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WeWork's CEO Makes Millions as Landlord To WeWork (wsj.com)
An anonymous reader shares a report: For more than two months after employees at IBM moved into a Manhattan building managed by office space giant WeWork, frequent elevator problems forced workers to climb the stairs of the 11-story building and prompted complaints to the company. One of the landlords behind the building was no ordinary owner: It was Adam Neumann, WeWork's chief executive, who leased the property to WeWork after buying it [Editor's note: the link may be paywalled; alternative source], according to people familiar with the situation.
Mr. Neumann has made millions of dollars by leasing multiple properties in which he has an ownership stake back to WeWork, one of the country's most valuable startups. Multiple investors of the privately held company said the arrangement concerned them as a potential conflict of interest in which the CEO could benefit on rents or other terms with the company. [...] WeWork, which was recently valued at $47 billion by investor SoftBank, signs long-term leases for office space with landlords, then subleases the space on a short-term basis to companies. Mr. Neumann, the 39-year-old executive who founded WeWork in 2010, is WeWork's largest individual shareholder and has voting control over the company.
Mr. Neumann has made millions of dollars by leasing multiple properties in which he has an ownership stake back to WeWork, one of the country's most valuable startups. Multiple investors of the privately held company said the arrangement concerned them as a potential conflict of interest in which the CEO could benefit on rents or other terms with the company. [...] WeWork, which was recently valued at $47 billion by investor SoftBank, signs long-term leases for office space with landlords, then subleases the space on a short-term basis to companies. Mr. Neumann, the 39-year-old executive who founded WeWork in 2010, is WeWork's largest individual shareholder and has voting control over the company.
That’s how you siphon off money from startups, struggling companies or even foundations into your own pocket.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
It's not a potential conflict of interest, it's a blatant conflict of interest.
From the Wolf of Wall Street:
"Mark Hanna : The name of the game, moving the money from the client's pocket to your pocket.
Jordan Belfort : But if you can make your clients money at the same time it's advantageous to everyone, correct?
Mark Hanna : No."
A startup without at least one executive siphoning money out of the company accounts - or even worse, the employees - is a true unicorn. It's what turned me off to the whole scene.
I was told a yarn when I worked at Hess about how all the artwork in the building in Houston was owned by Hess himself and when he retired he leased all the artwork back to the company. He allegedly made more after he retired then when he ran the company.
"A person is smart. People are dumb, panicky dangerous animals and you know it." - K
Related party transactions common and ok if arms length at market prices. WeWork investors should have an oversight function and require board approval. But this is a private investor concern. Ho hum. Just be careful on the iPO.
Oh good, someone's learning something from Eddie Lampert.
Self dealing and raiding public company to fill private coffers? Check
Corrupt? Check
I see a future presidential candidate from a major political party.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Money that could be used to grow the start-up to make it thrive and prosper is just lining the pockets of an already wealthy individual. Can I just say, we don't hate on the rich enough. At least not this type of rich. They're the ones killing jobs, not those pesky immigrants or regulations.
I've pretty much concluded that all CEOs are raging assholes who feel entitled to huge sums of money.
I've also pretty much concluded that the CEO of a tech-darling startup is almost certainly guaranteed to be a complete and utter fucking asshole, so somehow I don't find this surprising.
Wonder if he's separating 2 ply toilet paper into 1 ply...
Easy to check which party too.
If NY AG prosecutes him, seizes his lawyers documents and charges his lawyer as well, he is GOP.
If NY AG says, nothing to see here, he is DNC.
CEOs spend a lot of time in the office and back-and-forth to off-site meetings. He's probably having to use the stairs a lot more than the average employee. Not to mention his loss of face to visitors -- CEOs like to have nice, shiny offices to show off. So you can bet that Adam Neumann is seriously annoyed with the people who are supposed to service the elevators.
and how Eddie hoovered up on the backs for Kmart/Sears employees and investors.
You may of course be making fun of Jesus, but seems you have noticed that there might be some corelation (achtung obligatory corelation/causation) between jesus followers and success in life. Just sayin.
He's working within the law, right? Most big business have multiple corporations that do things just like this - lease back property. Almost no large commercial buildings are "owned" by the people who occupy them.
Yes, if you want to be wealthy you must worship the Lord our God who gave his life for our sins and you should oppose all efforts by liberals, SJW's and video game haters to impose big goverment regulations on free enterprise, so we are in agreement. God bless you.
I wonder if the whole Millenial hipster open-space preschool workplace thing will survive this latest tech bubble...but WeWork is guaranteed to profit. Apparently they're one of the largest commercial landlords in the world and they seem to specialize in this free-flowing startup space. It's akin to selling prospectors supplies on their way to the gold fields.
Whenever I see self-dealing like this, I simultaneously think that it's totally unfair that things can be set up this way, and wonder why I don't take advantage and profit from it. :-) Most business owners structure their affairs in such a way that their company is buying everything they own to offset any profits that pass to the owner. And then they complain bitterly about taxes. It seems ludicrous that I can set up Bob Smith LLC, have Bob Smith LLC purchase a car in the company's name, rent houses and offices, etc. and I would work for Bob Smith LLC as the CEO paying myself a salary of $1/year. This happens all the time with small business owners. I know that the "corporate veil" can be pierced if the IRS or someone suspects this is going on, but the reality is there are way too many ways to avoid it.
We'll see what happens when Dotcom Bubble 2.0 crashes in the next year or two and the VC funds used to rent these offices dry up. I'm assuming WeWork will be just fine though...here in NYC people will give you their life savings for a closet and a hot plate.
The president of the United States makes billions sending dignitaries with deep pockets to his own resorts and hotels; perhaps that is the bigger issue.
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
they're in real estate. You typically have to lease property from them to run a franchise.
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> I can set up Bob Smith LLC, have Bob Smith LLC purchase a car in the company's name, rent houses and offices, etc. and I would work for Bob Smith LLC as the CEO paying myself a salary of $1/year. This happens all the time with small business owners. I know that the "corporate veil" can be pierced if the IRS or someone suspects this is going on
The thing about that is you have to report your salary on the tax forms, as well as revenue, etc. A $1 salary isn't going to be "if the IRS suspects", that's pretty much "go directly to jail. Do not pass go." These days IRS computer sees that $1 and you're dead.
Yes, people try it - and people pay large fines and penalties and go to jail.
So, Neumann takes on the debt of buying the building, rather than WeWork, while providing the stability that WeWork won't lose their lease because the building owners don't like them, or get a better offer.
What's the problem?
That's right. It must be reasonable compared to what other people are paid for the same job in other companies, and they can look at what other people in the same company are paid. If the owner / CEO makes less than other employees, that's suspicious and they better be able to defend that.
I owned a company that I quit working for. I worked full time at a different company, while also going to school full time. Somebody else ran the company. They got paid for their full time work, my pay was commensurate with the eight hours / year I spent on the company - the key was I was able to document that. I could show that I no longer worked for the company, though I did own it.
As long as he's disclosed the conflict to the board and gotten approval from a majority of the disinterested board members, any shareholder opposed is going to face an uphill battle clawing that money back. This kind of self-dealing isn't illegal and if it's done carefully it isn't even a violation of fiduciary duty. Still makes him a cunt, but c'est la vie.
The idea that your hard work and preseverance makes you wealthy is a lie. I bet 90% of the people here work harder every day than this clown ever has in his life but will never see the millions he has. We see this all the time. The rich get richer by running scans and pay no consequences. But let some poor fool try to run a game and they end up in court. This is what America has become, land owned by the rich, home of the scammers. We only to look at our dear leader who speaks with impunity only because of his wealth to see the truth.
Why am I not surprised those retards rented a stinker of a building from WeWork!
Remember when Mervins (the moderately successful retailer) was split into two companies? One was set up to hold all the real-estates and assets --- the other of which held all the debt and liabilities and retail operations? The former then raised rents on the latter, sending the latter to bankruptcy (wiping out the debt); while the owners of the former laughed all the way to the bank. Well - not quite -- some sued; and they had to pay $166 million settlement on their huge (IIRC ~$400 million) profit from the scam. https://www.reuters.com/articl... Sears seems to be going through the same now ---- where Sears' CEO is also the biggest debtholder; and he's systematically stripping all assets (land, brands) away from Sears and to his other companies (ESL, etc) through debt structuring.
There is a difference in ethics between a corporation owning a McDonald's vs the CEO.
Not to say McDonald's is a saint. They have been known to take a few mom and pop ones
http://saveie6.com/
When by brother got married, the fathers agreed to split the costs. The wedding was held at the bride's parents' backyard. Her father tried to add a charge for renting the house and property to the bill.
Sounds like the CEO needs to take a course or two in business ethics.
Either the company is making money or it's not. Invest wisely.
None of you Nanci's even have any idea if the property is being leased at market rates.
Unless informed otherwise, I do not see a problem with this. It is a risk mitigation strategy.
You may of course be making fun of Jesus, but seems you have noticed that there might be some corelation (achtung obligatory corelation/causation) between jesus followers and success in life. Just sayin.
I know many true (as opposed to Trump) Christians with poverty and pain in their lives.
Any serious reading of the source texts, second hand as they may be, reveals that the Jesus meme (meme because the existence of a historical jesus is questionable) shows that "prosperity theology" is crap. Some sayings of His groupies who made Him into a religion are perverted to support prosperity theology, but the Jesus meme is quite explicit in denying prosperity theology. Sucking up to that Old Man with the long beard in the sky will not ensure you make a touchdown in the Super Bowl, win the lottery, or cure your nephew's drug addiction. (Though He was quite clear that you should love and help that nephew.)
This type of bribe-laundering even works for modern presidents.
I'm being sold a narrative that guys like this are job creators who I have to give special privileges to (like lower taxes than me, nicer living and working conditions, private jets, etc) in exchange for a place to work.
What we have here is a company that isn't structured to grow jobs but instead to divert profit into the CEO's hands. This runs contrary to the narrative I'm told.
When I see this there's a moment of cognitive dissonance that borders on physical pain. There's two ways to reconcile this:
1. Double think. Tell myself the Job Creator Narrative is correct _and_ a CEO can plunder his company.
2. Get angry.
From the comments a lot of people are choosing #2, but the ones who choose #1 are usually silent. Double think is usually not perfect. You know something is wrong but you go with it anyway. It's tough to speak out in that instance unless you're one of the propagandists working for our pro-corporate media.
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It's about real estate. The price of real estate is a lot of markets is prohibitive. So you have your employees work from home as much as possible. Sometimes that's not possible, so you need a space where they can get together and work. If it's 2-5 times a month a communal space is cheaper than renting office space.
They're not going anywhere unless there's a change in that.
As for why you need face to face: body language. It's tough to read it even over an HD video feed. If you don't trust somebody (which happens a lot in business) you want to be able to look for those little "tells" to see if they're lying.
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
for a reason I wrote about elsewhere: it breaks the "Job Creator" narrative. e.g. the notion that CEOs exist (and deserve special privileges because) they create jobs.
Yes, We Work creates some jobs, but very few. They're just fancy landlords after all. Here we've got a CEO who our gut tells us should be investing in his people and instead is plundering the company's largess.
The question to ask is: why does our "gut" tell us this and the answer is we're hammered with the Job Creator narrative day after day. But it's just another variant on trickle down economics. Stuff like this is needed to break down the false narrative so folks can see it for what it is.
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
Congratulations! Your eyes have been opened.
It is a time-honored tradition for any aspiring CEO/Owner that has nothing but $$$ in their eyes.
1. Buy a company
2. Buy a building
3. Rent building to company
4. Profit!
5. When employees raise a stink about the situation (and they always do)
6. Sell building to mutually benefited person/entity.
7. Continue to rent building
8. Profit.
This is the exact type of behavior a cutthroat capitalist (aka a sociopath) has.
A fair and just person would figure out how the company benefited before himself, but that is not capitalism in it's truest form.
Capitalism in its truest form DON'T GIVE A FUCK!
WeWork + weed = "WeedWork"
OK so the shoddy maintenance I get is a problem. But leasing space in a building you own, to a company you control...what's wrong with that exactly, unless the rates are not market rates?
This is a technique used by many businesses to limit their losses should they suffer hard times. If a company owns its own building, and the company goes broke, they lose the building too. But if the building is owned by a separately-held LLC, and the company goes broke, the lenders can't take the building away. Most accountants worth their salt highly recommend this practice. My last two employers both used this as a way to shield themselves from catastrophic losses should things go bad.
Why shouldn't they?
Its sad how American culture such as television or the media make idols out of horrible terrible people whose only purpose in life is more money.
Whoever wrote this article needs to take English classes again. Obviously it was taken from WSJ and it shows. Writer needs to read and write more as a hobby
The question here is why anyone would continue to fund/invest in such an obviously conflicted arrangement?
People like this are only successful as long as others tolerate this behavior.
-Styopa