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NewsmakersApril 22, 2022

New York Pension Plans Launch Fight to Dislodge 2 Amazon Directors

Protesting working conditions at the e-commerce giant’s warehouses, the city and state funds urge no votes on reelecting board members.

By Larry Light

New York City’s and New York state’s public pension plans are launching a proxy fight to oust two Amazon directors, in a bid to highlight what the retirement programs say are unsafe working conditions at the retailer’s warehouses.

The five city plans and the state program, New York State Common Retirement Fund, which together hold $5 billion in Amazon stock (0.3% of its market value), are urging other public retirement systems to vote against two of Amazon’s 11 board members up for another one-year term at the company’s May 26 annual shareholders’ meeting.

Targeted are Daniel Huttenlocher, dean of the MIT Schwarzman College of Computing, and Judith McGrath, former chair and CEO of MTV Networks Entertainment Group, a Viacom unit. They have been on the Amazon board since 2016 and 2014, respectively. Amazon declined to comment, and the two directors couldn’t be reached.

The New York proxy campaign is reminiscent of last year’s successful effort to remove three directors from the Exxon Mobil board. Led by New York State Common, the California Public Employees’ Retirement System, and the California State Teachers’ Retirement System, the proxy drive aimed to give climate activists a voice on the oil behemoth’s board.

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Huttenlocher and McGrath are members of the Amazon board’s Leadership Development and Compensation Committee. A letter from New York City Comptroller Brad Lander and New York State Comptroller Thomas DiNapoli, who oversee the city and state plans, cited unresponsiveness from the committee to requests since 2020 for a meeting on the officials’ concerns.

The comptrollers criticized what they called “Amazon’s high injury rate relative to peers, unsustainable turnover, and labor rights violations, as well as high executive compensation as evidence of the committee’s misplaced priorities.”

In the past, Amazon has denied that it doesn’t care about workers’ safety. It issued a report about the $300 million it spent last year in safety enhancements and other moves it made to improve conditions for its workers.

What Worries CIOs Most? Inflation and Valuations

CaseyQuirk’s Sentiment Survey shows allocators are hustling to beat higher prices with private investments.

By Larry Light

For CIOs, climbing consumer prices and over-priced stocks are the biggest concerns, according to an annual poll of their sentiment.

The 2022 CIO Sentiment Survey was taken before Russia’s invasion of Ukraine, an event that stoked inflation further and rattled stock markets worldwide. “CIOs began 2022 feeling more confident about the health of their portfolios and their ability to meet returns than in any of the last three years,” the report notes.

Nonetheless, it adds, the results “hold a warning that after an extraordinary 2021, the risk of a painful downturn is high.” The survey was taken by CaseyQuirk, part of Deloitte Consulting, in collaboration with Top1000funds.com.

Even before the Ukraine war, inflation and hot stock valuations had emerged as looming problems. The Consumer Price Index had already started its climb in 2021, and lofty price/earnings ratios have accompanied the bull market that ruled for years (apart from a crash in early 2020 as the pandemic appeared). Even now, in 2022, with the S&P 500 down 7.8%, the index’s P/E is almost 23, still higher than the historical average of around 16.

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Asset owners are responding to the current situation, the survey says. They are investing more in private markets—in infrastructure, private debt, and real estate—in a bid to beat inflation, the survey indicates.

And while stocks may be pricey, allocators are trying to keep costs down—and succeeding—by demanding lower fees for transactions. As “return targets remain challengingly high, high equity valuations are now a key risk,” the report says.

Some allocators, presumably corporate pension programs, are turning to de-risking—reducing their equity allocations. The CIOs, particularly at larger funds, report greater pressures from outside forces, such as from climate change activists, the survey finds.

All that said, allocators have confidence that they can meet their target returns, with 63% expressing a positive view, the highest showing in three years. Furthermore, 76% are willing to take more risks to reach those targets, the most in three years. Better funded status prompts the investment chiefs to take more risks than any time before in the period from 2020 to 2022.