Group pressures Amazon over financials
A group of securities analysts draws up a list of questions aimed at pressuring board members of the e-tailer to clarify the company's financial picture.
The questions drawn up by the New York Society of Security Analysts are directed to the company's board of directors, who have nominated themselves for re-election at Amazon's annual shareholders next month. They are running unopposed.
"If they are running for office, they should be able to answer questions," said Gary Lutin, an adviser to the group of analysts and the force behind recent pressure for Amazon to report its financial information in clear, precise terms.
The meeting here Thursday was attended by about a dozen people, more than half of them reporters.
One member of the group, Patrick McGurn, said one question was whether the Amazon board has the depth of experience needed.
"The board has substantial tunnel vision," said McGurn, director of corporate services at Institutional Investor Services.
Seattle-based Amazon will hold its annual meeting May 23. The analyst group has been sharply critical of the financial information Amazon has provided to investors. In the last two months, it sent letters to venture capitalist John Doerr and Amazon's other directors, asking them to encourage the company to provide more information on its financial standing.
Much of the pressure relates to a report issued in February by then-Lehman Brothers analyst Ravi Suria. In it, Suria said suppliers may soon stop selling goods to Amazon because of its credit risk. Although Amazon dismissed the report as "silly," other analysts have raised similar concerns.
Additionally, several shareholder groups have recently filed class action lawsuits against Amazon, claiming that misleading statements from company executives about Amazon's financial standing inflated the company's stock price.
Among the questions the group suggested:
• Explain the role of Doerr, who is on the board of eight other companies, including Amazon-backed Drugstore.com. Is there a conflict of interest there? What role does a venture capitalist have on the board of an established company?
• What specifically are Amazon's "strict stock trading policies," given the recent acknowledgement by the company that the Securities and Exchange Commission is investigating stock sales by Chief Executive Jeff Bezos?
• What are the directors' track records at other companies? What are the qualifications of upper management generally?
• Will they hire a chief operating officer to replace Joseph Galli, who resigned in July. Will the board split the job of chairman and CEO, which has always been held by Bezos?
• What is the foundation--"in writing"--for Amazon's argument that negative working capital is good?
Lutin said the meeting was not held to single out Amazon, and that if this process works with getting questions answered at the meeting, the group would like to expand the forum to other companies.
"Normally in shareholder meetings, the votes are tallied well before the meeting," Lutin said. "This is where shareholders have the opportunity to ask questions."