To Thomas O. Ryder, Chairperson of Audit Committee, Amazon Board of Directors

To Jeffrey P. Bezos, Chairperson of Amazon Board of Directors

Hello,

I’m writing under unfortunate circumstances:

Amazon FinTech is engaged in reckless conduct and Amazon leadership, such as Mr Bezos and Mr Olsavsky, have failed to correct this matter when warned through internal channels.

Amazon FinTech is an organization within Amazon’s business services unit “FGBS” responsible for Amazon’s finance technology and digital controllership. Amazon FinTech (as of 2020 Q3) was an entire order of magnitude off its hiring goals for senior engineers (ratio of 26:1 vs target of 3:1 for L5:L6) and had zero principal level staff (L7+) among a multi-hundred person organization. This is a shockingly unprofessional way to run an engineering organization.

This is the engineering equivalent of Amazon Legal being staffed entirely by junior associates without appropriate senior oversight and no principal counsel at all.

To date, these problems in staff have already caused (mild) preventable lapses in controllership: when I first complained this fall, it was amid a late tax filing and a lapse in reconciliation between accounting and tax ledgers.

Further, not only has Amazon leadership failed to cease this reckless conduct – they have retaliated against people (such as myself) who have expressed concerns about the unprofessional and dangerous manner in which Amazon FinTech is run.

As an investor, I have no confidence in the financial integrity of Amazon.

At this point, without rigorous review and remediation by the board of directors, I believe that Amazon will experience a serious controllership lapse in the next 12-24 months.

At Your Service,

Z. Michael Gehlke

INCLUDED: “FinTech Engineer Staffing”, “Controllership Lapse Timeline”

FinTech Engineer Staffing

This is a supplement to my letter which describes in greater detail Amazon software engineering and the current staffing in FinTech.

Software Engineering

Amazon (like all employers) recognizes levels among its engineering staff. Amazon has an internal leveling guideline, but roughly speaking –

• SDE 1 (L4) staff deal with implementation and tactical level issues.
• SDE 2 (L5) staff deal with implementation and project management.
• SDE 3 (L6) staff deal with supervision of L4/L5 and lead project planning.
• SDE 4+ (L7+) staff deal with organizational strategy.

The exact amounts vary, but for an SDE 1 typically 50% of your time will be code writing, while for an SDE 3, that number is closer to 25% – with 50% now being leadership and mentoring. Similarly, your impact grows from implementing features as an SDE 1 to leading technical strategy for an organization as an SDE 4.

A typical mix of L4:L5:L6 is between 2:2:1 and 5:5:1, depending on the complexity of the field. For something like FinTech, where there’s a high bar for security and compliance, you want a lower mix. A typical number of L7+ is 1 per 30-100 staff, depending on the technical complexity. For example, science teams have a higher density of principal level staff.

A normal mix of 100 engineers is 45:45:9:1 in its L4::L7.

Amazon FinTech Staffing

Amazon FinTech recognizes this need for L6 staff overseeing its junior engineers and the complexity of finance as a field, and set a target of 42:42:16 for its L4:L5:L6 staff – a perfectly fine goal.

Unfortunately, the current mix (as of 2020Q3) is 45:53:2. This puts the L5:L6 ratio at 26:1 – an effective lack of supervision for FinTech junior engineers. This is well outside what would be legal in regulated engineering disciplines.

Compounding this is the complete lack of L7 staff. People laugh when I tell them a Fortune 10 company like Amazon has zero principal level engineers in its FinTech department. Amazon FinTech has nearly 500 engineers – and so should have five L7+ level employees coordinating its technical compliance strategy.

This dual lack of senior oversight for junior engineers and lack of technical compliance strategy from principal level engineers has severely harmed Amazon FinTech systems.

For example, our tax filings (globally) depend on three Python script files of several thousand lines each with zero testing. That’s incredibly reckless engineering – well outside the norms practiced in the rest of Amazon.

Controllership Lapse Timeline

This is a supplement to my letter which describes in greater detail Amazon’s recent struggles with controllership.

Context

For context, I want to note a few historic events:

• Circa 2015, Amazon experienced a severe breakdown of its promotion pipeline and shortage of SDE3 staff.
• In December 2017, Amazon Device Economics staff discovered that for years economists had been misallocating Prime’s finances.
• In 2018, Amazon Retail suffered a hiring freeze. Jeff Wilke commented that had Retail received the correct allocation, it likely could have avoided a hiring freeze.

Struggles in 2020

I was hired in December 2019 to assist a newly created team in Amazon FinTech with running its processes (eg, sprint and project planning) and to lead the re-design of a critical financial system, the SEED tax pipeline compiler.

However, leadership in FinTech repeatedly thwarted my efforts to raise standards – eg, insisting we start development prior to reviewing our design with senior engineers.

Lapses in basic operation became normalized for the European, Middle East, and Africa (EMEA) team during 2020Q3, when for months multiple alarms about PII were sent to staff – with no follow-up. This normalization of ignoring alarms by a young team quickly led to negative impacts on Amazon at large.

The EMEA team suffered two preventable lapses in controllership during 2020Q4:

• A late tax filing;
• A week-long outage of our reconciliation between accounting and tax.

While neither permanently negatively impacted the company, both were caused by EMEA FinTech staff failing to perform basic maintenance on the systems – ignoring data quality alarms in the first case and failing to perform rigorous testing in the second.

In a December meeting, FinTech leadership revealed that of the 50-100 SDE3s needed to meet the target ratio, they’d hired approximately 10 in all of 2020.

Concerns

I am concerned that FinTech isn’t on track to hit staffing targets on a reasonable timeline.

I am concerned that FinTech leadership views this as a minor issue when the lack of senior oversight and lack of professional standards are causing preventable lapses in controllership.

I believe that without strong intervention, FinTech will experience a serious lapse in controllership within 12-24 months.