WeWork is set to vote on adding 2 new independent board members after big investors suing SoftBank unsuccessfully tried to stop it

WeWork Press Kit - Conference Room in Houston Galleria

WeWork's board is set to vote on Friday to add two temporary independent directors to the SoftBank-controlled board.
The duo, who bring deep business and legal expertise, would decide whether the current lawsuit against SoftBank can continue.
A pair of current board members – the only non-SoftBank-affiliated directors – contested the additions in court on Wednesday, arguing that the process would hurt WeWork's minority shareholders.
The dispute stems from SoftBank's April decision to pull the plug on a tender offer to buy up to $3 billion of WeWork stock from investors, founder Adam Neumann, and 850 current and former employees.
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A fight over new WeWork board members culminated in a Wednesday court hearing that showed the battle between WeWork investors and SoftBank is far from over.

On behalf of WeWork, board members Bruce Dunlevie and Lew Frankfort asked a judge to prevent WeWork's board from bringing on two temporary board directors. Dunlevie and Frankfort are suing SoftBank in the Delaware Court of Chancery for backing out of a $3 billion stock purchase agreement in April.

The judge, Andre Bouchard, ruled on Wednesday against Dunlevie and Frankfort's motion to stop the board additions, so WeWork will vote on the directors on Friday. The proposed directors would form an independent committee to decide if Dunlevie and Frankfort have the authority to sue SoftBank.

Dunlevie and Frankfort formed a special committee in October 2019 to evaluate rescue packages for WeWork, including SoftBank's bailout that included the stock buyback agreement. The pair were chosen because they lacked ties to SoftBank, unlike other board members.

"The uncertainty created by this process will cause harm to the Company and its minority stockholders," Frankfort wrote in a court filing.

The new directors, Alex Dimitrief and Frederick Arnold, have deep corporate, legal, and board experience. The two names were detailed at the hearing on Wednesday, sources who attended the hearing virtually told Business Insider.

Dimitrief held a number of executive roles at GE, including general counsel and then CEO of the company's global growth organization, and is now a partner at law-focused consultancy Zeughauser Group. Arnold served on the board of Lehman Brothers' bankruptcy estate and is currently a director at FS KKR, a business development corporation.

WeWork's board is chaired by SoftBank chief operating officer Marcelo Claure and includes two other SoftBank and SoftBank Vision Fund executives, as well as SoftBank's financial adviser on the stock purchase agreement and WeWork's CEO.

"WeWork is pursuing best practices of corporate governance to determine what role if any WeWork should have in this contractual dispute among its shareholders. The court's decision today allows that process to go forward," a SoftBank spokesperson said in a statement.

Spokespeople for WeWork and the special committee declined to comment.

War of words

The row was sparked by an April 17 letter that SoftBank sent to WeWork's board questioning if the special committee even had the authority to file lawsuits on behalf of the company. In response, the company's external lawyers recommended hiring executive recruiting firm Heidrick & Struggles to find independent directors, per Wednesday's court filings.

Dunlevie and Frankfort said they were not part of the original discussions with the recruiting firm, and the pair voted against hiring the firm and forming the temporary committee. Later, they learned WeWork agreed to pay the recruiting firm $450,000 for successfully finding the new directors or $225,000 if the firm did not find them.

In a court filing, attorneys for WeWork's special committee called SoftBank's attempt to form a new committee an "unprecedented betrayal" and a "tainted process."

SoftBank, meanwhile, said in filings that the proposed independent directors would not "rubberstamp" the Japanese investor's claim that the special committee can't act on behalf of WeWork.

"The Special Committee seeks to entrench itself, securing a blank check drawn from WeWork's treasury to fund litigation benefiting its members and other tendering stockholders," SoftBank's attorneys said in a filing on Wednesday.

The investor's lawyers also said that Dunlevie and Frankfort have ties to WeWork via investments, Dunlevie via his venture capital firm Benchmark Capital and Frankfort via two investment entities. The recruiting firm was engaged to bring on independent board members – someone who doesn't have any relationship to or interest in the company.

Dunlevie and Frankfort said they're representing 850 current and former WeWork employees who were set to participate in the tender offer. WeWork founder Adam Neumann is also suing SoftBank over the same issue; his lawsuit was consolidated with the special committee's suit and will be heard in January.

The groups are due back in court in late July for the next phase of the tender offer litigation.

SoftBank's tender offer came as part of a larger rescue package for WeWork in the fall after the office company shelved its initial public offering. After Neumann was ousted, SoftBank agreed to bail out the company through a multibillion-dollar debt and equity agreement and to buy stock from early employees and investors.

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