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Frederick W. Smith

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For other people named Fred Smith, see Fred Smith (disambiguation).
Frederick Wallace Smith
Born (1944-08-11) August 11, 1944 (age 80)
Marks, Mississippi, United States
NationalityAmerican
Alma materYale University
OccupationFounder of FedEx
EmployerFedEx
TitleChairman, President and Chief executive officer
ParentFrederick C. Smith
Military career
AllegianceUnited States
Service/branchUnited States Marine Corps
RankCaptain
Battles/warsVietnam War
AwardsSilver Star, Bronze Star
Purple Heart (2)

Frederick Wallace Smith (born August 11, 1944), or Fred Smith, is the founder, chairman, president, and CEO of FedEx, originally known as Federal Express, the first overnight express delivery company in the world, the largest in the United States and largest in the world. The company is headquartered in Memphis, Tennessee.

Early years

Smith was born in Marks, Mississippi, the son of James Frederick Smith — who (before age 20) dropped his first name, expressing a preference to be known as Fred or Frederick — the founder of the Toddle House restaurant chain and the Smith Motor Coach Company (renamed the Dixie Greyhound Lines after The Greyhound Corporation bought a controlling interest in 1931).[2][3] Fred Smith, the father, died while Smith the son was only 4, and the boy was raised by his mother and uncles.[4]

Smith had a great interest in flying, and became an amateur pilot as a teen. He attended elementary school at Presbyterian Day School and high school at Memphis University School.

In 1962, Smith entered Yale University. While attending Yale, he wrote a paper for an economics class, outlining overnight delivery service in a computer information age. Folklore suggests that he received a C for this paper, although in a later interview he claims that he told a reporter, "I don't know what grade, probably made my usual C", while other tales suggest that his professor told him that, in order for him to get a C, the idea had to be feasible. The paper became the idea of FedEx (for years, the sample package displayed in the company's print advertisements featured a return address at Yale). Smith became a member and eventually the President of the Delta Kappa Epsilon fraternity and the secret society Skull and Bones.[5][6] He received his Bachelor's degree in economics in 1966. In his college years, he was a friend and DKE fraternity brother of George W. Bush.[7] Smith was also friends with John Kerry and shared an enthusiasm for aviation with Kerry[8] and was a flying partner with him.

Marine Corps service

After graduation, Smith joined in the U.S. Marine Corps, serving for four years, from 1966 to 1969, as a platoon leader and a forward air controller (FAC), flying in the back seat of the OV-10. Much mythology exists about this part of his life; Smith was a Marine Corps "Ground Officer" for his entire service. He was specially trained to fly with pilots and observe and 'control' ground action. He never went through Navy flight training and was not a "Naval aviator" or "pilot" in the military. Individuals who completed Navy flight training and became a "Designated Naval Aviator" (pilot) were obligated to serve six years at the time.

As a Marine, Smith had the opportunity to observe the military's logistics system first hand. He served two tours of duty in Vietnam, flying with pilots on over 200 combat missions. He was honorably discharged in 1969 with the rank of Captain, having received the Silver Star, the Bronze Star, and two Purple Hearts. While in the military, Smith carefully observed the procurement and delivery procedures, fine-tuning his dream for an overnight delivery service.[4]

Smith also served with, and became a personal friend of, legendary Special Forces-Intelligence hero Marine Lt. Col. William V. "Bill" Cowan during his Vietnam service. Cowan's wvc3 group is famous for daring hostage rescues, and assisted Smith in FedEx's expansion into the Middle East.[citation needed]

Business career

In 1970, Smith purchased the controlling interest in an aircraft maintenance company, Ark Aviation Sales,[4] and by 1971 turned its focus to trading used jets. On June 18, 1971, Smith founded Federal Express with his $4 million inheritance (about $21 million in 2008 dollars),[9] and raised $91 million (about $484 million in 2008 dollars)[9] in venture capital. In 1973, the company began offering service to 25 cities, and it began with small packages and documents and a fleet of 14 Falcon 20 (DA-20) jets. His focus was on developing an integrated air-ground system, which had never been done before. Smith developed FedEx on the business idea of a shipment version of a bank clearing house where one bank clearing house was located in the middle of the representative banks and all their representatives would be sent to the central location to exchange materials.[4]

Smith has served on the boards of several large public companies, the St. Jude Children's Research Hospital and Mayo Foundation boards. He was formerly chairman of the Board of Governors for the International Air Transport Association and the U.S. Air Transport Association. Smith is chair of the Business Roundtable's Security Task Force, and a member of the Business Council and the Cato Institute. He served as chairman of the U.S.-China Business Council and is the current chairman of the French-American Business Council. In addition, Smith was named 2006 Person of the Year by the French-American Chamber of Commerce. He is a member of the Aviation Hall of Fame. Smith was approached by Senator Bob Dole, who asked Smith for support in opening corporate doors for a new World War II memorial.[10] Smith was appointed to co-chairman of the U.S. World War II Memorial Project. Smith was named as Chief Executive magazine's 2004 "CEO of the Year".

In addition to FedEx, Smith is also a co-owner of the Washington Redskins NFL Team. His son, Arthur Smith, who played football at the University of North Carolina, is now a coach for the Washington Redskins. This partnership resulted in FedEx sponsorship of the Joe Gibbs NASCAR racing team. Smith also owns or co-owns several entertainment companies, including Dream Image Productions and Alcon Films (producers of the Warner Bros. film Insomnia starring Al Pacino and Robin Williams).

In 2000, Smith made an appearance as himself in the Tom Hanks movie Cast Away, when Tom's character is welcomed back, which was filmed on location at FedEx's home facilities in Memphis, Tennessee.

A DKE Fraternity Brother of George W. Bush while at Yale, after Bush's 2000 election, there was some speculation that Smith might be appointed to the Bush Cabinet as Defense Secretary.[11] While Smith was Bush's first choice for the position, he declined for medical reasons — Donald Rumsfeld was named instead.[12] Although Smith was friends with both 2004 major candidates, John Kerry and George W. Bush, Smith chose to endorse Bush's re-election in 2004. When Bush decided to replace Rumsfeld, Smith was offered the position again, but he declined in order to spend time with his terminally ill daughter.[13]

Smith was a supporter of Senator John McCain's 2008 Presidential bid, and had been named McCain's National Co-Chairman of his campaign committee. Some had speculated that Smith might have a role as an economic advisor in a theoretical McCain administration.

Smith was inducted into the Junior Achievement U.S. Business Hall of Fame in 1998. His other awards include "CEO of the Year 2004" by Chief Executive Magazine[14] and the 2008 Kellogg Award for Distinguished Leadership, presented by the Kellogg School of Management on May 29, 2008.[15] He was also awarded the 2008 Bower Award for Business Leadership from The Franklin Institute in Philadelphia, Pennsylvania.[16] He is the 2011 recipient of the Tony Jannus Award for distinguished contributions to commercial aviation.[17]

While CEO of FedEx in 2008, Frederick W. Smith earned a total compensation of $10,434,589, which included a base salary of $1,430,466, a cash bonus of $2,705,000, stocks granted of $0, and options granted of $5,461,575.[18] In June 2009, Smith expressed interest in purchasing the controlling share (60%) of the St. Louis Rams from Chip Rosenbloom and Lucia Rodriguez.[19] In 2009, Frederick W. Smith earned a total compensation of $7,740,658, which included a base salary of $1,355,028, a cash bonus of $0, stocks granted of $0, options granted of $5,079,191, and other compensation totaling $1,306,439.[20]

Forgery Indictment and Fatal Hit and Run

On January 31, 1975 Fred Smith was indicted for forgery by a Federal Grand Jury. The suit was filed by Smith's two half-sisters, Fredette Smith Eagle and Mrs. Laura Ann Patterson. The lawsuit alleged that Smith had forged documents to obtain a $2 million dollar bank loan and that he and executives of his family's trust fund had sold stock from the fund to a loss of $14 million dollars. A warrant for Smith's arrest was issued for which Smith posted bond with Federal Authorities in Memphis.[21]

The same evening of his forgery indictment Smith was involved in a fatal hit and run whereby he killed a 54 year old black handyman named George C. Strughill. Smith was arrested and charged with leaving the scene of an accident and driving with an expired license. He was released on a $250 dollar bond.[22]

This was not the first time Smith was involved in a fatal car accident. During his first summer break from Yale, Smith was back in Memphis driving out to a lake with friends when he lost control of the car he was driving causing the vehicle to flip killing the passenger in the front seat. The cause of the accident were never investigated.[23]

Notes

  1. ^ Memphis Business Journal (2006-03-10). "Fred Smithakes Forbes' billionaire list". Memphis.bizjournals.com. Retrieved 2012-06-24. {{cite web}}: |author= has generic name (help)
  2. ^ http://www.findarticles.com/p/articles/mi_qn4155/is_20050605/ai_n14669376. {{cite news}}: Missing or empty |title= (help) [dead link]
  3. ^ "Fred Smith 1944". Business Biographies.
  4. ^ a b c d "Frederick W. Smith Biography: Father of the Overnight Delivery Business". Academy of Achievement.
  5. ^ Robbins, Alexandra (2002). Secrets of the Tomb: Skull and Bones, the Ivy League, and the Hidden Paths of Power. Little, Brown and Company. pp. 172, 180–1. ISBN 0-316-72091-7.
  6. ^ "Frederick W. Smith." Contemporary Newsmakers 1985, Issue Cumulation. Gale Research, 1986.
  7. ^ "'Live' with TAE: Frederick Smith". The American Enterprise. June 1, 2004.
  8. ^ Purdum, Todd S. (July 6, 2004). "The 2004 Campaign: The Massachusetts Senator: Idealistic Man on Campus To Realistic Sailor at War". New York Times.
  9. ^ a b The Federal Reserve Bank of Minneapolis. Minneapolisfed.org. Retrieved on 2009-02-01.
  10. ^ Dole, Bob (May 28, 2004). "Former Senator Bob Dole Discusses the New WW II Memorial" (Interview). Interviewed by Greta Van Susteren. Fox News. {{cite interview}}: Unknown parameter |program= ignored (help)
  11. ^ "Bush Takes Break Amid Transitions". Inside Politics. CNN. December 26, 2000. Retrieved 2007-01-27.
  12. ^ Bush, George W. (2010). Decision Points. Crown. pp. 83–84. ISBN 978-0-307-59061-9.
  13. ^ Bush, George W. (2010). Decision Points. Crown. p. 91. ISBN 978-0-307-59061-9.
  14. ^ William J. Holstein (July 1 2004). "CEO OF THE YEAR 2004". {{cite web}}: Check date values in: |date= (help)
  15. ^ Henretty, Aubrey (May 30, 2008). "Kellogg honors FedEx CEO Fred Smith as Distinguished Leader". Kellogg School of Management, Northwestern University. Retrieved 2008-05-30.
  16. ^ "2008 Bower Award for Business Leadership: Frederick W. Smith". The Franklin Institute Awards. The Franklin Institute. Retrieved February 1, 2009.
  17. ^ Huettel, Steve (April 14, 2011). "FedEx CEO wins Tony Jannus Award". St. Petersburg Times. Retrieved 2011-04-14.
  18. ^ 2008 CEO Compensation for Frederick W. Smith, Equilar.com
  19. ^ Tritto, Christopher (June 21, 2009). "FedEx's Smith could deliver bid for Rams".
  20. ^ 2009 CEO Compensation for Frederick W. Smith, Equilar.com
  21. ^ "Jury Indicts Freight Flyer In Bank Loan" (February 4, 1975), The Commercial Appeal, Little Rock Bureau, page 1.
  22. ^ "Jury Indicts Freight Flyer In Bank Loan" (February 4, 1975), The Commercial Appeal, Little Rock Bureau, page 1.
  23. ^ "A Review of OVERNIGHT SUCCESS: FEDERAL EXPRESS AND ITS RENEGADE CREATOR" (Bernhard Reichert), Journal of Business Leadership, page 39.

http://cafehayek.com/2007/05/vernon_and_fred.html

Vernon (and Fred) Smith

by Russ Roberts on May 21, 2007

in Podcast

This week’s EconTalk is with my Nobel-prize winning colleague, Vernon Smith. We talk about whether supply and demand works, the purpose of experimental economics, the insights of Hayek and lots of other stuff. He tells an amazing story of how his first paper in experimental economics got accepted at the Journal of Political Economy. He also talks about the work of Roy Radner showing how a firm may deviate from standard models of profit maximization and risk-taking because of the risk of bankruptcy in ending the life of the company. It reminded me of this story about Fred Smith and the early days of Fedex.

When Fred Smith first started FedEx, he struggled desperately to make payroll. At one point he raided the family trust fund without his sisters’ permission (they later sued him) and was forced to keep borrowing money to cover his costs. Finally, the bank in Chicago that had been lending him money said enough—we’re done, No more loans. Smith found himself at O’Hare airport facing the trip back to Memphis knowing he would have to tell his employees that it was over. He simply didn’t have the money to pay them. As he looked up at the departure board for the status of his flight home, he noticed that a flight was leaving soon for Reno. Instead of going to Memphis, he went to Reno and took all the remaining money he had (insufficient to cover the next month’s salaries but still something) and began gambling. (It may have been roulette, but I don’t remember.)

Fortunately, for those of us who often want to get a package somewhere overnight, he had a run of good fortune at the gaming tables, enough to cover the next month’s salaries. During that time, revenue picked up and FedEx survived and ultimately thrived.

I suspect Fred Smith doesn’t spend a lot of time gambling (at casino odds, anyway) with the revenue of FedEx. But facing extinction, he became quite a risk-taker.

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