By Amol Sharma and Joann S. Lublin
Netflix Inc.'s shareholders on Monday voted against a nonbinding
resolution to split up the company's chief executive and chairman
positions, a move some investors and proxy-advisory firms have
pushed at U.S. companies to improve corporate governance.
Netflix founder Reed Hastings has held both the CEO and chairman
titles since the company went public in 2002. The resolution to
create an independent chairman was defeated at Netflix's annual
meeting in Los Gatos, Calif. with 53% of votes cast against it,
according to the company. Last year, a similar proposal passed with
73% of the vote and Netflix directors didn't take any action.
"Netflix has demonstrated extraordinary long term success under
the leadership of Reed and the board," a Netflix spokesman said
Monday.
Shareholder resolutions seeking an independent chairman tend to
win strong support, but rarely pass. Four of 51 such measures voted
on so far this year received a majority of votes cast, with average
support of 31.1%, according to Institutional Shareholder Services.
There were six victories and average support of 32% for 61
resolutions during all of 2013, the big proxy adviser said.
Companies in the Russell 3000 Index where such proposals have
passed this year include Allergan Inc. and Staples Inc.
Whether to split the top two roles became a hot issue at J.P.
Morgan Chase & Co.'s annual meeting last year. The proposal
ended up garnering approval from 32% of voting shareholders
following a bruising campaign that included the possibility of
Chief Executive James Dimon's exit if investors endorsed the
idea.
The Netflix proposal, backed by the New York City comptroller's
office, which oversees its public-employee pension funds, called
for the chairman to be an independent director who isn't a current
or former employee of the company. "Netflix is the latest company
to twist the independent chair vote into a referendum on the CEO,"
said Scott M. Stringer, New York City's comptroller. "Reed Hastings
may be a terrific CEO, but he shouldn't also chair the board to
which he answers. "
ISS, which endorsed the proposal, said giving the chairman
position to the company's CEO presents potential conflicts of
interest and weakens the board's ability to represent shareholders'
interests.
Mr. Hastings co-founded Netflix in 1997 and has led the
company's rise from a DVD-by-mail provider into the dominant
streaming-video service, with over 48 million members globally. On
his watch, Netflix has delivered huge returns for investors, who
are attracted to its track record of swift subscriber growth
despite not generating large profits. Netflix shares are up about
15% this year and 91% over the last 12 months.
Mr. Hastings has been the face of the company in many of its
dealings with Wall Street, regulators and the entertainment
industry. Lately, for example, he has been a vocal opponent of
cable giant Comcast Corp.'s pending takeover of Time Warner Cable
Inc., which he says will concentrate too much power in the
broadband market within a single company.
At the annual meeting, shareholders re-elected Mr. Hastings and
the two other directors who were up for re-election.
Shareholders approved a nonbinding proposal to require an
investor vote if the company wants to adopt a"poison pill," a
stockholder rights plan meant to deter an activist investor from
acquiring a significant stake. Netflix adopted a poison pill in
2012 and terminated the provision last year.
Write to Amol Sharma at amol.sharma@wsj.com and Joann S. Lublin
at joann.lublin@wsj.com
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