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Why WeWork founder Adam Neumann is getting $1.7 billion to leave the company he ran into the ground

This isn’t normal, but nothing about WeWork is normal.

WeWork’s ex-CEO Adam Neumann clasps his hands and smiles at the audience from onstage.
Sometimes it pays to be bad.
Kelly Sullivan/Getty Images for the WeWork Creator Awards
Rani Molla is a senior correspondent at Vox and has been focusing her reporting on the future of work. She has covered business and technology for more than a decade — often in charts — including at Bloomberg and the Wall Street Journal.

WeWork founder and former CEO Adam Neumann drove his coworking company’s valuation to a whopping $47 billion by selling investors on his personality and the idea that he was revolutionizing real estate through tech. He also steered the company — through a series of poor and avoidable decisions — into near oblivion. Now the company’s biggest investor, SoftBank, is paying him $1.7 billion to leave the company and most of his stock behind.

That means, as Recode’s Pivot podcast co-host Scott Galloway pointed out, Neumann is getting about $850,000 for each of the 2,000 employees WeWork is expected to lay off — it just hasn’t done so yet because it couldn’t afford the severance.

Screwing up never felt so good.

“I’ve never seen such a massive consulting fee for someone who is walking away,” Evan Epstein, founder of the corporate governance firm Pacifica Global, told Recode, referring to tech startups. “It’s extraordinary that he walks away with billions of dollars in a situation where maybe the company is imploding and it’s losing value at the rate it is.”

About a billion dollars of that payout goes toward buying out Neumann’s stock, which like other WeWork employees, he’s free to sell (though it’s unclear how much the stock is really worth). Also questionable: SoftBank issuing him a $500 million credit line to help him repay loans he has due to JPMorgan Chase. On top of all that, SoftBank is paying him a $185 million consulting fee. That of course raises the question: Why pay someone to consult who has grossly mismanaged a company in the first place?

The deal reveals how badly the investment firm wants Neumann gone and how much of a liability the founder had become for a company that SoftBank had poured $13 billion into — which is now valued at only $8 billion.

“He basically said, ‘This is what I need in order to leave,’ and they’re finding different ways to categorize that payment,” Nell Minow, vice chair of ValueEdge Advisors, a corporate governance consulting firm, told Recode. “The question now to me is, ‘What is SoftBank thinking?’ It’s hard to imagine that throwing any additional money into this mess is good for their investors.”

Part of the reason Neumann was able to leave with so much money is due to how WeWork’s voting structure was set up. Like many other tech unicorns, WeWork had given its CEO super-voting stock, meaning the shares he owns were worth more votes than shares issued to everybody else. When WeWork first filed to go public, each of Neumann’s shares were worth 20 times more, though public scrutiny forced the company to lower that ratio to 10 to 1, then 3 to 1.

“They’re trying to make it attractive for him to leave the company,” Council of Institutional Investors deputy director Amy Borrus told Recode. “When the founder-CEO has voting control, sometimes you have to bend over backwards.”

Neumann got his outsize power over WeWork in the first place because investors like SoftBank were willing to grant it.

“There’s so much private money chasing founders with promising startups,” Borrus said. “Founders are in the driver’s seat, or have been. They can demand and get super-voting stock that guarantees them control of their company even if they don’t have equity control.”

CEO pay has ballooned in recent years, thanks in part to increased corporate buybacks, but even with that in mind, experts say Neumann’s enormous exit package is not normal. Indeed, a consulting fee is usually reserved for a hallowed CEO whose institutional wisdom will be necessary and who’s left a company on a good note.

“Usually you see [a consulting fee] when it’s a bit more on favorable terms,” Courtney Yu, director of research at executive compensation firm Equilar, told Recode. “Generally when you’re trying to force someone out, you don’t see this kind of thing.”

To put Neumann’s $185 million consulting fee in perspective, the 200 highest-paid CEOs at public companies last year had a median pay of $18.6 million, according to Equilar. Typically, CEOs receive exit packages that are multiples of their salary and bonus. Neumann’s consulting fee alone would equal 10 years of that median salary. We don’t know yet what the terms of the consultancy are.

WeWork didn’t immediately respond to request for comment.

For now, it doesn’t seem likely we’ll see more instances of giant payouts like these.

“I hope that this is an isolated situation that will serve as a cautionary tale rather than a trend,” Minow said.

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