At the risk of sounding terribly morbid, when that day eventually comes where game-changing Amazon (AMZN) CEO founder Jeff Bezos is no longer around manning the massive digital ship he created, stockholders could be badly bruised.
Bezos could change this — or at least ease the financial blow to investors — by more clearly articulating his succession strategy today. By and large, investors have been left in the dark by who Bezos plans to eventually hand the reigns over to should he die or decide to focus solely on philanthropy.
“We believe Amazon faces significant succession risk,” D.A. Davidson analyst Tom Forte said Thursday in a sprawling new white paper.
“It almost goes without saying, we consider Mr. Bezos (Amazon's Founder, Chairman, CEO, and President) to be one of the most influential CEO's in not only the Consumer Technology sector but also the world,” adds Forte. “Further, when considering he personally owns the Washington Post, his influence is even greater. Therefore, despite a deep bench of talent, most with long tenures at the company, we believe his departure could have a materially negative impact on its share price.”
Forte estimates that if Bezos were to leave the company for whatever reason it would lead to a double-digit percentage plunge in Amazon’s stock price. The analyst points out there was almost a “beta” test of the market reaction to Bezos’ eventual departure.
In early 2014, Bezos was airlifted from a cruise ship due to a medical emergency. It was later disclosed Bezos had kidney stones.
Bezos should take some steps here
Bezos — the architect of Amazon’s culture —has done well to surround himself with a strong bench of C-suite level talent. Forte’s analysis shows that excluding Bezos, the average tenure of Amazon’s management team is 21 years.
“We consider that to be very important because it means they have been with the company for a long time and have witnessed and contributed to its growth and development. They not only know but helped create its culture. This should have the team well positioned for life after Mr. Bezos, when that day comes,” Forte writes.
Now it may be time for Bezos to acknowledge the experience of some of his team members and put two potential successors on the board. Or, perhaps elevate them to a co-CEO position. These are actions not unlike those taken recently by Berkshire Hathaway (and Amazon shareholder) Warren Buffett.
Forte notes that no members of Amazon’s senior management are currently on the company’s board of directors. A possible successor getting valuable board experience at Amazon while Bezos is still alive is important for investors to see, Forte stresses.
In the end, no matter what Bezos does to prepare Amazon for life after his leadership it may not be enough to initially please investors.
“In our view, while Mr. Bezos is once-in-a-generation type CEO and therefore not replaceable,” reminds Forte.
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