Netflix shareholders are flexing their muscles, voting to change the company’s board structure in a way that could make a takeover a little easier.
Currently, Netflix directors serve staggered terms of three years on what’s called a “classified” board. But in a filing with the SEC on Tuesday, the company said shareholders at its annual meeting last week voted 28.8 million to 8.9 million to repeal the classified board. The proposal, put forward by an individual stockholder, is not binding but puts a lot of pressure on Netflix to change its policy, particularly given the high tally in favor of the notion.
Netflix has been considered an attractive takeover target for a range of suitors from Amazon to Microsoft to Google. Speculation heated up last fall when the stock took a major hit after some strategic missteps and a deal looked cheaper than ever before. Founder and CEO Reed Hastings has said that he’d like to stay independent and continue growing the business.
Classified boards, as contrasted to those in which all directors stand for re-election every year, have come under fire for breeding complacency and too cozy a relationship between board members and management. Netflix currently has three classes of directors elected for three-year staggered terms. Companies who favor this arrangement say it helps the board withstand the often short-term focus of special interest groups.
Stockholders also passed another proposal by 19 million to 16.6 million making it easier to convene special shareholders’ meetings. Netflix had urged no votes on both measures.