Amazon Shareholder Meeting: Selipsky Cashes In, Human Rights Concerns, AI, More
There’s a lot on the docket when investors vote April 24.
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Amazon CEO Andy Jassy received no new stock compensation in 2022, per an April 13, 2023, Securities and Exchange Commission filing. And he made less money — to the tune of 25% less — “primarily to our stock price decline over the course of the year,” the filing reads.
Jassy’s restricted stock unit awards from 2021, when he took over as Amazon CEO, vest over 10 years. Amazon says it took this approach to “establish a long-term owner’s perspective and encourage bold, long-term initiatives, in the same manner that [Jeff] Bezos’ shares as founder incentivized him to focus on long-term, expansive growth, and is intended to represent most of Mr. Jassy’s compensation for the coming years.”
Amazon’s Leadership Development and Compensation Committee further does not plan to give Jassy any more stock in 2023.
The story is different, though, for AWS CEO Adam Selipsky.
In 2022, Adam Selipsky, who assumed the role of AWS CEO in 2021, received stock compensation equal to 245,960 shares. Those will vest through 2028.
Amazon said Selipsky had earned a “periodic grant” for 2022, for his:
• Experience and skill in managing AWS.
• Sustained performance since rejoining the company and during the period of his previous employment with the company.
• Long-term perspective.
• Expected future contributions, including his continued oversight of expansion and innovation at AWS.
How much did Selipsky help bolster AWS’ numbers?
Amazon is awarding Selipsky more stock for several reasons. Here’s what the company noted in its Proxy Overview:
• Selipsky contributed to AWS’ increase in net sales between the end of 2020 and 2021, by about $14 billion.
• He also played a role in raising AWS’ operating income by about $4 billion over that same period.
• He oversaw the expansion of AWS to 84 data center regions (what the company calls “Availability Zones”) during that same time frame.
• He intends to open 24 more Availability Zones.
• He helped secure more customers.
• He was part of launching “numerous” new AWS services.
Plus, Amazon said, Selipsky’s level of responsibility “relative to compensation for senior executives of comparably sized businesses at peer companies, including that the size of operations he manages, is equivalent to those managed by chief executive officers of many other Fortune 100 companies.”
As for where AWS ended 2022?
By the end of 2022, AWS had made some big strides, ones that Amazon hopes shareholders will notice when they meet on April 24 to vote on executive compensation and other issues.
For example, the cloud computing provider was was running in 96 Availability Zones within 30 global regions. In addition, the company intends to open at least 15 more Availability Zones across five more regions.
On top of that, Amazon touted the introduction of “thousands of new features and services” in 2022. It cited its work in chipmaking, internet of things, supply chain and machine learning, among other domains.
The company also highlighted its involvement in helping “solve water scarcity challenges around the world,” adding that AWS “announced a goal to be water positive by 2030, returning more water to communities than it uses in its direct operations.”
But will those strides be enough to assuage some shareholder concerns? Some investors don’t think AWS is doing enough to push back against human rights violations, especially.
On April 24, shareholders will vote on several proposals. One of those asks that the Amazon board of directors commission an independent, third-party report to assess whether the company’s products — AWS, in particular — contribute to human rights violations.
The proposal notes that AWS serves “multiple government customers” with a history of human rights abuses, “and Amazon’s technologies may enable mass surveillance globally.”
Concerned shareholders say inadequate due diligence on Amazon’s part “presents material privacy and data security risks, as well as legal, regulatory, and reputational risks.”
They refer specifically to Amazon’s Rekognition face comparison feature and Amazon Ring.
Regarding Rekognition, shareholders said that despite Amazon’s “indefinite moratorium of its Rekognition face comparison feature, it has not clarified how Rekognition is still used by police outside of ‘criminal investigations.’”
Plus, “Amazon’s Ring continues to infringe on citizens’ privacy, despite an audit and Ring’s resulting changes. Its vague standards regarding information sharing with law enforcement, absent consent, led to sharing of videos with law enforcement 11 times in 2022. Ring continues to expand its thousands of police partnerships.”
There’s more. On the next slide, the shareholder proposal goes even deeper into concerns over AWS.
Some shareholders want their peers to approve a third-party report that will evaluate whether AWS is contributing to human rights violations. Here’s how they back up that call to action:
“Amazon’s government-affiliated customers and suppliers with a history of rights-violating behavior pose risks to the company, including:
• AWS will host the Department of Homeland Security’s biometric database, which will reportedly be used to “assemble target lists for ICE raids, expand the tech border wall, and to facilitate surveillance, arrests, immigrant detention and deportation.”
• Amazon sells relabeled surveillance products in the U.S. from Chinese companies Dahua and Hikvision, which have been blacklisted by the U.S. Government and implicated in mass surveillance, internment, torture, and forced labor of the ethnic Uyghur minority.
• The Israeli government’s “Project Nimbus,” protested by Amazon employees, uses AWS to support the apartheid system under which Palestinians are surveilled, unlawfully detained and tortured. Israel plans to use AWS as it expands illegal settlements and enforces segregation.
• AWS opened a data center in United Arab Emirates, a country that deploys a state surveillance apparatus targeting human rights defenders, journalists and political dissidents. AWS’ first data center in the region opened in Bahrain, which has a poor human rights record.
• Amazon’s existing policies appear insufficient in preventing customer misuse and establishing effective oversight, yet Amazon continues releasing surveillance products.”
Amazon is hoping shareholders vote against the proposal to commission a report regarding any human rights violations. In the Proxy Overview, board leaders said Amazon is “committed to the responsible use of our artificial intelligence and machine learning (AI/ML) products and services and other AWS services.”
They referred to efforts such as the 2020 global moratorium on police use of Rekognition for criminal investigations as examples of its “consistent and proactive” efforts to “address concerns and mitigate the risk of misuse through policy and advocacy efforts.”
They also noted the completion of a civil rights and liberties audit by Ring with the Policing Project at New York University School of Law in 2021 as another example of those initiatives. Ring “implemented over 100 changes to its products, policies, and legal processes,” as a result of the audit, the board said. And, “Ring continues to engage with community stakeholders and independent experts like the Center for Democracy and Technology. ”
“Over the six years that AWS has been offering Amazon Rekognition and the five years since we acquired Ring, we have been updating our technology and enhancing safeguards and have avoided or mitigated the risks and concerns expressed in this proposal,” the board wrote. “For example, AWS has not received a single verified report of Amazon Rekognition being used in the harmful manner posited in the proposal.”
All in all, the board wrote, “We believe strongly in harnessing the capabilities of advanced technology such as the cloud and machine learning to promote ongoing safety and security of our fellow citizens, our communities, and the world. While we understand the concerns over potential misuse, we believe these are effectively addressed through the policies and procedures we have adopted and that we continue to advance with input from internal and third-party partners and stakeholders.”
As for where AWS has been and for how far it has come since 2008 when it was “still a fairly small, fledgling business,” Jassy has more thoughts for shareholders in advance of their April 24 meeting.
In 2008, Amazon leaders faced a big decision about the then-two-year-old AWS. The mortgage sector was melting down, the feds were bailing out companies considered “too big to fail” and the Great Recession loomed. Cloud computing had yet to gain real traction. As such, Amazon could have taken its eyes off the AWS prize. Instead, 15 years ago, executives chose to “continue investing,” Jassy noted.
That move has paid off. AWS continues to rank as the world’s largest public cloud computing provider. (Microsoft Azure isn’t far behind but it has yet to attain universal analyst consensus that it has surpassed AWS.) AWS now boasts an $85 billion annual run rate, Jassy wrote to shareholders on April 13.
“Amazon would be a different company if we’d slowed investment in AWS during that 2008-2009 period,” he said.
Even so, AWS has experienced the same challenges as other cloud providers in a difficult, post-COVID economy. Because of that, AWS faces another key moment. More end users are (at last) paying attention to the need to optimize their cloud resources, which translates into less revenue for the vendors. Wall Street and analysts have sounded that alarm since last year, but it’s worth pointing out that the hyperscalers are still reporting up to 30% quarterly growth. While such numbers ultimately are not sustainable, Amazon executives think AWS has more room to expand.
AWS “is still early in its adoption curve, but at a juncture where it’s critical to stay focused on what matters most to customers over the long haul,” Jassy wrote in his letter to shareholders. “Despite growing 29% year-over-year in 2022 on a $62 billion revenue base, AWS faces short-term headwinds right now as companies are being more cautious in spending given the challenging, current macroeconomic conditions.”
However, he added, AWS is not going to go the route of many of its peers.
“While some companies might obsess over how they could extract as much money from customers as possible in these tight times, it’s neither what customers want nor best for customers in the long term, so we’re taking a different tack.”
That tack looks like building the customer base into a business that will “outlast all of us,” Jassy said.
As a result, he continued, “our AWS sales and support teams are spending much of their time helping customers optimize their AWS spend so they can better weather this uncertain economy. Many of these AWS customers tell us that they’re not cost-cutting as much as cost-optimizing so they can take their resources and apply them to emerging and inventive new customer experiences they’re planning.”
There are other ways AWS expects to get through 2023’s macroenomic challenges.
Sure, “short-term headwinds” will soften AWS’ growth rate, Jassy said. But, there are a lot of positives for shareholders to consider.
“Our new customer pipeline is robust, as are our active migrations,” he wrote. “Many companies use discontinuous periods like this to step back and determine what they strategically want to change, and we find an increasing number of enterprises opting out of managing their own infrastructure, and preferring to move to AWS.”
It looks like Generative AI — think ChatGPT, Google Bard — will be key to furthering AWS’ traction in the cloud world. Indeed, this technology is “core to setting Amazon up to invent in every area of our business for many decades to come,” Jassy said.
Generative AI represents the latest version of machine learning. It’s based on so-called very Large Language Models, which means the AI tech trains of hundreds of billions of parameters. These capabilities have made big strides in recent months and Microsoft has made the most waves with ChatGPT. Its rivals, including AWS, are working to catch up. Jassy didn’t address that aspect of the sector but did say that “LLMs and Generative AI are going to be a big deal for customers, our shareholders and Amazon.”
For Jassy, much of Amazon’s promise lies with AWS. About 90% of global IT spending remains on-premise, he said. That means “immense future opportunity” for cloud computing — AWS, in particular.
“I strongly believe that our best days are in front of us,” Jassy said of Amazon overall, “and I look forward to working with my teammates … to make it so.”
For Jassy, much of Amazon’s promise lies with AWS. About 90% of global IT spending remains on-premise, he said. That means “immense future opportunity” for cloud computing — AWS, in particular.
“I strongly believe that our best days are in front of us,” Jassy said of Amazon overall, “and I look forward to working with my teammates … to make it so.”
Curious how much Amazon wants to boost Amazon Web Services’ CEO’s pay? Or how it’s responding to allegations of the cloud computing provider’s involvement in human-rights violations? The annual Amazon shareholder meeting will address those issues and many more later this month.
Scheduled for April 24, the gathering will serve as a chance for anyone who holds the company’s stock to vote on a number of matters. Those include executive compensation amounts and whether to commission a report on AWS and human rights concerns.
All in all, there are 18 shareholder proposals on deck for the Amazon shareholder meeting. That’s a record number, surpassing 2022’s total of 15. The majority come from investors focused on environmental, social and governance issues. Importantly, one of those takes direct aim at alleged human-rights violations within AWS stemming from because of government contracts.
In advance of the 2023 Amazon shareholder meeting, CEO Andy Jassy has crafted an 88-page letter to anyone who holds the company’s stock. Amazon also filed its annual Proxy Overview detailing which items will require votes and discussing other important matters.
In the slideshow above, we cover all the hot topics in Jassy’s letter and the Proxy Overview as the latest Amazon shareholder meeting looms.
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