A Revealing Lawsuit
Named in the WWE lawsuit are Chairman and Chief Executive Officer,
Shareholders allege that WWE's executives intentionally misled investors about the success to secure media rights deals in the MENA region, and that the company failed to disclose the true reasons behind declining merchandise sales and subscriptions to its streaming service, WWE Network.
Unlike typical incidents that
Corporate governance has its own definition within WWE. WWE, characterized by many as a "one-man operation", has been centered around its Chairman and Chief Executive Officer
Whether it be a company-wide restructuring or designing the minute details of a particular wrestler's "gimmick"(on-screen character), anecdotal stories of McMahon's micromanagement of the WWE number in the dozens and illustrate the depth of his involvement at nearly every level of the company's operations. While this approach may have led to the WWE becoming the undisputed champion of the wrestling industry, McMahon's dominance over the company may present a problem as it enters its third decade on the stock market.
WWE's Board Expertise and Skills Matrix
Source: CGLytics Data and Analytics
An analysis using the CGLytics Board Effectiveness software toolsillustrates how WWE's board lacks financial expertise and has no governance expertise among its members. Considering the nature of the class-action lawsuits filed against the company, the lack of financial and governance expertise presents both a significant problem and also a valuable opportunity for the company to strengthen its board in these fields. What remains to be seen, however, is if and/or how the famously iron-fisted McMahon will proceed as the lawsuits work their way through the legal system.
WWE's entry into the stock market revolutionized the professional wrestling industry. Never had a "booker" become the Chairman and CEO of a publicly traded company, much less a wrestling promotion into the stock market. Due to
WWE Goes Public
Interestingly, it was not the wrestling itself that allowed the WWE to go public in 1999. That particular part of WWE's success can be traced back to the 1997 King of the Ring pay-per-view when "Stone Cold"
No longer purely a wrestling promotion, WWE transformed its entire business around the merchandise sales of its top stars. From
McMahon is noted to have pressured
Flash forward twenty years and WWE has again adjusted its business model to not only include merchandise lines, but also other forms of entertainment, including WWE-produced feature-films and reality tv shows starring WWE talent. The company's most recent success appears to be linked to the 2014 launch of the WWE Network, an online streaming service and digital TV network that offers access to WWE live events, TV shows, WWE-produced films and documentaries, and the company's expansive digital library (known to be the world's largest collection of professional wrestling video content).
WWE's Financial Evolution
Source: CGLytics Data and Analytics
Shareholders "Take the Book"
These class action lawsuits present a new dilemma for the WWE. Historically, it has taken relatively earth-shattering events to cause WWE to respond to shareholders in a meaningful and lasting manner. The first prominent event to occur after WWE's IPO was the tragic and sudden death of wrestler
The second and more tragic event that caused a dramatic change within WWE was the Chris Benoit double murder-suicide in 2006. Benoit's actions had reverberations across the entire wrestling industry and caused WWE to relaunch its programming under a new "TV-PG" rating in a very public attempt to decrease the violence shown on WWE shows. The entire tone of WWE programming shifted to a more "family-friendly" atmosphere, placing an emphasis on more comedic storylines and wrestler gimmicks, and heavily restricting the wrestling portions of its shows.
For example, one of the more controversial restrictions (among wrestlers and large swaths of fans) was the banning of the decades-old practice of "blading". In order to bleed for dramatic effect during a match without actually being hit over the head with a blunt object, wrestlers would use small, hidden razor blades to make shallow cuts in their foreheads that bled profusely but rarely caused actual injuries. Under WWE's PG policy, blood has almost vanished entirely from its programming, apart from accidents that draw blood (wrestlers term this bleeding "the hard way"). In these instances, WWE TV shows will only broadcast those portions of the show in black-and-white to deemphasize the appearance of blood. Former wrestler and Guardians of the Galaxy actor,
The Impact on Share Prices
The lawsuits appear to have already begun to cause damage to WWE's share prices. Forbes reported a 13% drop in the company's share price on
To navigate through difficult times, such as a lawsuit, it is of utmost importance for a company to show governance oversight and understand how their company is perceived by shareholders, investors, proxy advisors and the media. Deficiencies in board expertise such as finance, technology and governance can be clearly seen in the CGLytics platform and reveal governance risks to stakeholders and activist investors. Software tools, such as CGLytics, highlight governance red flags allow companies such as WWE to gain control through proactive insights and make smart data-based decisions.
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