A federal lawsuit filed in the US District Court in San Francisco accuses Netflix of giving undeserved “sham” bonuses to top executives so that the company could take advantage of a prior tax loophole. The pension fund lawsuit was filed by the City of Birmingham Relief and Retirement System, one of the company’s shareholders.
The lawsuit alleges that Netflix awarded “multi-million dollar windfalls” to some executives based on reaching milestones that were not difficult in the least for them to achieve and which they almost always seemed to hit. According to a Deadline report published on Wednesday, the four executives (and their ungodly bonuses) named in the lawsuit are: chief content officer Ted Sarandos ($10.5 million), former chief product officer Neil Hunt ($12.5 million), current chief product officer Greg Peters ($3.2 million), and general counsel David Hyman ($800,000).
Under that old tax loophole, which applied to public companies, compensation in excess of $1 million could be tax deductible only if the value of that executive’s bonus goals remained uncertain at the time the salary was enshrined. The suit states that, “Through their conduct, Defendants rigged the compensation process, guaranteeing Netflix offers huge cash payments while misleading investors into believing that these payments were justified by attainment of real performance goals.”
A Netflix spokesperson responded to the lawsuit by saying, “We intend to respond to these claims at the appropriate time.”
The lawsuit is asking for damages based on Netflix board members’ alleged violation of their fiduciary responsibilities and that they return any compensation determined to have been unlawfully gained.