Proxy season came at quite a challenging time of high inflation and rising interest rates this year. Amazon is a leading US business employing more than one million people around the globe, which makes its annual shareholder meeting a significant one in understanding shareholders’ near-term ESG priorities.
A growing number of investors believe ESG themes are central in modern-day investment management. However, there is increasing politicization of ESG in the US, which has prompted a sizeable cohort of investors to perceive that managers are overprioritizing sustainability issues to the detriment of investor returns.
Amid this split in investor sentiment the voting results for the many topics addressed at Amazon’s shareholder meeting give important signals as to which ESG themes shareholders are prioritizing in 2023.
See also: – How US investors are tackling ESG this AGM season
Shareholder resolutions are becoming more prevalent in the US and cover a broader range of ESG topics than before. This year there was a record 18 ESG proposals at Amazon’s shareholder meeting, up from 15 in 2022. Four of these resolutions have a clear environmental angle—addressing issues like climate change or plastic pollution. Two proposals address governance themes, while the remaining 12 address social issues. Interestingly, this split reflects the prevalence of social-themed resolutions in the US, which contrasts with a greater focus on climate matters elsewhere in the world.
Key resolutions
Four of the shareholder resolutions at Amazon – down from six in 2022 – qualify as key resolutions according to Morningstar’s methodology. This means that they were supported by more than 40% of the company’s independent shareholders (that is, if we adjust the calculation to exclude the 12% shareholding of founder and executive chair Jeff Bezos).
The four key resolutions request additional reporting on freedom of association and collective bargaining, warehouse working conditions, customer use of facial recognition technology, and customer due diligence on human rights. Investor attention on freedom of association and collective bargaining, in particular, is rising, as the vote at Amazon and another well-supported proposal at Starbucks this year both indicate.
Linking all four of these themes is a focus on the societal implications of Amazon’s interaction with key stakeholders: its workers and customers in these cases. These themes are gaining in importance at a time of rising interest rates and high inflation, which typically has a knock-on effect on workforce availability and motivation; and as new technology such as AI and facial recognition raises unprecedented ethical challenges.
Notably, all four of these proposals are similar to four resolutions filed at Amazon’s 2022 shareholder meeting, where they also gained the support of more than 40% of the company’s independent shareholders. Average adjusted support for the four proposals has fallen slightly from 49% to 43% year-on-year, but it is clear that a broad swathe of shareholders believe greater transparency on these key stakeholder matters is of benefit.
Say on Pay
Proposals requesting reporting on gender and racial pay gaps, tax transparency, lobbying, packaging materials, and new policies on employee-director nominations, also returned to the proxy card for a second year running. All these proposals gained more than 20% independent shareholder support, as did a new request for reporting on climate-related stakeholder impacts.
Among the management proposals, executive compensation was a key area of dissent for Amazon shareholders—as it often is at many companies. Almost 32% of the company’s shareholders voted not to approve the company’s executive compensation in the ‘Say on Pay’ proposal this year. That equates to more than 38% opposition from independent shareholders.
We saw shareholder dissatisfaction with executive pay in votes against director elections; in particular, the directors on Amazon’s leadership development and compensation committee after proxy adviser ISS advised a vote against all three of them.
Committee chair Judith McGrath’s re-election was opposed by more than a third of Amazon’s independent shareholders, and the other two directors on the committee saw more than a fifth of the company’s independent shareholders vote against their re-appointments.
This appears to be a long-running and deteriorating, situation. At Amazon’s 2022 shareholder meeting, 27% of Amazon’s independent shareholders voted against McGrath’s election. However, the other two directors on the committee were both supported by more than 90% of shareholders.
Amazon’s size and large index weighting means it is often a stock that even highly active managers are reticent to just sell out of. So, if there are no changes made by management, shareholders are likely to escalate their dissent on this issue further in the coming year.
ESG support continues
So, what can we draw from all this? First that shareholders’ focus on value creation, aligned incentives and appropriate oversight remains as strong as ever, with increasing willingness to hold individual directors accountable for perceived shortcomings.
Second, proposals requesting additional insight into how companies are managing material ESG risks continue to be well supported, as they allow investors to make prudent, long-term decisions about where to invest their capital.
As the proxy season wraps up in June, we will continue to gauge exactly how these trends will shape the corporate agenda, and shareholder topics of engagement with companies in the coming year.
