Squid game is popular! In just one month since its launch on September 17, the number of viewers around the world has exceeded 110 million, not only in various countries in the Asia-Pacific region, but also in North America for two consecutive weeks, and the number of views on related topics on TikTok has exceeded 32 billion. Whether you have seen it or not, you have to admit that a craze called "squid game" is sweeping the world.

Who's Netflix?

There is no doubt that Netflix has become the biggest winner of the game. Netflix closed at about $589 a share when "Squid Game" began to air on September 17th.As of October 17, the share price closed at about $633.8 per share, an increase of nearly 7%, and the market capitalization exceeded $208.8 billion.。

Friends who like European and American TV dramas should be no stranger to Netflix. Their slogan is:"Don't give up on your dream. We were just disc rentals at first. "The hearts of the people. It is such a small workshop that started by renting DVD, but it has become a North American streaming empire in a short time, becoming the "four swordsmen of Silicon Valley" with Facebook Inc, Alphabet Inc-CL C and Amazon.Com Inc. How on earth did they do that?

Here we have to mention an important document widely circulated in Silicon Valley in 2009, the Netflix Culture Handbook, which reveals the core corporate culture of Netflix in the form of PPT.Freedom and responsibility。

In 2001, when the first wave of the Internet bubble burst, Netflix faced a huge bankruptcy crisis, and the management led by founder Reed Hastings had to make a difficult decision to cut the size of its employees by 1/3. However, just after Netflix's first large-scale layoffs, Hasting was surprised to find that the atmosphere of the company has changed dramatically, and the motivation and productivity of employees have been significantly improved. Under the circumstances of error, Hasting began to think more deeply about the corporate culture of Netflix.

Netflix's unique equity incentive system

Compared to increasing the number of employeesHow to maintain the talent density of the company is the primary problem to be solved by Netflix.. Netflix's unique equity incentive system is also born under this background. Compared with the traditional equity incentive plan, Netflix has made a certain degree of innovation in many aspects.

Unlike most companies, Netflix wants employees to decide the ratio of cash to stock options in the compensation package, rather than the compensation committee. Therefore, the company provides employees with two ways to obtain stock options.

First, Netflix automatically grants free stock options to regular employees each year, worth 5 per cent of their salaries. If employees want to get more options, they can also choose the second way. Use part of your salary to buy Netflix stock options for investment.

Compared with the first free grant, the second method is obviously the core of the Netflix equity incentive plan. According to the public information on the Netflix employee benefits website,Options will be granted on the first trading day of each month and are valid for 10 years from the date of grant. The price cost (inclusive value) of the option is 40% of the closing price of the stock on the day the option is granted.

To take a simple example, assume the following:

The monthly salary of an employee is $1000.

The daily closing price of the grant is $200.

The number of options granted is $1000 / (40% purchase 200) = 12 Options, which means employees have the right to buy 12 Netflix shares at a price of $200 in the future. If the stock price rises above $200, employees can make a profit by selling it.

License Grant tool: stock option

At present, incentive tools in mainstream markets are broadly divided into two categories:Stock options and restricted stock. There is no difference between the two tools, and the company needs to choose the tools that accord with the company's temperament for motivation according to the type of business and the stage of development.

The characteristics of flexible and upward stock options, encouraging growth and sharing value-added are exactly in line with the rapid growth of most start-ups and the development stage and orientation of pursuing growth, soMost of the companies that choose stock options as incentive tools are early start-ups and fast-growing companies.。

On the other hand, restricted stock is more conservative and prudent, because the grant price is lower or the cost is zero, restricted stock is more guaranteed to the incentive object. However, for companies pursuing market value growth, the over-stable income way can easily make the incentive object pay too much attention to the present value and lack of growth motivation. So the choice of such toolsIt is more suitable for companies that enter a stable period and have low growth expectations.。

It has been 19 years since Netflix went public in May 2002. As the pioneer of the global streaming media market, Netflix global paid subscribers have exceeded 200 million, ranking first among global streaming media manufacturers.If Netflix has been holding shares of the company since its listing, the return for investors has exceeded 4000%.The amazing growth rate of such a company, entering the 19th year after going public, still uses stock options as the main incentive tool for its employees, which shows that Netflix's ambition is more than that.

Flexible grant period and lock-up period

It is different from the annual stock option granting system adopted by most companies.The grant period of Netflix is very intensive, and the first stock trading day of each month is set as the grant date.What is even more rare is thatNetflix abandoned the mainstream three-to four-year lock-up period in the market and chose to unlock it completely on the date of the option grant without setting a lock-up period.

In this way, on the one hand, it can make Netflix's equity incentive plan more flexible in pricing the grant price, and on the other hand, it can help employees ease the anxiety of falling stock prices caused by market fluctuations. Because in less than a month, if the market is not good, there will be an option exercise grant with a lower exercise price. The fact that there is no lock-up period for stock options is also consistent with Netflix's concept of avoiding complex management systems, because there is no institutional control and there is no significant increase in stock prices, so naturally no one will exercise their stock options.

Summary

In fact, Netflix's unique equity incentive plan has also been recognized and supported by most employees. Financial data disclosed from 2020 showThe proportion of stock options in Netflix senior compensation has increased from an average of 44% to an average of 58%.. Reed Hastings, as CEO, is more confident about the future of Netflix, choosing 98.1% of stock options and 1.9% of cash as his total compensation package.

Netflix's equity incentive plan is bold and innovative, which is in line with their corporate culture of "freedom and responsibility". The greater the freedom, the greater the responsibility. Netflix builds a team of only "adults", each of whom knows where he is going and is willing to do whatever it takes to do so. Abandoning all complex, rigid and inefficient management systems and looking at the future from the perspective of development is the correct way to open Netflix equity incentives.