Welcome to Netflix's 2024 Annual Meeting of Stockholders. I will now turn the call over to Netflix's Chief Legal Officer and Secretary, David Hyman, to begin the meeting.
Good afternoon. My name is David Hyman, and I am Chief Legal Officer and Secretary of Netflix. It's my pleasure to welcome you to the company's 2024 Annual Meeting of Stockholders. The annual meeting is now called to order. This meeting is being held to consider the proposals listed in the proxy statement previously delivered to you and to conduct such other business as may properly come before the meeting. Broadridge Financial Solutions has provided a signed affidavit that the notice of the meeting and the Internet availability of the proxy materials were mailed beginning April 18th, 2024, and it went to all stockholders of record as of April 8th, 2024, our record date. The Inspector of Elections, Lou Larson, a representative of Broadridge, has confirmed a quorum is present, so the meeting is duly constituted and the polls are now open.
We have three management proposals on the ballot that will be voted on at this meeting. One, the election of directors. Two, ratification of the appointment of Ernst & Young as our independent auditors for the year ending December 31st, 2024. And three, advisory approval of our named executive officer compensation. We also have five shareholder proposals on the ballot. The sponsor of these proposals wishes to make a brief presentation, so we will call on you now. Operator, can you please open the line for Ms. Erin Markowitz for Proposal 4 ?
Good afternoon. My name is Erin Markowitz, and I am a Senior Corporate Research Analyst at the AFL-CIO. I hereby introduce Shareholder Proposal 4 on behalf of the AFL-CIO Equity Index Funds. The shareholder proposal requests that the board of directors prepare a transparency report on the company's use of artificial intelligence in its business operations and disclose any ethical guidelines that the company has adopted regarding the company's use of AI. In our view, the development and deployment of AI systems should center transparency and consent from workers, consumers, and other stakeholders. The use of AI to generate media content raises particular risks for entertainment companies such as Netflix. In a 2023 survey on AI risks by McKinsey, factual inaccuracy was the most cited risk associated with AI.
For example, the Netflix true crime documentary, What Jennifer Did, received negative media attention because it included images that allegedly had the hallmarks of AI-generated images. Although the executive producer of this documentary denied having used AI-generated photos, we believe that having a clear and transparent policy for the use of AI-generated media content will help avoid potential controversies in the future. The Archival Producers Alliance, a group of more than 300 documentary filmmakers, has called for the establishment of transparent standards for the use of generative AI in documentaries. We believe that AI systems should not be trained on copyrighted works or the voices, likenesses, and performances of professional performers without transparency, consent, and compensation to creators and rights holders.
We also believe that AI should not be used to create literary or artistic material to replace or supplant the creative work of professional writers and animators in the entertainment industry. For those reasons, we urge you to vote in favor of this proposal. Thank you.
Thank you. Operator, please open the line for Mr. Ethan Peck for Proposal 5.
Hello. This proposal requests a review of how and to what extent the company's policies and positions, including and especially on social and political matters, impacts the company's financial sustainability. While Netflix frequently comments on the sustainability of the climate, something that the company has no impact on or responsibility for, the company, and specifically the board, has made no similar effort to protect the financial sustainability of this company, which is the board's primary, if not only, responsibility. One of the primary ways that many companies, including Netflix, jeopardize their financial sustainability is by taking on unnecessary reputational and financial risks by wading into social and political matters for no financial benefit. Corporations have a fiduciary duty to their shareholders not to take sides on divisive issues, as their shareholders, who hold varying political and social opinions, will always fall on both sides of any given divisive issue.
A company can't use the money belonging to all shareholders to promote and fund the views of half of them. Corporations also have a fiduciary duty to their shareholders not to take any action that may hold significant financial risk to shareholders, which is exactly what dividing and alienating its customers and investors does. So when companies insert themselves in the middle of heated societal debates by taking public stances, as Netflix often has, by funding activism on divisive issues, issues that are meant to be debated among citizens in the halls of Congress, not at corporations or in meetings like this. I shouldn't have to be giving this statement right now. Netflix should be apolitical, but unfortunately, I have to. Then they violate their fiduciary duty twice.
Once for using shareholder assets to push an agenda that those same shareholders are deeply divided about, and another time for risking those, the value of those shareholder assets by doing just that. Because time and again, and particularly in the last few years, the market has punished companies for being overtly political, Netflix included. In July 2022, after 2 years of incessantly taking exclusively left-wing stances publicly on a number of hotbed issues, including DEI, COVID, climate change, trans issues, and more, a politicization that also very noticeably found its way into Netflix's content, the company lost nearly 1 million subscribers in a single quarter, which was the single largest drop in company history.
But after that quarter, the company very briefly learned from some of its mistakes and canceled woke disasters, including Ibram X. Kendi's Antiracist Baby, and a show about supposed male pregnancy called He's Expecting.
Additionally, Netflix rightly withstood pressure from radical activists to not air Dave Chappelle's new special. Immediately after that noticeable political shift, just to be a little bit more neutral, Netflix subscribers rose, and so did the stock price. The data couldn't be more clear. Netflix subscribers simply don't want to be preached on politics, especially in a radically one-sided fashion. They just want to watch good content. We're not asking the company to adopt right-wing or conservative views, just pointing out that the company has a legal obligation not to hold left-wing views either.
The company itself must remain neutral, and insofar as Netflix's streaming content is sometimes political, which is fine, it must not be extreme to either side or over-overwhelmingly biased to one side, as it currently is now, very biased to the left, given that Netflix shareholders and customers are split nearly 50/50 into politics. Netflix is not a small private company, so it can't just editorialize in the way that it wants. If it's gonna take public money, it has to respect public views. Simply put, in order for the company to sustain itself, it should be politically neutral. At a minimum, we recommend that the company thoroughly and fairly evaluate the risks of its current politically biased policies and programming. That's all our proposal requests.
Thank you. Operator, please open the line for Mr. Harvey McKinnon for Proposal 6.
Good afternoon. My name is Harvey McKinnon, and I represent the New York City Carpenters Pension Fund, the proponent of the director election resignation bylaw proposal. The fund is a long-term holder of Netflix and supports the company's board of directors. We appreciate the dialogue on the director resignation issue by company representatives. Shareholders possess several rights as corporate owners, but none is more important than the right to elect the board of directors. The company has in place an election vote standard that requires a director nominee to receive a majority of the votes cast in order to be elected. Netflix operates under Delaware law, which holds that an incumbent director who fails to achieve re-election continues to serve on the board as a holdover director. The company has in place a bylaw that requires such director to tender her or his resignation for board consideration.
The board has full discretion and the final say in determining whether a director's resignation is accepted or rejected. The fund's proposal is straightforward and designed to strengthen the resignation bylaw shareholder voting rights. There are two key provisions. First, a board can accept or reject a tendered resignation from an unelected director, but it would be required to articulate a compelling reason for rejecting the resignation. If the board finds that there is no compelling reason for the director remaining, then the board would accept the resignation and the director's service on the board would end. If the board rejects the resignation, the unelected holdover director would continue to serve on the board. This is when the second key feature of the proposal comes into play.
It provides that when an unelected director continues to serve and is defeated again at the next annual meeting, that that unelected director's second resignation must be accepted by the board. Two strikes, and an unelected director is out. The majority voting standard in director elections was instituted for the explicit purpose of giving shareholders a meaningful right to determine who is elected to a corporate board. Most current director resignation bylaws, including the company's, operate to seriously diminish the election voting rights of shareholders. Our proposal is designed to bolster shareholder voting rights in director elections. While it provides a board a strong measure of decision-making discretion, it limits that discretion by requiring the end of the board service of a twice-defeated director. We believe this is a measured reform which serves the best interest of Netflix and its shareholders. Thank you.
Thank you. Operator, please open the line for Sister Susan Mika for Proposal 7.
Thank you. My name is Sister Susan Mika, and I'm representing the Benedictine Sisters of Atchison, Kansas, who filed Proposal 7. The "Be it resolved" asks, "Resolved, shareholders urge the board of directors of Netflix to amend the publicly available code of ethics by expanding the topic Inclusive and Respectful Work Environment, and to issue a report to shareholders at reasonable expense, excluding confidential information, on how the board of directors of Netflix checks and verifies board member compliance with the amended code of ethics, including outside of their roles as Netflix board members." We felt this was an important concern to be discussed. We felt that the current version of the code of ethics does not sufficiently cover key diversity, equity, and inclusion issues. Some examples that we mentioned are non-discrimination, equal opportunities, and zero tolerance towards harassment, and robust whistleblower protections.
In the resolution, we mentioned amendments which could be considered, and that's in our supporting statement. We met with company officials who listened and decided to see if other shareholders are concerned about this topic as well. We ask for your vote for Proposal 7.
Thank you. Operator, please open the line for Mr. John Chevedden for Proposal 8.
Hello, this is John Chevedden, Proposal 8, Special Shareholder Meeting Improvement. Shareholders ask our board to take the steps necessary to amend the governing documents to give the owners of a combined 15% of our outstanding common stock the power to call a special shareholder meeting. A 15% stock ownership threshold to call a special shareholder meeting would bring Netflix generally in line with more than 100 companies that provide for 25% of the shares to be able to call for a special shareholder meeting. More than 100 companies do not attach a big impediment to their 25% stock ownership requirement. However, Netflix has attached a big impediment to its current requirements by excluding certain Netflix shares from the ability to call for a special shareholder meeting. It is undemocratic to exclude certain Netflix shares from an important shareholder right.
Plus, excluding certain shares is deceptive because Netflix has never told its shareholders how many shares Netflix has excluded from this important shareholder right. 1/3 of Netflix shares could thus be excluded from this important shareholder right. Treating 1/3 of Netflix shares as non-shareholders is not democratic. To make up for this exclusion of certain Netflix shares from this important shareholder right, the new stock ownership requirement at Netflix should reasonably be set at 15%. Since a special shareholder meeting can be used to replace a director, this proposal may be an incentive for Netflix directors to improve their performance and in turn, improve Netflix shareholder value. For instance, Matthias Döpfner and Jay Hoag each received more than 60 million against votes. This compares unfavorably to two other Netflix directors on the 2023 ballot, receiving less than 13 million against votes.
For instance, Tim Haley could be replaced since he was the chair of the Executive Pay Committee in 2023, when Netflix executive pay was rejected by 71% of shares. With the widespread use of online shareholder meetings, it is much easier for management to conduct a special shareholder meeting, and thus the Netflix bylaws need to be Updated accordingly. Please vote yes special shareholder meeting improvement Proposal 8.
Thank you. That concludes the presentation of proposals. The board of directors recommends that stockholders vote for all directors for Proposals 2 and 3, and against Proposals 4, 5, 6, 7, and 8. If you previously voted via the Internet, telephone, or mail, you don't need to take any further action. If you didn't previously vote or wish to change your vote, you may do so by following the instructions on the virtual annual meeting platform. Please do so now. The polls for each matter to be voted on in this meeting are now closed. No additional ballots, proxies, or votes, and no changes or revocations will be accepted. Mr. Larson, will you report on the vote of the matters brought before this meeting?
Yes. Based on preliminary results, the director nominees were duly elected. The stockholders voted in favor of the appointment of Ernst Young LLP. Stockholders approved the advisory resolution to approve the named executive officer compensation. Stockholders did not approve Proposals 4, 5, 6, 7, and 8.
Thank you, Mr. Larson. We will be reporting the final vote results in a Form 8-K within four business days of today's meeting. The following leadership team members and directors are present at today's annual meeting: Ted Sarandos, Greg Peters, Spencer Neumann, Eunice Kim, Marian Lee, Reed Hastings, Jay Hoag, Anne Sweeney, Ambassador Susan Rice, Richard Barton, and Leslie Kilgore. Also present is Stephen Meier from Ernst & Young LLP, our independent registered public accounting firm, and Emily Barton, Netflix's Director of ESG. Stephen will be available for any questions for our auditors. This concludes our annual stockholder meeting. There being no further business, I declare that the annual meeting of stockholders is hereby concluded, and I will hand it over to Emily.
Thank you, David. Since there were no relevant stockholder questions submitted for our auditors, we will now end this call. Thank you all for participating.
This now concludes the meeting. Thank you for joining, and have a pleasant day.