Today, National Legal and Policy Center presented an “Adopt Cumulative Voting” proposal at the annual meeting of Netflix, Inc.
Board elections are usually conducted on a majority voting basis, and shareholders can only vote “yea” or “nay” for each member across the entire slate. That means that a coalition representing 51% of shareholders can effectively control 100% of board seats. Cumulative voting would allow investors to aggregate their votes so that representation would be proportional to ownership. In theory, if you own 50% of the company, you would get to elect 50% of the board.
Netflix’s board opposed the proposal, as explained on page 77 of the company’s proxy statement. NLPC responded to the board’s opposition statement in an exempt solicitation report circulated to the company’s shareholders.
Presenting the proposal was Paul Chesser, director of NLPC’s Corporate Integrity Project. His three-minute remarks can be heard here, and a transcript follows:
I’m Paul Chesser of National Legal and Policy Center.
We sponsor Proposal 7, which asks the Board to adopt cumulative voting for the election of directors.
The case begins with the past six months.
In December, Netflix announced an $82.7 billion dollar agreement to acquire Warner Bros. Discovery — a transaction that required favorable regulatory determinations from the current presidential administration.
In the middle of that pursuit, a sitting Netflix director (former Obama and Biden administration official Susan Rice) used a podcast appearance to warn corporate America of an “accountability agenda” and “subpoenas” when her political allies return to power.
Within four days, the President of the United States demanded her removal from the board of Netflix.
Netflix’s co-Chief Executive Officer (Ted Sarandos, pictured above) was dismissive, answering that the President “likes to do a lot of things on social media.”
Three days later, Warner Bros. Discovery accepted a competing bid from Paramount Skydance, and Netflix walked away.
The deal Netflix had pursued for months was dead.
The deeper concern is that this Board’s existing governance reforms did not flag the risk in advance, did not constrain the conduct in the moment, and has produced no visible accountability since.
A scuttled corporate acquisition is not the only concern about Netflix’s board.
At the company’s annual meeting last year, the Lead Independent Director failed to receive a majority of votes cast for his own re-election.
He tendered his resignation as the Company’s policy required.
But the Board declined to honor the shareholder vote and reinstated him.
That same director chairs the committee that produced the slate before you today.
Of the twelve director nominees, four have Netflix executive employment history.
This board is insulated from outside perspective.
Cumulative voting, as Proposal 7 calls for, addresses that.
It would allow shareholders to aggregate their votes for a single candidate, creating the possibility of at least one director on this Board who reflects perspectives the current nomination structure excludes.
That director would not displace anyone on the slate.
That director would sit alongside the existing Board and surface the questions the existing Board has shown it will not entertain on its own.
The Securities and Exchange Commission, the OECD, the International Finance Corporation, and Institutional Shareholder Services all recognize cumulative voting as a legitimate governance mechanism.
Netflix shareholders deserve no less.
We ask shareholders to vote FOR Proposal 7.
Thank you.
All assertions made by Chesser in his above remarks are footnoted and can be found in NLPC’s exempt solicitation report, here. An executive summary of the report can be viewed here.
Read NLPC’s shareholder proposal for the Netflix annual meeting here.
Listen to Chesser’s presentation of the proposal at the meeting here.
