Wework Corporate Governance

HBP# NA0714
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The We Company: A Quandary in
Corporate Governance
Roberto S. Santos, University of Massachusetts Lowell
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Shreya Patel, University of Massachusetts Lowell
In early September 2019, The We Company’s Board of Directors (Board), which

included Bruce Dunlevie, Ronald Fisher, Mark Schwartz, Lewis Frankfort, Steven
Langman, and John Zhao (see Exhibit 1), faced a predicament. Since the company had
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filed its initial public offering (IPO) prospectus in August 2019, it had been the focus
of increased media scrutiny related to not only its IPO prospectus, but also for possible
conflicts of interest associated with the behavior of its CEO and Chairman of the
Board, Adam Neumann.1 Investors had begun to question Adam’s ability to run a large,
public company.1 The IPO roadshow was planned to kick off as soon as the week of
September 16, 2019.2 Something had to be done to restore investor confidence.3, 4, 5
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THE PROSPECTUS
On January 8, 2019, WeWork, a shared office space provider founded in 2010 by Adam
and Chief Culture Officer Miguel McKelvey, changed its name to “The We
Company.”6 This decision was made with the intention to rebrand the company and
add two additional business units under the same umbrella (see Exhibit 2): WeLive,
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a fledgling co-living residential unit, and WeGrow, an elementary school attended by

Adam’s children.7, 8 Adam’s wife, Rebekah Newmann, served as WeGrow’s CEO
but was not paid a salary.7 On August 14, 2019, The We Company filed its IPO
prospectus with the U.S. Securities and Exchange Commission. On the 199th page, the
prospectus stated:
In July 2019, WE Holdings LLC assigned residual rights related to “we” family
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trademarks to the Company, which we desired to obtain following our

rebranding in early 2019. In consideration of this contribution and in lieu of
paying cash, the Company issued to WE Holdings LLC partnership interests
in the We Company Partnership with a fair market value of approximately
$5.9 million, which was determined pursuant to a third-party appraisal – The
We Company Form S-1.7
The “We” trademarks were developed for a brand outside of the scope of Adam’s
employment at The We Company, thus they were not legally subject to the
contractual right of assignment to the company. While Adam disclosed this action in
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-----------------------------
Copyright  2021 by the Case Research Journal and by Roberto S. Santos and Shreya Patel. The
authors would like to express their sincere gratitude to Case Research Journal Editor Gina Grandy,
Associate Editor Eric Dolansky, and three anonymous reviewers for their guidance and helpful
feedback throughout the review process. An earlier version of this manuscript was presented at the
2020 North American Case Research Association (NACRA) annual meeting.
The We Company: A Quandary in Corporate Governance 1
This document is authorized for educator review use only by Stella Xu, University of Bedfordshire until May 2023. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
the S-1 filing, this and other information contained within the IPO filing immediately
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drew a great deal of scrutiny and vitriol from business pundits in the media.1 It also
raised red flags with potential IPO investors.1 As expressed by Amy Borrus, Council
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of Institutional Investors, “it turns out a lot of investors had pointed questions as to
how the company was structured, how [Neumann] ran the company, as well as the
economic outlook for the company.” 9
The IPO prospectus provided a glimpse into the inner workings of the company.
It revealed losses of $429 million in 2016, $933 million in 2017, $1.9 billion in 2018,
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and $904 million in the first 6-months of 2019 (see Exhibit 3).7 While revenue
generated from rental fees was up year-over-year, operating expenses continued to
outpace revenue.7 As of 2019, the company had yet to make any profits and it was
losing $219,000 every hour.10 Between 2013 and 2014, the company had also loaned
$25.4 million (0.2% interest) to We Holdings LLC (repaid by retiring shares of stock
held by We Holdings LLC) and forgave a $625,000 loan to its CFO, Artie Minson, in
2018.7 The company’s business model involved leasing properties, renovating them,
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and then renting them out to clients at a higher price.11 It had signed long-term leases
with many of the landlords of its properties (15 years average) and the company was at
a higher risk of default during a recession.1, 7 The prospectus also revealed that Adam
and Rebekah had pledged to donate $1 billion to charitable causes over the course of
10 years following the IPO.7
ADAM NEUMANN: IT’S ABOUT ME, NOT WE

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Adam envisioned The We Company as a place where people worked, lived, and grew,7
building a cult-like following in the process, including among investors.12, 13
When you’re in a room with Adam, he can almost convince you of anything. –
Former The We Company employee12
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So many of the people were young and had never worked in a real company.
They bought all of it. I realized after I got there it was a cult. – Former Senior
Executive12
When I met him, after a couple of minutes, I wanted to invest. He was hungry
for success—that was for sure. – Joey Low, Founder Star Farm Ventures14
While Adam’s vision, hubris, and masterful storytelling had elevated him to idol status
among board members, some former employees described him as outrageous,
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domineering, and inappropriate.12, 13, 14

In 2015, Adam sold some of his shares as part of an investment round, profiting
millions, while the company offered its employees a substantially smaller payout for
their shares.14 Adam had also purchased properties in New York and San Jose and then
leased them to The We Company, collecting rent from the company for years.1, 7
Eschewing the traditional CEO persona, Adam walked barefoot around the office,
held rowdy office parties, and built a chaotic office culture.14 During a 2016 all-hands
meeting to discuss why he had fired 7% of the staff, he explained that it was the only
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way to cut costs.14 The meeting was promptly followed by a tequila infused party with
a performance by hip-hop group Run-DMC, leaving employees dumbfounded.14 From
March to October 2017, Adam had cashed out $700 million in advance of the
company’s IPO.7, 9 He also used office maintenance and IT personnel to fix things
around his home.14 Several of Adam’s immediate family members were employed by
the company.1, 7 One was the head of the company’s wellness offering, and another
2 Case Research Journal •Volume 41• Issue 4• Fall 2021
was hired to host its Creator Awards in 2018, both of whom were paid salaries in the
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range of $200,000 U.S.7
The We Company’s triple-class share structure meant that Adam’s stock had 20
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votes per share to every one vote of regular shareholder stock,7 which ensured that he
would remain in control.1 If anything happened to Adam, his shares would go to
Rebekah, who was also empowered to pick a new CEO;7 a task usually delegated to
the board. Adam claimed that his descendants would still control the company in 300
years.12
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FUELING EXPANSION
The We Company’s financial situation was attributed to its expansion plans. Its
expansion strategy consisted of buying and leasing real-estate properties as well as
acquiring smaller shared office space competitors, such as Spacemob in 2017, Naked
Hub in 2018, and Spacious in 2019.15 The We Company also invested in unrelated
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companies like Wavegarden in 2017, a manufacturer of artificial wave pools, for $13.8
million.16 Adam, an avid surfer, believed that investment would significantly enhance
the company’s product offering,16 but it raised concerns among investors about the
responsible use of company resources.12
Despite its expansion efforts, the company’s size was smaller than some of its main
competitors. The We Company’s portfolio comprised 528 locations and 527,000
members as of 2019.7 One of its main competitors, IWG (under the brand of Regus™),
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a publicly traded European shared office space provider founded in Belgium in 1989
had 3,000 locations and 2.5 million members as of 2019.17 IWG’s market cap was $3.7
billion.1 IWG was one of the few competitors in the industry that actually profitable,
posting a profit of $61 million in 2018.18 The We Company also faced considerable
competitive rivalry in certain areas. In China for example, it faced Ucommune, a
Chinese rival founded in 2015, that also incurred significant losses in an attempt to
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grow rapidly but had nearly 200 locations in China as of 2019.19

The We Company’s expansion was financed by venture capital. Among its
investors were Benchmark Capital, founded by Bruce Dunlevie, Hony Capital, founded
by John Zhao, and Softbank, founded by Masayoshi Son. Son saw potential for The
We Company to become a dominant company in the industry but also recognized that
it needed substantial funding for expansion.20 He expressed, “WeWork is the next
Alibaba.”21
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Softbank’s initial $4.4 billion investment on August 25, 2017 fueled The We
Company’s global expansion and gave it a $20 billion valuation.22 It was Softbank’s $2
billion investment on January 9, 2019 that pushed the company’s valuation to $47
billion, which made it the second largest IPO of 2019 behind Uber (valued at 75 billion
post-IPO).1 SoftBank invested a total of $10.65 billion in The We Company, becoming
its largest single investor with approximately 30% equity stake and controlled two
board seats.7, 20, 23, 24 It was estimated, however, that despite these investments the
company would run out of cash as soon as November 2019.25
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OPTIONS
The lack of a clear path to profitability had raised red flags with potential IPO investors
as did Adam’s behavior.1, 9 Questions were raised as to whether the company was ready
to go public and had the controls in place to protect shareholders.1, 9 The weeks since
the media furor began had been tumultuous and the Board now considered how to
regain the public’s confidence.4, 26 They could try to make Adam pay back the $5.9
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million that he paid himself for the “We” trademarks and bring closure to the event
that initiated the media uproar,3, 4 but Adam might not agree. They could attempt to
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alter the composition of the Board and bring in more independent directors,3, 4 but
would those new directors be truly independent or loyal to Adam? The Board could
try to oust Adam, forcing him to step down from his position as CEO and Chairman
of the Board,9, 27 but attempting a coup would be a gamble. They could attempt to curb
Adam’s voting power by reducing the votes for each share of stock that he held,3, 4 but
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they would likely face considerable resistance. Finally, they could try to buy out Adam,28
but they might be criticized for throwing good money after bad or might face backlash
from The We Company employees.
Any action against Adam would require an affirmative majority vote by
shareholders, but the voting power of Adam’s shares made it difficult for investors to
wage a proxy contest to alter the board’s composition, including removing the CEO
(Adam controlled greater than 90% of the voting power - see Exhibit 4).1, 7 Indeed,
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Adam had the power to fire the entire Board if he so desired.27 There was also a schism
that divided the Board members into two camps: those allied with Adam and those
that represented The We Company’s investors, who blamed Adam for the
mismanagement of the company.24 The We Company’s financial position was
precarious.29 The IPO was expected to raise $3.5 billion in additional capital,30 but if it
was going to be successful, something had to be done to address conflicts of interest
and regain the confidence of potential IPO investors.3, 4, 5 Doing nothing was not an
option. The IPO roadshow was fast approaching (see Exhibit 5)! What should the
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Board do?
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Exhibit 1 - The We Company Board of Directors
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Board of Directors
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Adam Neumann (Co-Founder, CEO, and Chairman of the Board)
Age: 40, Education: Israeli Naval Academy, Baruch College
Adam had previously co-founded Big Tent, Inc. a children’s clothing company and Green Desk,
the predecessor of The We Company. He was married to Rebekah Neumann.
Bruce Dunlevie (Founder of Benchmark Capital)
Age: 62, Education: Rice University, Stanford University
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Bruce was a seasoned venture capitalist with more than 20 years of experience in high-tech
investing, he served as Lead Independent Director of ServiceSource International, Inc. and as
director of One Medical Group, Inc.
Ronald (Ron) Fisher (Vice Chairman of SoftBank Group Corp.)
Age: 71, Education: University of Witwatersrand, Columbia University
Ron held senior executive positions at Phoenix Technologies, Ltd., Interactive Systems Corp.,
Visicorp, TRW, and ICL (USA). He was the vice chairman of Sprint and a director of Arm
Holdings and Fanatics. He previously served on the boards of E*Trade and GSI Commerce.
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Lewis (Lew) Frankfort (Chairman of Flywheel Sports, Inc.)
Age: 73, Education: Hunter College, Columbia University
Lew served as a director of Mindbodygreen Advanced Assessment Systems, LLC and Recycle
Track Systems, was on the Board of Overseers at Columbia Business School, and was Chairman
Emeritus of Coach.
M. Steven Langman (Co-founder of Rhône)
Age: 57, Education: University of North Carolina, London School of Economics and Political
Science
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Steve co-founded Rhône, a global private equity firm, and had over three decades of investing
experience. He served on the boards of a number of Rhône portfolio companies.
Mark Schwartz (Director at Softbank)
Age: 65, Education: Harvard University
Mark served as vice chairman of The Goldman Sachs Group, Inc. and chairman of Goldman
Sachs Asia Pacific. Mark also served on the boards of One97 Communications, Ltd., OYO
Rooms, MIT, and Harvard.
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John Zhao (Founder & CEO of H ony Capital, Executive VP Legend H oldings Corp.)
Age: 56, Education: Nanjing University, Northern Illinois University, Northwestern University
John has extensive experience investing in China. He served as a director of Legend Holdings,
Lenovo, China Glass Holdings, Best Food Holding Company, and Shanghai Jin Jiang
International Hotels Development.
Leadership Team
Rebekah Neumann (Chief Brand and Impact Officer, Founder and CEO of WeGrow)
Age: 41, Education: Cornell University
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Rebekah was an aspiring actress and yoga instructor. Rebekah was married to Adam Neumann.
Miguel McKelvey (Co-Founder and Chief Culture Officer)
Age: 45, Education: Colorado College, University of Oregon
Miguel previously served as The We Company’s Chief Creative Officer.
Jennifer Berrent (Co-President and Chief Legal Officer)
Age: 47, Education: University of Pennsylvania, New York University
Jen was a partner at the law firm Wilmer Cutler Pickering Hale and Dorr LLP.
Michael Gross (Vice Chairman)
Age: 43, Education: Cornell University
Michael previously served as Chief Executive Officer of Morgan Hotel Group.
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Arthur Minson (Co-President and Chief Financial Officer)

Age: 48, Education: Georgetown University, Columbia University
Artie served as Executive Vice President and Chief Financial Officer of Time Warner Cable Inc.
and served in a number of senior management roles at AOL Inc.
Source. Created by authors based on The We Company Form S-1 and public sources.
Exhibit 2 - The We Company Organization (simplified version)
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Managing Partners CEO
Adam Neumann Adam Neumann
Miguel McKelvey
We Holdings LLC The We Company (Formerly WeWork)
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Assets
We Trademarks
CEO
WeLive WeGrow Rebekah Neumann
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Source. Created by authors based on the structure outlined in The We Company Form S-1.
Exhibit 3: The We Company Condensed Financial Statement
Six Months
Year Ended December 31, Ended June 30,
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(Amounts in thousands) 2016 2017 2018 2019
Consolidated statement of operations information:
Revenue $ 436,099 $ 886,004 $ 1,821,751 $ 1,535,420

Expenses:
Location operating expenses 433,167 814,782 1,521,129 1,232,941
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Other operating expenses — 1,677 106,788 81,189

Pre-opening location expenses 115,749 131,324 357,831 255,133
Sales and marketing expenses 43,428 143,424 378,729 320,046
Growth and new market development expenses 35,731 109,719 477,273 369,727
General and administrative expenses 115,346 454,020 357,486 389,910
Depreciation and amortization 88,952 162,892 313,514 255,924
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Total expenses 832,373 1,817,838 3,512,750 2,904,870
Loss from operations (396,274) (931,834) (1,690,999) (1,369,450)
Interest and other income (expense), net (33,400) (7,387) (237,270) 469,915
Pre-tax loss (429,674) (939,221) (1,928,269) (899,535)
Income tax benefit (provision) (16.00) 5,727 850 (5,117)
Net loss (429,690) (933,494) (1,927,419) (904,652)

Net loss attributable to noncontrolling interests — 49,500 316,627 214,976
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Net loss attributable to WeWork Companies Inc. $ (429,690) $ (883,994) $ (1,610,792) $ (689,676)
Source. Compiled by authors based on financial data contained within The We Company Form S-1.
Exhibit 4 - The We Company Shareholder Equity and Voting Power
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% Share Class
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Greater than 5% Total Voting % Voting
Equity Class A Class B Class C
Stockholders Power Power(3)
Stake(3) 1 vote ea. 20 votes ea. 20 votes ea.
WE Holdings LLC 30 2,428,730 111,848,498 — 2,284,555,670(2) 91.3
Benchmark 9 32,645,314 — — 32,645,314 1.3
Bruce Dunlevie* — — — — — —
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J.P. Morgan 5 18,542,307 — — 18,542,307 0.7
Softbank 30 113,988,653 — — 113,988,653 4.6
Ron Fisher* — — — — — —
Mark Schwartz* — — — — — —
Directors and Executive Officers
Adam Neumann* <1 — 658,873 1,062,578 34,429,020 1.4
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Lew Frankfort* <1 1,247,033 852,309 — 18,293,213 0.7
Steven Langman* <1 27,056 — — 27,056 < 0.01
John Zhao* — — — — — —
Artie Minson <1 — 1,909,057 (1) — — —
Jen Berrent <1 109,933 348,792(1) — 109,933 < 0.01
* WeWork board member
1. WE Holdings LLC and Adam Neumann each held an irrevocable proxy over all Class B shares
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held by Jen Berrent and Artie Minson.
2. This total includes the voting power of Jen Berrent and Artie Minson’s Class B shares.
3. Estimated based on available data.
Source. Created by authors based on data contained within The We Company Form
S-1.
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Exhibit 5 - Timeline
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2010
WeWork founded.
2013 - 2014
Neumann borrows $25.4 million at 0.2%
interest from WeWork.
March - October 2017
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Neumann cashes out $700 million in
WeWork stock.
August 25, 2017
Softbank invests $4.4B in WeWork, increasing
its valuation to $20M.
January 8, 2019
WeWork changes its name to The We Company.
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January 9, 2019
Softbank invests $2B in The We Company,
increasing its valuation to $47B.
July 2019
The We Company purchases the “We” family of
trademarks from We Holdings LLC.
August 14, 2019
The We Company files its IPO registration with
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the SEC.
Mid-Late August, 2019
The We Company is scrutinized by the media,
alienating potential IPO investors.
September 16, 2019
Scheduled date for The We Company IPO
roadshow.
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Source. Created by authors

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2ds1.htm#toc781982_105
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8 Dodes, R. (2021, June). How billionaire Rebekah Neumann put the woo-woo in WeWork.
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thousands-every-hour-2019-7
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13 Brown, E., & Farrell, M. (2021). The cult of We: WeWork, Adam Neumann, and the
great startup delusion. New York: Crown.
14Brown, E. (2019, September). How Adam Neumann's over-the-top style built WeWork.
‘This is not the way everybody behaves.’. The Wall Street Journal. Retrieved November 5,
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11568823827?mod=article_inline
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15White, A., & Mathur, P. (2019, September). WeWork has acquired more than 20
companies in the run-up to its IPO. Retrieved September 3, 2021, from
https://pitchbook.com/news/articles/wework-has-acquired-more-than-20-
companies-in-the-run-up-to-its-ipo
16 Holmes, A. (2019, September). WeWork CEO Adam Neumann is such a big surfing fan
he led the company to invest $13 million into a startup that creates artificial waves — check out
how ‘Wavegarden’ works. Retrieved April 12, 2021, from
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https://www.businessinsider.com/wework-ceo-adam-neumann-invested-in-
wavegarden-wave-startup-2019-9
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18 CB Insights. (2019, December). As WeWork stumbles, these 11 co-working companies
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banks drop out. Retrieved April 12, 2021, from
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wework.html
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Economy/SoftBank-s-Son-says-WeWork-is-his-next-Alibaba
22Konrad, A. (2017, August). WeWork confirms massive $4.4 billion investment from
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SoftBank and its Vision Fund. Retrieved September 3, 2021, from
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4-4-billion-investment-from-softbank-and-its-vision-fund/?sh=1353a4365b3c
23McBride, S., & Turner, G. (2019, September). WeWork IPO turns contentious at
SoftBank's Vision Fund. Retrieved November 5, 2019, from
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24Spector, M., Franklin, J., Roumeliotis, G., & Sen, A. (2019, October). How Softbank
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Khan, Y. (2019, October). WeWork is reportedly rushing to get new debt-financing deal and
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could run out of cash next month. Retrieved April 12, 2021, from
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26Farrell, M., Hoffman, L., Brown, E., & Benoit, D. (2019, September). Some
WeWork board members seek to remove Adam Neumann as CEO. Retrieved September 3,
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27Court, E. (2019, September). WeWork board members are talking about ousting CEO
Adam Neumann amid IPO turmoil. Retrieved September 7, 2020, from
https://www.businessinsider.com/wework-adam-neumann-ipo-board-directors-aim-
for-new-ceo-2019-9
28Haselton, T., & Sherman, A. (2019, October). WeWork’s Adam Neumann offered
package worth up to $1.7 billion to step down from board. Retrieved October 14, 2021, from
https://www.cnbc.com/2019/10/22/weworks-adam-neumann-to-get-200-million-
t
to-leave-board-report-says.html
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29Langevoort, D. C., & Sale, H. A. (2020). Corporate adolescence: Why did “We”
not Work?. Texas Law Review, 99, 1347.
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next week, giving us our best look yet at its business. Retrieved September 3, 2021, from
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neumann-2019-8
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HBP# NA0714

In early September 2019, The We Company’s Board of Directors (Board), which

a fledgling co-living residential unit, and WeGrow, an elementary school attended by

trademarks to the Company, which we desired to obtain following our

The We Company: A Quandary in Corporate Governance 1

ADAM NEUMANN: IT’S ABOUT ME, NOT WE

domineering, and inappropriate.12, 13, 14

2 Case Research Journal •Volume 41• Issue 4• Fall 2021

grow rapidly but had nearly 200 locations in China as of 2019.19

The We Company: A Quandary in Corporate Governance 3

4 Case Research Journal •Volume 41• Issue 4• Fall 2021

Arthur Minson (Co-President and Chief Financial Officer)

The We Company: A Quandary in Corporate Governance 5

We Holdings LLC The We Company (Formerly WeWork)

Exhibit 3: The We Company Condensed Financial Statement

Revenue $ 436,099 $ 886,004 $ 1,821,751 $ 1,535,420

Other operating expenses — 1,677 106,788 81,189

Total expenses 832,373 1,817,838 3,512,750 2,904,870

Loss from operations (396,274) (931,834) (1,690,999) (1,369,450)

Pre-tax loss (429,674) (939,221) (1,928,269) (899,535)

Income tax benefit (provision) (16.00) 5,727 850 (5,117)

Net loss (429,690) (933,494) (1,927,419) (904,652)

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