SUMMARY

• Shareholder revolt: A mere 56% of Amazon shareholders approve executive pay packages, signaling significant dissatisfaction.
• ESG demands: Investors call for Environmental Social Governance (ESG) benchmarks in determining stock vesting.
• Changing dynamics: Amazon's relationship with Wall Street undergoes a notable transformation as investor sentiment shifts.

Amazon Inc. (AMZN) recently published its annual proxy statement, which includes a proposal to vote on the frequency of executive compensation approval. The e-commerce giant seeks investors' input on whether they should vote annually, biennially, triennially, or abstain from voting altogether. Although such voting practices are typically routine, Amazon's Say on Pay votes carry substantial significance.

Last year, an astonishingly low 56% of Amazon shareholders approved the executive pay packages, indicating a level of investor discontent rarely seen since the company's initial public offering in 1997. In contrast, 90% of S&P 500 companies received approval with a minimum 70% majority vote. Given Amazon's status as one of the world's most valuable companies, boasting a market capitalization exceeding $1 trillion, the narrow majority vote represents a significant rebuke.

The primary cause for concern centered around the stock awards granted to top executives, particularly CEO Andy Jassy. Jassy, who succeeded founder Jeff Bezos as CEO in 2021, received an eye-popping $212 million in stock awards, drawing criticism from shareholders. Amazon defended the compensation package by highlighting its extended vesting period, with over 80% of the shares scheduled to vest between 2026 and 2031.

However, the issue at hand, as stated in the proxy statement, extended beyond the award's size. Following the vote, Amazon's board engaged in discussions with its largest shareholders, who collectively own 33% of the company's stock. Notably, these investors, including The Vanguard Group, BlackRock, SSgA Funds Management, Fidelity, and T. Rowe Price, expressed the desire for specific benchmarks, particularly related to Environmental Social Governance (ESG) goals, to determine the vesting of restricted stock for Jassy and other executives.

Despite these shareholder concerns, Amazon firmly rejected the notion of incorporating near-term performance conditions and discrete financial, environmental, or social goals into executive compensation. The company emphasized the importance of long-term shareholder value and urged management to focus on initiatives aligned with careful ESG stewardship. Amazon's comprehensive response to the shareholder revolt highlights the increasing significance of Say on Pay votes, which provide investors with a platform to voice criticisms and initiate meaningful discussions on important matters.

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