What exactly happened to WeWork?

What exactly happened to WeWork? This guide explores a classic case of corporate governance gone awry and what lessons we should learn.

Any digital nomad, entrepreneur, startup employee or worker who’s newly remote post-pandemic will have heard of WeWork. Their business model of office buildings filled with on-demand hot desks and other corporate necessities has left a global imprint. 

However, behind the innovation, WeWork has become a textbook case of corporate governance screwups. The company’s meteoric rise was followed by a spectacular fall, revealing something no company wants to face: deep-rooted issues that went unchecked for years and will be challenging to remedy. From a governance perspective, this is one of the main things your strategy should seek to avoid. 

Let’s dive into how it happened.

• From 2010, WeWork quickly expanded globally with its popular co-working model. By 2019, it was valued at nearly US$47 billion. 
• However, that year, its planned IPO quickly descended into disaster. Its public prospectus raised serious questions about its governance, business model, and profitability. 
• In November 2023, WeWork filed for Chapter 11 bankruptcy in the US. CNN described it as the culmination of a “stunning downfall” for the company. 
• In April 2024, the company agreed to a restructuring deal with creditors. Reshuffles have been made at the board level and a new CEO, John Santora, was appointed. Many WeWork locations remain operational.
• The company’s former CEO, Adam Neumann, was central to much of the criticism levelled at WeWork during its crisis period. Many took issue with his governance practices, which they claimed raised red flags.

Two main factors turned the “world’s most valuable startup” into a corporate nightmare:

Adam Neumann’s leadership caused huge problems and endless negative commentary. He was accused of being eccentric, disengaged, and treating WeWork like a “personal piggy bank” rather than a growing company. He would regularly obtain loans from WeWork to fund his own high-flying lifestyle. He also oversaw a general haemorrhaging of money during his time at the helm. 

For that reason, many business experts have pinned the central portion of the blame on him because he was simply the wrong person for the job. They do have a point, but it doesn’t stop there. The only thing worse than a wrong CEO is a wrong CEO who goes unchecked by the board. That’s precisely what happened here. 

The board’s oversight of Neumann’s actions was not what it should have been. Modern boards are supposed to question, challenge and follow strategic decisions through to the end. In WeWork’s case, this didn’t happen at pivotal moments. 

Why? Two common reasons in scenarios like this are that the directors did not embrace their roles as challengers and that the board itself did not contain enough independent viewpoints (people with little to no stake in the company who could provide purely objective opinions). For WeWork, it was both, and it added up to disaster.

Ambition is essential for growth, as long as it doesn’t dominate strategy at the expense of realistic goal-setting. WeWork fell into this trap. 

The company was eager to prioritise aggressive expansion, fuelled by long-term leases for its worldwide co-working office spaces. When stakeholders saw that these long-term expenditures weren’t matched by long-term revenue streams, they panicked. 

It didn’t help that Neumann—the person they directed these worries to—was visibly engaged in frivolous spending on things like private jets and lavish parties. This painted a bleak picture as far as financial structure was concerned. 

The alarming prospectus, failed IPO, and multiple investor concerns led to a dramatic reduction in the company’s valuation. To go from $47 billion to less than $10 billion in a few short months is a definitive sign of a governance fiasco. 

From there, other fallouts were inevitable, including Neumann’s departure, board reshuffles, investor losses and reputational damage. 

It goes without saying that in the governance world, none of these ramifications are easy to bounce back from.

One word: balance. 

• Balance in power between the CEO, the board and the investors. 
• Balance in prioritising short-term and long-term growth.
• Balance in opinion at the highest levels, so group-think doesn’t win out. 

WeWork is not the first, nor will it be, the last company to fall victim to the “dominant CEO unchecked by a weak board” scenario. 

The bottom line is when we consider a company with as much potential as WeWork, there is a lot at stake. Profits, market control, influence as a sector-leader: all are tied to the success or failure of the company’s leadership structure. 

In those scenarios, the board must be free, willing, and able to question key decisions—especially if the CEO has a track record of erratic behaviour. It should be a no-brainer. 

Not asking the right questions is a core governance failure. This is critical in modern times when stakeholders recognise the power of collective input for sustainable success.

Here are some practical tasks which would have helped:

• Recruiting a higher percentage of capable, independent directors for tangible criticism.
• Implementing clearer governance structures.
• Focusing more on frequent risk assessments.
• Growing a culture of collective accountability.
• Governance training to emphasise the importance of fiduciary duty and strategic decision-making.

The WeWork saga offers invaluable lessons on the importance of sound corporate governance. Both executives and board members play crucial roles in ensuring that a company is managed responsibly, with a clear focus on sustainable growth, transparency, and accountability. 

As of 2024, the company’s operations continue, albeit with huge restructuring and serious reputational harm. As for what happens next, make no mistake: Governance decisions now and in the future will matter just as much as the past decisions that led us here.