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Elizabeth Pollman and Yifat Aran: Ousted, Startup Failure and Equity Compensation in the Unicorn Era.
Description
(0:00) Intro.
(1:28) About the podcast sponsor: The American College of Governance Counsel.
(2:15) Start of interview.
(3:16) Yifat's "origin story."
(6:20) Yifat's bio and positions at the University of Haifa and Technion - Israel Institute of Technology.
(8:00) About Elizabeth Pollman, Professor at the Penn Carey Law School at the U. of Pennsylvania.
(9:57) About their article, Ousted (2023).
"We use that term broadly to refer to being forced or pushed to step down from the CEO role, specifically that managerial role, despite having significant control. And what we're arguing is that there's a whole bunch of countervailing forces and factors that can work to limit the durability of the founder CEO's power and ultimately can lead to them resigning from that managerial role."
(11:58) Examples of countervailing forces and factors to the founder/CEO power. Differences between public and private companies. Influence of voting rights.
(15:20) Influence of margin loans (backed by founder stock) and secondary sales in corporate governance. *Reference to E41 with Maureen Farell on Cult of We (Aug 2021).
(19:31) Conflict with regulators, investors and other stakeholders (example: Uber). *Reference to Elizabeth Pollman's article on Regulatory Entrepreneurship.
(22:19) On employee pressure in corporate governance.
(23:00) On OpenAI's board debacle (involving Sam Altman's ouster and reinstatement).
(29:31) Other founder/CEO cases referenced in Ousted. *Mention of E64 with Keir Gumps, involved in Uber's governance clean-up. Cases of Elizabeth Holmes (Theranos) and Sam Bankman-Fried (FTX). On externalities from lack of corporate governance in startups, particularly unicorns. The impact of the Power Law in VC-backed companies.
(36:26) Take-aways from their article Ousted. Gap between academia and practice.
(40:04) Elizabeth Pollman's article Startup Failure. *Reference to E3 with Elizabeth Pollman on Startup Governance and Regulatory Entrepreneurship (May 2020).
"[I]t's really important that law and culture facilitate the efficient flow of the failure of venture-backed startups and that failed startups can do so with honor because that's what sustains our system in a big way, out of which comes these few successes.
But we also have to have a way of dealing with lots of failed startups (ie. M&A, acquihires, ABCs, and liquidation)."
*Reference to my newsletter describing a time of "downrounds, shutdowns and recaps" on a monthly basis.
(44:28) Yifat Ar