Adam Neumann’s billion-dollar exit package from WeWork is a lesson in giving founders too much control

By Jena McGregor
Oct. 24, 2019 at 11:54 a.m. EDT

Adam Neumann’s eye-popping deal with SoftBank to exit WeWork is being described by corporate governance experts as a prime example of the issues with dual-class shares, where founders or early investors receive “high-voting shares” with voting rights disproportionate to their economic interest.

The news of Neumann’s package, which would let him walk away with as much as $1.2 billion, as well as a loan to repay a credit line, comes amid increasing pushback from investors as start-up unicorns such as Lyft, Pinterest and Peloton continue to go public with such arrangements.

Mark Zuckerberg holds nearly 60 percent of the voting power at Facebook with his super-voting shares. At Snap, the common shares offered as part of its IPO had no voting rights at all; its 2018 annual report said its co-founders controlled 97 percent of the voting power. Neumann’s shares at one point granted him 20 votes per share; that figure dropped to 10 votes per share before he stepped down as CEO.

The exit package is largely about control, corporate governance experts said. The buyout offer and hefty consulting fee from SoftBank, WeWork’s largest outside investor, probably helped loosen Neumann’s iron grip. The leasing start-up has seen its valuation implode, scrapped its ill-fated initial public offering and is preparing to lay off at least a couple thousand employees, according to reports.

“Adam Neumann will essentially get a king’s ransom for grossly mismanaging the company on his way out,” said Amy Borrus, deputy director of the Council of Institutional Investors. “This is a cautionary tale about the dangers of the dual-class share structure.”

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