Peloton’s CEO Has Had Enough

It is not quite right to say that John Foley, the co-founder and still technically chief executive officer of Peloton Interactive Inc., is also Peloton’s controlling shareholder, but it’s close. Peloton has dual-class stock in which the founders and some other insiders have stock with 20 votes per share, and Foley has a lot of it; according to Peloton’s proxy statement, he controls 39.6% of the voting power of Peloton’s stock, and his co-founders Thomas Cortese and Hisao Kushi own another 18%. This is not quite right either — it counts stock options in a weird way1 — but we will just go with it. In practice, Foley controls a large block of super-voting stock, and along with his co-founders and fellow senior executives he has a majority of the voting stock.

This makes shareholder activism somewhat challenging. If you are an activist and you do not like Peloton’s management, you can put together a zingy deck about how bad the managers are and how much money they are costing shareholders, and you can present it to Peloton’s board of directors and urge them to fire the managers, but the board’s hands are somewhat tied because, if they fire the managers, the managers — as controlling shareholders — can fire them right back and reinstate themselves. Or you can present your zingy deck to Peloton’s other shareholders, hoping to lead a proxy fight that will unseat the board, but you will lose that fight because, again, the managers control a majority of the voting stock.