Amazon Has Tough Choices – Closing Charity Programs, Cutting Staff, And Facing CEO Pay Pressure

Amazon’s board may follow the example of many other tech companies moving to cut staff and reduce salaries of their CEO. After all, AppleAAPL
drew headlines last week when it announced a 40% cut in CEO’s Tim Cook pay for this year, an action which was in response to shareholder demand.

The shareholders of other big tech companies have also voiced objections to executive compensation paid out last year, making it easy for consultants to predict that more tech companies will likely follow Apple and cut executive compensation. The Information quotes Aalap Shah, a managing director at compensation firm Pearl Meyer, who said that the “vast majority of his clients to the tech industry are planning to cut their executives’ pay this year by giving them smaller equity packages.”

At this uncertain time, with interest rates rising, a more disciplined approach to spending may be in order. This change of attitude responds to complaints by some investors who have objected to the compensation packages of executives for years. At Amazon, 56% of shareholder votes supported the pay package of the company’s top executives last year. Security filings show that prior year the support for the pay package was 81%. In 2020, the support was 98%.

CEO Andy Jassy was awarded a stock grant of $212 million in 2021, to vet over a 10-year period. Jassy’s predecessor, Jeff Bezos, did not get any stock grants. The 2022 proxy filing says that the 2021 grant will likely represent most of Jassy’s compensation in coming years.

At the same time, Amazon is taking other actions to be thriftier. It has announced that AmazonSmile charity donations will be shut down on February 20, 2023. This charity allowed customers to donate 0.5% of an eligible item’s purchase price to charity. Amazon has donated $500 million to charities selected by customers since the program was launched in 2013 though most charities actually received small amounts. At a time when the company is making mass lay-offs throughout the organization (which will amount to about 18,000 people), it is appropriate that other cost-saving measures also be initiated. In this case, the optics are problematic when people and charities are the big losers.

POSTSCRIPT: While big compensation packages attract talented chief executives, in these uncertain times it is appropriate that companies husband their funds. These seemingly conflicting needs create a challenge for these companies. MicrosoftMSFT
is another tech giant that has also announced that they will lay-off about 10,000 employees in order to bring employee headcount more in line with revenues. Big tech companies want to continue to be profitable and need inventive leaders for the future. In the post pandemic period, their leadership is needed. Time will tell how these competing priorities are resolved and who will remain industry leaders.