In accordance with SEC rules, we have set forth below a stockholder proposal, along with the supporting statement of
the stockholder proponent, for which we and our Board accept no responsibility. The stockholder proposal is required to be voted upon at our Annual Meeting only if properly presented at our Annual Meeting. As explained below, our Board unanimously
recommends that you vote AGAINST the stockholder proposal.
Jing Zhao, 1745 Copperleaf Ct., Concord, CA 94519, the beneficial owner of 8 shares of the
Companys common stock on the date the proposal was submitted, has notified the Company of his intent to present the following proposal at the Annual Meeting.
Resolved: stockholders recommend that Netflix, Inc. improve the executive compensation philosophy to include CEO pay ratio and other factors.
SUPPORTING STATEMENT
Section 953(b) of the Dodd-Frank Act directed the
SEC to amend Item 402 of Regulation S-K to require each company to disclose the annual total compensation of the CEO, the median of the annual total compensation of all employees (except the CEO), and the
ratio of these two amounts (CEO pay ratio). Netflixs CEO pay ratio was 133:1 in 2017 (2018 Proxy Statement p. 65), 178:1 in 2018 (2019 Proxy Statement p. 47), and 190:1 in 2019 (2020 Proxy Statement p. 70). Since the median of the annual total
compensation cannot jump, the rising ratio is due to the CEO compensation jump from $24,377,499 in 2017 to $36,080,417 in 2018 (48% increase), to $38,577,129 in 2019 (Ibid. p.49).
The section Determining Executive Compensation Magnitude lists some philosophical points of executive compensation (Ibid. pages 39-40) without any consideration of social and economic factors, such as the CEO pay ratio.
There is no rational methodology or
program to determine the executive compensation. For example, Twitters CEO pay ratio is less than 0.001 in 2018 and in 2019, Amazons CEO pay ratio is 58:1 in 2018 and in 2019. JCPenneys alarming CEO pay ratio 1294:1 in 2018 is one
cause to its bankruptcy. The executive compensations of big Japanese and European companies are much less than big American companies.
As Warren Buffett stated,
Theres class warfare, all right, but its my class, the rich class, thats making war, and were winning. (In Class Warfare, Guess Which Class Is Winning, New York Times Nov. 26, 2006.)
Americas ballooning executive compensation is neither responsible for the society nor sustainable for the economy, especially under the current social and economical crisis. Reducing the CEO pay ratio should be included to the philosophy of
executive compensation. The Compensation Committee has the flexibility to include other social and economic factors.
NETFLIX OPPOSING STATEMENT
The Board has considered the stockholder proposal and, for the reasons described below, believes that the proposal is not in the best interests of Netflix and our
stockholders.
The proposal is vague and unclear and therefore would be difficult to implement. The proposal fails to explain how the CEO pay ratio and other
factors should be considered in improving our executive compensation philosophy. It is difficult to determine what actions would be required to change our current executive compensation philosophy to implement the proposal. The proposal also
does not specify the other factors that should be considered in our compensation philosophy.
Moreover, CEO pay ratios vary widely across companies as
different companies may have different employment and compensation practices. The SEC has stated that the purpose of CEO pay ratio disclosures is not to facilitate