Netflix Executives Get Hefty Raise, Thanks To New Tax Law

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Netflix Executives Get Hefty Raise, Thanks To New Tax Law
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Netflix will be paying its executives in full, irrespective of the performance by the company, according to Bloomberg. This has been made possible by the new tax law under which the company cannot deduct the performance-based bonuses to managers who get more than $1 million.

New tax law leads to more salary for Netflix executives

Citing the new tax law, the online streaming company said in a filing on Thursday that the salary of its top executives would increase in 2018. Instead of the cash bonuses, Netflix will now give guaranteed payment to the top executives in the form of salary.

Netflix stated that a salary of more than $1 million was subjected to a significant surcharge. Therefore, the company had performance-based bonuses in place for certain executives.

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“With the recent passage of federal tax reform, the performance bonus plan will no longer eliminate such surcharges,” the streaming firm said in the filing. “As such, the compensation committee of the board of directors has determined that all cash compensation for 2018 will be paid as salary.”

Chief Content Officer Ted Sarandos will get $12 million as a base salary in 2018 compared to just $1 million over the past three years, as per the filing with the Securities and Exchange Commission (SEC). In 2017, Sarandos’s salary was $1 million, while his bonus target was about $9 million. Sarandos will receive $14.3 million in stock options next year.

Under the new plan, Netflix CEO Reed Hastings would be paid $700,000 in salary and $28.7 million in annual stock options. Hastings is already a wealthy man, and the new salary will add further to his wealth. The Netflix CEO already made a spot for himself this year in Forbes 400 list of richest Americans. With $2.2 billion, Hastings was at the 359th spot, notes CNN.

Salaries of other top executives have also increased, and have been disclosed in the filing. CFO David Wells gets a base salary of $2.8 million and $2.45 million in stock options. General Counsel David Hyman’s 2018 pay package includes $2.5 million in salary and $3.275 million in stock award, while chief product officer, Greg Peters will get a $6 million salary and $6.6 million in stock options.

It must be noted that the pay details that Netflix revealed is not total pay as it does not include potential bonuses and other compensation, notes Variety.

Stellar run continues for Netflix

Netflix had a stellar run this year, with shares up over 50%. The company performed exceptionally well in the international regions despite the competition from the likes of Amazon, Hulu and local service providers.

According to Trefis estimates, Netflix’s streaming subscription business accounts in the U.S. account for 55% of its value. Domestic subscribers crossed the 50 million mark in the second-quarter, and are growing steadily. Netflix added around 3.34 million subscribers in the first nine months of 2017 despite escalating competition in the online streaming industry.

Outside the U.S., the company performed even better, increasing its total subscription base from 1.9 million in 2011 to over 44 million by the end of 2016. During the first nine months of 2017, the international subscriber base swelled 27% totaling to 56.5 million. Netflix now has a presence in 190 countries.

On Thursday, Netflix shares closed up 3.47% at $192.71.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@wordpress-785388-2679526.cloudwaysapps.com
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