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THE WALL STREET JOURNAL. * * * * Wednesday, December 23, 2020 | B5

BUSINESS NEWS

Tech Firm Aid Will Pilots at Delta and United

had agreed to accept cuts in
order to prevent furloughs.

Founders Let Airlines Provisions in those agree-

ments will be paused so pi-
lots’ pay will be restored

Gain Clout Rehire Staff through March, unions have

said.
The legislation may halt
contentious negotiations be-
Continued from page B1 Continued from page B1 tween Southwest Airlines Co.
by investors, like Google and would be able to cut checks to and several of its labor
MARTINA ALBERTAZZI/BLOOMBERG NEWS

Facebook Inc. Airbnb, Door- furloughed workers by Christ- unions: The company had told
Dash, Palantir and a string of mas Eve on Thursday. While workers that furloughs in
other recent listings show how pay and benefits will be re- 2021 would be unavoidable
so-called founder control has stored immediately, employ- unless the unions agreed to
effectively become the norm. ees will return to work in concessions or the govern-
The moves by the large phases. ment provided more aid.
newly listed companies are Tracking down all the fur- A Southwest spokesman
stirring concern among propo- loughed workers could be a said the airline is “very en-
nents of strong corporate gov- daunting task. couraged” but needs to exam-
ernance, particularly as they The employees have relin- ine the final terms surround-
come just over a year after the Tony Xu, co-founder and CEO of DoorDash. Three co-founders control 75% of the company’s votes. quished their corporate email ing the payroll funding. He
failed IPO of WeWork Cos. addresses and mailed back declined to say Tuesday
WeWork co-founder Adam “They have earned the right company-provided phones and whether the airline will call
Neumann had full control over Risk Posed to Rule democracy is a better way.” to have that control,” he said. ID badges. Some may have off its planned job cuts next
the business—so much so that Founder control took off as Smart, strong-willed founders moved. In many cases, work- year.
potential investors jettisoned By Shareholders startups were deluged with should be able to focus on ers will need training before Airlines had asked for the
the offering after being money from private investors “building an enduring busi- they can return to their posi- Cares Act funding to be ex-
spooked by his management hoping to find the next Face- ness,” he said. tions. tended with no changes to the
style and mounting losses, Founder control—where in- book or Alphabet Inc. Besieged DoorDash’s three co-found- Not all airlines cut staff terms, and the new legislation
among other issues. vestors effectively hand over with demand from investors, ers control 75% of the com- once aid ran out in the fall. closely tracks the previous
The high-profile debacle led the keys of giant companies founders were able to dictate pany’s votes, according to se- Delta Air Lines Inc. didn’t agreement.
many investors in Silicon Val- to a single person or small terms of funding rounds, said curities filings. Airbnb’s co- furlough any workers, though Airlines must agree not to
ley to question the wisdom of group—brings large new risks Renee Jones, an associate founders control 43%, many have been working re- buy back shares or pay divi-
granting founders so much for shareholders. dean at Boston College Law although that amount is ex- duced hours. dends, and to limit executive
power early on. They worried Even a competent founder School who has researched pected to grow as early inves- Delta said earlier this compensation. The Treasury
that a measure once reserved can tire of their job, yet share- governance at large startups. tors sell their own high-po- month that it planned to bring previously required that air-
for a handful of standouts was holders of companies where “There’s more money than tency shares. Palantir’s three all its workers back to full lines repay about 30% of the
being shared too widely and founders have outsize control there are good deals,” she co-founders control 49.99% of schedules by Jan. 1, though it job support funding.
without discernment. For in- wouldn’t have any real ability said, leading to persuasive or the votes in a complex struc- also sought more volunteers The package once again re-
stance, few of the large start- to unseat the CEO, said Nell compelling founders having ture that increases their share to take unpaid leaves of ab- quires airlines to maintain
ups going public had ever pro- Minow, vice chair at Val- the upper hand in negotiations potency as they sell stock in sence. service levels to ensure that
duced an annual profit. ueEdge Advisors and a long- and leverage over how much the company, which decamped “We know the recovery rural areas don’t lose air ser-
Now, the mood has shifted time advocate for shareholder control they want. Such struc- to Denver this year. continues to be choppy,” Chief vice, which could mean that
amid a sizzling market for rights. tures, she said, are precarious, Many adherents of strong Executive Ed Bastian wrote in carriers have to restore flights
IPOs—one where Airbnb’s “I want them to be on and have led to a series of corporate governance question a Dec. 9 message to employ- that have been cut in recent
shares more than doubled on their toes all the time,” she high-profile missteps like We- the shift. Some marquee stock ees. months.
their first day of trading. In- said, rather than mimicking a Work, given the lack of over- indexes like the S&P 500 won’t
vestors say the strong market monarchy. “For all its faults, sight. include new companies that
helps strengthen the hands of have multiple classes of
co-founders of hot tech com- shares, while shareholder
panies that are going public, went public with a structure terviews that they didn’t re- groups such as the Council of
giving them greater leverage that gives the founder 20 ceive any questions about Institutional Investors advo-
over those who push for more votes per share. their high-voting stock during cate against it because it hin-
democratic structures where So far this year, 41.5% of meetings with investors before ders accountability for corpo-
every shareholder has the the 41 tech companies that their IPOs. rate leadership.
same voting power. have gone public had dual- Backers of founder control The rise in founder control

PATRICK T. FALLON/BLOOMBERG NEWS

The founder of artificial in- class shares, with one class say it is appropriate to give cuts against the general trend
telligence company C3.ai Inc., holding higher voting potency some visionary CEOs room to elsewhere in corporate Amer-
which went public this month, than the other, said Jay Ritter, experiment and take risks that ica, where shareholders in re-
has 50 votes per share com- a University of Florida busi- Wall Street might not always cent decades have been gain-
pared with the more standard ness professor who tracks appreciate. Alfred Lin, a part- ing a bigger say, said Nell
10 votes. That is down from IPOs. That figure is just shy of ner at Sequoia Capital who Minow, vice chair at Value-
the 100 votes per share listed the record 43.3% seen in 2017 sits on the boards of both Edge Advisors and a longtime
in early drafts of the com- and well above the 7.2% over- Airbnb and DoorDash, said in advocate for shareholder
pany’s prospectus filed with all seen since 1980. an interview this month that rights.
the Securities and Exchange Both the CEO of DoorDash, those firms’ CEOs have proven —Maureen Farrell
Commission. Last week, e- Tony Xu, and the CEO of Wish, they are responsible after and Heather Somerville American Airlines, which furloughed 19,000 workers in the fall,
commerce site Wish’s parent Peter Szulczewski, said in in- years of expansion. contributed to this article. said it should be able to start paying them again on Thursday.

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