The Directors Compensation Project: Amazon.com, Inc. (AMZN)

This post is part of an ongoing series that examines the way stock exchange independence rules relate to director compensation. We are for the most part including companies from 2016’s Fortune 500 and using information found in their 2016 proxy statements.

NASDAQ and the NYSE have similar rules with respect to director independence. NYSE Rule 303A.01 requires that each listed company’s board of directors be comprised of a majority of independent directors. A director does not qualify as “independent” if he or she has a “material relationship with the company.” NYSE Rule 303A.02(a). In addition, the director is not considered independent under NYSE Rule 303A.02(b)(ii) if the director received more than $120,000 in direct compensation, other than director’s fees, during any of the previous three years. The NYSE imposes a higher independence standard for directors serving on the company’s audit committee by requiring them to comport with Rule 10A-3 (C.F.R. §240.10A-3) (see Rule 303A.06) and requires consideration by the board of directors of certain specified factors in designating directors for the Compensation Committee. See NYSE Rule 303A.02(a)(ii).

Finally, as the Commission has noted with respect to director independence:

All compensation committee members must meet the general independence standards under NYSE’s rules in addition to the two new criteria being adopted herein. The Commission therefore expects that boards, in fulfilling their obligations, will apply this standard to each such director’s individual responsibilities as a board member, including specific committee memberships such as the compensation committee. Although personal and business relationships, related party transactions, and other matters suggested by commenters are not specified either as bright-line disqualifications or explicit factors that must be considered in evaluating a director’s independence, the Commission believes that compliance with NYSE’s rules and the provision noted above would demand consideration of such factors with respect to compensation committee members, as well as to all Independent Directors on the board. 

Exchange Act Release No. 68639 (Jan. 11, 2013); see also Exchange Act Release No. 68641 (Jan. 11, 2013).

Directors do not receive cash compensation for their services as directors or as members of committees of the board, but Amazon (Nasdaq: AMZN) does pay reasonable expenses incurred for attending meetings. According to the 2015 proxy statement, the company compensated directors with the stock awards. In 2015, restricted stock awards were approved for three directors, Ms. Gorelick and Messrs. Brown and Monié, each vesting in three equal annual installments, with the first vest date occurring approximately one year after the final vest under the director’s previous restricted stock unit award. As the proxy statement noted:  “The 2015 awards were designed to provide approximately $265,000 in compensation annually based on an assumed value of the restricted stock units vesting in each year, which compensation represents the 50^th percentile for annual director compensation among a group of peer companies.”

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Jeffery Bezos*	0	0	0	0	0
Tom Alberg	0	0	0	0	0
John Seely Brown	0	979,395	0	0	979,395
William B Gordon	0	0	0	0	0
Jamie Gorelick	0	979,395	0	0	979,395
Judith McGrath	0	0	0	0	0
Alain Monie	0	979,395	0	0	979,395
Jonathan Rubinstein	0	0	0	0	0
Thomas Ryder	0	0	0	0	0
Patricia Stonesifer	0	0	0	0	0

* Employee director (CEO)

Director Compensation. During fiscal year 2015, Amazon held four board meetings and thirteen committee meetings. Each director serving during 2015 attended at least 75% of the aggregate of the meetings of the board and committees on which they served. All directors attended the 2015 Annual Meeting of Shareholders.

Director Tenure. Mr. Bezos has been Chairman of the Board since founding the company in 1994. Bezos holds the longest tenure as a member of the board. Mr. Weeks holds the shortest tenure joining the board in February of 2016. Two of Amazon’s directors sit on other boards: Ms. Gorelick has served as a director of VeriSign, Inc. since January 2015. Mr. Ryder has been a director of Starwood Hotels & Resorts Worldwide, Inc. since April 2001, a director of RPX Corporation since December 2009, and a director of Quad/Graphics, Inc. since July 2010.

CEO Compensation. The highest paid officer in 2015 was Brain T. Olsavsky, Senior Vice President and Chief Financial Officer. Mr. Olzavskys base salary was $160,000 and his total compensation was $7,786,573. The second highest paid officer in 2015 was Jeffrey Bezos, Amazon’s Chief Executive Officer. Mr. Bezos earned a base salary of $81,840 and his total compensation was $1,681,840. Due to Mr. Bezos substantial ownership in Amazon, Mr. Bezos again requested not to receive additional compensation in 2015 and has never received annual cash compensation in excess of his current amount. The primary component of a named executive officers’ total compensation is stock-based compensation in order to closely tie total compensation to long-term shareholder value. Because the compensation program is designed to reward long-term performance and operate over a period of years, named executives may not necessarily receive stock-based awards every year.