Netflix's Cash Bonuses Become Salary Thanks to New Tax Plan

Updated on
  • Sarandos to get $12 million salary, more than 2017 cash target
  • Three executives get average 31 percent boost to option grants
Bloomberg’s Matt Townsend takes a look at the winners and losers in the tax overhaul bill.

Netflix Inc.’s top executives will now get paid in full no matter how the company does, thanks to the Republican tax plan.

The streaming-video provider is scrapping its cash bonuses, instead making the payments to top executives as salary. The recently passed tax plan eliminates companies’ ability to deduct performance-based bonuses to managers who are paid more than $1 million, so Netflix just decided to lump all cash payments into executives’ salaries.

Guaranteed Cash

Netflix executives won't be getting cash bonuses in 2018 in response to Trump's tax plan

Source: Company Filings

Note: Values are of Ted Sarandos's compensation with cash bonuses displayed at target.

Netflix implemented the cash bonus structure in 2015 to take advantage of the tax deductions it could make at the time. In that year and in 2016, executives got either their full target bonus or slightly less. The data for 2017 isn’t yet available.

Next year, Chief Content Officer Ted Sarandos will get a salary of $12 million, more than his salary and cash bonus target combined for 2017. Greg Peters, who was promoted this year to chief product officer, will get $6 million in salary, also bigger than his combined total for 2017.

Read More: The GOP Wants to Kill Rule that Led to Astronomical Pay

Netflix’s management team is still getting most of its pay through stock-based incentive compensation. Chief Executive Officer Reed Hastings, Chief Financial Officer David Wells and Sarandos will each get an average increase of about 31 percent in the value of their option grants for 2018, while Peters’s will more than double. There’s a trade-off for Hastings, whose salary will fall to $700,000 from $850,000.

Netflix shares have gained 56 percent this year. A press representative for the company declined to comment.

Other companies including Goldman Sachs Group Inc. and Jefferies Group have also made compensation changes because of the new tax plan. Goldman accelerated the payment of stock awards that were due to be paid next month, which a person briefed on the move said will save the firm about $140 million and slightly benefit the individuals collectively. Jefferies gave employees the option to get their bonus checks in either December or January as some bankers and traders may find it more advantageous to have a bigger income in 2017 with existing deductions in place, while others may benefit from next year’s lower tax rates. 

— With assistance by Lucas Shaw, and Michael J Moore

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