Netflix, Hastings Have a History of Ignoring Shareholders: Opinion

NEW YORK (TheStreet) -- For a man I have never met before -- and only exchanged a handful of curt emails with -- I know Reed Hastings quite well.

Simply put, he's a control freak, at least when it comes to Netflix (NFLX).

Hastings has a puppet regime in place on Netflix's board of directors and a management team full of "yes" men and women. There's little threat of mutiny from the inside. When something happens on the outside that Hastings doesn't like, he directs the Board to act unilaterally without broad shareholder input.

Last week, I wrote this:

Netflix CEO Reed Hastings Hates Carl Ichan Right Now. Now, right on cue, Hastings pulls this ...

The latest: Netflix euphemistically adopts a "shareholder rights plan" (Story via CNBC).

It's a poison pill.

Long story short -- it makes it really expensive for somebody like Carl Icahn to orchestrate a hostile takeover and wield influence. That's all Hastings cares about. Keeping what amounts to personal control over the company.

It's an all-around bad deal for shareholders.

First, if the poison pill kicks in, it dilutes the living hell out of NFLX stock.

But, again, Hastings has a history of not caring about such peskiness.

Last year, he opted for dilution when he went to market and fundraised $400 million when he should have sold the company's DVD division to raise cash.

Second, Icahn puts it best in an amended SEC filing posted Monday in response to the poison pill:

This morning [Netflix] announced its adoption of a poison pill. [We] believe any poison pill without a shareholder vote is an example of poor corporate governance, and find the pill Netflix just adopted is particularly troubling due to its remarkably low and discriminatory 10% threshold. We also note that Netflix is one of the few companies that continues to ignore the fact that the shareholders have strongly expressed their wishes through a majority vote to de-stagger its board. As one of the company's largest shareholders we are concerned about the poor corporate governance at Netflix that these and other actions reflect.

Icahn should not be surprised.

Hastings has a vision. He'll be damned if he doesn't go to extremes with it: Either world-beating success or crash-and-burn failure. That's a shame because he is a visionary who could still triumph in a situation where he actually puts Netflix before his ego and ambition.

Ignoring Shareholders: Typical Netflix

You'll find scant reporting of it from anybody other than me, but throughout 2011 I hammered Netflix on corporate governance issues, in particular, the company's decision to ignore the will of its shareholders.

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