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Changes are coming to Netflix‘s executive compensation packages.
In its Q3 earnings letter, Netflix says that it is planning “substantial changes for 2024” to its CEO and executive pay packages. The promise to investors comes after shareholders rejected the company’s 2022 pay packages in a “Say on Pay” vote over the summer.
According to an SEC filing, Netflix shareholders rejected the pay packages by a 3-1 margin, with 241.7 million voting no and only 97.8 million voting yes. The vote was non-binding, but when shareholders reject the pay packages, companies usually respond by adjusting executive compensation plans. In fact, Netflix dealt with this exact issue in 2019, another year when shareholders rejected its CEO pay.
“We recognize we don’t have wide support for our executive compensation model of the last 20 years,” Netflix wrote Wednesday. Now, Netflix says it will shift its pay plans “to a more conventional model.”
Co-CEO Ted Sarandos and former co-CEO Reed Hastings each took home more than $50 million in 2022, with Hastings taking almost all of that in stock, and Sarandos electing to have a $20 million base salary, with the rest in stock. After Greg Peters was elevated to co-CEO and Hastings stepped aside, the company set a salary cap of $3 million on its executives, shifting more risk to stock.
Netflix as a company allows its employees to choose how much of their pay they receive in cash, and how much they receive in stock options. For CEOs, however, many institutional investors prefer a relatively low salary, with executives required to have “skin in the game” via performance-based stock options and bonuses.
The company says that its new executive compensation plan, whatever the details are, “will continue to be built on pay for performance.”
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