Netflix, Inc. (NASDAQ:NFLX) shareholders will vote on the CEO Chairman split of roles in an annual meeting scheduled on Monday. A proposal has been made by two pension funds, Calpers, the giant California public pension fund, and Scott M. Stringer, New York City’s comptroller and the overseer of the city’s pension funds, to separate the role of chairman from that of CEO. Currently, both positions are held by Reed Hastings, Netflix’s co-founder.
Many issues but split most important
The issue is among the several issues to be discussed, including putting all board members up for re-election every year, rather than every three years. Apart from these two pension funds, other big firms such as Institutional Shareholder Services and Glass, Lewis & Company have also backed the demand.
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Mr. Stringer was the first person to demand the split of roles and received massive support from individuals. Last year, over 73% of the Netflix, Inc. (NASDAQ:NFLX) shares went in favor of the split, which is the highest-ever approval level for an independent chairman proposal, according to I.S.S. The company has, however, not made any changes.
To strengthen their case, Mr. Stringer and Calpers could use their holdings in the company (over 350,000, out of an estimated 60 million shares outstanding) to vote against the election of directors, including Mr. Hastings.
Netflix stronger under Hastings
In a telephone interview, Stringer said that a board that ignores the shareholders is a house of cards, wittily referring to the most popular Netflix, Inc. (NASDAQ:NFLX) original series.
Netflix, Inc. (NASDAQ:NFLX) has an independent lead director, but he is not elected by the company’s other independent board members. On the other hand, the board says that Hastings has been the CEO and chairman ever since the company went public, which has benefited the company and the same is reflected in the stock price that has risen 95% over the last 12 months.
Recently, separating the CEO role from chairman has become the hottest corporate governance issue with companies such as JPMorgan Chase and retailer Abercrombie & Fitch under pressure to adopt the same strategy. Supporters say that the split would enhance the independence of the board and reduce the influence of management.
The online streaming service company has been involved in battles over a number of issues this year, including opposition to Comcast’s proposed takeover of Time Warner Cable and accusing Verizon of hitch in streaming video content to users.