001: Where Was The Board?

​WeWork raised $12.8B in equity and debt financing from high profile investors such as Benchmark, Goldman Sachs, T Rowe Price, Wellington and of course SoftBank. That’s a lot of people and opportunities for a board to provide fiduciary oversight. And yet, CEO Adam Neumann was able to treat corporate governance like a joke:

• ​Voting Control: Adam had effective shareholder and board control as his shares had 20x the voting power of ordinary shares
• Nepotism: Adam’s wife was Chief Brand Officer and brother-in-law was Head of Wellness
• Self-Dealing: Adam had the company buy the trademark “We” for $6MM. Oh, did I mention that he owned the trademark? 
• More Self-Dealing: Adam privately bought 4 properties in New York that the company then leased from him. Oh, wait, it gets better. Adam borrowed over $700MM at low interest rates from the company to finance these purchases (and his lifestyle)

​At what point did the investors stop and try to curb Adam’s power? Apparently only after the public markets decided the company was worth less than ⅓ of the last private price. The story of WeWork should serve as a wake up call for private investors to take their fiduciary duties on private boards seriously. Oh wait, Uber and Travis Kalanick already provided that wake up call.

Hmm...wait a second, don’t Uber and WeWork share investors? Yep...SoftBank, Goldman Sachs and Benchmark. Guess the third time’s the charm.

Now we finally know why WeWork’s CEO was able to run wild and free...the board couldn’t find an open room for their meetings at a #WeWork! □ #wherewastheboard #LetThemEatTech pic.twitter.com/b1U5TSt1Vt

— Joseph Floyd (@thejoefloyd) October 4, 2019