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Following a strange corporate governance structure and other methods, WeWork’s largest investor is now looking to have Adam Neumann removed as CEO.
WeWork is less than a decade old but is already enmeshed in more than its own fair share of troubles. The company which was founded back in 2010 has already had a large number of its most senior officials exiting. WeWork executives are very unhappy because of all the uncertainty about the company’s corporate governance methods, as well as all the obscurity about the company’s initial public offering (IPO) until it has been recently canceled.
Furthermore, there is a lot of distrust and faithlessness in Adam Neumann, the company’s CEO, so much so that WeWork’s largest investor Softbank Group, represented by Chief Executive Masayoshi Son, is spearheading efforts to have Neumann ousted from his position as CEO.
So far, there has been no official statement from WeWork on much of the situation but it’s clear that all is not well. Softbank came on board back in 2017 in an agreement that guaranteed the inclusion of the Japanese conglomerate’s Vice Chairman Ronald Fisher and former Board Director Mark Schwartz, as a part of the WeWork board.
Since then, Softbank has invested billions of dollars into WeWork. However, as Neumann still holds more than enough shares to make him a controlling shareholder, he still has too much control and can even sack the board if he chooses to. This directly means that removing Neumann might be close to impossible if he doesn’t step down of his own accord.
However, this isn’t the end of WeWork’s woes. It has also been reported that the banks – JPMorgan Chase & Co., Credit Suisse Group AG and UBS Group AG – which gave the company a credit line access to the tune of $500 million, are very unsatisfied as well, and are looking to change the already agreed-upon terms of the funding. Neumann has already accessed $380 million of the credit figure.
Kellie McElhaney, a University of California Berkeley’s Haas School of Business professor, noted:
“It’s Uber-scale mess. He’s really taken a first-mover advantage that WeWork had in the space and blown it in a big way.”
Softbank’s move to have Neumann removed is not surprising at all especially considering the situation at the time it came on board. Softbank’s investment into the company was largely based on a valuation said to be worth $47 billion which had already dropped to $10 billion by the time the IPO was being planned.
Furthermore, there is also news of Neumann’s reported excesses which make him a lot less trustworthy. Some of these include drug abuse, a disturbing conflict of interest regarding some of the buildings used by WeWork, and also the fact that shortly before the IPO was to launch, Neumann reportedly withdrew $700 million in an unusual turn of events. So far, he is said to have plunged about $80 million into several real estate endeavors.
Members of the WeWork board are reportedly considering giving Neumann the option to become an interim CEO until a worthy enough substitute is found. Either way, Softbank hasn’t had the best of times, as it also lost up to $600 million when Uber stock (UBER) fell to a record low, earlier this month.
So far, there has been no official request made to Neumann but it seems unlikely the CEO would be willing to step down. Till then, Neumann has a lawsuit to fight off from disgruntled employees who claim that the CEO fires staff members willy-nilly and also forces employees to participate in a mandatory alcohol-driven summer camp.