SoftBank is tightening governance at companies it backs as the Japanese conglomerate and its $97bn investment powerhouse try to limit the outsized control of start-up founders and restore confidence in their bets following the near collapse of WeWork.
The Tokyo-based group is expected to outline tougher governance standards and restrictions on dual-class share structures on Wednesday as it takes a multibillion-dollar writedown because of bad bets on investments such as the US-based office-sharing group, said people briefed on the plan.
The new governance standards will apply to future investments made by SoftBank. Its Saudi Arabia-backed Vision Fund is in discussions about how it can adopt some or all of these measures. Both SoftBank and the fund declined to comment.
The attention on governance standards marks a shift for SoftBank founder Masayoshi Son, who is known as a risk-addicted dealmaker, who claims to be guided by a gut feeling that lets him “feel the force”. His quick decision-making and belief in his own ability to pick winners in the technology industry has come into question, following the poor performance of a number of high-profile bets, such as car-booking app Uber.
The broad autonomy typically afforded to the creators of Silicon Valley firms has caused disquiet within private markets for years. But concerns have grown that the Vision Fund’s investment spree, which has pumped $75bn into 88 companies, has further enabled bad behaviour among tech founders.
These fears came in to sharper focus after an initial public offering of WeWork collapsed largely because of governance concerns. Public equity investors baulked at the property company’s dual-class share structure, which at one point gave its co-founder Adam Neumann 20 times the voting power of other shareholders.
Mr Neumann was ultimately forced out of the company, but not before securing a $1.7bn pay-off through SoftBank’s rescue of the group. His wife Rebekah was earlier removed from a role in succession planning.
The guidelines that SoftBank is now introducing echo the steps WeWork was forced to take to address investor anxiety in the run-up to its IPO, as well as after it received a $9.5bn rescue package from its Japanese backer to avert bankruptcy.
For private companies, SoftBank will look to have at least one board seat, require at least one independent director, prohibit directors from owning supervoting shares and limit founders or management to less than half of the board seats.
SoftBank will also introduce guidelines on how much a founder’s or management stakes can be sold at the time of an IPO or other forms of exits. A chief executive succession plan also needs to be approved by a majority of directors.
A team led by Robert Townsend, SoftBank’s chief legal officer, has been working on the proposals.
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