Between the lines on the latest WeWork drama

Happy Monday and welcome back. (Friday's edition here)

Situational awareness:

• An early measure of eurozone manufacturing shows output falling to the lowest level since December 2012, with Germany's manufacturing sector slumping to its lowest reading in more than a decade. (MarketWatch)
• British travel group Thomas Cook said it has gone into administration, leaving 150,000 travelers stranded abroad as it halted trading and operations. (Axios)
• Indonesia will fault design flaws and lax U.S. oversight in its first formal statement on the Boeing 737 MAX jet that crashed in October killing 189 people, according to people familiar with the draft. (WSJ)

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1 big thing: SoftBank vs. WeWork CEO Adam Neumann

By: Dan Primack ? Newsletter: Axios Pro Rata

The WeWork soap opera had been scheduled to take a short hiatus, at least until Q3 numbers could be compiled, but then the company surprised everyone with a pop-up episode over the weekend.

What's happening: The WSJ reported yesterday that "a bloc of WeWork directors is planning to push Adam Neumann to step down as chief executive." CNBC added that SoftBank's Masayoshi Son supports the move.

What we’re hearing: The unofficial narrative is that the directors were shocked, just shocked to find out that Neumann likes to smoke pot and had some questionable self-dealings with the company. Too bad they didn't ask anyone who knows Neumann about the former, or read their own financial disclosures about the latter.

• Yes, the part about transporting marijuana over international borders was likely new, but hardly the sort of thing that would get most CEOs canned in 2019.

Between the lines: What the directors do seem to have learned recently is that public market investors are very hesitant to invest in a WeWork with Neumann at the helm, so they're putting up a smoke-screen to deflect from their own blind spot.

• Again, please don't peddle that the board is suddenly blanching at how Neumann spent company money. Save for fraud, of course, but there's not yet even a whisper of that.
• There also are market concerns about losses, but that's one in which Neumann and SoftBank seemed to share the same "grow at all costs" philosophy. (Hey DoorDash, you watching this?).

Our thought bubble: We've previously pondered SoftBank's end-game, with the most plausible theory being that it would like to become WeWork's investor of last resort.

• It is unclear if SoftBank really wants Neumann out, or is just using the threat as leverage to postpone the IPO (thus buttressing internal rates of return for Vision Fund 1, as fundraising for Vision Fund 2 continues).
• SoftBank runs the risk of scaring off future founders, but a bigger one of WeWork blowing up Vision Fund 2. Plus, it can just tell other entrepreneurs that they're smarter, more stable, etc. than a loose cannon like Neumann. Silicon Valley may run on hubris, but it's underwritten by flattery.

The big picture: Yes, there are lots of shades of Uber here, particularly once you notice that Benchmark is on the board. But it's unclear how Masa currently views the Travis-for-Dara swap, given Uber's lackluster public market performance.

• As Axios colleague Felix Salmon said: When a company's CEO is also its mascot, it's hard to know what firing the CEO will do.

The bottom line: That's true for WeWork, SoftBank, Neumann, Wall Street, and yours truly. All we know for sure is that we'll get more shocks and cliffhangers before a conclusion.

Go deeper: Pro Rata Podcast: WeFight

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2. How CEOs trump politicians

By: Jim VandeHei ? Newsletter: Axios AM

Illustration: A?da Amer/Axios

Walmart, which first banned assault weapon sales and now vaping products, is providing a template of how CEOs can move beyond a monomaniacal focus on profits.

Why it matters: It’s one thing to sign an unenforceable pledge to think more about employees and society, like most members of the Business Roundtable did. It’s another to take specific action while politicians dither.

In conversations with a half-dozen CEOs this week, we were stunned by how much pressure business leaders are feeling to take social action. If so, here’s what they can do:

• JPMorgan Chase, Starbucks, Walmart, Amazon and many others increased their minimum wage. Every CEO has the power to do this.
• Delta Airlines returns billions in profits to employees — this year, a bonus equal to 14% of their annual pay — and has grown since making this change. Every company can do this. 
• Amazon became the first to sign The Climate Pledge to be net zero carbon across the businesses by 2040 — a decade ahead of the Paris Accord's goal of 2050. An individual company can’t put a dent in overall pollution — but a bunch might.
• Stripe, the online payment platform, announced last month that it plans to spend at least $1 million a year to pay for direct removal of carbon dioxide from the atmosphere. Stripe said in its emissions announcement: "For other companies: Please reach out to Stripe to join our commitment."
• Bank of America last year stopped lending money to makers of military-style assault weapons.
• Dick’s Sporting Goods paid a price in its earning after it initially made it harder to buy firearms in its store, but then went even further this year.

What else can be done:

• They could also limit CEO pay if they wanted to narrow the gap in their own shop. 
• All retailers control what’s on their shelves, so if they want to eliminate AR-15s, or vaping, or whatever — free enterprise permits it.
• All companies control child care, family leave and health policies and can be as generous as they choose. 

The big picture: The new public assertiveness by corporations follows an earlier wave, after President Trump took office, of CEOs taking stands on immigration, climate, gender equality and other issues that their predecessors avoided.

• Apple's Tim Cook, who has become increasingly vocal, said at a Fortune conference last year: "Apple is about changing the world. It became clear to me some number of years ago that you don’t do that by staying quiet on things that matter."

The bottom line: The pressure on CEOs from employees, customers and communities seems to only be intensifying.

Go deeper:

• CEOs are America's new politicians
• CEOs under more pressure to save society
• A new form of American capitalism

For more from Axios CEO Jim VandeHei and the trends shaping CEO behavior, sign up for Axios' daily AM newsletter.

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3. Silicon Valley's fraying cult of the founder

By: Ina Fried ? Newsletter: Axios Login

WeWork CEO Adam Neumann. Photo: Cindy Ord/Getty Images for WeWork

For 25 years Silicon Valley has built successful companies by handing control to inventive and driven but sometimes eccentric or reckless startup founders. From Facebook to Google, these leaders often receive special kinds of voting stock that let them sell shares to the public — and become fabulously wealthy — while retaining power over their firms.

Why it matters: As the latest wave of tech startups lines up for its string of IPOs, the pendulum may be swinging the other way — with investors demanding problematic founders step back or cede control.

• As WeWork's public offering falters amid questions about the company's business model and the behavior of founder and CEO Adam Neumann, Softbank, WeWork's biggest investor, is pushing to replace Neumann, the Wall Street Journal reports.
• Several stories have targeted detailing Neumann's excesses, from his penchant for alcohol to pot-filled flights on private planes to examples of WeWork doing business with other entities he controlled.

Where it stands: For now, Neumann still has his voting stock, but WeWork needs access to cash to keep funding and expanding its growing network of office-sharing spaces.

• Neumann's troubles come in the wake of founder Travis Kalanick's 2017 ouster from Uber, which he had built and controlled. His board turned on him after accounts surfaced of a culture of sexual harassment, gender discrimination, retaliation and bullying that he'd overseen. 

The big picture: There have been other cautionary tales of placing too much faith in a charismatic founder (see: Theranos). In other cases, eccentric founders remain in control, such as Elon Musk, though concerns remain about his judgment, temperament and ability to adhere to securities law.

Our thought bubble: Entrepreneurial drive doesn't necessarily translate into true leadership, particularly as organizations grow.

• When control passes from founders, right now it usually goes to professional managers beholden to short-term market forces, and that isn't necessarily a great answer, either.
• The industry needs to develop a better system for cultivating founders who have ethical values as well as disruptive ideas.

The bottom line: Being an effective CEO requires a range of skills and few individuals have all of them. But when founders are guaranteed to remain in control, they're empowered to be reckless, licensed to misbehave, and difficult to hold accountable.

Go deeper: Why WeWork waits

Sign up for Ina's daily newsletter Axios Login for more on the biggest tech news.

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