"There was just one catch to landing that deal: It had to hire the streaming company’s vice president of IT operations, Michael Kail, as a consultant and an advisor, and pay him with fees and stock options."
That seems pretty clear to me.
“leveraged his status as a leader of the IT community in Silicon Valley to subvert the trust of Netflix and others to profit at their expense”
How did he leverage it in a way that was illegal? I'm not questioning that he did it, I literally don't understand. The diversity of responses here highlights what's confusing. People are saying hiring him at all was the problem? Other responses say that hiring him without Netflix knowing is the problem? It's hard for me to understand the specific transgression.
If you don't understand why that's wrong, I strongly suggest maybe taking a few philosophy or ethics classes.
In short: He was supposed to be acting on behalf of his employer - that's what being an exec means. He instead used the resources of his employer (not his to use, except on behalf of the employer) to dangle a lucrative deal in front of a much smaller company - which, at this point, is akin to exercising quite a bit of force, because these deals can be make-or-break especially for small places.
He then made that deal contingent on enriching himself personally.
That's about as crooked as you can get without inflicting physical harm.
Conflict of interest. Netflix is defrauded because they could have selected a lower cost vendor, or developed the service in-house.
- I work in purchasing approval position for company A
- Company B would like to do business with Company A
- If I say "B, I can get you deal with my employer A, but you need to give me extra money" - this is against every business conduct guideline / contract / terms of employment in every company I worked for, and against law in many jurisdictions.
In case that somehow slipped / you missed it: person was SIMULTANEOUSLY employed by A, while being given money by B to approve things on behalf of A. That's simple kickback / bribery.
It wasn't a morally-dubious but frequently-legal case of "revolving door" where a person does this sequentially. They were approving deals as exec for netflix, and earning money to approve those deals by small companies, at the same time.
When someone hires you to do a job, they hire you to make decisions that are in the best interest of the company. If you are getting paid bribes from suppliers when you buy their services for the company, how can you be trusted to be objective?
I'm curious, what geography do you work in? European country, India, China, USA, Canada? My curiosity is because this seems self evident to me, but it may be cultural thing, and I'm curious to know your cultural background.
Netskope wanted Netflix to be a customer.
Netflix (or, more specifically, whoever they talked to at Netflix) said "Sure, we will buy your product, but you have to pay Michael Kail."
Nine other companies were told the same thing by Netflix.
The question here is whether Netflix paid Netskope because that was genuinely the right thing for Netflix, or whether Netflix paid Netskope because Michael Kail, who had the authority to make purchases using Netflix's money, personally benefited from the deal. It's a conflict of interest.
Maybe a simpler example, and possibly easier to understand: Suppose Michael Kail, in the evenings after he got home from Netflix, started a company called Kailcorp that provided IT services. Then when he got back to the office, he said, "We should sign a deal with Kailcorp and pay them lots of money." Is it clear why this would be illegal / why he would be profiting at Netflix's expense? (Genuine question - maybe it's not.)
If so, then the only distinction here is that Kail didn't start the company himself, he subverted ten other companies (with real products) into the same thing.
