Netflix Changes Compensation Packages Following Shareholders’ Rejection of CEO Pay Packages

In its Q3 earnings report, Netflix revealed its intention to make “significant changes for 2024” to the compensation packages of its CEO and executives. This commitment to investors follows the rejection of the company’s 2022 pay packages in a “Say on Pay” vote during the summer.

According to an SEC filing, Netflix shareholders opposed the proposed pay packages by a substantial margin, with 241.7 million voting against and only 97.8 million in favor. While the vote was not binding, it is customary for companies to adjust executive compensation plans when shareholders reject them. In fact, Netflix faced a similar situation in 2019 when shareholders disapproved of its CEO’s compensation.

Netflix acknowledged the lack of widespread support for its executive compensation model over the last two decades. In response to this, the company now plans to transition to a more conventional compensation structure.

In 2022, both Co-CEO Ted Sarandos and former Co-CEO Reed Hastings earned over $50 million each, with a significant portion of Hastings’ compensation coming in the form of stock, while Sarandos opted for a $20 million base salary, with the remainder tied to stock. When Greg Peters assumed the role of co-CEO, the company imposed a salary cap of $3 million for its executives.

Netflix affords its employees the flexibility to choose the composition of their compensation, allowing them to decide the ratio of cash and stock options.

The company has indicated that its upcoming executive compensation plan, although lacking specific details at this stage, will maintain a strong emphasis on performance-based rewards.

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