‘A Mess Any Way You Look at It’: 5 of the Weirdest Things in the WeWork IPO Filing

“We” may have some corporate governance issues.

Officially known as The We Company, the startup dropped its hotly anticipated IPO filing Wednesday and it didn’t take long for corporate governance types to start noting the…irregularities. Here were 5 that stood out.

All in the family

Part of WeWork’s management team is Neumann’s wife and co-founder, Rebekah, who serves as the company’s Chief Brand and Impact Officer. She is also the founder and CEO of WeGrow, the elementary education portion of The We Company. Unrelated fun fact: Gwyneth Paltrow is her cousin.

“Rebekah has been a strategic thought partner to Adam since our founding and has actively shaped the mission and strategy of The We Company and its global impact agenda, as well as being the primary voice and leading advocate for the We brand. Rebekah has never been paid a salary from us,” the filing states.

First class shares for Adam

Adam Neumann’s shares will hold a controlling portion of the voting power because of his ownership of high-vote stock, which carries 20 votes per share. WeWork’s IPO will have three classes of common stock: Class A shares have one vote each. Class B and Class C shares are the “high-vote stock.” According to the filing, “Adam will have the ability to control the outcome of matters submitted to the Company’s stockholders for approval, including the election of the Company’s directors. As a founder-led company, we believe that this voting structure aligns our interests in creating shareholder value.”

Index funds won’t touch this

Sure, maybe for the shareholders of the high-vote stock. But in a section titled “Risks Relating to This Offering and Ownership of Our Class A Common Stock,” the prospectus sounds a warning bell about the differences in voting rights harming the value and liquidity of the Class A shareholders. Many index providers restrict tiered share structures. “As a result,” the filing cautions, “the multiple-class structure of our common stock may prevent the inclusion of our Class A common stock in these indices and may cause stockholder advisory firms to publish negative commentary about our corporate governance practices.”

The commentary from corporate governance expert Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, is certainly negative: “It’s a mess any way you look at it from a governance standpoint.”

A charity case

Can Class A shareholders take comfort in one feature that the WeWork prospectus outlines that could diminish Neumann’s voting power? If Adam and Rebekah Neumann do not fulfill a $1 billion charity pledge within 10 years, the number of votes in their high-vote stock falls from 20 to 10. “In connection with this offering, Rebekah and Adam are dedicating additional resources to amplify the positive global impact of our organization. This effort is designed to enable us to scale our social and global impact as the Company grows.”

“They’re sunsetting if they give money away?” says Elson. “Where does that come from? If you want to invest in philanthropy then do it, but this isn’t being sold as a philanthropy. The whole thing is bizarre.”

That’s one unusual succession plan

Speaking of bizarre, there are curious provisions in the event that Adam dies or becomes disabled. A committee consisting of two current board members—Bruce Dunlevie of Benchmark Capital and Steven Langman, co-founder of private equity company Rhone Group—and Rebekah, who is not a board member, will choose the new CEO. If neither Dunlevie or Langman are currently on the board when this happens, Rebekah will choose a board member or two to help her pick the company’s new leader.

“Succession planning is being done by the spouse, not the independent directors, which is strange,” says Elson.

What’s more, if Rebekah isn’t able to serve in her succession planning duties, “the trustee then acting on behalf of Rebekah and Adam’s estate will serve in all such capacities and make all such determinations,” says the prospectus.

Let’s hope it doesn’t come to that.

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