Inside Amazon's battle to kill an unprecedented shareholder revolt over facial recognition
- Amazon shareholders will stage an unprecedented vote on Wednesday on whether to stop the company from selling its facial recognition technology to government agencies.
- Activist shareholders are concerned that the technology, known as Rekognition, will be used for surveillance and has been found to produce inaccurate results.
- Amazon tried to kill the vote in an unusual legal battle, during which it has trash talked the commercial potential of Rekognition and said customers are to blame if the technology is misused.
- The votes are not binding and may fail to secure a majority of support among shareholders, but investors hope they will send a message to Amazon CEO Jeff Bezos.
- An Amazon spokeswoman said: "We have not seen law enforcement agencies use Amazon Rekognition to infringe on citizens' civil liberties."
- Visit Business Insider's homepage for more stories.
Activist Amazon shareholders will stage an unprecedented vote on Wednesday on whether to stop the company from selling its facial recognition technology to government agencies and law enforcement.
The vote at Amazon's annual shareholder meeting, believed to be the first of its kind brought by investors in a major US company, is a flashpoint amid simmering concerns around the ethics of the technology.
Shareholders will decide whether to "prohibit sales of facial recognition technology to government agencies," according to Amazon's proxy statement. In a second vote, they will ask Amazon to "commission an independent study" into Rekognition, the name of the software.
Amazon has called on investors to dismiss both proposals, citing its "commitment to customer trust, privacy, and security," and heralding the technology's "benefits to both society and organizations" in terms of significantly reducing the time it takes to recognise people and objects.
The proposals are not binding and may fail to secure a majority of support among investors. But just getting the votes on the agenda of the annual shareholder meeting represents a victory of sorts for the activist investors involved.
Amazon fought an unusually hard legal battle to silence shareholders and stop the votes from taking place this week. After engaging law firm Gibson Dunn, it appealed to the Securities and Exchange Commission (SEC) twice to strike the proposals out. Legal documents show that in doing so, Amazon trash talked the commercial potential of Rekognition and said customers are to blame if the technology is misused.
Rekognition under heavy fire
Amazon launched Rekognition in 2016 and it is used to analyse images or videos to identify people or objects. Hosted on Amazon Web Services' servers, Rekognition is mainly licensed by media and technology companies, such as Sky News, which used the software to identify celebrities at Prince Harry and Meghan Markle's wedding last year. Amazon has also worked with government groups to, among other things, rescue victims of human trafficking, the firm said in its proxy statement.
But Amazon has come under heavy fire from human rights organizations, such as the American Civil Liberties Union (ACLU), and its own staff, over sales of Rekognition to government agencies and law enforcement. The ACLU fears it could be used for surveillance and has raised alarming questions about its accuracy.
The ACLU tested the technology last year on members of Congress, 28 of whom it mistakenly identified as people who have previously been arrested. A group of AI experts also published an open letter in April, warning that the technology is particularly inaccurate when analyzing the faces of women and people of color.
Amazon said the ACLU had not applied the correct "confidence threshold," which it says is necessary to use the technology. However, reports from Gizmodo and The Washington Post revealed that police in Washington County, who are currently deploying Rekognition, do not necessarily pay attention to the 99% confidence threshold that Amazon recommends. The force was even running black and white sketches of suspects through the software, the Post said.
In a statement sent to Business Insider, an Amazon spokeswoman said it has spent the past few months talking to customers, researchers, academics, and lawmakers about balancing the "benefits of facial recognition with the potential risks."
She added: "We have not seen law enforcement agencies use Amazon Rekognition to infringe on citizens' civil liberties. We've received no reports of misuse of Amazon Rekognition by law enforcement agencies, and if anyone is concerned that the service is being misused, they can report it here and we will investigate."
A brusque 30-minute phone call
Activist shareholders swung into action late last year, drawing up plans for a vote on sales of Rekognition at Amazon's annual investor meeting.
The battle to get the proposals on Amazon's proxy statement started with a brusque, 30-minute phone call in December, according to Michael Connor, the executive director of Open Mic, an organization that helps shareholders campaign to improve governance at some of America's biggest companies.
Long Island-based Catholic women's order, the Sisters of St. Joseph of Brentwood, put forward a shareholder proposal to bind Amazon's hands on selling Rekognition to government agencies on December 7. It was supported by Open Mic and the Tri-State Coalition, which advocates for corporate social responsibility on behalf of 40 Roman Catholic dioceses and congregations.
Sisters of St. Joseph of Brentwood only owns around $2.5 million worth of Amazon shares, but felt compelled to take a stand after becoming "alarmed" that Amazon's facial recognition software "may increase targeted surveillance of immigrants and people of colour," according to its letter to Amazon's general counsel David Zapolsky.
"It's a poor instrument to use and it's especially poor for African American communities," Sister Patricia Mahoney added in a phone interview with Business Insider.
Connor told Business Insider that it was clear from the initial phone call with Amazon representatives in late 2018 that the company was not prepared to engage with questions about its technology, and the conversation was over almost as soon as it began.
Amazon bids to block shareholder votes
On January 22, Amazon lawyers wrote to the SEC requesting that it block the proposal, known as the Tri-State proposal. It also asked the SEC to strike out a second proposal, put forward by activist shareholder Harrington Investments, calling for an independent review of Amazon's facial recognition activity.
Amazon Web Services
In a 17-page letter sent to the SEC, Amazon's lawyers provided grounds for the dismissal for two reasons. Firstly, they argued that Rekognition is not "economically significant" to Amazon or a big part of its day-to-day business.
The facial recognition software is just one of 165 Amazon Web Services products, lawyers said. It accounted for "significantly less" than 5% of Amazon's overall revenue of $233 billion last year and sales are not expected to "increase meaningfully" this year. Furthermore, the "vast majority" of Rekognition's customers are not in the public sector, according to the letter.
Amazon's second argument was basically this: If facial recognition is misused, it is the fault of the customer who has broken the terms of service, rather than Amazon itself. Amazon is "not aware to date of any reported misuse by law enforcement customers," lawyers added.
"The proposals do not have a sufficient nexus to the company's operations ... and instead address potential inappropriate actions by certain of the company's customers," Amazon's lawyers said. "Any unlawful use of Amazon Rekognition by the company's customers would violate the contractual terms on which the company has made its product available."
Six days later after Amazon's plea to block the votes, the SEC rejected the move. Amazon then appealed the SEC's decision in "legal action that's rarely taken," according to Connor. In a letter on March 29, Gibson Dunn rehashed Amazon's arguments from its first request, but again, the appeal was dismissed. "We find no basis to reconsider our position," said Elizabeth Murphy, the SEC's associate director in a letter to Gibson Dunn on April 3.
Amazon's battle to kill an investor vote on facial recognition was over.
The facial recognition face-off
Now shareholders will have their say when they vote on the Tri-State and Harrington proposals on Wednesday at Fremont Studios in Seattle, Washington.
They were urged to back the proposals in an open letter from the ACLU, which is aggressively lobbying against facial recognition software, and was a vocal proponent of the technology being banned in San Francisco.
"Without shareholder action, Amazon may soon become known more for its role in facilitating pervasive government surveillance than for its consumer retail operations," the ACLU said on Monday.
Connor said it's "impossible" to predict the outcome of the votes, but they are quietly confident. "We know we've gotten the support of two leading proxy advisors for at least one of the proposals, and some large pension funds have said they are supportive," he said. "Whatever the outcome on Wednesday, Amazon will not be able to ignore us. This issue is not going to go away."
Even if the votes fail, investors hope they succeed in giving Amazon pause for thought. Asked what message she has for Amazon CEO Jeff Bezos, Tri-State Coalition executive director Mary Beth Gallagher said: "I'd make clear to him that the human and civil risks are too significant. Amazon should proceed with caution."
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