For the people in this thread wondering whether this is ok: double dipping is never ok.
Once you get to a level where you have financial decision making power, don't pick a provider (even a great one, even at a competitive price) if you have a meaningful financial interest in them. The incentives are all wrong and it leads to badly run companies. In this particular case, it's so far over the line, it's pretty bad.
The board might not be able or want to force him out right now, but long term the tone has been set.
...for companies that are structured as public companies.
If your companies are all private, with no investors, go ahead and do whatever you like. It's all just your money, (or your family's money), anyway.
But to do that with money from public investors is, and this is only my opinion, but I think it's extremely unethical. Obviously the issue is that there is nothing explicitly illegal about what people like the WeWork CEO are doing. I'm not sure why?
I'm not a lawyer, but I suspect this may cause you to lose the liability protection of the corporation. From [1]:
"The veil of liability protection provided by an entity may be pierced based on the following theories:
Alter Ego Theory. If you run your company as little more than your “alter ego,” as a mere extension of yourself (this will generally be the case where there is a lack of separateness between you individually and the company itself, due to commingling of funds, lack of proper governance, and other factors)."
Re-read what the WeWork CEO did. It was not commingling of funds, it was what would loosely be termed as double dipping. One of his corporations, doing business with another. ie - each of his corporations making independent decisions, via the mechanisms not wholly dependent on himself, about what to do with money in their own accounts. Not money in his accounts. It happens a lot nowadays precisely because it is legal. Usually in parts of the business that deal with real estate, like we see here, or another one is benefits. For instance, you get a basket of funds to choose from for your 401k, but some of them are funds run by "Bigshot Investor X", who also happens to be an investor in the company at which you're working. If you tried to go after corporations or individuals for these kinds of things on the basis of alter ego you would be laughed out of court.
That's why this stuff is legal, because it by definition, is NOT an alter ego situation. My point is that while it is not illegal, it is definitely unethical, and probably should be illegal. Not because of the doctrine of Alter Ego, which is obviously not violated in these sorts of instances. But rather because all of these corporations, while acting independently, are clearly acting in concert to benefit a third party that is NOT the general shareholder class. There is no explicit, sort of generic, law against that right now.
As I said, if your companies are private, do whatever you like in this regard. All of your companies can, and probably should, concert to benefit you and your family. I'm just saying for companies with public investors, that's just not cool.
> there is nothing explicitly illegal about what people like the WeWork CEO are doing
Not sure why you say that. This seems to be textbook self-dealing, which is illegal under Delaware law (where WeWork is incorporated) unless the self-dealing party can demonstrate fairness:
http://www.sgalaw.com/news-and-views/2014/11/24/self-dealing...
I think you honed in on a key issue: "pick a provider".
There's nothing wrong with the current "arrangement", but there might be a lot wrong with the way the arrangement came to be.
Or said another way, there aren't any ethical issues with WeWork renting a building from one of the owners in an above-board lease arrangement. The way WeWork chose that building and reevaluates its lease may have some issues.
Is that true? For example, PayPal's CEO is Dan Schulman, Schulman is the head of the board of Symantec, and PayPal has to use all Symantec products in every category where they sell a product.
Once you get to a level where you have financial decision making power, don't pick a provider (even a great one, even at a competitive price) if you have a meaningful financial interest in them. The incentives are all wrong and it leads to badly run companies. In this particular case, it's so far over the line, it's pretty bad.
The board might not be able or want to force him out right now, but long term the tone has been set.