Amazon 2019 ProxyInsight

Amazon 2019 Proxy Voting Guide

Amazon 2019 annual meeting is May 22nd, so vote online by May 21st. To enhance long-term shareholder value, vote AGAINST Thomas Ryder, pay and auditor. Vote FOR all shareholder proposals EXCEPT #12 Report on Board Ideologies.

Amazon.com, Inc. engages in the retail sale of consumer products and subscriptions in North America and internationally. Most shareholders do not vote.  Reading through 50+ pages of the proxy takes too much time. Your vote will make only a small difference but could be crucial. Below, how I voted and why.

If you have read these posts related to my portfolio and proxy proposals for the last 24 years and trust my judgment, skip the 10 minute read. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.

I voted with the Board’s recommendations 42% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.

Amazon 2019: ISS Rating

From the Yahoo Finance profile: Amazon.com, Inc.’s ISS Governance QualityScore as of April 1, 2019 is 6. The pillar scores are Audit: 1; Board: 9; Shareholder Rights: 1; Compensation: 9.

Corporate governance scores courtesy of Institutional Shareholder Services (ISS). Scores indicate decile rank relative to index or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk. We need to pay close attention to Board and Compensation.

Amazon 2019 Proxy Voting Guide: Board Proposals

1. Amazon 2019: Directors

Egan-Jones Proxy Services recommends AGAINST Thomas O. Ryder.

A director who receives, or whose immediate family member receives, more than $120,000 per year in direct compensation (base salary plus cash bonus) from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not independent until three years after he or she ceases to receive more than $120,000 per year in such compensation.

Also, according to Egan-Jones’ Proxy Guidelines a director whose tenure on the Board is 10 years or more is considered affiliated, with the exception of diverse nominees.

Vote AGAINST

2. Amazon 2019: Ratification of Auditor

I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest. Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. Ernst & Young, LLP served more than seven years. No other issues appear significant.

Vote AGAINST.

3. Amazon 2019: Executive Compensation

Amazon’s Summary Compensation Table shows the highest paid named executive officer (NEO) was Andrew R. Jassy, CEO Amazon Web Services, at $19.7M. I’m using Yahoo! Finance to determine market cap ($19.8B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Amazon is, or course, a large-cap company.

According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at large-cap corporations was $10.3M in 2014. Amazon shares outperformed the NASDAQ over the most recent one, two, and five year time periods. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 1:58.

Egan-Jones Proxy Services uses a proprietary rating compensation system to measures wealth creation in comparison to other companies. “Superior” is their compensation rating for Amazon. They recommend a vote For the say-on-pay item.Egan-Jones

Trillium voted against: “CEO pay is not tied to ESG performance. The company CEO-worker pay ratio exceeds 50:1. The previous year’s restricted shares and stock options awarded to the CEO vest over less than five years.” Given those reasonable concerns, above median pay and my concern for growing wealth inequality, I voted AGAINST but performance has been so good that I did not vote against the compensation committee.

Vote AGAINST.

Amazon 2019: Shareholder Proposals

4. Shareholder Proposal: Report on Management of Food Waste

Proposal by the JLens Network requests annual report on environmental and social impacts of food waste. Egan-Jones recommends against. I recommend FOR. It is a report. The cost will be minimal and should give Amazon another thing to brag about… if they are doing it right.

Vote: FOR

5. Shareholder Proposal: Reduce Requirement for Special Meetings

This good governance proposal is mine, so of course I voted FOR. Egan-Jones recommends against, because they appear to believe a threshold below 20% makes special meetings too easy, therefore too frequent and expensive. Currently, Amazon requires a 30% threshold. That means shareholders would need hold about $300B. I think a 20% threshold of about $200B is plenty high enough to avoid unnecessary meetings.

Vote: FOR

6. Shareholder Proposal: Risks of Sales of Facial Recognition Software

This proposal is by Sisters of St. Joseph of Brentwood. The title for the proxy card was changed by Amazon to “Requesting a Ban on Government Use of Certain Technologies.” However, the requested would be temporary, until Amazon determines if sale would cause or contribute to actual or potential violations of civil and human rights. Egan-Jones recommends Against. I say, we should have the report before Amazon sells they technology to governments, such as the US or China.

Vote: FOR

7. Shareholder Proposal: Report on the Impact of Government Use Of Certain Technologies

This proposal by Harrington Investments calls for study only, not a ban. Similar arguments apply.

Vote FOR.

8.  Report on Certain Products

I am not sure who the proponent is but they are simply asking for a report on Amazon’s “efforts to address hate speech and the sale of offensive products throughout its businesses.” They have policies but it appears they are not being uniformly applied. Egan-Jones recommends against. I recommend For.

Vote FOR.

* Egan Jones Recommends a Vote FOR the remaining shareholder proposals.

9. Independent Board Chair Policy

Good governance policy we can all agree with from SumofUs. CEO should not be their own boss.

Vote: FOR

10. Report on Certain Employment Policies (Report on Sexual Harassment)

A review and assessment of policies related to sexual harassment is appropriate, given the damage lack of such policies can have.

Vote: FOR

11. Report on Climate Change Topics

This proposal comes from brave employees at Amazon. Proposals by employees, especially on such an important topic, should be encouraged.

Vote: FOR

12. Requesting a Board Ideology Disclosure Policy

While boards should reflect a broad spectrum of opinions, there is no role for dogmatic ideology in the boardroom. No need to seek a balance of communists and fascists on the Amazon board. In fact, no ideologues on the board would be a plus.

Vote AGAINST

13. Gender Pay Equity

Arjuna Capital requests Amazon report on the company’s global median gender pay gap, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining female talent. Gender pay equity certainly deserves support.

Vote: FOR

14. Integrating Certain Metrics into Executive Compensation

This proposal from Zevin Asset Management seeks a report assessing the feasibility of integrating sustainability metrics, including metrics regarding diversity among senior executives, into performance measures or vesting conditions that may apply to senior executives under the Company’s compensation plans or arrangements. If we do not address climate change, we will not have a salubrious planet. What could be more important?

Vote: FOR

14. Vote-Counting Practices for Shareholder ProposalsUnfair Voting Available at AMZN

This proposal from Bruce Herbert and Investor Voice is the most important widely ignored and under-reported problem in corporate elections and governance. Right now at Amazon and many other undemocratic companies, abstentions on proxy proposals are counted as votes against. If we wanted our votes to count as against, we would vote against. This proposal requests that all non-binding matters presented by shareholders be decided by a simple majority of the votes cast FOR and AGAINST an item.

Vote: FOR

Amazon 2019 CorpGov RecommendationsProxy Insight

Proxy Insight reported quite a few votes, as presented in the graphic at the top of this post. Click on the graphic to expand. You may find more by looking up funds on our Shareowner Action Handbook.

CorpGov Votes:

  1. Directors: AGAINST Thomas O. Ryder
  2. Ratify Auditor: AGAINST
  3. Executive Pay: AGAINST
  4. Report on Food Waste: FOR
  5. Reduce Threshold for Special Meetings: FOR
  6. Address Risk of Facial Recognition Software: FOR
  7. Report Impact of Government Use Of Certain Technologies: FOR
  8. Report on efforts to address hate speech and the sale of offensive products: FOR
  9. Independent Chair: FOR
  10. Report on Sexual Harassment: FOR
  11. Report on Climate Change: FOR
  12. Report on Board Ideologies: AGAINST
  13. Gender Pay Equity: FOR
  14. Integrate Sustainability Metrics in Exec Pay: FOR
  15. Fair Vote Counting: FOR

Amazon 2019: Issues for Future Proposals

SharkRepellentLooking at SharkRepellent.net for anti-shareholder provisions:

  • Special meetings can only be called by shareholders holding not less than 30% of the voting power.
  • Proxy access provisions are lite.

Amazon 2019: Mark Your Calendar

To be considered for inclusion in the proxy statement and proxy card for the 2020 Annual Meeting, proposals must be submitted in writing to the Corporate Secretary of Amazon.com, Inc. and  received no later than 6:00 p.m., December 13, 2019. The submission of a shareholder proposal or proxy access nomination does not guarantee that it will be included in our proxy statement. (edited for readability)

Warnings

Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” chosen by aspiration. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.

   

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