This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Netflix Happens When a CEO Has Too Much Power

This is not the first time Hastings has appeared on the SEC's radar. Late last year, a report hit claiming that the Commission wanted to know more about how Netflix reports subscribers metrics, as I noted on Seeking Alpha at the time. Hastings, for all intents and purposes, seemed to think the SEC was out of line for asking. Netflix now reports less subscriber data, not more.

Along similar lines, Netflix has a history of ignoring the will of its shareholders. At the 2011 annual meeting, investors overwhelmingly passed a measure Hastings disagreed with; he directed the board to shoot it down. Just hideous, practically non-existent corporate governance.

And, of course, Hastings is willing to dilute the living snot out of his stock if Carl Icahn or anybody else buys too many shares. Hastings' poison pill strategy does not represent the best interest of his company, but is simply a guarantee he personally maintains control.

In his response to the SEC this time around, Hastings tells the government it's wrong and here's how it should interpret the "Fair Disclosure" regulation.

Kudos to CNBC's Herb Greenberg, who saw this coming back it when happened in July. At the time, Greenberg noted on CNBC that the SEC needed to deal with social media as it pertains to Reg FD:

My advice to the SEC: Do it and do it soon. Common sense would seem to prevail, but for some CEOs, arrogance gets in the way.

"Arrogance gets in the way."

As far as we know, that's been Netflix since Hastings took credit for its founding. Things went well. He believed his own hype. He got what he wanted -- complete control. Maybe not officially, but it might as well be, given the figurehead board and executive team Hastings has in place.

It's this arrogance, this disregard for anything but the trajectory of your personal and professional destiny that gets companies in trouble.

When you buy shares of Netflix, you're not buying a stake in a company -- in an organization with checks and balances -- you're putting your faith in one guy. Given what we know about this one guy, that's a scary proposition.

--Written by Rocco Pendola in Santa Monica, Calif.
Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
ZNGA $2.82 -0.88%
NFLX $661.87 0.54%
AAPL $125.61 -0.66%
FB $87.77 0.56%
GOOG $522.49 -0.17%

Markets

DOW 17,688.32 -41.79 -0.24%
S&P 500 2,071.08 -5.70 -0.27%
NASDAQ 4,994.11 -15.1040 -0.30%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs