At the company’s annual meeting last week, Netflix Inc. (NASDAQ: NFLX) shareholders voted overwhelmingly to change the way the company’s board is structured. The vote was advisory only, but if the proposal is adopted the change could make it easier for Netflix to be taken over.
The current Netflix board serves staggered terms that are of different lengths and that overlap one another. The shareholder proposal recommends repealing that so-called “classified” structure and replacing it with an annual vote on board memberships held at the same time for all members every year. Such a change increases increase significantly the opportunity for a shareholder with a sufficiently large stake in the company to make a run for one or more seats on the board.
Netflix’s current seven-member board includes CEO and Chairman Reed Hastings; Richard Barton, co-founder of Zillow, Expedia Inc. (NASDAQ: EXPE), a partner at venture firm Benchmark Capital, and Netflix board member since 2002; Skip Battle was CEO and executive chairman of Ask Jeeves, now part of IAC/InterActiveCorp (NASDAQ: IACI), is currently chairman of the board at Fair Isaac Corp. (NYSE: FICO) among other directorships, and has served on the Netflix board since 2005; Timothy Haley, managing director of Redpoint Ventures and a board member since 1998; Jay Hoag, general partner at Technology Crossover Ventures and a board member since 1999; Leslie Kilgore, formerly the chief marketing officer at Netflix, who was added to the company’s board in February of this year; and Ann Mather, a director at games publisher Glu Mobile and Google Inc. (NASDAQ: GOOG) since 2005 and director at Netflix since 2010.
Five of the board members have served for at least ten years, three are associated with venture capital firms, and two are long-time Netflix managers. One can appreciate the argument that Netflix’s board could use some fresh blood. Either that or it could be added to our list of companies where shareholders have no power.
Shares of Netflix are up nearly 5% today at $68.02 in a 52-week range of $60.70-$304.79.