April 29, 2011

It’s no secret that Amazon (AMZN) spends a lot of money each year on providing undefined security services to CEO and founder Jeff Bezos. That disclosure first appeared in Amazon’s proxy in 2006 and judging from that filing, has been a regular component of his compensation since at least 2003.

In the proxy that Amazon filed earlier this week, it disclosed that in 2010, Bezos’ security costs were $1.6 million, which is actually $100K lower than it was last year. That prompted our friend, Todd Bishop, a Seattle-based journalist who now runs Geekwire to tweet the news of Bezos’ lower security costs and admittedly modest salary of $81,840 shortly after the proxy was filed.

Amazon has long defended the high security costs by noting Bezos’ low salary and the fact that unlike a lot of top executives, he doesn’t get oodles of stock options every year (though, of course, he owns about 20% of Amazon). In fact, here’s how Amazon describes Bezos’ compensation in the current proxy:

Due to Mr. Bezos— substantial stock ownership (approximately 20%), he believes he is appropriately incentivized and his interests are appropriately aligned with shareholders— interests. Mr. Bezos has never received any stock-based compensation from Amazon.com.

But reading between the lines — which is something we spend a fair amount of time doing here at footnoted — we sense that Amazon is starting to feel a bit of pressure about Bezos’ hefty security costs. We’re making that leap because the filing has this new language about the security costs:

“we believe that the amount of the reported security expenses is especially reasonable in light of Mr. Bezos’ low salary and the fact that he has never received any stock-based compensation.

It’s the words “especially reasonable” that really caught our attention. Indeed, it sounds like some of the emails that cross our inbox on a regular basis offering us “such a good deal” if we click now. Now granted, the folks at Amazon know something about marketing and even more about offering low prices, judging by what’s happened to some of their competitors over the past few years. But this type of salesman-like language is pretty uncommon when it comes to the world of SEC filings.

It’s also not clear from any of Amazon’s filings what exactly is covered by that $1.6 million: squadrons of burly-men, specially trained drivers, an armored car, access to a Gulfstream or all (or none) of the above. And without knowing those details, it’s impossible to figure out whether the costs really are “especially reasonable”.

Image source: Department of Interior

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