Netflix Stock Option Program

We want our employees to have an opportunity to take part in Netflix’s success. Most companies mandate how your compensation is structured (base, bonus, and restricted stock), but at Netflix, we believe in guaranteed top-of-personal-market pay and providing employees with a choice in the degree to which they participate in equity investment and its related risks.

Our Stock Option Program is unique. You automatically participate in the program at a certain level at no risk to you. And, in most countries, you can choose to participate to a greater extent by exchanging your compensation for more options. The choice is yours. 

How it Works


(i) Australia, Belgium, Brazil, Germany, India, Netherlands, United Kingdom, and United States Employees
When you join Netflix as a salaried employee, an amount equal to 5% of your annual salary will be allocated to the Stock Option Program. You can think of these as ‘free’ options, at no cost to you. In your first year working at Netflix, this allocation is prorated from your hire date, and it’s annualized from then on. 

If you want the opportunity to participate at a higher level, you can enroll in the program’s Annual Supplemental Stock Option Allocation (Supplemental Allocation). You can direct up to 100% of your salary, reducing your cash compensation in exchange for stock options. No amount of the compensation you direct to the Supplemental Allocation is considered taxable income—a potential tax advantage for you. 

(ii) Japan, Singapore, and Taiwan Employees
Employees in the above countries, where we do not offer supplemental SOP, to allow you greater equity participation, your free options are calculated based on 10% of your annual salary.


Enrolling
You are automatically provided the free options.  

Employees in all locations (except Japan, Singapore and Taiwan) can enroll in the Supplemental Allocation when they join Netflix or during the program's enrollment period, which typically occurs in December.  

If you enroll in the Supplemental Allocation, the amount of cash compensation you direct to it can’t be changed until the next enrollment period, even if you experience a life event that qualifies for a change in other Netflix benefits.  


Calculating Your Options
Options are granted monthly on the first trading day. We use a basic calculation to figure out the number of options granted. We first calculate the amount of funds that will be available on a monthly basis to acquire options, then apply it to the formula used to calculate the number of options granted.  Here's how it works:

Example of calculating your free options: 


(i) Australia, Belgium, Brazil, Germany, India,
Netherlands, UK & US Employees


(ii) Japan, Singapore, &
Taiwan Employees
Annual salary: $240,000
5%: $12,000 ($240,000 x 5%)
Monthly portion: $1,000 ($12,000/12)
Annual salary: S$340,000
10%: S$34,000 (S$340,000 x 10%)
Monthly portion*: S$2,833 (S$34,000/12)
*converted to USD
We then use the amount of monthly funds available and the closing stock price on the day of grant (multiplied by 40%) to determine how many options you will receive, based on the following calculation:

Monthly Funds Available
40% x Closing Price on Date of Grant
Monthly funds available: $1,000
Closing stock price: $120
Reduction to 40%: $48
Options granted: 20.83 ($1,000/$48)

$1,000 
40% x $120

You are granted 20 options (we can't grant partial options, so the remaining $ value is carried over and applied in the next month).
Monthly funds available: $1,983
Closing stock price: $120
Reduction to 40%: $48
Options granted: 41.32 ($1,983/$48)

$1,983 
40% x $120

You are granted 41 options (we can't grant partial options, so the remaining $ value is carried over and applied in the next month).


Calculating Your Supplemental Allocation Options 
(Australia, Belgium, Brazil, Germany, India, Netherlands, United Kingdom, and United States)
We use the same grant calculation formula to determine the number of grants for your Supplemental Allocation. We simply add the amount of cash compensation you directed to the Supplemental Allocation to your free options. 

For example, if you decided to contribute $24,000 annually, this amount is added to the $12,000 (5% value using the salary from our previous example) for a total of $36,000. Divided by 12 months, your monthly portion is now $3,000. The options granted monthly utilize the same equation as previously outlined. Your cash compensation, using the example above, is reduced to $216,000 ($240,000 - $24,000). Your paychecks are then calculated using this adjusted salary.


Vesting
Your options are fully vested (i.e. you have the right to exercise) at the time of grant. This means you can exercise them immediately within current or future trading windows. (To read up on trading windows and your role in the Stock Option Program, review the Netflix Insider Trading Policy.)


Exercising Your Options
It’s easy to exercise your stock options online at any time prior to their expiration date. An E*TRADE account will be opened for you upon your first grant. As a defined “insider” of the company, be sure to familiarize yourself with trading window guidelines.

Your options expire 10 years after the grant date (regardless of whether you are a Netflix employee at that time).

Important Rules
We’ve prepared a list of FAQs to help you understand important rules governing this program. 


U.S. employees and employees on temporary assignment outside the U.S.
It’s important for you to be aware of a few things that may be affected by your participation in the Supplemental Allocation.
  • As described earlier, you reduce your cash compensation in exchange for receiving additional options. Because you’re reducing your pay, benefits that are normally determined and deducted from your pay can be impacted. For example, if you participate in the Netflix 401(k) Plan, the calculation of your percentage deferral is based on your bi-weekly pay. If you reduce your cash compensation by directing money to the Supplemental Allocation, you will also reduce your 401(k) deferral. In addition, be aware of the impact on your take-home pay—particularly if the health plans you enrolled in exceed our Health Benefit Allowance—so you don’t reduce your monthly pay to the point you can’t cover your premiums. 
  • The amount of compensation you direct to the Supplemental Allocation is not considered when calculating your short-term disability benefits.
  • Netflix currently grants only non-qualified stock options. Under U.S. tax law, this means you aren’t taxed at the time of the grant. You owe tax when you exercise the option, but only on the difference between the exercise price and the market value of the stock at the time of exercise.

International employees
It’s important for you to be aware of a few things that may be affected by your participation in the Supplemental Allocation.
  • Free options and Supplemental Allocations are translated to USD (U.S. dollars) for calculation purposes.
  • As described earlier, you reduce your cash compensation in exchange for receiving additional options. Because you’re reducing your pay, benefits that are normally determined and deducted from your pay, or calculated based on your earnings, can be impacted. An example is contribution to a pension or retirement plan, and/or Netflix contribution to your pension or retirement plan. Additionally, your Supplemental Allocation is not included in compensation when determining your sick leave and disability (where applicable). Finally, be aware of the impact on your take-home pay—particularly if the health plans you enrolled in (where applicable) exceed our Health Benefit Allowance—so you don’t reduce your monthly pay to the point you can’t cover your premiums. 
  • The options granted to you are not considered part of your employment relationship with Netflix and are considered to be separate from your salary and other benefits.
Review the Global Stock Option Agreement and Prospectus/Employee Information Supplement in Workday for more information and for other important terms and conditions, notifications, and tax information.