Sonnenfeld: Amazon’s Sweetheart HQ Incentive Deals Are ‘Outrageous’

Will the HQ2 deals from New York and Virginia make sense for the locations in the long-term, considering the big incentives Amazon will receive?

amazonAmazon this week announced that its two new headquarters facilities will be located in Northern Virginia and Long Island City, N.Y.—bringing with them a $2.5 billion investment from Amazon and 25,000 new lucrative tech jobs to each locale. Will the deals make sense for the locations in the long-term, considering the big incentives Amazon will receive?

Jeffrey Sonnenfeld, senior associate dean of leadership studies at the Yale School of Management, told Chief Executive that the huge incentives that cities and states have been clamoring to give Amazon, and other big corporate entities, aren’t guaranteed to pay big dividends in the long run. They also can leave a bitter taste in the mouths of businesses that are already located in those towns.

“This kind of corporate welfare is outrageous, and it’s been a race to the bottom across the nation to see who can hand out billions in giveaways,” Jeffrey Sonnenfeld, senior associate dean of leadership studies at the Yale School of Management told Chief Executive. “It’s often not good for the states, and definitely a major problem on a national basis.”

In a blog post detailing the new HQ deals, Amazon indicated that it will receive performance-based direct incentives of $1.525 billion from New York, based on the company creating 25,000 jobs in Long Island City. This includes a refundable tax credit through New York State’s Excelsior Program of up to $1.2 billion.

In Virginia, Amazon will receive performance-based direct incentives of $573 million based on the company creating 25,000 jobs with an average wage of over $150,000 in Arlington, including a workforce cash grant from the Commonwealth of Virginia of up to $550 million.

For a company that just hit $1 trillion in market value two months ago, that’s a lot of incentives, according to Sonnenfeld. “When these companies take the money and run its reckless, it’s irresponsible and public officials are looking at short term gains and long-term losses,” Sonnenfeld says.

The deals may also leave established businesses in these locales feeling slighted, as they have served as the bedrock of the business community without the benefit of special tax breaks. Those businesses will remember the deal Amazon received when considering new locations and could be more likely to go out and seek one of their own.

“It’s not fair—why should existing companies suffer? What are the retention benefits that they get? You can see that it just spirals,” Sonnenfeld says.

RelatedSonnenfeld: Equifax CEO’s ‘Retirement’ Well Past Due


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.