Netflix shareholders thumbed their nose at management by voting decisively to get rid of the classified board — meaning all directors would be up for election each year — and to make it easier for shareholders to call special meetings. While the votes are not binding, Netflix would have hell to pay if it ignored the lopsided tallies from its investors. More than 26.8M votes favored, and nearly 9M opposed, the proposal regarding the classified board made by the Los Angeles County Employees Retirement Association in collaboration with the Harvard Law School Shareholder Rights Project. It would end the company’s current three classes of directors. Only one class is elected each year to a staggered, three-year term. “Having directors stand for elections annually makes directors more accountable to shareholders, and could thereby contribute to improving performance and increasing firm value,” the retirement association said. Netflix opposed the change saying that a classified board “encourages directors to look to the long-term best interest of the Company” by making it easier for independent members to resist “the often short-term focus of special interests.”
The vote was closer on the special meetings proposal, with 19.1M votes in favor and 16.7M against. The idea, submitted by an individual investor, would enable shareholders representing one-tenth of the votes to call a special meeting. Shareholder rights activists say that the lower threshold would make it easier for investors to hold management accountable when things go awry. Netflix says the change “would permit a small group of stockholders who have a special interest to use the right to call a special meeting to serve their narrow self-interests that are not shared by the Company’s stockholders generally.”
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