Co-CEOs Are Out of Style. Why Is Netflix Resurrecting the Management Model?
Plenty of companies have tried the twin CEO approach, with mixed results; ‘two heads aren’t better than one,’ some say Netflix CEO Reed Hastings, left, with Ted Sarandos in 2016. Mr. Sarandos was named co-CEO of the company Thursday.
Photo: Ahn Young-joon/Associated Press By Updated July 17, 2020 11:18 am ET
Netflix Inc.’s NFLX -6.88% decision to elevate the company’s chief content officer to co-chief executive, sharing the power and the spotlight with co-founder Reed Hastings, highlights a relatively rare management arrangement: dual chief executives.
In the S&P 500, few companies have co-CEO arrangements, and a number have recently abandoned the structure, slimming down to a lone executive at the helm.
Salesforce.com Inc. ended its 18-month experiment with twin-CEOs in February, leaving Marc Benioff at the top. German software giant SAP SE ditched its dual-CEO model in April after less than six months. Oracle Corp. in December said it wouldn’t return to a two-CEO arrangement following the death of co-CEO Mark Hurd, leaving Safra Catz as the company’s sole chief executive.
Human nature prevents many co-CEO setups from succeeding, corporate governance experts say. Dual bosses can leave employees confused about who holds ultimate decision-making authority, and competitive tensions can flare, breeding conflicts at the top, says Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.
“Co-CEOs rarely work,” he says. “Two heads are not better than one.”
In naming programming chief Ted Sarandos as a co-CEO, longtime Netflix chief Reed Hastings said Thursday that the company was formalizing how it already ran its business. Mr. Sarandos has been at the helm of content creation and runs Netflix’s Los Angeles headquarters. The move is also widely seen as setting up Mr. Sarandos, who is joining the company’s board, to eventually succeed Mr. Hastings.
Unlike some other co-CEO arrangements in the past, Mr. Sarandos and Mr. Hastings appear to have distinct domains. Mr. Sarandos will remain chief content officer, overseeing the company’s vast original programming efforts and entertainment offerings, while Mr. Hastings is expected to continue focusing on the company’s overall strategy and technology.
“In terms of the day-to-day running of Netflix, I do not expect much to change,” Mr. Hastings said in a blog post. Mr. Hastings has been known to embrace the unorthodox. He has a management book coming out in September called “No Rules Rules” about the more than 20-year-old company’s disruptive culture and habit of reinventing itself. In an investor video Thursday, Mr. Hastings said he planned another decade at the company.
“As co-CEO, it’s two of us full-time, it’s not like a part-time deal,” he said. “This is definitely broadening the management team, and helping us grow even faster.”
Even with clear responsibilities, navigating a co-CEO dynamic can be challenging, experts say. Among the largest U.S. public companies by revenue, only two currently have a co-CEO structure, according to research firm Equilar. They are insurer American Financial Group Inc., run by brothers Carl Lindner III and Craig Lindner, and Markel Corp., a holding company that primarily sells insurance and named dual chiefs in 2015.
The coronavirus era only complicates leadership matters. When SAP moved away from its dual-CEO structure in April, it cited the need for clear decision-making during the crisis. Co-CEO Jennifer Morgan left the company, while Christian Klein took the reins as the company’s sole chief. “More than ever, the current environment requires companies to take swift, determined action which is best supported by a very clear leadership structure,” the company said at the time.
At times, signaling the next CEO can cause other senior executives to leave a company, if they feel they were passed over for the top job. Not long after Walt Disney Co. earlier this year named Bob Chapek, then head of its parks and consumer products division, as its next CEO, another top Disney executive, Kevin Mayer, left the company for a CEO role at TikTok.
At Netflix, the situation is different. Mr. Sarandos has long been considered a likely contender for its next CEO. The company also said Thursday that Greg Peters, Netflix’s chief product officer, would take on the added role of chief operating officer. Mr. Hastings said he wanted Mr. Peters to take on more of the kind of work he now does across the company.
“Eventually he needs to know every corner of Netflix better than I do today,” Mr. Hastings wrote in a blog post.
Jeffrey Sonnenfeld, a Yale School of Management professor, said Netflix’s Mr. Hastings has repeatedly defied critics over the years, transforming the company from a DVD-by-mail operation into a streaming behemoth. Still, he expressed skepticism that Netflix’s new executive arrangement would prove long-lasting.
“These co-CEO relationships are really almost always unstable, with very few exceptions to that rule,” he said. “I bet your life on it that it won’t last.”
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Answer the question
1. How does the article explain what Netflix intends to do in order to make the Co-CEO structure work?
2. Do you believe a Co-CEO set up will work? Why or why not? Explain at least one challenge having two CEO’s
350 minimum words combined for the answer… No other sources unless personal example but no other article