Amazon.com Might Be Having Difficulty Using Its Capital Effectively

Amazon.com Inc (NASDAQ:AMZN)is embroiled in a legal battle with the US government, alleging that federal prosecutors and the Occupational Safety and Health Administration (OSHA) have been sharing sensitive information obtained during worker safety investigations with external parties.

The online retail giant is now seeking a protective order to safeguard its confidential data, including briefing materials for its board of directors and strategic budgetary plans. This development comes as prosecutors intensify their scrutiny of Amazon, requesting additional documents related to the company's leadership, including CEO Andy Jassy and founder Jeff Bezos.

Amazon's clash with the US government is multifaceted, with multiple cases focusing on worker safety issues at the heart of the dispute. The e-commerce behemoth is voicing concerns over the alleged sharing of confidential information obtained during these investigations with outside organizations, potentially compromising its strategic secrets.

Worker Safety at the Core

Worker safety concerns have loomed large over Amazon in recent years, particularly amid the COVID-19 pandemic. The company faced allegations of inadequate safety measures, leading to numerous workers falling ill. This prompted investigations by federal authorities, including OSHA and federal prosecutors, to ensure the well-being of employees.

In response to the government's demands for further documentation, Amazon has taken a defensive stance. The company argues that the increased scrutiny should not come at the expense of its sensitive corporate information. Amazon's request for a protective order aims to restrict the government's ability to disseminate confidential materials, particularly those relating to the board of directors and financial strategies.

Confidential information, such as briefing materials for the board of directors and budgetary strategies, is vital for a corporation like Amazon. It forms the foundation of their decision-making process, allowing them to adapt to an ever-evolving marketplace and make informed strategic choices.

Amazon's concerns extend beyond potential leaks of sensitive data. The company fears that sharing such confidential information could give external organizations, possibly including competitors, an unfair advantage in the fiercely competitive e-commerce sector. Safeguarding their corporate secrets is paramount to maintaining a competitive edge.

On the other side of the dispute, federal prosecutors and OSHA have defended their actions, arguing that their investigations into worker safety practices must be thorough and transparent. They contend that the information they are requesting is essential to their inquiries and that it serves the greater public interest by ensuring workplace safety.

Amazon's ROCE Performance:

One crucial aspect of evaluating a company's growth potential is assessing its return on capital employed (ROCE). ROCE measures a company's annual pre-tax profit relative to the capital it has invested in its business. In essence, it tells us how effectively a company is reinvesting its profits.

As of the trailing twelve months ending in June 2023, Amazon.com (NASDAQ: AMZN) reports an ROCE of 5.4%. This figure represents the return generated by Amazon in relation to the capital employed in its operations.

Understanding the ROCE Formula:

The ROCE formula is straightforward:

ROCE = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

In the case of Amazon.com:

ROCE = US$18 billion ÷ (US$478 billion - US$148 billion)