WeWork’s charismatic but controversial CEO is stepping aside from the communal office-space company he founded

WeWork’s charismatic but controversial CEO is stepping aside from the communal office-space company he founded, another moment of reckoning between the fast-growing startup and its disenchanted investors.

The New York-based company said Tuesday that Adam Neumann will be replaced by two co-CEOs: Artie Minson, formerly co-president and chief financial officer, and Sebastian Gunningham, formerly vice chairman. Neumann will remain on its board as non-executive chairman.

WeWork leases buildings and divides them into office spaces to sublet to members, which include small businesses, start-ups and freelancers who can’t afford permanent office space. But with location operating expenses – mostly rent – amounting to some 80% of revenue, it has been heavily reliant on cash infusions from its private investors.

But Wall Street began raising questions after the company delayed a planned initial public offering earlier this month. The company was having trouble drumming up interest in the offering after revealing massive losses in its IPO filings. WeWork’s revenue rose sharply to $1.8 billion in 2018, but the company lost $1.6 billion the same year.

Adding to its problems have been concerns about Neumann’s behavior. He used some of his WeWork stock to secure a $500 million personal loan prior to the IPO. He also drew criticism after The We Company – WeWork’s recently renamed parent – paid him nearly $6 million for the trademark “We.” He returned the money following the backlash.

Potential investors also questioned the company’s governance. Neumann owns four of the buildings WeWork leases, for example.

“While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive,” Neumann said in a statement.

Tim Derdenger, associate professor of marketing and strategy at Carnegie Mellon University’s Tepper School of Business, said WeWork’s board clearly realized that Neumann’s conflicts of interest and management style weren’t a good fit for a company that will face even more scrutiny once it goes public.

“It’s about the business,” she said. “They’re going to need more than just that change if the goal is to try to tap the public market again.”

Sometimes, investors are willing to be patient with companies that are losing money but growing rapidly. Amazon is the poster child for this, and it’s become one of the most valuable companies in the world following years of losses.

“Our core business is strong and we will be taking clear actions to balance WeWork’s high growth, profitability and unique member experience,” they said.

AP Business Writer Stan Choe contributed from New York

Accumulated profits at the film company co-owned by Irish movie director Neil Jordan increased last year by €69,218 to just under €2.8 million.

Accumulated profits at the film company co-owned by Irish movie director Neil Jordan increased last year by €69,218 to just under €2.8 million.

New accounts filed by Jordan’s Sunwind Enterprises Ltd show that it recorded the profit after sustaining a loss of €93,133 in 2017. It had current assets of €2.79 million, mainly made up of cash at the end of December last.

The two directors on the board of the company are Mr Jordan and his wife, Brenda Jordan. Its main place of business is at the Jordans’ Sorrento Terrace residence in Dalkey, and the company derives its income from the directing and production of films for TV and cinema.

The return to profit coincided with Jordan last year making his directorial comeback to the big screen with psychological thriller Greta, which starred Stephen Rea.

Before Greta, Jordan’s last major movie was the 2012 Byzantium starring Saorise Ronan and Gemma Arterton, which followed his success of overseeing the historical fiction drama, The Borgias.

Jordan shot three series of the drama starring Oscar winner Jeremy Irons, focusing on the fortunes of the 16th century Italian family.

He won an Oscar for the 1992 film The Crying Game for best screenplay. Other movie credits include The Butcher Boy, Interview with the Vampire, The Vampire Chronicles, Michael Collins and Ondine.

EU court moved to overturn a 2015 decision that Starbucks received unfair tax deal

The European Commission’s decision three years ago that Ireland gave Apple €13 billion of illegal tax aid has been given a partial boost by a court verdict in another contested case, involving US coffee chain Starbucks, according to competition lawyers.

The EU’s second-highest court, the General Court, moved on Tuesday to overturn a 2015 commission decision that Starbucks received an unfair tax deal amounting to about €30 million from the Netherlands.

However, the court said the commission was correct in assessing transactions between different parts of Starbucks, which determined what profits were taxable under the Dutch tax rate, on an “arm’s length principle” – as if they were not related companies. The transactions included green coffee beans and royalties covering coffee-roasting expertise.

The main argument of the Irish Government and Apple in their appeals against the commission is that it was wrong in assessing the iPhone maker’s tax liability in Ireland on the premise that valuable intellectual property (IP) behind group products lay in two Irish branches.

They contend that that the IP was based in, and controlled from, Apple’s headquarters in Cupertino, California.

Ireland has consistently argued that there were no arms-length principles in Irish law at the time of the rulings. Still, Brussels has insisted the principle is enshrined in the Treaty of the Functioning of the EU and backed up by case law.

Arm’s-length principle

“The arm’s length finding regarding the Starbucks case potentially boosts part of the European Commission’s Apple decision, as it would play into the commission’s secondary argument in relation to the Apple case, that Ireland did not use the arm’s-length principle correctly,” said Philip Andrews, a partner at Dublin-based law firm McCann Fitzgerald, which is not involved in the case.

“The principles laid down in these judgments provide some ammunition for both the taxpayers and the commission in the ongoing investigations,” said Natura Garcia, a lawyer with Linklaters in London, according to Bloomberg.

Separately, the general court ruled on Tuesday that Luxembourg gave a unit of carmaker Fiat Chrysler about €30 million of unfair tax deals, backing up an earlier finding by the commission.

Luxembourg and Fiat are assessing whether it will appeal Tuesday’s ruling before the Court of Justice of the European Union.

“The judgments confirm that, while member states have exclusive competence in determining their laws concerning direct taxation, they must do so in respect of EU law, including state aid rules,” said EU competition commissioner Margrethe Vestager.

The State should double down on supports for entrepreneurs in the forthcoming budget, a new lobby group has said.

The State should double down on supports for entrepreneurs in the forthcoming budget, a new lobby group has said.

Scale Ireland, which is backed by many leading figures in the start-up community, has called for targeted measures to make it easier for entrepreneurs to establish and scale businesses in the Republic.

The organisation’s call comes as Dublin Chamber yesterday urged the Government to provide greater incentives for Irish companies in Budget 2020 rather than simply relying on foreign direct investment (FDI) to fuel economic growth.

Incentives

Scale Ireland, which has been founded to represent “innovation-driven enterprises”, has called for a number of measures to be introduced in Budget 2020 to aid entrepreneurs. These include revamping the key employee engagement programme (Keep) and making improvements to capital gains tax (CGT) entrepreneur relief. It also wants to see the research and development tax credit simplified and the employment and investment incentive scheme (EIIS) overhauled.

Appearing before an Oireachtas committee on budgetary spending, Ms Burke said the Government should show it is serious about competing with the UK, whose tax regime for entrepreneurs has greatly improved in recent years.

“Innovation-driven enterprises share a special set of problems because they run huge negative cashflow early on as they invest in research, product development and even in some cases the introduction of a new business model. That gives them a set of problems that are unique relative to small firms generally and it requires a specific policy response,” he said.

“FDI is vital to the Irish economy, but as the global environment changes so our business model must adapt, remaining attractive to international investors while also avoiding excessive reliance on a small number of highly mobile firms.”

Dublin Chamber has called for the raising of the lifetime cap on qualifying gain for CGT to be raised from €1 million to €15 million to send a “strong signal” that Ireland intends to compete with the UK ahead of Brexit.