Netflix chief Reed Hastings got 68% raise in 2011, pay cut for 2012
Netflix Chief Executive Reed Hastings' compensation skyrocketed 68% to $9.3 million in 2011, but subscriber losses and strategic missteps will result in a pay cut this year for the head of the popular video subscription company.
The shift is the result of a difficult year for Netflix, during which an unpopular price increase and a botched plan to divide its delivery systems into a DVDs-by-mail and a separate online brand caused a precipitous drop in the company's stock price and a temporary shift in its previously red-hot customer growth.
Hastings' 2011 salary was $500,000, virtually the same as in 2010. However, the value he realized from exercising stock options grew to $8.8 million from $5 million. His total compensation for the year was just under $9.3 million, compared with $5.5 million in 2010.
The company noted in its proxy filing with the Securities and Exchange Commission filed Friday that Hastings' compensation was above the 75th percentile for CEOs at what it considers peer companies — primarily Silicon Valley firms such as Electronic Arts and Autodesk.
However, Hastings' compensation pales next to that of CEOs in the media industry with whom he often deals, such as CBS' Leslie Moonves, who received nearly $70 million in 2011, and Walt Disney Co.'s Robert Iger, who took home $31.4 million.
Netflix noted in its filing that 2012 "compensation for Mr. Hastings has been reduced in light of the Company’s performance in 2011." As a result, the initial value of his stock option allowance — the final value of which is realized when he exercises them — was cut in half from $3 million in 2011 to $1.5 million this year. Hastings' salary will remain the same.
Other Netflix executives got huge raises in 2011 as well. Chief Content Officer Ted Sarandos, who acquires rights to movies and television shows for Netflix's streaming video service, saw his compensation more than double to $4.9 million. Chief Production Officer Neil Hunt got an 81% raise to $3.6 million and compensation for Chief Marketing Officer Leslie Kilgore, who resigned in February, grew 45% to $4 million.
All of Netflix's senior executives except the CEO will receive pay increases in 2012, leaving Hastings as the only one to take a hit for the company's missteps last year.
The Los Gatos, Calif., company lost 800,000 U.S. subscribers during the third quarter and its stock fell 77% from July to the end of 2011. It gained back 610,000 subscribers during the fourth quarter, however, and Netflix shares are up more than 50% so far this year.
— Ben Fritz
Photo: Reed Hastings, chief executive of Netflix, seen in 2005. Credit: Fred Prouser / Reuters