Netflix has pledged to allocate about 2% of the $5 billion it holds in cash — some $100 million — to "financial institutions and organizations that directly support Black communities in the United States," the company announced today.
Why it matters: U.S. corporations are sitting on trillions of dollars of cash, which is earning them effectively no interest. Aaron Mitchell, a recruiter at Netflix, had the idea that some of that cash could be deposited at Black-owned banks, where it would be reinvested into Black communities.
The catch: As part of this pledge, Netflix is investing $25 million into a newly established fund called the Black Economic Development Initiative.
- But that investment isn't a "short-term, highly liquid investments that are readily convertible to known amounts of cash" — so they won't count as cash on Netflix's balance sheet.
The bottom line: Netflix says that it wants to "inspire other large companies" to move their cash deposits to Black-led institutions. But given the limits of deposit insurance, that's easier said than done when billions of dollars are on the line.
- Corporate treasurers go to great lengths to keep their billions of dollars of cash in risk-free instruments. That does not include things like savings accounts at banks, which are only insured up to $250,000.
- Netflix hasn't worked out all the details of how it's going to meet its $100 million pledge. The big question remains open: Whether it is possible for significant sums of corporate cash to be held in Black-led institutions, while still remaining classed as cash for GAAP purposes.
Editor's note: This story has been corrected to reflect that Netflix's investment in the Black Economic Development Initiative is $25 million (not $35 million).
