Jeff Bezos, founder and CEO of Amazon.com
Anindito Mukherjee/BloombergAs Amazon.com founder Jeff Bezos prepares to leave his role as the firm’s CEO, expect the company’s board to have a harder time overseeing company management, one activist shareholder says.
Bezos will step down as CEO in the third quarter, handing the reins to Andy Jassy, who built and runs the company’s Amazon Web Services cloud business.
Currently, Bezos serves as Amazon’s (ticker: AMZN) CEO and board chair. While the separation of the CEO and chair role has always been positive from a corporate governance perspective because it reduces potential conflicts of interest, Bezos is remaining as executive chairman.
“The level of independence of the board will decline because you’re now adding the CEO,” says Dieter Waizenegger, executive director of CtW Investment Group, which works with union pensions. “The board will also need to manage the dynamics between the executive chairman and the CEO, increasing the risk that there are [competing interests] that may require more effort to navigate.”
“It probably puts additional strain on the board’s independent members,” Waizenegger added, in an interview with Barron’s.
Amazon wasn’t immediately available to comment.
Amazon has faced criticism in the past about the independence of its board, partly because Bezos is both chairman and CEO. In the last proxy season, the AFL-CIO Reserve Fund proposed that the board have an independent chair, arguing that the independent chairman “is best positioned to build up the oversight capabilities of our directors.” The proposal failed.
One big issue: How Amazon will manage risk related to potential anti-competitive practices. Bezos in July was asked to testify about antitrust issues to the House Judiciary Committee.
“That will be more of a challenge given the new administration,” says Waizenegger. Meanwhile, the European Union charged Amazon with using its access to the nonpublic data of its third-party sellers to increase sales of its own goods. The firm reportedly faces a potential fine as high as $19 billion.
CtW has submitted a shareholder proposal for the current proxy to require Amazon’s board to report to shareholders how it oversees risks related to anticompetitive practices, including whether the board has oversight responsibility, and how the board considers such risks as it advises on strategy. “The board needs to figure out how this will work,” Waizenegger says.
Write to Leslie P. Norton at leslie.norton@barrons.com
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February 05, 2021 at 07:20PM
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As Bezos Exits Amazon CEO Role, Expect More Pressure on Board - Barron's
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