Shareholder meetings, which are required annually by the SEC, used to be a time to conduct real business. Directors and audits were ratified. Ownership of shares was reviewed. Executive compensation was discussed.
But while no one was looking, activists used this corner of the business world to begin pushing companies to take actions outside their scope or make unnecessary political statements.
Using Amazon purely as an example, we compare their proxy statements and annual meetings from 10 years ago to today. While the company was still wildly successful in 2010, from today’s standpoint it seems like it was only the beginning for Amazon. Regardless of the company’s growth within the last decade, the difference between the annual meeting from 2010 and this year’s meeting on May 27, 2020 is quite extensive.
In 2010, Amazon’s proxy statement was 28 pages and covered business processes and procedures. They reviewed the ratification of the company’s independent auditor, a proposal to require disclosure regarding corporate political contributions, ownership of shares and executive compensation. There were only two shareholder proposals on the docket to review that year.
Fastforward to 2020, Amazon’s proxy statement was 75 pages and contained twelve shareholder proposals to review. A majority of them were related to political causes such as environmental impact, immigration issues, gender and minority pay gaps and promotion velocity, ideological discrimination, and social justice-related causes.
Only two of the twelve proposals were about something other than social, political or environmental initiatives. Those two business-focused proposals were: 1) A proposal to decrease the threshold from 30% to 20% to call a special meeting (outside of the company’s annual meeting), and 2) a proposal to require an independent chair of the board of directors, which would effectively remove Jeff Bezos as the Chair of the Board of Directors.
It is a slippery slope when businesses are pushed to make political statements or take stances on social issues. For example, Amazon joined the “We Are Still In” campaign after President Trump pulled out of the Paris Climate Accord. However, Amazon also gave funding to the Competitive Enterprise Institute which disputes climate change science.
There are also contradictions within the Amazon Smile program and what charities are eligible to receive funds. While these non-profit organizations are reviewed by an independent third party, Southern Poverty Law Center (SPLC), there has become an issue of ideological discrimination by which charities are approved and those that aren’t.
While philanthropy and community support in business is a good thing, it has the ability to cause great reputational risk. Nonprofits that a company decides to support must jive with the campaigns that they back and who they choose to do business with. As soon as there are contradictions between a company’s policy and practice, it can quickly damage stakeholder relationships and consumer trust.
As a society and culture it is critical that we allow businesses to do what they do best—business. When companies focus on short-term political or cultural whims, they ignore their primary responsibility, producing high quality products and maximizing the return on investment for their shareholders. Companies that focus exclusively on their core free-market missions don’t marginalize groups or individuals. And in doing so, they reduce risk and increase returns that benefit everyone.