It Could Be Said #38 The Real McMahon Stands Up

Turns out Vince McMahon isn't the retiring type, nor father of the year

No matter how awful or hectic the start of 2023 has been for you, the new year has been worse and busier for anyone who has gotten in Vince McMahon’s way.

The patriarch of pro wrestling’s all conquering family had been forced from running his own company by a series of sex scandals last summer. It was ultimately revealed that not only had Vince repeatedly slept with his workers in various clandestine relationships, but he had used his own money to buy their silence in a way that expose WWE to legal jeopardy. Whilst the media interest died down upon his retirement, he is still under investigation by the American Government and threatened with lawsuits by unhappy shareholders.

And yet, as of Tuesday 10th January 2023, he is back as Executive Chairman of WWE.

The reason for this stunning comeback is his power as controlling shareholder. Like many American companies who are taken public whilst still being run by their owners, WWE shares are divided into different classes. Overall, Vince barely owns a third of the company, but he owns nearly 80% of the shares that actually gives anyone a say in WWE’s future direction. Whilst common in America, just arrangements are banned or tightly restricted in other countries, because they undermine shareholder accountability by allowing powerful founders (who typically get the ‘Class A’ shares) to ignore the wider interests of all shareholders to instead indulge themselves. One might suggest that is what is happening right now in WWE.

When Vince left, I thought that he would never come back. This was because he was caught in a Mexican standoff with a Board of Directors who had clearly told him that it was in his and the company’s interests for him to retire, and to do so quickly. It was a position they unanimously reiterated when he approached them over Christmas about coming back.

This is where the different classes of shares confuses the situation. Vince may have a controlling stake in the company, but the Board has a legal responsibility to act in the interests of all shareholders. Individual directors open themselves up to being sued if they fail to take decisions that they don’t think are for the good of all shareholders. But as the controlling shareholder Vince has the ability to pick and choose who sits on WWE’s Board of Directors.

So, whilst legally, the Board can’t just do what Vince wants them to do, Vince can legally fire them if they don’t just do what he wants them to do.

(Yes, I know that makes no sense – like I said, it’s a bad system)

My theory last summer was that Vince would never go against the Board of Directors because to do so would surely hurt the stock price and potentially risk the very future of WWE as a company. They were basically stuck in a game of mutually assured destruction - yes Vince could fire the board, but he would lose more money than anybody in the argument that would ensue. The events of the past week have seen Vince brutally break free of this trap.

For you see Vince knew that there was one thing guaranteed to cause the share price to rise; talk of a sale. WWE is entering the window where a sale is possible with its media rights due to be renegotiated shortly. Once those deals are signed it becomes a much harder company to sell both because earnings in its key revenue stream would be locked in, and due to bidders in television/streaming potentially losing interest if the company’s product is committed to a rival. Vince has shrewdly couched his comeback in the context of him pursuing some form of sale, the prospect of which was more than enough to get Wall Street to ignore that he had openly used his voting power to overrule the Board’s considered objections about his own personal character and professional value.

What he did need the Board to do was vote for him to be the new Executive Chairman. This explains some of the weirder steps along the way in this process. The reason why he went through the motions of trying to get the Board to agree to his return, was because he would ultimately need their votes to return to management. When they refused that’s why he brought along with him George Barrios and Michelle Wilson as new directors; they were handpicked to vote for him. And that’s why he was initially announced as having returned as just a director.

But the other shoe was bound to drop, and as usual with Vince, it dropped quickly. Today Stephanie McMahon announced she was leaving the company.  

But be under no illusions; Stephanie resigned from nothing. Whilst technically she and Nick Khan shared the role of Chief Executive Officer, their division of duties were closer to the standard model for how an Executive Chair and CEO work well together; the former helping to sell the company and set the strategic direction, the latter being the day-to-day leader. Vince demanding to be Executive Chairman was nothing less than demanding his daughter be fired as Chairwoman and Co-CEO - there simply wouldn’t be a role left for her to do. She’d be right back to where she was in May 2022 when she went on a Leave of Absence after her responsibilities as Chief Brand Officer had been chipped away to the point of nothingness.

And whilst Nick Khan is putting a brave face on developments right now, he must surely be perturbed at the sight of Vince bringing back his two predecessors to be henchmen on the Board. Likewise given all his negotiating experience, it must be galling to be told that Vince has comeback to be hands-on with leading the negotiations of not just a potential sale, but future media deals. This must be especially worrying considering that whilst at CAA, Khan only got to negotiate WWE’s last rights deal because Vince couldn’t use his preferred choice because their ownership of UFC constituted a conflict of interest; today Endeavor are one of the favourites to become WWE’s new owners should a sale occur. It surely wouldn’t be a surprise to see Khan leave before the end of the year as well.

And yet the stock keeps going up, hitting $92 at some points today.

Vince has acted brutally to restore some sense of meaning to his empty, cold life. And he really does seem to have gotten away with it, providing whatever deal he cooks up pleases Wall Street. But it cannot be underscored how risky his behaviour is. As the Board made clear to him, not all the damaging information about him is in the public domain. He is still being investigated, and at risk of being sued. Two directors, including one that had led the investigation into Vince, immediately resigned, rather than be party to his comeback. And whatever it means to him, he may be destroying his relationship with his immediate family.

Vince may have won. But doesn’t mean he didn’t make an almighty gamble. And he still could ultimately lose.