For the top brass at Amazon, equity in the company has long been the primary method of compensation, with salaries and other cash rewards so common to other firms taking a backseat to stock-based rewards.
Amazon explains that its compensation philosophy values slow-vesting stock awards over more traditional salaries and bonuses, noting that that approach filters down throughout the organization in a bid to align employees’ incentives with the long-term success of the company.
“(We) believe that a fundamental measure of our success will be the shareholder value we create over the long term. As a result, we may make decisions and weigh tradeoffs differently than some companies,” Amazon said in its 2014 proxy statement. “(W)e believe granting stock-based compensation to employees at all levels across the company results in motivated, customer-centric people who think and act like owners because they are owners.”
Amazon further detailed the pillars of its compensation philosophy, including valuing “performance and potential to contribute to our long-term success” over “rewarding solely for length of service.”
“Finally,” Amazon continued, “our compensation program reinforces and reflects our core values, including customer obsession, innovation, bias for action, acting like owners and thinking long term, a high hiring bar and frugality.”
So what did Amazon’s leaders earn in 2014, a year when net sales increased over 2013, but the company posted a net loss for the year?
At the top, founder and CEO Jeff Bezos’ base salary held steady at $81,840, which Amazon says is the most he has ever received in annual cash compensation. And unlike other named Amazon executives, Bezos has never taken any stock-based compensation from the company.
By an overwhelming margin, Bezos remains the largest single shareholder, in possession of 18 percent, or nearly 84 million shares, of Amazon’s common stock. Capital World Investors, a privately held investment manager, sits a distant second with 5.6 percent of Amazon’s common stock, or 26.1 million shares.
Excluding Bezos, all the other executives and directors taken together hold 0.2 percent of Amazon’s stock.
Bezos’ base salary checked in at the low end of the named executives in Amazon’s 2014 proxy report, though in keeping with the company’s general approach, each of those leaders netted the lion’s share of their compensation in the form of stock awards.
By base salary alone, Diego Piacentini, senior vice president of the international consumer business, led the way with $175,000. Jeffrey Wilke, senior vice president of Amazon’s consumer business, netted $165,000. Amazon Web Services Senior Vice President Andrew Jassy and Thomas Szkutak, the firm’s chief financial officer until his retirement earlier this year, each received $160,000.
Base-salary compensation for each of those executives, including Bezos, held steady for at least the last three years.
Amid mounting populist concern over the growing wealth disparities between the very rich and the middle and lower classes, executive compensation has become an area of increasing interest among policymakers. Earlier this month, the Securities and Exchange Commission adopted a rule that will require publicly traded companies to disclose a ratio comparing the compensation of their chief executive to median employee income.
The compensation rule, which takes effect in about two months and stems from a mandate in the Dodd-Frank Wall Street reform act, has drawn considerable opposition from some in the business community and inside the Beltway, including outspoken Republican SEC Commissioner Daniel Gallagher, who called it “a nakedly political rule … to once again effect social change desired by ideologues and special interest groups.”
For Amazon, unlike many of its rivals in the Internet and retail sectors, the new disclosure rule doesn’t figure to highlight such a stark contrast between the CEO and rank-and-file workers, given that Bezos accepts a modest salary and takes no stock rewards.
Unlike Bezos, however, other senior executives receive substantial stock-based compensation, though the company notes those rewards are drawn out over a period of time and that not every executive will receive stock compensation in a given year.
“For example, because annual total compensation includes the entire fair value as of the grant date of a stock award granted in that year, without regard to the fact that the grant vests over a number of years, a named executive officer’s total compensation will be higher in years in which he or she receives a grant compared to years in which he or she does not receive a grant,” Amazon explained in its proxy statement.
Apart from Bezos, however, each of Amazon’s four other named executives received significant stock awards in 2012 and 2014. Szkutak was awarded 17,286 shares of stock, though under Amazon’s long-term plan none of those shares vested before his retirement.
Among active executives, stock awards in 2014 were down across the board from the previous round. Wilke received stock awards valued at $8.35 million last year, down from $17.56 million in 2012. Jassy’s 2014 stock award of $7.5 million was down from $11.45 million two years earlier. Piacentini’s award fell even more sharply, down from $11.59 million in 2012 to $6.64 million last year.
In determining those awards, Amazon’s Leadership Development and Compensation Committee looked at a variety of factors, including compensation figures from more than two dozen companies that compete in the same industries as Amazon, such as Apple, eBay, Google and Target.