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Aug 29, 2019

Attorney says ‘unusual’ WeWork CEO succession plan illustrates trend

Shared workspace company looking to go public

WeWork has raised at least one set of seasoned corporate governance eyebrows with its CEO succession plans.

The arrangement – featuring as it does a ‘pre-delegation’ of the process and the inclusion of the current CEO’s wife – is ‘quite unusual,’ a highly experienced corporate governance attorney tells Corporate Secretary. The lawyer describes the plan as illustrative of a trend among companies going public with individuals closely entwined in their ownership who wish to retain a high degree of control, such as with dual-class share structures.

‘[Such companies are posing the question:] how much can you get away with and still go public?’ the attorney says. ‘The answer is: a ton.’ These issuers want the benefits of being public companies with none of the accompanying governance burdens, he adds.

The shared workspace firm’s parent – The We Company – recently filed a Form S1 with the SEC ahead of a potential IPO. The form includes a detailed description of plans for replacing co-founder, CEO and board chair Adam Neumann in the event he is ‘permanently disabled or deceased’ at some point during the 10 years after the company goes public.

In such circumstances, the filing states, a committee will be formed for the sole purpose of selecting a new CEO. The committee will be composed of Bruce Dunlevie and Steven Langman – currently members of the board and members of the compensation and nominating committee – if they are still serving as directors, and Neumann’s wife Rebekah Neumann.

If neither Dunlevie nor Langman is at that time serving as a director, Rebekah Neumann – who is a co-founder and chief brand and impact officer but not a board member – will choose one or two board members who are serving at the time to sit on the selection committee with her.

The WeWork succession plan ‘is another example of pushing the envelope,’ the lawyer says, adding that it is delineated precisely because it is so unusual. Succession planning is one of the key roles a board plays and the details are not typically included in IPO documents because there is an implicit understanding among investors that the company will have a well-designed process in place, he adds.

He comments that he had expected to see more of a pushback against such unusual governance structures in companies going public in 2019, but that positive market conditions and investor acceptance have been conducive to their continuation.   

A WeWork spokesperson declined to comment. The company filing states that, by the third anniversary of the IPO, Adam Neumann ‘will propose a succession plan relating to the period beginning from and after the 10-year anniversary of this offering.’