Cult of Personality: WeWork’s CEO Is a Cautionary Tale for Tech
It has not been a good week for Adam Neumann. The newly embattled founder and CEO of the We Company, parent entity of WeWork, is reportedly fending off a coup from the adults in the room.
Unfortunately for Neumann, the grown-ups showered his company with more than $10 billion—and now they’d like to secure their investment against the notably odd, famously self-enriching chief executive.
Softbank, American tech’s deepest-pocketed foreign financier, owns about 29 percent of the We Company, which encompasses WeWork and its sister brands. That includes the company's residential real estate arm WeLive and WeGrow, an alternative schooling program that charges $38,000 for a 4-year-old to do yoga asanas in a designer Chelsea classroom.
In 2017, Softbank famously launched an unprecedentedly huge $100 billion pool of venture capital called the Vision Fund. By pumping money into the We Company, the Japanese corporate mega-conglomerate helped power the company’s fairly incomprehensible $47 billion private valuation—a number that’s since sunk to a more Earth-bound $10 billion as Neumann and company navigate emerging palace intrigues, leading to a tabling of the IPO in the meantime.
Now, the The Wall Street Journal and a handful of other outlets have reported that board members with Softbank loyalties are poised to move against Neumann. Reuters reports that Benchmark Capital is also in on the plan, and Team Neumann and Team Big Money are set to have it out this week. Reportedly, no agreements have been reached. WeWork declined to comment, telling The Daily Beast that the company is in a pre-IPO “quiet period.” Softbank did not respond to requests for comment.
FALL FROM GRACE
Stories about Neumann and his wife, Rebekah Paltrow Neumann—cousin of Goop goddess Gwyneth Paltrow—have included myriad bizarre anecdotes in recent weeks: he stuffed weed in a cereal box on a private international flight; she fired a cluster of employees she’d just met because she “didn’t like their energy” (so much for the warm, fuzzy feelings). Add that to some business maneuvers that have prompted broad accusations of self-dealing, and an erratic picture emerges.
Even among companies defined by their CEOs, Neumann's stranglehold on his company and its culture comes off as extreme.
In August, the company’s financial filings revealed a corporate structure explicitly designed to keep power concentrated with Neumann and his wife, who is credited as the We Company’s chief brand and impact officer and a WeWork co-founder. The prospectus controversially detailed how control of the company would default to her in the event anything happened to Neumann and that she would be empowered to appoint a successor.
In a September amendment to WeWork’s S1 filing, Rebekah Paltrow Neumann appears to have been stripped of that responsibility. “No member of Adam’s family will sit on our board,” the amendment states.
Investor-friendly tweaks designed to rein in the chief executive’s power also saw Neumann’s special class of shares toned down, though they still carry extra votes—votes he could use to purge the entire board, in the event of a failed or flailing corporate ouster.
ICARUS COMPLEX
Neumann’s precarious position is a cautionary tale for the tech industry, where cults of personality à la Steve Jobs-era Apple once reigned. Recent years have illustrated how a company synonymous with its problematic chief executive can devolve into a corporate Superfund site—a mess investors and new leadership are tasked with cleaning up. Former Uber CEO Travis Kalanick is widely regarded as the seed of the ridesharing giant's many misdeeds, now the topic of a bestseller. And no one will soon forget Elizabeth Holmes and Theranos, in spite of the company’s quite forgettable science.
WeWork shouldn’t be an interesting company, but Neumann’s exploits are elevating it into rarefied, risky air. Its core business—subleasing office space—is almost shockingly mundane, but Neumann’s inflated corporate jargon paints a grand, if ambiguous picture—one not without culty overtones. (The We Company’s mission statement? To “elevate the world’s consciousness”—corporate shorthand for ideological negative space.)
Whether or not you agree that WeWork is a tech company (is it enough to take money earmarked for tech companies?) the sector has historically celebrated a degree of “eccentricity” from leaders that might not fly in the traditional business world. Neumann is just the latest in a storied tradition for an industry only beginning to come to terms with its heroes and their at times less than heroic deeds.
Neumann’s fate aside, investors seem to be getting wiser to the smoke and mirrors of singular “geniuses” within tech, seeing the phenomenon for what it usually is: strong branding coupled with aggressive business practices built from the ground up. To investors, this kind of corporate metonymy can be worryingly emblematic of a founder’s vise-like grip on a company—a liability, if not tempered by less lofty minds.
Softbank’s coup isn’t a sure thing, but it’s still an ugly crack in Neumann’s veneer—and a signal he won’t be able to supercharge his company with massive wads of venture capital without some accountability.
In the broader tech industry, the halcyon consequence-free heydays are drawing to an end in the face of an onslaught of regulation and bad press. If investors have their way, the party might be over for WeWork soon too.
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