On Thursday afternoon, Netflix announced that co-founder and chairman of the board Reed Hastings would be stepping down when his term expires later this year “in order to focus on his philanthropy and other pursuits,” according to a letter to shareholders.
Hastings founded Netflix in 1997 with Marc Randolph, and took the reins in 1999 when the company was still a DVD-by-mail service. In 2020 he elevated creative executive Ted Sarandos to the co-CEO position, reflecting how important original content had become for Netflix, by then the leading subscription streaming service. In 2023, he stepped away from the co-CEO role, with chief operating officer Greg Peters replacing him.
After a new board is elected in June, he will just be a Netflix shareholder, with a half a percent of the company’s shares, according to FactSet. His holdings have dwindled considerably in recent years from charitable donations.
Hastings is relatively young at 65 and his exit at that age is a bit unusual for tech founders. He doesn’t seem to have been forced out, and during the company’s Thursday first-quarter earnings call, Sarandos and Peters said that there had been no behind-the-scenes disagreements over the failed Warner Bros. Discovery merger. From our vantage point today, this looks like a six-year slow goodbye after a two-decade run.
New Street Research’s Dan Salmon didn’t find the move surprising.
“Despite Hastings’ outsized impact setting the culture and early success of NFLX, co-CEOs Greg and Ted have now had their hands firmly on the wheel for some time,” he said in a Friday note. “Not only has this been a very successful succession (in contrast to, say, DIS) but NFLX currently features one of the most successful co-CEO arrangements in recent memory.”
On the earnings call, Sarandos said, “The first time I met Reed in 1999, he said that he was building a company that would be around long after him, and that requires succession.”
“Now, imagine talking about succession while you’re just starting to build,” Sarandos said. “He built a company of risk-takers.”
Bill Gates left Microsoft’s board in March 2020 at roughly Hastings’ age — Gates was 64 — just at the beginning of Covid pandemic lockdowns.
Gates had stepped down as CEO in 2000, but remained in a day-to-day role until 2008. He ceded the chairman role in 2014 to focus more on philanthropy and his investment vehicles like Breakthrough Energy.
The Wall Street Journal, citing multiple sources, reported in 2021 that Microsoft board members “decided that Bill Gates needed to step down from its board in 2020 as they pursued an investigation into the billionaire’s prior romantic relationship with a female Microsoft employee that was deemed inappropriate.” The Journal reported that Gates resigned before the investigation was complete.
A Microsoft spokesman told the Journal it had hired an outside law firm to conduct an investigation into a complaint from a former Microsoft employee with whom Gates “sought to initiate an intimate relationship.” A Gates spokesperson acknowledged the relationship with a Microsoft employee, but said his “decision to transition off the board was in no way related to this matter.”
Today, 81-year-old executive chairman Larry Ellison remains keenly involved in running Oracle’s business almost half a century after its founding. Though co-CEOs Clay Magouyrk and Mike Sicilia are in charge day-to-day, Ellison takes center-stage at Oracle, and still owns 40% of the company. A sailor in his spare time, he may die at Oracle’s helm.
In the past, it was very common for even successful founders to be forced out after the company went public, like Steve Jobs’ 1985 board-battle losses at Apple. But since the 2004 Google IPO, it’s become more common for tech founders to protect themselves from this outcome via dual share classes. Increasingly, founders control their own fates, even after going public.
While Hastings didn’t have that sort of muscle, he was still able to script his own ride off into the sunset. Perhaps he will become a ski bum.
Write to Adam Levine at [email protected]
