Netflix
NET FL IX DANCES to its own drummer when it comes to compensation. And it had to barnstorm big investors’ conference rooms last year after it narrowly lost an advisory say-on-pay vote — making it among just 3% of U.S. corporations that failed to win shareholder support for executive compensation. Stockholders objected to its unusual decision to eschew so-called performance-based bonuses tied to how well executives and their companies meet predetermined annual goals. Instead, Netflix computes compensation based on how much it’s willing to pay, how much it would cost to replace the person and how much the person could expect to be paid elsewhere. The company calculates its offer — and leaves it to the employee to decide how much should come from cash or stock options. Last year, 97% of CEO Hastings’ $38.6 million package came from options. Chief content officer Ted Sarandos bet about 48% of his $34.7 million on the stock. Opponents say the policy rewards management even in bad years. The company counters that it attracts talent and promotes long-term planning. The stock price must appreciate 40%, it says, for options to pay more than cash. So did Netflix scrap the unpopular policy? Of course not. But “we have attempted to better describe our program,” the proxy
says. The Compensation Committee also says it’s “mindful” of last year’s vote. Still, it piled $2 million onto Hastings’ total based on “his accomplishments in developing and evolving the business strategy,” the company’s performance and “his ability to attract and retain senior management.” One other change: During the year, Netflix ended its deal to lease two jets that Hastings owns. As a result, he just made $508,438 from the arrangement — down from $1.2 million in 2018 — although he also received $465,637 to reimburse him for “personal use of company aircraft.” Substantial as these sums are to most people, they’re tiny compared with Hastings’ wealth from the 9.3 million Netflix shares he owned at the end of 2019, equal to about 2.1% of the company. They’re worth about $4.1 billion. Netflix’s average employee made $202,335 last year. Companies compute the number differently, so comparisons are unreliable. Still, this stands out as the highest among the companies we track. Netflix also has the youngest board in our group. To help prevent a hostile takeover, directors serve staggered, three-year terms. Three are up for election this year, including Hastings.