Amazon (AMZN) shareholders voted on a wave of proposals tied to worker safety at their annual meeting this week — and rejected every last one.
However, the concerns that shareholders brought up could have long-term implications for Amazon and its board. Those proposals range from addressing environmental issues and Amazon’s use of non-disclosure agreements, to ending fulfillment center quotas and conducting an independent audit of warehouse working conditions. Though shareholders voted down all the proposals related to ESG (environmental, social and governance), we don’t yet know what the detailed vote results look like.
And those detailed results matter, according to Charles Elson, founding director at the University of Delaware’s Weinberg Center.
“If a proposal hits 20% or 30% it’s vital that boards address that issue,” he said. “If your owners tell you that it’s an issue, it’s probably to the board’s benefit to take it seriously.”
Amazon is due to report the more granular results of its proxy voting in the coming days. However, we do know that, at the annual meeting on Wednesday, investors did approve executive compensation plans, the company’s director nominees, and a stock split.
Shareholder proposals as bellwethers
So, what kind of power does an un-passed shareholder proposal have? Well, as it turns out, passed or not, shareholder proposals carry no legal weight.
Even if a shareholder proposal passes, it’s highly unlikely to be legally binding, except in rare circumstances, according to Mary-Hunter McDonnell, a professor at the University of Pennsylvania’s Wharton School. Simply passing a proposal doesn’t guarantee implementation. Instead, shareholder proposals are fundamentally viewed as symptoms of what most ails a company, she said.
“The proposals can be an echo of that broader reputational challenge that a company faces,” McDonnell told Yahoo Finance.
This year, Amazon has faced a range of public relations crises tied to its warehouses, especially in the aftermath of unionization efforts across the country. However, even before this year, any good board would be concerned about safety and wages, Elson added. In 2021, Amazon announced a partnership with the National Safety Council to address common warehouse injuries like sprains and strains.
The non-binding nature of shareholder proposals is counterintuitive, McDonnell acknowledged. Legally, a board is under no obligation to adopt shareholder proposals and, if the board determines that it’s their fiduciary duty to ignore shareholder proposals that have even passed, they will.
“We’re used to democratic processes so we’re used to something passing meaning something symbolic, but legally it’s non-binding,” McDonnell said. “Fiduciary duty is doing what’s in the firm’s best interest, even if that’s not necessarily what shareholders want.”
However, even when a shareholder proposal doesn’t pass, two groups still pay attention when ESG issues come up at annual meetings: large institutional investors and analysts. Giant institutional investors are certainly in the mix at Amazon; as of this year, Vanguard holds 6.68% of the company’s shares, while BlackRock (BLK) owns 5.73% of Amazon shares.
“People are focusing on ESG proposals more than they did, because they’re getting more votes than they did [even a few years ago],” said Elson, who added that institutional investors are the primary leaders and backers of ESG proposals in recent years.
Simultaneously, analysts also pay attention to shareholders and can sometimes downgrade stocks due to the risks that proposals highlight over time, said McDonnell. Some studies have suggested that environmental risks, for example, can be clearly linked to financial risks, and ultimately lead to downgrades that can rattle a company’s shares.
Amazon, like many tech companies, does have a major advantage when it comes to proxy standoffs. It would be deeply difficult for an activist investor to run a campaign there. If a company has dual-class stock — as tech giants like Alphabet (GOOG, GOOGL) and Meta Platforms (FB) do — a proxy fight isn’t really possible, according to Elson. In this situation, it’s difficult if not impossible for an activist to buy enough stock and build enough influence to enact change at the company.
Though Amazon has a straight stock structure, he says, the giant section of the stock that founder and ex-CEO Jeff Bezos owns is a logistical deterrent for activists.
That said, never’s a long time, says Elson.
“Shareholder proposals are reflective of shareholder sentiment and, if you ignore it long enough, you theoretically could end up in a proxy fight, which would be difficult at Amazon but, if there’s enough shareholder sentiment, a lot’s possible,” he said.
Allie Garfinkle is a senior tech reporter at Yahoo Finance. Find her on twitter @agarfinks.
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