Note to FedEx: schoolyard taunts are a poor PR strategy

Photo: abc7news

On Sunday, the New York Times published a critique of the way that the shipper FedEx cut its federal tax bill to zero. Rather than defending itself, FedEx lashed out at the finances of the Times. While such tactics may be working for politicians, they’re no way for a public company to behave.

Here’s the lede of the Times piece, which is titled “How FedEx Cut Its Tax Bill to $0“:

WASHINGTON — In the 2017 fiscal year, FedEx owed more than $1.5 billion in taxes. The next year, it owed nothing. What changed was the Trump administration’s tax cut — for which the company had lobbied hard.

The public face of its lobbying effort, which included a tax proposal of its own, was FedEx’s founder and chief executive, Frederick Smith, who repeatedly took to the airwaves to champion the power of tax cuts. “If you make the United States a better place to invest, there is no question in my mind that we would see a renaissance of capital investment,” he said on an August 2017 radio show hosted by Larry Kudlow, who is now chairman of the National Economic Council.

But FedEx didn’t increase investment. This piece is really a critique of the tax cuts, because, as the article says, “A New York Times analysis of data compiled by Capital IQ shows no statistically meaningful relationship between the size of the tax cut that companies and industries received and the investments they made.” And “As for capital investments, the company spent less in the 2018 fiscal year than it had projected in December 2017, before the tax law passed. It spent even less in 2019. Much of its savings have gone to reward shareholders: FedEx spent more than $2 billion on stock buybacks and dividend increases in the 2019 fiscal year, up from $1.6 billion in 2018, and more than double the amount the company spent on buybacks and dividends in fiscal year 2017.”

According to the Times, “FedEx spent $10 million on lobbying in 2017, in line with previous spending, with much of it focused on tax issues, according to federal records. Its team pushed hard to shape the bill behind the scenes, meeting regularly with House and Senate committee staff who were writing the provisions.”

The FedEx response is misguided

There are many ways to defend yourself against an attack like this. Here’s what FedEx put into its statement in response:

Statement from Frederick W. Smith, Chairman and CEO of FedEx Corporation

November 17, 2019

The New York Times published a distorted and factually incorrect story on the front page of the Sunday, November 17 edition concerning FedEx and our billions of dollars of tax payments and billions of dollars of investments in the U.S. economy. Pertinent to this outrageous distortion of the truth is the fact that unlike FedEx, the New York Times paid zero federal income tax in 2017 on earnings of $111 million, and only $30 million in 2018 – 18% of their pretax book income. Also in 2018 the New York Times cut their capital investments nearly in half to $57 million, which equates to a rounding error when compared to the $6 billion of capital that FedEx invested in the U.S. economy during that same year.

I hereby challenge A.G. Sulzberger, publisher of the New York Times and the business section editor to a public debate in Washington, DC with me and the FedEx corporate vice president of tax. The focus of the debate should be 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.

I look forward to promptly hearing from Mr. Sulzberger and scheduling this open event to bring further public awareness of the facts related to these important issues.

This is in the “I’m rubber, you’re glue,” schoolyard taunt theory of public relations. Here’s the biggest problem: while FedEx claims that the Times article is distorted, the statement provides no evidence whatsoever of the distortion. The criticism of the Times’ tax situation and investments is irrelevant to the truth of the article.

The ad hominem fallacy states that attacking the messenger is not a real defense against the truth of the message. This particular strategy is called “tu quoque” (literally, oh yeah, you too!). Despite the fact that it’s popular with our chief executive and babbling heads on cable news, it proves nothing.

It’s particularly baffling given that there are any number of factual responses FedEx could have made, for example:

  • FedEx took advantage of the full range of tax benefits in the new law, which is its fiduciary responsibility to its shareholders. There is nothing wrong in that.
  • It’s unfair to judge the effect of tax cuts based on year-to-year changes in capital spending. This statement by a FedEx spokesman was actually in the article: “FedEx invested billions in capital items eligible for accelerated depreciation and made large contributions to our employee pension plans. . . . These factors have temporarily lowered our federal income tax, which was the law’s intention to help grow G.D.P., create jobs and increase wages.”
  • Fedex could have cited increasing the size of its workforce by 11% in the last two years, accelerating wage increases, planning to invest $1.5 billion over seven years in a hub in Indianapolis, and buying 24 planes from Boeing.

If FedEx wants to make a case that the tax cuts were worth it, all of these arguments are available to it. They are based on facts and are true regardless of who chooses to write about it. And they’re arguably exactly the kind of business value the tax cut was supposed to bring about.

Instead, FedEx indulged its baser instincts and behaved like a bully who’s been punched in the eye, a tactic right out of the Roy Cohn dirty PR playbook. America’s in bad enough shape right now because of name-calling and divisiveness. If that’s what the future of corporate PR is, we’re all in trouble.

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