Over the years since it was founded by Marc Randolph and Reed Hastings (in 1997), Netflix has been at the forefront of entertainment and innovation. Initially a rental service, the company introduced a streaming option in 2007 and, as they say, the rest is history.
The company has also garnered attention for its innovative approach to corporate governance—one based on proximity more so than distance. I wrote about it several years ago. The approach, founded on governance by walking about and pragmatic reports, ensured directors were adequately informed to make smart decisions.
But that was then. Now, eight years on, things have changed somewhat.
Jay Hoag, a venture capital investor, was voted off the board recently, after pressure was applied by Institutional Shareholder Services, a data analytics and proxy advisory firm. It turns out Hoag missed three quarters of the board and committee meetings he should have attended. Given the Netflix board usually meets quarterly, it follows that Hoag attended once per year. Quite how anyone can contribute well if they don't attend meetings, is beyond comprehension.
That shareholders have taken a stand on the matter is laudable. Well done ISS, for bringing Hoag's absenteeism to the attention of shareholders. But other questions remain:
- What confidence can shareholders have if the board only meets quarterly, and in directors who seemingly turn a blind eye to chronically absent colleagues?
- What of accountability and board effectiveness? When was the last board/governance assessment completed, and was it any more than a cursory exercise?
If boards are to have any hope of governing with impact, all of the directors need to be appropriately engaged (capable and present). Ideally, the board should adopt a robust governance framework too, to expedite effective steerage and guidance. How does your board stack up in this regard?
