based on any disagreement with the company’s “operations, policies and procedures.”
Bronczek’s photo no longer appears on the FedEx website page displaying its executive leadership. He has also retired from his director’s post at International Paper Co. (NYSE:IP).
According to yesterday’s filing, Bronczek will receive a $2.5 million cash payment in return for entering into a five-year, non-compete agreement.
Bronczek’s retirement clears the way for another Smith protege, Raj Subramaniam, to become the heir apparent. On March 1, Subramaniam, 52, will become FedEx’s president and COO. Subramaniam will continue to serve as president and CEO of FedEx Express, the company’s air and ground operation and its largest unit where he took over Jan. 1. He will also continue as co-president and co-CEO of FedEx Services, which provides support services to the various units. Subramaniam has been with FedEx for more than 27 years and has held numerous high-level roles at the company.
Asked if Subramaniam’s effectiveness will be compromised because he will be holding six jobs at once, Satish Jindel, head of consultancy ShipMatrix, said Subramaniam is a highly efficient executive who shares Smith’s vision that “he will bring more rapid changes in all those organizations with more hands-on involvement.”
Subramaniam will have his hands full. FedEx in December posted subpar fiscal second-quarter results and lowered its fiscal 2019 outlook due to issues integrating its TNT Express unit and economic weakness in Europe and Asia. Weakness in those markets has continued, said Benjamin J. Hartford, transport analyst for investment firm Baird, in a note today. Hartford kept an outperform rating on FedEx, but reduced its earnings per-share estimates for fiscal 2019 and 2020.