Shareholder Rights


"I am my Board of Directors!"

Series about dysfunctional - if not straight up fraudulent - startups are everywhere from Showtime to streaming services and podcasts everywhere.

They're the kind of shows that get viewers doing Google searches halfway through episodes to see if what they're watching is true. It's safe to say they all get the gist of the stories right while doing what they need to do to keep the plots moving and building some tension.

They add characters who never existed to make it easier to follow. Conflicts that never happened but quickly (and dramatically) make a point that's usually spot on are invented.

Then there's WeCrashed, the story of WeWork and its founder (and erstwhile cult leader) Adam Neumann. WeWork has already been the subject of a podcast (WeCrashed) and a documentary (WeWork: Or The Making and Breaking of a $47 Billion Unicorn). The writers of WeCrashed had a problem - if they left everything 'true' in, no one would believe it. The story of WeWork is insane.

But instructive.

There's a scene in the third episode where a prospective investor/hire asks Adam, "Don't you have to get the board' of directors' permission before you sign me?" He answers, "I am my board."

He says it in front of his board of directors. No one says a word.

That, in a nutshell, sums up the early years of WeWork perfectly. The board of directors were also investors and major shareholders. They had a duty to reign in Adam's excesses and self-dealings but never tried to check him until the company was crashing. Then, they paid him hundreds of millions to leave the company. Like everyone involved in WeWork, except Adam and his wife, they had mind-bending losses. They had themselves to blame, their inactions and lack of oversight led directly to their losses.

Or, as AV Club put it, "The board, the people whose responsibility it should have been to rein the company in, was more focused on getting a gigantic injection of cash that would have allowed its members to cash out their shares at a huge profit; when that failed, they pushed for an IPO to get themselves the same."

Needless to add, at the expense of the company, employees, and minority shareholders.

WeWork had their IPO after Machiavellian machinations between the investors, new money, and, of course, Adam. They left the minority shareholders - most, if not all of them, employees who exercised stock options just before being laid off - with nothing.

The lawsuits have begun. Breach of duty (s), self-dealing, shareholder oppression, and more. None of these have been published yet, but they are moving forward, a major one is a class action filed in San Francisco. We'll be following it as it develops.

The one lesson to take now is to not let a bad situation get this far. Who knows how WeWork would look today if anyone had stood up to Adam years ago? Someone with a good shareholder rights attorney in their corner.