- Netflix said on Thursday that it will restructure its governance process, including removing supermajority vote requirements for board changes.
- Investors have been asking Netflix to alter its voting rules, but the company has refused until now.
Netflix shares are getting pummeled after hours because of the company's weaker-than-expected forecast for subscriber growth. But investors are getting something else they've been wanting: a change in corporate governance.
In its fourth-quarter earnings report on Thursday, Netflix said it's recommending the elimination of a supermajority provision that's required two-thirds of the votes for board member changes. The proposal will come at the next shareholder meeting.
"While our current governance structure has served our shareholders extraordinarily well with a sustained period of substantial growth, we've clearly proven our business model," Netflix said in its letter to shareholders. "So the Netflix Board has decided to evolve to a more standard large-cap governance structure and will recommend several changes at our next annual meeting."
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In addition to removing supermajority votes, Netflix said it will allow shareholders to call special meetings and will change the voting standard for its directors in uncontested elections.
Netflix stockholders have been asking for the change to a simple majority for years. Five times since 2013, investors have supported a proposal at the annual shareholder meeting to get rid of the supermajority requirement, yet the company has repeatedly opposed the efforts.
Here's what Netflix said in its proxy filing ahead of the last shareholder meeting in June:
"We believe that in the current dynamic business environment, the supermajority we have in place is appropriate to increase stability in our operations, while still being set low enough for stockholders to have a voice on issues where there is strong consensus. We will continue to monitor and evaluate this issue."
Seven months later, Netflix has finally reevaluated. Its notice came on the same day that the company reported fourth-quarter earnings that beat estimates. However, shares plunged almost 20% after-hours trading on slowing subscriber growth.
— CNBC's Jordan Novet contributed to this report
Correction: Netflix beat on profit and was in line with expectations on revenue. An earlier version misstated the results.