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C/HR/685. Equity on Demand: The Netflix Approach to Compensation. Case Study Analysis

WORDS:
2800
DATE:
2010
PRICE:
29.99 GBP

This paper analyses “Equity on Demand: The Netflix Approach to Compensation” case study by Larcker, McCall and Tayan. The paper evaluates one of the world’s biggest DVD subscription company’s compensation strategy “Netflix Compensation Program” and its features. Further, it demonstrates the way it helps the firm to retain its employees taking into consideration demographic, economical and behavioural factors. The paper answers the following questions: Describe the key features of the Netflix compensation program? Explain whether the program is consistent with the company’s culture, strategy, and business model. Evaluate the economic efficiency of the Netflix compensation program. In what ways is it more efficient than the more standard practice whereby the firm decides the compensation mix for employees at the beginning of the fiscal year? In what ways is it less efficient? What economic and behavioural factors might explain the findings in Exhibits 6 and 7 regarding: (a) an employee’s election to allocate a portion of his/her salary to stock options, (b) demographic variables that influence this decision, (c) correlations between electing to receive stock options and job performance, and (d) the decision of when to exercise stock options? Given your answers to question 4, what changes would you suggest that Netflix make to its compensation program? Why would an executive or employee desire to hedge their stock options? Why would the board adopt the insider trading policy described in Exhibit 8? What is the broader applicability of the type of compensation program used by Netflix? In what types of companies or industry settings would such a system work? In what settings would it be less effective?

 

KEYWORDS: Netflix Compensation Program, Fixed Compensation Plan, Determinants Factors, Larcker, McCall, Tayan,

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