- After 26 years in the position
- Praise and thanks for Hastings
- Greg Peters taking over
- Hastings will remain as Executive Chairman at Netflix
- Hastings made a lengthy statement and said 510 words
(exechange) — Los Gatos, California, January 19, 2023 — Reed Hastings, co-chief executive of Netflix, leaves his position. As announced by Netflix Inc. in a news release and in a regulatory filing published on Thursday, January 19, 2023, Reed Hastings has left his post as co-chief executive officer at the entertainment services provider, after 26 years in the role, effective January 13, 2023.
The average tenure of CEOs who announced their departure over the past 12 months was 8.4 years. Around 7% of CEOs left their posts after more than 20 years. This is according to data collected by CEO-exit research firm exechange.
exechange tracks CEO departures at the 3,000 largest publicly traded companies in the U.S., examines the reasons CEOs leave and determines the Push‑out Score™, a measure of pressure on departing chief executives on a scale of 0 to 10.
Reed Hastings’s duties as co-CEO will be taken over by Greg Peters, most recently Chief Operating Officer at Netflix Inc.
Reed Hastings’s move coincides with a management shake-up also involving the positions of Chief Content Officer; and Chairman of Netflix Film.
“This makes formal externally how we have been operating internally”
The management change is explained as follows. Netflix stated: “To complete our succession process, Reed Hastings has become Executive Chairman, and Greg Peters has stepped up from COO to become Ted Sarandos’ co-CEO, and a member of the Netflix board. Reed, Greg, and Ted have been working closely together for 15 years, and this makes formal externally how we have been operating internally.”
The top three reasons cited in corporate announcements for CEO departures over the past 12 months are performance issues (27% of cases), implementation of a planned succession (16.1%) and the statement that the time was right for a change (8.8%), according to exechange data. Other motives given for leadership changes included the outgoing CEO’s wish to pursue other opportunities (5.9% of cases), personal reasons (2.9%) and conduct issues (2.1%). Rather rarely stated reasons are career change (2.1% of cases), health problems (1.8%), death (0.9%), the desire for more time with family (0.6%) and disagreement (0.6%). Sometimes, more than one reason was given. In 31.4% of cases, no reason was given.
Hastings will remain as Executive Chairman at Netflix
Netflix stated: “On January 13, 2023, Reed Hastings was appointed as Executive Chairman of the Board of Directors (the “Board”) of the Company, effective immediately. At that time, Mr. Hastings resigned his role as co-Chief Executive Officer and President of the Company, but remains an employee of the Company in his new role as Executive Chairman. ”
Netflix said: “Mr. Hastings resigned his role as co-Chief Executive Officer and President of the Company.”
Generally, resignations are seen as formally voluntary departures. Still, CEOs may also be pressured to resign. In fact, 78% of the time “resign” was used in CEO departure announcements over the past 12 months, the departing chief executive received a Push-out Score above the critical threshold of 5, indicating elevated pressure.
Share price decline since January 2022
The announcement follows a decline in Netflix Inc.’s share price of 45% since January 2022.
In the position of CEO since 1997
Reed Hastings became CEO of the Company in 1997.
His bio reads as follows:
- Founder, Co-Chief Executive Officer, President and Chairperson of Netflix (since 1997)
- Founder, Pure Software (1991) through IPO (1995) and ultimate sale to Rational Software.
Hastings, as co-founder and Co-Chief Executive Officer, deeply understands the technology and business of Netflix and brings strategic and operational insight to the Board. He is also a software engineer, holds an MSCS in Artificial Intelligence from Stanford University, and has unique management and industry insights.
Hastings is an active educational philanthropist: he served on the California State Board of education from 2000 to 2004, and after receiving his B.A. from Bowdoin College in 1983 served in the Peace Corps as a high school math teacher in Swaziland. Hastings previously served on the board of Facebook, Inc. from 2011-2019.
510 words by Reed Hastings
In the news release announcing his departure as CEO of Netflix Inc., Reed Hastings received praise and thanks.
In announcing the leadership change, Reed Hastings made a lengthy statement and said 510 words.
“Spending more time on philanthropy”
Reed Hastings stated: “I’m so proud of our first 25 years, and so excited about our next quarter of a century. We can do so much more to better entertain the world and deliver more joy to our members.
Our board has been discussing succession planning for many years (even founders need to evolve!). As part of that process, we promoted Ted to co-CEO alongside me in July 2020, and Greg to Chief Operating Officer – and in the last 2½ years I’ve increasingly delegated the management of Netflix to them.
It was a baptism by fire, given COVID and recent challenges within our business. But they’ve both managed incredibly well, ensuring Netflix continues to improve and developing a clear path to reaccelerate our revenue and earnings growth. So the board and I believe it’s the right time to complete my succession.
Starting today, Greg Peters will step up from COO to become Ted’s co-CEO. Going forward, I’ll be serving as Executive Chairman, a role that founders often take (Jeff Bezos, Bill Gates, etc.) after they pass the CEO baton to others. Ted, Greg and I have been working closely together in different capacities for 15 years. As is common in long, effective relationships, we’ve all learned how to bring out the best in each other. I look forward to working with them in this role for many years to come.
Ted and Greg have developed great trust and respect for each other through their collective successes and failures. In addition, they can always be relied upon to put Netflix’s interests first. These qualities – combined with their complementary skill sets, deep knowledge of entertainment and technology, and proven track record at Netflix – create a unique opportunity to deliver faster growth and greater success long term with them as co-CEOs.
Looking back, Ted had the early foresight and skill to push into original programming, changing our trajectory as a company. He then moved quickly to expand into international originals, film, animation, and unscripted – bets that have helped broaden our content slate and which took courage given all the skepticism. Greg has been instrumental in driving our partnerships, building and launching advertising, pushing us into deeper personalization, rebuilding our talent organization and helping to strengthen our culture. He also spent several years in Japan, launching our early efforts in Japanese originals as the country’s general manager, and is currently building out our games initiative.
For myself, I’ll be helping Greg and Ted, and, like any good Chairman, be a bridge from the board to our co-CEOs. I’ll also be spending more time on philanthropy, and remain very focused on Netflix stock doing well.
Also, today, we have made Bela Bajaria Chief Content Officer and Scott Stuber Chairman of Netflix Film. It’s been amazing to see the enormous strides we’ve made across TV and film under their leadership.
We start 2023 with renewed momentum as a company and a clear path to reaccelerate our growth. I’m thrilled about Ted and Greg’s leadership, and their ability to make the next 25 years even better than the first.
Here’s to the next chapter of Netflix and our leadership.”
Over the past 12 months, 25% of all outgoing CEOs remained silent in the departure announcement, according to data compiled by exechange. Departing CEOs who did make a statement said an average of 108 words. The longest statement was 382 words. The shortest statement was 23 words. Leadership transitions in which departing CEOs provide conspicuously short, excessively long or no explanations for their move are statistically associated with elevated pressure and show an increased incidence of Push-out Scores above the critical threshold of 5.
34% of CEOs are forced out or fired
When CEO departures are announced, exechange determines the Push-out Score on a scale of 0 to 10 to assess how likely it is that the chief executive was pushed out or felt pressure to leave the position, with 0 being most likely a voluntary move and 10 being most likely a forced exit. Anything over a 5 indicates that there are valid reasons to believe an executive may have been pushed out.
Of the 341 CEO departures in the Russell 3000 Index evaluated over the past 12 months (January 19, 2022, to January 18, 2023), the average Push-out Score was 5.7, according to exechange data. References to conduct issues, disagreements and irregularities lead to the highest Push-out Scores. When time with family, performance issues or other opportunities were cited as departure reasons, the average Push-out Scores were also significantly elevated.
Around 34% of the CEO departure events from the past 12 months received Push-out Scores of 8 or higher.
In other words, in the past 12 months, one in three departing CEOs were forced out or fired.
Pressure in the communication sector far above the critical threshold
Some industries are under generally higher pressure than others, and CEOs are feeling the strain. In the past 12 months, the communication, consumer staples and health care sectors showed the highest average Push-out Scores. By contrast, pressure on CEOs was lowest in the real estate, financials and utilities sectors, as measured by average Push-out Scores.
In the communication sector, which includes Netflix Inc., the average Push-out Score over the past 12 months was 7.3, which is far above the critical threshold of 5.
In the communication sector, eight exiting CEOs received Push-out Scores of 8 or higher over the past 12 months, indicating that they were most likely forced out or faced strong pressure to step down.
Push-out Score for Reed Hastings’s move determined
The Push-out Score regarding Reed Hastings’s move is explained point by point in the exechange report.
exechange reached out to Netflix and offered the company the opportunity to comment on the score.
Read the full story in the exechange report 4.2023 ($).