2,800 Displaced Peloton Employees Must Wonder Who Embattled Founder John Foley is Referring to When He Says: “We’re Holding Ourselves Accountable”
2/11/22 – – Addressing Peloton shareholders’ increasing anger and frustration (the company’s shares have fallen in value by 80% since their high in January 2021), founder/CEO John Foley said on Monday: “We own this . . . and we’re holding ourselves accountable.”
My guess is that the 2,800 Peloton employees who lost their jobs this week are wondering about Foley’s definition of the word “we.”
Having started the week still clinging to the pride, camaraderie and monetary rewards of working for what was just months ago one of the fastest growing companies in the world, these former members of the Peloton “family” (about 20% of the company’s workforce) were shown the door by Foley, who also lost his job — sort off. He stepped down as CEO, but carved out a spot for himself as executive chairman after shareholder pressure forced him to hand over the reins to Barry McCarthy, a hired gun with a track record of pulling entrepreneurial enterprises out of survival-threatening ditches.
Betting on the street is that once McCarthy cleans things up, Peloton will be acquired (Amazon, Nike, Apple and Disney are rumored to be possible suitors), delivering Foley and impatient activist investors handsome returns. For the terminated employees? In addition to what seems a reasonable severance package, they get a free one-year extension of their all-access Peloton membership.
As Archie Bunker used to say: “Well, whoop dee do!”
Every grown-up should know by now that there really is no such thing as a corporate “family.” Functional, loving families don’t reduce head counts when times are tough. This harsh reality is especially true when it comes to public companies, which have accepted “other people’s money” to grow. So, why is there so much surprise among internal “stakeholders” when the leaders who showered them with love and appreciation at the holiday party make them clean out their desks before Valentine’s Day?
The results of a study by professors at Harvard Law School and the University of Tel Aviv published earlier this month may help us answer that question. Here’s how The Wall Street Journal summarized the conclusions of “Stakeholder Capitalism in the Time of COVID”:
Chief executives love to talk about “stakeholder capitalism.” But when they face a final choice to sell a company and divide the spoils between workers and shareholders, guess who gets the money? You got it: Shareholders are the winners—along with the executives themselves.
Professors Lucian Bebchuk, Kobi Kastiel and Roberto Tallarita studied 116 takeovers since April 2020 of companies worth more than $1 billion and discovered a pattern of dishonesty in the virtue-signaling pronouncements of CEOs:
In public, they talk about the importance of employees, communities, the environment and other stakeholders in the business. In private, they negotiate deals they know will lead to job losses and closed offices but don’t demand compensation for the losers.
John Foley, who deserves credit for building Peloton into a movement, is not alone in abandoning nice thoughts when under the gun. In 2019, members of the Business Roundtable revised their “Statement on the Purpose of a Corporation,” moving away from “shareholder primacy,” broadening a corporation’s responsibilities to act in the best interests of “all stakeholders,” including customers, suppliers, communities and yes, employees. The authors of the Harvard/ Tel Aviv study make a compelling case that despite this new pledge, shareholder interests still rule and other considerations fade away whenever crises or ownership transactions are on the table.
One of the legitimate responsibilities of CEOs is to motivate employees and nurture loyalty throughout a company’s workforce. But understanding that storm clouds may be just over the horizon, leaders should be more corporate than familial when addressing the troops. Honesty builds trust, which makes even painful divorces more tolerable.
The 2,800 displaced Peloton workers must have felt a level of betrayal and wondered who he was referring to when John Foley assured shareholders that, “We’re holding ourselves accountable.”
UPDATE: 9/13/22 – – John Foley and other Peloton senior managers are leaving the company; once a $50 billion company, now a $4 billion company.