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Amazon HQ2 Could Boost Retailer's Reputation and Social Impact for Less-Affluent Regions

Newark, New Jersey; Philadelphia and Miami Would Get Immediate Economic Boost, Study Finds
October 2, 2018
Amazon donated 25,000 square feet of restaurant space on its South Lake Union campus to FareStart, a nonprofit that provides meals as part of a work training program for the homeless.

Amazon, the online retailer under European Union investigation for alleged anti-competitive actions and criticized by U.S. labor unions for its workplace practices, could improve its reputation by choosing a less-affluent city such as Newark, New Jersey; Philadelphia or Miami to build its second headquarters, according to a study.

Amazon ranked No. 55 among the best and "most just" publicly traded U.S. businesses in an analysis compiled by the nonprofit Just Capital Foundation, which surveyed nearly 900 of the nation’s largest publicly traded companies. The analysis came before Amazon announced on Tuesday that it plans to raise its minimum wage to $15 for all full-time, part-time, temporary and seasonal employees across the country effective Nov. 1.

John Boyd, principal of site selection consultancy Boyd Cos., concluded in a study that built on the Just Capital analysis that Amazon’s ''most just'' ranking in that Just Capital survey would leap to No. 9 if it chooses Newark for its second headquarters.

"What is really throwing gasoline on this fire is the enormous amount of backlash the company is dealing with," said Boyd. He points to Amazon facing the EU inquiry for its alleged practice of using data from companies that sell on its site to compete with those same businesses. It has endured criticism from unions for allegations of unrealistic worker performance goals, surveillance of some employees and reduced break times. It has been criticized for taking more than a year to choose its second headquarters site and demanding too much data from cities seeking to land the project.

"This is kind of the last piece in the puzzle for Amazon dragging this out for so long," Boyd said.

Amazon announced its search for a second headquarters location in September 2017, and it narrowed the original 238 applicants to a shortlist of 20 in January. Amazon has said it plans to invest $5 billion in the winning city and to create 50,000 jobs paying an average of $100,000 annually. It has said it will make its decision by the end of the year.

Amazon did not immediately respond to requests for comment.

The Just Capital survey ranked companies on seven criteria, including treatment of workers and customers, environmental sustainability and ethical and diverse leadership.

It praised Amazon for creating jobs, ranking it No. 1 for job creation among all American companies. Amazon increased its U.S. headcount by 500 percent in the past five years. It also noted that the company offers employees flexible working hours and pays women at the company 99.9 cents for every dollar that men earn. That's better than the 80 cents paid to women for every dollar their male colleagues receive in America, according to other surveys.

In the study, Amazon ranked No. 711 for paying its "fair share" of taxes. It notes Amazon’s average U.S. tax rate is only 15 percent, much lower than the average corporate tax paid, even though corporations often find deductions to pay less than the required amounts.

However, it also cited the criticism over the company’s taxes in Europe, where it was fined $294 million for "illegal tax benefits" between 2006 and 2014. Amazon ranked low for both its treatment of its customers, at No. 646, and lack of transparency among management and shareholders, at No. 770.

Amazon, the world’s largest online retailer that has reached the $1 trillion mark in stock market value, was once criticized for its lack of philanthropy, but has taken several steps to rectify that in the past several years.

It recently pledged $10 million to, a nonprofit working to expand access to computer science in schools, especially for women and under-represented minorities. It also recently announced 70 grants to nonprofit groups across the country through its Amazon Literary Partnership program.

In its Seattle hometown, the company donated 25,000 square feet of space to open five restaurants on its South Lake Union campus run by FareStart, a nonprofit that operates a job-training program for the homeless and disadvantaged. It also pledged to open a new, 200-bed facility for the homeless in a new building set to open in 2020.

Boyd, whose company doesn’t work with Amazon, said even though Amazon has made strides, it’s still viewed as a company more concerned with profit than people. Even if it chooses a more affluent region -- such as Northern Virginia or Montgomery County, Maryland -- Amazon will "make a big deal" about its social philanthropy, he said.

He said Amazon could make a real impact in Newark, where the median household income is just more than $33,000. The state of New Jersey has approved $7 billion in incentives to lure the company, the second-most of any region with publicly disclosed bids, behind the state of Maryland’s $8.5 billion package.

Amazon would hold outsized influence in a place like Philadelphia, where median income is slightly more than $41,000, Boyd said. The median income in the United States last year was about $59,000, according to U.S. Census figures.

"I’m not saying a decision (on its second headquarters) will be predicated based just on social impact," Boyd said. "But it’s clearly something Amazon is thinking about, and how they will incorporate some of these ideas into whatever city is chosen."

Rob Smith, National Retail Reporter  CoStar Group   
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