Netflix's Corporate Governance Issue Explained

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Netflix’s Corporate Governance Issue Explained

• Netflix is the Lowest Ranked Company of Largest US Stocks.

WHY?

• Primarily for repeatedly ignoring its shareholders on voting requirements for Board Elections and Executive Compensation.

• Netflix’s approach to corporate governance appears to ignore proxy votes whenever legally possible.

• Netflix requires 67% at least a super majority of the vote to pass shareholder amendment.

• Shareholders have long proposed moving that requirement to the majority level of 50% since 2013 with >80% approval in most years.

• Supermajority requirements help to entrench management, and protect directors that fail to achieve 50% of the vote for their nominations.

• For example, head of the compensation committee, Jay Hoag, received only 48% of the vote.

Ex#1: We are in a Dynamic Business, Competitors are Charging

Ex#2: We have considered this many times before, maybe next year

• 49.8% of the Shareholders Voted For 2020 Compensation Plan • Average Total Comp Increases > 13% for past 3 years

2020 Netflix Peer Group Activision Blizard Electronic Arts Adobe Systems Intuit Apple Lions Gate Entertainment AT&T Microsoft Booking Holdings Oracle Charter Communications PayPal Holdings Comcast salesforce.com Discovery Communications Sirius XM Holdings DISH Network Viacom Disney WMWare eBay

Stock/Fundamental Data Company Ticker CEO 3-yr Total Ret Mkt Cap ($B) Net Margin ROE Sirius XM Holdings SIRI James Meyer 9.0% 24,961 15.4% Not Collected WMWare VMW Patrick Gelsinger 110.0% 61,406 13.3% 91.5% Oracle1 ORCL Safra Catz 16.0% 176,112 31.3% 83.9% Booking Holdings BKNG Glenn Fogel -14.0% 69,886 39.5% 82.0% eBay EBAY Devin Wenig 52.0% 41,648 20.4% 62.4% Apple AAPL Timothy Cook 163.0% 1,662,998 25.3% 61.1% Intuit INTU Brad Smith 130.0% 80,200 27.7% 41.5% Electronic Arts EA Andrew Wilson 26.0% 40,654 27.2% 40.7% Microsoft MSFT Satya Nadella 211.0% 1,620,354 34.7% 38.3% Adobe Systems ADBE Shantanu Narayen 205.0% 223,620 28.7% 28.0% Viacom VIAC Robert Bakish -61.0% 14,231 11.8% 24.8% Netflix NFLX Reed Hastings 205.0% 241,334 10.2% 24.6% Comcast CMCSA Brian Roberts 6.0% 185,342 15.6% 15.8% Discovery CommunicationsDISCA David Zaslav -20.0% 9,632 20.6% 15.5% PayPal Holdings PYPL Daniel Schulman 224.0% 209,470 16.9% 14.6% DISH Network DISH W. Carlson -45.0% 16,715 15.2% 12.1% Disney DIS Robert Iger 9.0% 215,560 20.0% 11.7% Activision Blizard ATVI Robert Kotick 33.0% 62,617 25.2% 11.7% AT&T T Randall Stephenson -3.0% 214,676 10.2% 7.5% Charter Communications CHTR Thomas Rutledge 52.0% 111,058 5.3% 5.3% salesforce.com CRM Marc Benioff 115.0% 179,191 4.1% 0.4% Lions Gate Entertainment LGF.A Jon Feltheimer -74.0% 1,648 -5.2% -7.1% Average 61.3% 248,332 18.8% 31.7% Median 29.5% 95,629 18.5% 24.6%

Subscriber Growth: NFLX Annual Net Adds - Year-over-Year Growth (%) Quarterly Net Adds - Year-over-Year Growth (%) 2015 2016 2017 2018 2019 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Subscribers (000s) 70,839 89,090 110,644 139,259 167,090 139,260 148,863 151,560 158,330 167,090 182,856 192,947 Net Adds (000s) 16,363 18,251 21,554 28,615 27,831 8,840 9,603 2,697 6,770 8,760 15,766 10,091 Sub Growth 25.8% 24.2% 25.9% 20.0% 25.9% 25.2% 21.9% 21.4% 20.0% 23.0% 27.3% DIS+ Nov-19 4Q19 1Q20 Subscribers (000s) 0 28,000 54,500 Net Adds (000s) 28,000 26,500 Sub Growth NM 94.6%

Netflix vs. Disney Quick Compare:

• Price to Sales = (10.3x vs 2.8x) • Market Cap = $216B vs $214B

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