WeWork's catastrophic attempt at an IPO has reportedly caused the seven-person board to consider firing founder Adam Neumann from the CEO job.
There's just one problem, the board has no legal right to just fire him, thanks to Neumann's control of virtually all of the company's super-voting rights shares, Nell Minow, Vice Chair of governance and investor advisory firm ValueEdge Advisors, tells Business Insider.
"He really had a moat around him to protect him from any kind of oversight, which is exactly the opposite of what you look for in a public company," Minow says. "Any board member who's up to the job would have refused to take that position under those circumstances because you cannot do the job if you don't have the votes."
So what can the board do to pressure Neumann to resign?
"All they can do is put pressure on him," she adds, "They'll have to use commercial pressure more than any legal right."
They can quit or threaten to quit which would derail the IPO completely, scare off private investors and bond investors (who have already grown more skittish of the company's junk-rated bonds). They may even threaten legal action of some sort, Minow says.
Read: A former WeWork executive who made $300,000 and is now suing describes strange cultlike culture, including endless flows of alcohol at mandatory sleepover camp for employees and the CEO's children on his lap during an all-hands meeting
Pressure from SoftBank may be the only real way to oust Neumann.
SoftBank's powerful founder Masayoshi Son was once Adam Neumann's biggest advocate.
But Son has "lost faith" in Neumann in recent days and wants him out, according to the Financial Times.
Son has reportedly been displeased with Neumann for ignoring Softbank's advice on everything from the timing of the IPO to using the phrase "elevate the world's consciousness" in the IPO prospectus, CNBC reports.
The Japanese conglomerate poured nearly $11 billion into WeWork and was set to spend another $1 billion on its shares to support its IPO, Markets Insider Theron Mohamed reports.
SoftBank is also a major stake owner of We's Asia operations including in China and Japan. Entities controlled by SoftBank rent space from We, as well, accounting for a growing chunk of revenue: $28.2 million in the first six months of 2019, up more than double from the prior year, according to the S-1. And Softbank is the major backer of We's venture investment "Creator Fund."
It is very difficult to see how Neumann would thrive if Son, one of the world's most powerful businessmen — not to mention investor, partner in Asia and big customer — were to turn his back on Neumann's company.
There is, of course, another problem.
"It's easy to be the Queen of Hearts and say, 'Off with his head.' The tricky part is finding some hugely credible person who can come in," Minow says.
Someone credible would not only have to take the job, but be invested with the power to succeed.
While one WeWork former exec tells Business Insider that Neumann has heard this wake-up call, others aren't so sure.
"Whoever gets this role, it won't be easy because Adam is not going away. He's not going to change his behavior. His title doesn't impact what he does," warns NYU Stern professor Allen Adamson.
"He's not going to accept change easily," Adamson adds. "Once your head gets that big, you're not going to take directions from an operations, management bean counter type. But that's what's required to get this back on track. It's going to be painful. Lots of people are going to lose money."