Netflix Stock Prices and Employee Compensation (2022)

Ever since Netflix stock prices have dropped, several events have unfolded for the streaming giant’s employees.

What is an Employee Stock Option Program?

Employee Stock Option Programs grant employees an equity compensation where instead of granting the shares of stock directly, employees are granted options giving them the right to buy the company’s stock at a specific price within a specific period of time.

How Does Employee Stock Option Plan Work at Netflix?

While several companies allow employees to buy company stock (RSUs or Restricted Stock Units), Netflix has an unusual plan that allows employees to buy higher-risk/higher rewards stock options. Out of the money you’ve set aside from your paycheck each month, you can purchase options at 40% of the current stock price, allowing you to buy 2.5 times more than shares. What sets these options apart from RSUs is that your stock will have some value even if the prices go down. But, in the case of options, they lose 100% of their value when the price drops below the exercise price, which means employees lose all their investment. Netflix also has an unusual agreement that grants options each month that employees can vest immediately.

  • “How much of your salary are you willing to risk with stock options?” If options lose all of their value in the worst-case scenario when the prices go down, how much are you willing to lose?
  • “What are the tax implications of your choice?” You may have access to different tax advantages depending on your stock options, i.e., Non-qualified Stock Options (NQSOs) or Incentive Stock Options (ISQOs). Check with a professional to understand the tax arrangements better before making a choice.
  • “What are the rights and restrictions applicable in your company for the plan?” The employee’s different rights and restrictions will drastically impact your choice and decision.
  • Last, if you have no idea how to handle stock options, it is best to seek professional advice to navigate through complexities.

Do These Events Indicate Netflix Layoffs?

According to Bloomberg, the company is already in the cost-cutting mode. A company that had a reasonably flat structure for the longest time has started restructuring its engineering teams to create levels to reduce cost, keep less room for mistakes, and have specific employees of a certain level performing tasks instead of them all being on the same level. Netflix layoffs were initiated by its editorial arm, Tudum on 29 April 2022, as part of its reorganization efforts in marketing teams.

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