Netflix shareholders recently voted the streaming company’s lead independent director off its board of directors in what might indicate a dramatic shift in how investors view the importance of showing up. Board members should view this rare rejection of a seasoned director as a sign that in the current environment of economic uncertainty and recession fears, any significant unexplained lapses in board attendance could result in concerns about a director’s value to the board and their commitment to shareholders.
According to news reports, Jay Hoag, who had served as a Netflix board member since 1999, received only 21.6 percent of votes cast during this year’s board elections. Hoag was lead independent director and chair of the nominating and governance committee for Netflix, but proxy advisory firm Institutional Shareholder Services (ISS) recommended investors vote against Hoag’s reelection to the Netflix board due to poor attendance.
The ISS recommendation read: “Jay Hoag failed to attend at least 75 percent of the total meetings of the board and committee on which he served during the fiscal year under review… The board did not disclose the reason for his absence. Directors who do not attend their board and committee meetings cannot be effective representatives of shareholders.”
Unfortunately for Hoag, his lack of attendance was only during 2024, but it was alarming enough for shareholders to vote him off the board. His rate of attendance in 2024 was 50 percent, after compiling an attendance record of 97 percent from 2019-2023. He had attended 100 percent of meetings this year.
The Netflix shareholder vote comes on the heels of shareholders at Tesla demanding that its CEO Elon Musk commit to spending a specific number of hours working for the company after the apparent negative impact his time away had on the share price and overall performance.
This growing shareholder attention to time dedicated to the company might encourage board members to consider the following actions now:
Reach out to shareholders to determine their feelings about over-boarding and board meeting attendance. There is nothing wrong with informally surveying key shareholders about their concerns over directors and key executives spending time on other company boards and other outside activities. Most companies already have policies governing these areas, so determining whether those policies should be updated or changed is an act of good governance. It is better to get ahead of this issue instead of getting caught off guard. Adjust policies if needed.
Conduct an internal audit of the workload and commitments of directors and the CEO. As more is required of board members, the issues of over-boarding and lack of attendance are likely to become a greater concern for shareholders. Shareholder activists may potentially target directors they consider over-boarded, uncommitted or missing-in-action and run candidates against them in future elections. Additionally, an internal audit can serve as a reminder for board members to reassess the amount of work they are contributing to their current board. Are they doing too much, and could afford to step back a bit—or are they doing too little, and could take on more responsibility in a key area? Either of those adjustments might help the board operate more efficiently.
Review term limits and age limits for board members and CEOs. Although it wasn’t said, Hoag’s 25-plus years of service on the Netflix board, in addition to his poor attendance record, might have swayed some shareholders to vote against his reelection. Reconsidering the number of years of service and the age at which directors should retire can be considered an act of good governance. Boards will need to handle these very delicate issues respectfully so that shareholders, the board and the executive team are all aligned regarding what will give the organization the best opportunity to improve shareholder value.
