Since 2011, Netflix has ignored 17 proposals for board changes that were approved by shareholders. At public companies, shareholder democracy is mostly in name only. Stockholders vote for directors and in almost all cases, they have to choose from just one candidate. Also only a few stockholders show up to annual meetings, and they are drawn more by sausage buffets than democratic urges, says Bloomberg.
Netflix investors have started to turn against the company’s directors, but it does not seem to matter. One board member has the ignominious distinction of being among the 1.3% of corporate directors who lost the shareholder election but still kept their positions, the report says.
Small stockholders suggested four proposals at Netflix’s shareholder election last week. The proposals were to change how the company’s board and shareholder votes are structured. Most of the recommendations included establishing an easier path for big investors to nominate board candidates on equal grounds as management’s preferred directors and requiring directors to win reelection each year rather than every three years.
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Shareholders typically go along with these measures, while companies mostly oppose them. The streaming giant recommended that its investors vote against these proposals, but they passed them with an overwhelming majority. Since these votes were not binding, the streaming service has been ignoring similar shareholder votes for years.
Is Netflix a dictatorship?
A stockholder-proposed ballot measure to prevent directors from being elected unless they received a majority of all votes cast came up in 2011. The proposal received a majority vote of shareholders in favor, but the steaming service did nothing. In 2012, shareholders proposed to make each of the board members stand for election next year. The ballot measure was passed against management’s objections, but the streaming giant did nothing.
Several proposals were passed from 2013 up to now, including a recommendation for a chairman, but no changes have been made. Rich Barton, a Netflix director, could not get a majority of votes even when he was the only candidate on the ballot.
Institutional Shareholder Services gives the streaming service its lowest score in a corporate governance ranking. ISS, which advises investment funds on corporate elections, said the board failed to act on several majority-supported shareholder proposals, continuing the pattern of non-responsiveness.
Netflix CEO and co-founder Reed Hastings owns less than 3% of the streaming giant’s shares. The company established itself as a stockholder republic, but it essentially functions as a dictatorship.