WeWork co-founder Adam Neumann did not plan his family's control of WeWork to end at his death, but instead expected to pass that control on to future generations of Neumans, Business Insider says.
The outlet reports that in a speech that Neumann gave employees in January this year, footage of which he says he watched, Neumann says that WeWork is not "simply controlled – we are generically controlled. "He maintains that they continue to say that while the five children he shares with his wife, Rebecca Neumann," must not run the company, "" they must remain the moral compass of the company. "
According to the BBC, Neumann even referred to his future grandchildren, telling the assembled: "It is important one day, maybe in 1
That may sound like more bizarre proclamations than Neumann, who has a sense of the dramatic. (Speaking to Fast Company earlier this year, he compares WeWork to a rare jewel, asking, "Do you know how long it takes to create a diamond?")
But before WeWork split at the seams, Neumann had every reason to believe that he could pass on power to his heirs. Although many public shareholders may not realize so much, more and more technical founders are relying on the kind of dual-class shares that Neumann has drawn from investors, shares that not only give founders more voting rights for a while after their companies become public or even throughout their lives, but whose power can be transferred and
Last month, we wrote about this as a kind of hypothetical, citing SEC Commissioner Robert Jackson, a longtime law scholar and law professor, who told the public last year that nearly half of companies that have listed shares with double classes between 2004 and 2018, they gave corporate insiders "comprehensive voting rights permanently."
Warned Jackson, "These companies are asking shareholders to trust business judgment – not just for five years, or 10 years, or even 50 years. Forever. "Such a perpetual double-class property" asks them to trust the children of the founder. And the children of their children. And their grandmother's children, this raises the prospect of controlling our publicly owned companies and ultimately Main Street retirement savings being forever held by a small, elite group of corporate insiders – who will pass on this power to their heirs. ”
You may argue that it is pointless to worry that the market will speak as in the case of WeWork. But not every company has such obvious disadvantages and Neumann could make it much harder to get rid of it. In fact, the broader question that the video raises is whether someone will intervene to stop the broader trend, or instead, public-market investors will live with the downside.
Neumann was not crazy to imagine the scenario he did. That doesn't mean it's rational. By giving shareholders super voting shares for a period of time after the transition to the public market, we can understand. Do they give the founders so much power that their children call them pictures of publicly traded companies? Now that is crazy.