Amazon (NASDAQ:AMZN) Chief Executive Officer (CEO) Andy Jassy sent an email to company employees on June 21 acknowledging that two of his top executives, who happen to be black, were leaving the company. If you’re considering buying AMZN stock, you might want to consider what these departures mean for Amazon’s future.
While it’s easy to ignore this news, diversity in senior leadership is critical to the sustainable growth of any business. It is especially essential for those with large workforces.
Amazon already lags U.S. companies when it comes to diversity in senior management. The move could lead to the departure of other senior executives from the company due to its failure to create a welcoming work environment for those who are neither white nor male.
Just as Amazon needs to do a much better job of how it treats its warehouse workers, it doesn’t seem to have done a very good job higher up the corporate ladder either.
If you are considering buying AMZN stocks, this is one of the reasons why now is not the time to consider a purchase.
AMZN stock is a buy
Several of my InvestorPlace his colleagues think now is the right time to buy AMZN stock.
Faizan Farooque thinks Amazon is a buy because of the cloud business, Amazon Web Services (AWS). It provides a boatload of operating revenue to Amazon’s bottom line. With AWS, the rest of the business can do and spend what they want to grow their business. It’s a great position.
Dana Blankenhorn recently pointed out that analysts can’t get enough of AMZN stocks. Out of 38 analysts, 36 rate it as a buy. You can’t do better than that. He points to the next Prime Day in July as the next river he needs to cross if his stock is to rebound from its 2022 correction. Ultimately, he thinks analysts are on point. Maybe they are.
The problems below the surface
To my knowledge, analysts have little diversity training. Therefore, the departure of two black executives would set off no alarm bells unless they were in a visible minority. Even then, it’s hard to say if that would move the needle.
Asset management is hardly seen as a bastion of diversity. If that were the case, Congress wouldn’t be trying to push the Law too narrow to succeed by the House and the Senate.
“A 2021 report from the John S. and James L. Knight Foundation of Miami, worth $2.9 billion, showed that only 1.4% of the $82.24 trillion in US assets under management in the foundation sample were managed by companies owned by diverse interests as of September 2021,” Pensions and investments reported in April.
Amazon may seem cheap, trading at 2.34 times sales compared to its five-year average of 3.89x. However, its human resources problems keep piling up. Like the Titanic, it’s what’s below the surface that counts.
Why all this fuss?
I may be making a mountain out of a molehill. However, as a white person who writes about investing for a living, it would be easy to turn the other cheek and ignore the situation. After all, it doesn’t have much to do with me.
However, part of being a good investor is considering what can go wrong, even if the odds are low.
In recent weeks, environmental, social and governance (ESG) investing has taken over. Elon Musk called him a “scam” because You’re here (NASDAQ:TSLA) was thrown from the S&P 500 ESG Index. Former Vice President Mike Pence called ESG a “pernicious strategy”. I could go on.
While I understand the skepticism, the “social” part of ESG investing is critical to the long-term success of public and private companies. How you treat your employees is important.
Amazon’s 5.5% problem
As Jassy acknowledged in his email to employees, Amazon still has a lot of work to do.
“While we have made substantial progress in hiring Tier 8 and Tier 10 black leaders over the past two years, it is not lost on any of us that we are losing two of our most senior black leaders. […] Change sometimes leads to other changes, and it is often difficult to navigate some of these changes,” Jassy wrote.
Essentially, Amazon’s Senior Vice President Alicia Boler-Davis was removed from the position of CEO of Amazon Stores Worldwide. He went to Doug Herrington, who is a white male.
According CNBC, 5.5% of its top executives were black at the end of 2021. With the departure of Boler-Davis and David Bozeman, that percentage drops even further. As for the company’s board of directors, of the 11 directors, six are white and male. To his credit, five of the 11 are women, a member of a visible minority. So not everything is bad.
I’m here to highlight the issues facing stocks. The departure of these two black executives could be a coincidence, or it could be a sign of more trouble to come on the HR front.
Govern yourself accordingly.
As of the date of publication, Will Ashworth had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.