Netflix CIO lawsuit Yahoo Canada

When a company like Yahoo hires Mike Kail as its CIO, it’s probably in part to bring forward some of the best practices he applied while working in the same role at an innovative tech company like Netflix. A new lawsuit against Kail, however, suggests there were some other practices going on that cast shame on the entire profession.

According to stories on Re/Code and many other sites, Netflix is suing Kail, who left the streaming video pioneer this past summer to join Yahoo under Marissa Mayer, for allegedly taking kickbacks from vendors. Here’s the gist:

The Netflix suit says Kail, who joined the company in 2011, arranged Netflix contracts with IT service companies Vistara and NetEnrich, and then pocketed commissions of 12 percent to 15 percent of the monthly fees Netflix paid each company.

Netflix says it paid the two companies a total of $3.7 million from 2012 until Kail’s departure, which would mean he could have collected between $450,000 and $560,000. The suit says he funneled the payments to “Unix Mercenary,” a consulting company he controls. Netflix said Kail approved all payments made to vendors.

Of course, nothing has been proven yet, and Kail (who I’ve never met) will no doubt defend himself accordingly. The damage caused by the lawsuit could extend far beyond him, however. Although it could cause some firms to take a much-needed second look at their IT governance, it could also make firms much more suspicious about how executive decisions around technology are made.

Think about it: Much of the technology marketing world is oriented around influencing CIO thinking. The Netflix suit apparently even takes issue with gift cards Kail might have received. Depending on how this pans out, it could cause a rewrite on policies by which CIOs can — or can’t — accept tokens of appreciation for their time and consideration.

Expect this case to spark a lot of discussion at tech conferences and CIO industry associations next year. It may take a while to work its way through the legal system, but the consequences could be as dramatic as anything you’ve ever seen on Netflix itself.



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