Leadership / WeWork

Leadership at WeWork

-A reflection on WeWork

-On what it means to lead

-The problems of charismatic leaders

-The value of the S-1

[Update, ofc, the CEO has resigned now]

Much is being written on WeWork and the debate around its valuation as it has tried to list on Public markets. Scrutiny of the business, governance and the like. A friend mentioned in passing the other day how the regulation behind the S-1 filing document was one of the most-value adding pieces of financial regulation law of history. This episode seems to back this up, as the transparency that the S-1 filing has brought has cast a scrutiny  that may have been lacking before.

The law is the 1933 Securities Act - “An act to provide full and fair disclosure of the character of securities sold in interstate and foreign commerce and through the mails, and to prevent frauds in the sale thereof, and for other purposes.”

There’s plenty of analysis of the business model and valuation. I’m interested in an assessment of the CEO as a person from what we can tell.

There has been analysis about its CEO and his “self-dealing” taking his trademark on “We” and selling it back to the company. Plus the side ventures WeWork has invested in, which closely align with the CEO’s personal interests, but seem further away from WeWork’s core business.

Namely a private school, a surfing/wave pool business, a natural food and an energy drink business. Plus WeWork has bought a private jet at $60m.

As a fundamental investor looking at company fundamentals and management - what it means to be a leader is an important question for me - although I know not for everyone.

When I’ve asked people, especially employees, what they look for - they tell me  they look to their leaders to reach out beyond themselves and beyond their own self-interest to a “wider purpose” to some purpose higher than themselves.

I sense this “purpose” led work - attractive to the younger generations - is becoming ever more important.

It’s one of the problems in the sense of “fairness” for executive pay.

When we see a CEO whose actions seem to have such self-interest to go along with the typical self-belief - typically needed - I don’t think people especially employees are inspired by that.

To me, that goes to the heart of the challenge with WeWork (and previously with the former Uber CEO) - it’s a challenge of leadership.

I know a multi-millionaire biotech CEOs who still travel economy as this means there is more money left to pursue the mission - save people’s lives.

So When Wework says this of its mission:

“When we started WeWork in 2010, we wanted to build more than beautiful, shared office spaces. We wanted to build a community. A place you join as an individual, 'me', but where you become part of a greater 'we'. A place where we’re redefining success measured by personal fulfillment, not just the bottom line. Community is our catalyst.”


“Create a world where people work to make a life, not just a living.”

I’m unsurprised that some have found jarring the CEO’s interconnection with what many view as his personal interests.

I am surprised neither the board nor a good friend/adviser has taken him aside and offered him other advice (or in the case of the investments sanctioned them).  

This twitter story by an early WeWork employee (number 17)  is also telling about how she wasn’t given options/stock. https://twitter.com/tristajaye/status/1162471350851817472?lang=en

Update: WeWork CEO has now gone. He’s still a billionaire though. 

Incentive Pay, CII update

Strong emphasis on time vesting awards:

CII overhauled its policy on executive compensation, urging public companies to dial back the complexity of pay plans for top executives and set longer periods for measuring performance for incentive pay. The new policy cautions against the pitfalls of performance-vesting awards and encourages companies to explore adopting simpler plans comprised of salary and restricted shares that vest over five years or more. The policy also recommends that companies consider barring the CEO and CFO from selling stock awarded to them until after they depart, to ensure management prioritizes the company’s long-term success. Although performance vesting share plans can work well for some companies, recent studies suggest they may not provide a strong enough connection to long-term company performance on a broad level, and use goals and metrics that can be numerous, overlapping, flexible and hard to understand.

CII notes:

For some companies, emphasis on restricted stock with extended, time-based vesting requirements—for example, those that might begin to vest after five years and fully vest over 10 (including beyond employment termination)—may provide an appropriate balance of risk and reward, while providing particularly strong alignment between shareholders and executives.Extended vesting periods reduce attention to short-term distractions and outcomes. As full-value awards, restricted stock ensures that executives feel positive and negative long-term performance equally, just as shareholders do. Restricted stock is more comprehensible and easier to value than performance-based equity, providing clarity not only to award recipients, but also to compensation committee members and shareholders trying to evaluate appropriateness and rigor of pay plans.

This is in line with work I’ve mentioned previously that Alex Edmans and Tom Gosling have done via the Purposeful Company.