Netflix is implementing corporate diversification by building a new model of corporate governance. In traditional corporate structures “as the elected representatives of shareholders, corporate directors are supposed to monitor management’s performance and conduct, weigh in on strategic decisions, and ensure a CEO succession plan is in place.” (https://www.gsb.stanford.edu/insights/another-netflix-disruption-transparent-board) However, these directors often lack “the critical information and intimate knowledge of the company’s operations needed to make well-informed decisions.” (https://www.gsb.stanford.edu/insights/another-netflix-disruption-transparent-board)
Netflix sets much more intense expectations for board members who attend monthly and quarterly senior management meetings as observers, and communications to the board are usually 30-page, analysis-laden memos that have hyperlinks to relevant data on Netflix’s internal computer systems. “Being armed with the memo before the board meeting makes for ‘an intelligent and informed conversation,’ according to one director.” (https://www.gsb.stanford.edu/insights/another-netflix-disruption-transparent-board). One might think this could be frowned upon by the CEO who might be overly arming the directors with too much information or setting up for information leaks. Netflix board of directors spend twice as long preparing for board meetings than their counterparts at other companies, but meetings are often shorter because the attendees are so well informed. A big takeaway is decision-making happens quicker because the of the openness.
As for the possibility for leaking proprietary information, this has not really taken place. Part of the reasoning is the data structure that Netflix has built which restricts and tracks the sharing of information. Although the directors governance structure might not be the driving reason for the success of the company, from implementing corporate diversification “the Netflix culture is the key driver of value, and the open board process supports the value creation process.”(https://www.gsb.stanford.edu/insights/another-netflix-disruption-transparent-board)
Powell Points 