Netflix Defeats Proposal Seeking Independent ChairmanAnthony Palazzo and Cliff Edwards
Netflix Inc. investors voted down a shareholder proposal recommending that the board appoint an independent chairman, narrowly reversing the outcome of an identical measure last year.
The vote was 53 percent against, Jonathan Friedland, a spokesman for Netflix, said in an e-mail. The chairman and chief executive officer roles are both held by Reed Hastings. The nonbinding resolution passed with 73 percent support last year and wasn’t implemented.
Calls for independent board oversight are gaining support from pension funds and shareholder advisers, who point to better long-term results and lower CEO pay. Twenty-one percent of companies in the Standard & Poor’s 500 Index have split the chairman and CEO roles, up from 9 percent in 2003, according to a statement from the measure’s sponsor.
While an active, independent chairman can muddle authority, CEOs shouldn’t be monitoring themselves, said Charles Elson, director of the University of Delaware’s Center for Corporate Governance.
“The trend is to split the two,” Elson said. “It makes sense. It’s very effective.”
While losing a shareholder vote it opposes can put pressure on a board, Los Gatos, California-based Netflix didn’t separate the CEO and chairman roles after the previous measure passed. Directors of the world’s leading streaming service unanimously opposed it, pointing out in materials that it has an independent lead director, Jay Hoag.
Netflix almost quadrupled last year to lead all members of the S&P 500. The shares fell 1.6 percent to $423.09 at the close in New York.
“The point is, ultimately for the board to function effectively, you need someone independent chairing it,” Elson said. “A good CEO wants a good board because it helps the CEO avoid his or her mistakes.”