Netflix shareholders recently voted for the lead independent director of streaming companies from the board, which could indicate a dramatic change in how investors see the importance of showing up. Board members should view this rare rejection of a veteran director as an indication that, in a current environment of economic uncertainty and fears of recession, a significant, unpublished failure to attend the board could raise concerns about the director's value to the board and its commitment to shareholders.
News reports show that Jay Hoag, who has been a board member of Netflix since 1999, only received 21.6% of the votes in this year's board elections. Hoag was the lead independent director and chairman of the committee on Netflix's Nomination and Governance Committee, but because of its low attendance, he recommended that investors against Hoag's reelection vote for investors.
The ISS recommendation states, “Jay Hoag was unable to attend at least 75% of the board and committee general meetings he served during the fiscal year under review. The board cannot be an effective representative of shareholders to directors who do not attend board and committee meetings.”
Unfortunately for Hoag, his lack of attendance was only during 2024, but he was surprised enough that shareholders would vote for him from the board. 2019 – After compiling 97% attendance records from 2023, his attendance rate in 2024 was 50%. He was attending 100% of the meeting this year.
Netflix's shareholder vote comes right after Tesla's shareholders and requires CEO Elon Musk to commit to spending certain hours working for the company, subject to the obvious negative impacts he has had on his time on stock prices and overall performance.
This growing interest in shareholders' time in focusing on the company may encourage board members to consider their next action right now.
Reach out to shareholders to determine their feelings about overboarding and board attendance. There is no problem with informal investigation of key shareholders regarding concerns about directors and key executives who spend time on boards of other companies and other external activities. Since most companies already have policies that govern these areas, determining whether to update or change these policies is a good act of governance. It's better to take this issue ahead of you rather than being caught off guard. Adjust the policy as needed.
Performs an internal audit of directors and CEO workloads and commitments. The issues of overboarding and lack of attendance can be a greater concern for shareholders, as board members need more. Shareholder activists could potentially run candidates in future elections, taking into account those who are not on board, uncommitted or missing. Additionally, internal audits serve as reminders for board members to reassess the amount of work they are contributing to the current board. Can they be doing too much and afford to retreat a bit? One of these adjustments may help the board operate more efficiently.
Check the duration and age limits for board members and CEOs. Not said, Hoag's 25+ years of service on the Netflix board may have rocked shareholders to vote against his reelection, along with his low attendance record. Rethinking the years of service and the age at which directors are to retire can be considered an act of good governance. The board must handle these very sensitive issues with respect, and the shareholders, board and executive team must all be aligned regarding what provides the organisation with the best opportunity to improve shareholder value.
