Netflix to Modify CEO Pay Policies After Shareholder Disapproval
Netflix has announced that it will be making modifications to its CEO pay policies following a majority shareholder vote against approving executive compensation at the last annual meeting. The company had already acknowledged earlier this year that changes were necessary.
In its annual shareholder letter, Netflix stated, “We recognize we don’t have wide support for our executive compensation model of the last 20 years. We are listening to our shareholders and plan on substantial changes for 2024 to a more conventional model. Our executive compensation plan will continue to be built on pay for performance.”
This is not the first time Netflix has faced opposition from shareholders regarding CEO pay. In 2022, the co-CEOs at the time, Reed Hastings and Ted Sarandos, topped the list of highest-paid chief executives, each earning about $50 million, which represented a 25% and 32% increase, respectively. Hastings transitioned to the role of executive chairman early this year, with Sarandos and Greg Peters now serving as co-CEOs. Netflix has allowed its executives to choose between cash and stock for their compensation, with Sarandos primarily opting for cash and receiving a $20 million base salary.
In response to shareholder pressure, Netflix has been reevaluating its pay policies. Starting in 2023, the company plans to cap co-CEO base salaries at $3 million and require that 50% of allocatable pay be in stock options. However, these stock options will only have a one-year vesting period, indicating a lack of long-term commitment.
Netflix has also taken the unusual step of publicly forecasting its top executives’ earnings before the start of each year. In December, the compensation committee of Netflix’s board of directors stated that it expected 2023 pay to be similar to 2022. Hastings was projected to receive a base salary of $650,000 and stock options worth $34 million, while Sarandos was estimated to earn a salary of $3 million, options worth $20 million, and a targeted bonus of $17 million.
These developments come as Netflix recently announced price hikes for some of its plans in the United States, United Kingdom, and France, potentially further fueling shareholder concerns.
As the company works on implementing changes to its executive compensation model, it remains to be seen how these modifications will be received by shareholders and whether they will alleviate the ongoing tensions surrounding Netflix’s CEO pay practices.