FedEx Response To Tax Story Is A PR Fail

FedEx CEO Fred Smith’s overheated response to a New York Times story about its tax bill – or lack of it – offers a PR master class in how not to react to an investigative piece.

The NYT story packs a punch. By taking advantage of the 2017 tax legislation that cuts corporate rates from 35 to 21 percent, FedEx managed to reduce its tax bill from $1.5 billion that year to exactly zero in 2018. That’s right, zero. All perfectly legal, of course. The piece illustrates how many major corporations benefited from the tax cuts and what some did with the windfall, using FedEx as an example.

FedEx is a logical company to carry the broader story in part because Smith lobbied heavily for tax reform, flogging it conversations with Treasury Secretary Steven Mnuchin, in op/eds and in media interviews as a way to stimulate capital investment by companies like his. He even floated the tax bill as a way for companies to offer higher wages to its workers.

Yet the article reports that, like many other corporations, FedEx invested primarily in buying back its own stock rather than in capital expenditures or even wage increases. It mentions previously scheduled pay raises for some employees and modest capital investment in 2018 but notes that FedEx actually reduced capital spending by $240 million after the tax policy changed.

The point is simply that the tax bill probably isn’t working as intended, or at least as promoted. It’s far from the first article to point this out, but the FedEx example gives a lot of weight to the story.

FedEx may get it done for customers but its own message delivery has fallen short. When the story hit, it fired back quickly with a letter from CEO Smith. The response is a study in protesting both way too much and far too little. It’s over-the-top on anger and accusation but empty of substance or facts. In an almost Trumpian display of whataboutism, Smith calls the story an “outrageous distortion of the truth,” then slams the New York Times company for its own “zero” federal income tax bill and reduced capital investment. Smith signs off by challenging the newspaper to a debate about tax policy along with his vice president for tax.

In short, as a corporate communications response, it’s reactive, defensive, and needlessly combative. Here are a few ways FedEx could have handled things differently in order to support its reputation and offer relevant information to the public.

Point out any inaccuracies

As we counsel clients, no journalist wants to get facts wrong and most will correct any errors. The thing to do is to point out wrong or misleading information respectfully and promptly. But here, despite calling the story “an outrageous distortion” and “inaccurate,” the letter never challenges a single fact. That makes FedEx look defensive and even hypocritical. And the surest way to pick a fight you probably don’t need is to cry foul on facts when the truth is you don’t like the coverage.

Acknowledge what’s true

FedEx is hardly alone in taking advantage of the tax cuts. Though the tax reform bill has been controversial, it was welcomed by many business leaders and it did offer a boost to the economy, or at least to the stock market. It would have been smarter to acknowledge FedEx’s duty to its shareholders to reap all possible benefits from the legislation, which Smith championed openly. Most of it is public information anyway.

Fill in the blanks

What about future plans? What did the piece leave out? Only one full tax year has passed since the bill went into effect. It’s highly possible that FedEx intends to spend on capital investment in the future. And wage increases may have been limited by the economic slowdown abroad. Maybe some aspects of the company’s position on tax policy were left out of the piece. If so, this is a golden opportunity to shine a light on future plans. Instead of seizing it, Smith squandered the opportunity with a juvenile-sounding challenge.

Lead the discussion

Smith calls for a debate focused on “federal tax policy and the relative societal benefits of business investments and the enormous intended benefits to the United States economy, especially lower and middle class wage earners.” This is actually a fine idea. Smith was an open champion of tax reform and he should be able to defend it as well as identify areas for improvement. The problem is that he sets up the discussion as a kind of boxing match where his company goes one-on-one with a national newspaper, as if they are equivalent businesses with parallel roles in the dialogue. Not only is that asymmetrical, but it’s needlessly antagonistic.

Stay calm and civil

The hyper-defensive tone of the response suggests that FedEx is ashamed of its actions. And hurling similar accusations at the Times about its own tax payments is not only an obvious deflection, but could be construed as a tacit admission that both companies are bad actors. It certainly doesn’t help clarify the situation or enlighten anyone on what FedEx might be doing right, or what it plans in the future. Public examples aside, staying calm in response to unflattering coverage is a sign of strength, not weakness.

A PR View Of Brands In The Crosshairs

When should a large company take a political stand? Some PR experts would say never. And you can’t blame big companies if they want to avoid public debates about the causes of gun violence, climate change, or other politicized issues. But increasingly, corporate America is being asked to pick a side. It seems there’s more pressure than ever for major corporations to weigh in on seemingly irresolvable problems or to bridge irreconcilable divides.

The latest case in point is that of Delta and the NRA. There are many other companies involved here, but it’s Delta who made it into the NRA’s crosshairs. The story started with the tragic Parkland, Florida shooting that spurred a new wave of activism to prevent gun violence. And the response to Parkland has given fresh hope to gun-safety advocates. Due to the eloquence of the students, but also because of anti-Trump sentiment among Democrats and Independents, the movement just feels different from past responses to mass shootings.

Delta was only one of many corporations who announced it would end a discount to NRA members, and its action was initially applauded by many observers. But the GOP in Georgia, where Delta is headquartered and has its hub, didn’t take kindly to the gesture. The state Senate has pledged to revoke a $40 million tax break granted to Delta unless it reverses the NRA position.

What’s a business-minded corporation to do? Any decision it takes will anger a contingent somewhere. But Delta’s dilemma is increasingly common, and it won’t be the last to face such a choice.
I’ve blogged about how companies can embrace social activism in the Trump era, and why CEOs should speak out on key issues as business leaders. But when a public company like Delta faces the loss of a lucrative tax abatement, the stakes rise. After all, it is as beholden to its Board and shareholders as to its employees and customers. And if it caves to state political pressure and reverses its stand, will business really suffer? It’s one thing for a customer to threaten to fly United, but in a highly consolidated category like air travel where routes, convenience, and price are all huge factors, a true boycott is unlikely. That’s probably why FedEx has said it will continue to offer NRA members discounted shipping despite organized protests. There’s just not that much choice in the shipping category.

Yet if I were advising Delta, I’d tell its management to stick to their guns in standing for gun safety, despite the cost. And that’s not just because it’s a principled position. First, flip-flopping only serves to anger everyone. It also shows weakness, which invites further pressure. Also, I feel the response to what seems like the umpteenth mass shooting of late truly is a turning point. With a movement led by high-school students growing and a public march scheduled within the month, anti-NRA sentiment is on the side of gun safety advocates. There will be setbacks, but I believe the NRA is the tobacco industry of the post-Millennial generation.
But more importantly, companies really do need to stand up for their values, not matter what the outcome. These difficult and divisive issues aren’t going away, the pressure on corporate America will only grow. Pick a side, and stick to it.

Well-Handled: FedEx Delivers On "Apology PR"

Talk about heavy lifting. Pity the communications pros at FedEx. At the height of the holiday season, when the company wants to focus on its state-of-the-art technology and customer service prowess, it’s the recipient of an unwelcome holiday gift – a viral video that threatens real damage to its brand.

One careless employee and 20 seconds – caught on camera – is all it takes these days. The video in question shows a FedEx delivery person heaving a computer monitor over a resident’s gate rather than taking an extra minute to ring the bell. The package toss instantly lit up Twitter and soon had mainstream media buzzing. At over four million views so far, it gives new meaning to the term “special delivery.”

Now, this isn’t the first time FedEx employees have been caught manhandling bags – a casual browse through YouTube can attest to that. But this mis-delivery was very clearly at a residence (where the recipient was at home and watching.) Combine that with a  slow news week and the rapidly growing social Web, and it adds up to real PR baggage.

To its credit, FedEx dropped everything – in a good way – to respond to the mini-crisis. It fast-tracked a video apology from operations executive Matthew Thornton in which Thornton vows to redouble efforts to regard each delivery as “precious cargo” and make the incident a “learning experience” for the company. The script is a bit stilted, but he’s credible and appropriately concerned.

FedEx tells us that the situation’s been handled. It has shipped out the sloppy employee (to a warehouse, apparently) and replaced the customer’s monitor. It then takes the opportunity to restate its corporate values, which is a savvy PR move.

Good job, FedEx. In a few weeks, with some luck, a kinder, gentler FedEx will emerge and the package panic will be relegated to the crisis PR archives, indexed under “well handled.” In the meantime, keep on truckin.’