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Amazon Brutal Working Condition Reports - Have They Affected Amazon Stock Price?

|About: Amazon.com, Inc. (AMZN)
Summary

Amazon has achieved amazing market cap growth.

Bezos' 14 tenets for employees was recently released - but with little market reaction.

Is this a sustainable company culture? What will investors think?

Amazon (NASDAQ:AMZN) became the world's largest retailer, ending Wal-Mart's (NYSE:WMT) reign, in July 2015. This achievement came about not by profits, or sales, but by market value. The reason for the surge in Amazon's stock price was an unexpected, second quarter profit.

The result of the announcement of a $92 million profit sent share prices soaring. The gain was 19 percent that left Amazon stock valued at $573.45 that created a value for the company at around $267 billion surpassing Wal-Mart whose total market value is a mere $233.5 billion. Later, the stock reached a high of $580.87.

Amazon is an Unrelenting Task Master

About three weeks later, the New York Times published an extremely harsh piece about the "brutality" that Amazon's white-collar workers face working at Amazon. The article, written by Jodi Kantor and David Streitfeld explains how new hires for white collar jobs are given a card on the first morning of the first day of a week-long orientation. They are founder Jeff Bezos' 14 Principles of Leadership. The principles sound highly ethical and seem geared towards developing leadership in all employees. Following is a list of the Principles.

  1. Customer obsession
  2. Ownership
  3. Invent & Simplify
  4. Leaders are right, a lot
  5. Hire and develop the best
  6. Insist on the highest standards
  7. Think big
  8. Bias for action
  9. Frugality
  10. Learn and be curious
  11. Earn trust
  12. Dive deep
  13. Have backbone; disagree and commit
  14. Deliver results

But according to the New York Times article, these principles are not benign, they are actually malevolent.

Not listed as a principle, but a reality at Amazon is an app known as the Anytime Feedback Tool. The tool allows employees to comment positively or negatively about fellow employees. Negative comments from fellow workers can mean anything from a tongue lashing to dismissal. The article goes on to describe how the foundation of Bezos' leadership causes fear and depression to many people.

There are testaments from employees who say that working there is working in a place where Bezos visions come to life. But, is working at Amazon akin to being an indentured servant?

An ex-Amazon employee, Bo Olson worked less than two years in book marketing remarked about his experience at Amazon,

"You walk out of a conference room and you'll see a grown man covering his face," he said. "Nearly every person I worked with, I saw cry at their desk."

Many Amazon employees who previously worked at start-ups or on Wall Street say the workload at Amazon is punishing and cite examples such as Thanksgiving and Easter Sunday marathon conference calls, when on vacation receive criticism from their bosses for intermittent Internet access, and spending hours working from home most nights or weekends.

Amazon's Response

The day after the publishing of the NYT article, August 16, Bezos responded by sending every Amazon employee a memo. In his memo, Bezos said,

"The article doesn't describe the Amazon I know or the caring Amazonians I work with every day. "But if you know of any stories like those reported, I want you to escalate to HR. You can also email me directly at jeff@amazon.com. Even if it's rare or isolated, our tolerance for any such lack of empathy needs to be zero."

Later in his memo he states,

"I strongly believe that anyone working in a company that really is like the one described in the NYT would be crazy to stay. I know I would leave such a company."

Other present and former Amazon employees wrote posts of their own, stating that the company culture is not callous and that the time story got things wrong.

Effect on Stock Price

The first three days after the story it seemed that Amazon investors cared little if the story was true and the stock price was doing okay. On Thursday, the 20th of August, the entire tech sector began to fall and continued on Friday the 21st when the stock closed at $494.47. On Friday alone, the stock lost 4.13 percent. However, volume was very light, and the drop might be completely attributable to market forces and not bad press.

Morningstar analyst RJ Hottovy said,

"I'm not overly concerned about the Amazon culture stories. Those have been floating around for years, and with a handful of current and former executives speaking out against the NYT article, I think most investors view the story as a non-issue."

Piper Jaffray analyst Gene Munster agrees and said,

"As long as the results are there, investors are going to be happy. If the business started to stutter, there would be a demand that they act more like Google or Facebook. If [Amazon keeps] doing what they're doing, [investors would] probably say, 'Don't change a thing.'"

In other words, the New York Times story has been received with yawns on Wall Street.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.