Netflix’s Stock in My Stockings

Featured Image: “Christmas” by alxhe is licensed under CC BY-NC-SA 2.0 

Skills Showcased 

This piece is showcasing my research and critical thinking skills. It shows this by showcasing my integration of sources in a way to a new light on a part of a company. The piece also shows how I can write about a theme. 

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Netflix is an American media production company that has been streaming online for more than a decade. However, their business model did not start off like that. At first, Netflix was a DVD rental and sales company that would mail its products to its customers. Netflix still does that, but now they have changed their model to online streaming and creating their own original content to compete with other streaming sites and Hollywood. This shift has made it an international multibillion-dollar company publicly owned company meaning that it has shareholders who are the ones to control the corporation by electing the board of directors. In addition, Netflix takes on an international accounting framework such as IFRS (International Financial Reporting Standards). The IFRS requires that an entity discloses the amounts used in calculating and diluted earnings per share and to the weighted number of original shares used as a denominator in tackling basic and diluted earnings per share. “IAS 33 sets out principles for determining the denominator (the weighted average number of shares outstanding for the period) and the numerator (‘earnings’) in basic EPS and diluted EPS calculations.” (IFRS) Netflix does both with its stock. It makes sense that Netflix would use the IFRS as it’s now an international entity they would like to use a framework that is agreed-upon internationally. Even if it’s not used in the United States. 

The hierarchy of corporations is shareholders at the top, then Board of Directors, then president, vice president, and other officers then employees of the corporation at the bottom. “The ultimate control of a corporation rests with stockholders who control a corporation by electing its board of directors.”(Wild 491) Netflix is an interesting case because its corporate structure is somewhat diluted by the fact that employees can also own stock as Netflix gives them an option when they are hired. Netflix doesn’t hide this fact by including a spot in its annual report about employees owning stock. This shows clear transparency that the IFRS would look highly on. “IFRS Standards bring transparency by enhancing the international comparability and quality of financial information, enabling investors and other market participants to make informed economic decisions.” (IRFS) Netflix makes it very clear that their employee’s stock exercise prices are greater than the average market price of stock when excluded from the diluted calculation. In class, it was learned that companies try to make it impossible for a hostile takeover and I believe that this situation showcases that Netflix is trying to stop that from happening. Netflix is a very marketable and profitable company especially with its original content, so it makes sense that they would give their employees stock as they are in the company‘s best interest and hopefully keep any hostile takeover from happening.

Netflix is a great company to look at if you want to see a company that follows the stock requirements for the IFRS. They do their best to be very transparent about their practices in their annual report and do the procedures that are asked of them for the IFRS at least for the stock part of it. It’s also interesting to see that their corporate structure is a bit different than a lot of corporations as their employees can be stockholders themselves which puts a little bit of the power back into Netflix as employees are more than likely the ones that have Netflix’s best interest. This also keeps Netflix from getting into the wrong hands. All in all, the stock part of Netflix is annual report is a transparent one and one that gives a lot of insight into Netflix is structure.

Work Cited

IRFS. “IAS 33 Earnings per Share.” IFRS. www..ifrs.org/issued-standards/list-of-standards/ias-33-earnings-per-share/

IFRS. “Why Global Accounting Standards?” IFRS. https://www.ifrs.org/use-around-the-world/why-global-accounting-standards/

Wild, John. Financial Accounting Fundamentals + Connect. Irwin Mcgraw-Hill, 2015.pg. 491.