Charlotte Rogers: 2018 is the year the founder bubble burst

From titans of industry to serious misconduct investigations, this year high-profile founders lost their shine as employees and brands seized back control.

Ray-Kelvin-Ted-Baker-
Ted Baker founder Ray Kelvin.

There has long been a kind of mystique around founders, which meant their (at times) strange behaviour was explained away as simply a mark of genius.

Ted Baker’s Ray Kelvin, for example, spent three decades refusing to show his full face in public, preferring to live in the shadow of his fashionable alter ego, while Tesla’s Elon Musk sent out controversial tweets and cooked up audacious plans for space travel.

Once considered quirky or eccentric, the behaviour of high-profile founders has now been marred by allegations of impropriety, forcing brands – perhaps for the first time – to reassess whether the person who founded their business is more of a risk than an asset.

The situation at Ted Baker is a prime example. Only after a petition signed by 300 former and current staff revealed serious allegations of harassment including “forced hugs” and ear kissing did Ted Baker confirm Kelvin would take a leave of absence from the company “for the benefit of the business”.

At the same time Kelvin, in his first statement since the allegations came to light, described Ted Baker as his “life and soul for 30 years” and, despite accepting the investigation, stated the business means “everything to him”.

Rather than properly acknowledging the people who have allegedly been made to feel uncomfortable and harassed, Kelvin, as with many founders this year, chose to focus on his own pain.

READ MORE: Why Ted Baker’s Ray Kelvin is not your average CEO

Arcadia boss Philip Green took a similar approach, describing the week he was exposed as the unnamed businessmen who had taken out a super-injunction to prevent accusations of sexual harassment, bullying and racial abuse going public as the “worst” of his life.

It is fair to say he probably felt slightly worse when global superstar Beyoncé cut ties with Topshop, pulling her Ivy Park athleisure brand from the fashion chain after the allegations emerged. The US singer’s Parkwood Entertainment company, which launched the brand via a 50/50 partnership with Topshop in 2016, last month confirmed it is now the sole owner of Ivy Park.

It has also been – in his words at least – an “excruciating” year for Elon Musk. The Tesla founder and CEO was charged in September by the US Securities and Exchange Commission (SEC) for misleading investors after tweeting in August that he had “funding secured” to take publicly traded Tesla into private ownership.

Alongside a $20m (£16m) fine for both himself and Tesla, Musk was forced to step down as chairman of the electric vehicle firm for a three-year period and be replaced by new chairwoman Robyn Denholm.

However, in an interview aired this week on US TV channel CBS, Musk claimed that Denholm would have no control over him, because he remains the firm’s majority shareholder.

“I am the largest shareholder in the company,” said Musk. “And I can just call for a shareholder vote and get anything done I want.”

He also took a swipe at the regulators during the televised interview stating: “I want to be clear, I do not respect the SEC”. Musk was then seen breaking into tears, insisting that the Tesla team do not review his tweets, despite having agreed to comply with company communications procedures when tweeting about the firm.

The fact that Tesla even attempted to extract this concession from Musk, and then replaced him as chairman, is clearly indicative of a deepening lack of trust.

READ MORE: How to ensure founder-led businesses don’t become toxic

Staging a comeback

Like Musk, it’s clear some founders were not prepared to go down without a fight.

US pizza chain Papa John’s is desperately trying to reinvent itself in a bid to shake off the scandal surrounding its founder John Schnatter, who stepped down as chairman in July after being exposed using racist terms on a conference call.

CEO Steve Ritchie has tried to steer the company away from a “founder-centric marketing plan” and removed Schnatter’s image from all marketing materials. In September the pizza business went live with ‘Voices’, an ad campaign designed to focus on other people within the business, and just this week revamped its rewards programme with a view to kickstarting lacklustre sales.

Yet despite all efforts, the shadow of Schnatter still looms large. He is attempting to regain control of the company, in which he holds a 31% stake, having made allegations of sexual misconduct within the current CEO’s “inner circle” via his website savepapajohns.com. On Friday it emerged Schnatter had hired advisors to review the financial prospects for the company.

Back in the UK, WPP is another organisation hoping a drastic repositioning will help it move on from an acrimonious split with its founder.

Speaking to Sky News last week, Sir Martin Sorrell denied he was out for revenge, despite boasting he was “two-nil up” against WPP seven months after leaving the business amid allegations of improper personal conduct.

In the interview Sorrell admitted it had not been an “easy six months” building his new business S4 Capital, which last week acquired US programmatic ad firm MightyHive and in July bought Dutch digital agency MediaMonks, despite WPP deeming the deal a breach of confidentiality.

Hoping to put the furore behind it, yesterday WPP (11 December) revealed a three-year strategy for “radical evolution”, described by CEO Mark Read as a “fundamental repositioning” of the organisation as a creative transformation company.

WPP will pump £300m into a restructure programme over the next three years, which will see the integration and disposal of various “under-performing businesses” at the cost of 3,500 jobs.

The company has also sought to draw a line under the previous era by unveiling a colourful new logo and even Read himself appeared to take a swipe at the Sorrell years by crediting the company’s more “contemporary proposition” for helping it win Volkswagen’s creative account in North America.

2018 has undoubtedly been a tough year for founders. However, as allegations of harassment, racism and financial impropriety come to light it is hard to feel sorry for them – or at least as sorry as they seem to feel for themselves.

Furthermore, it is clear that brands are growing in confidence and are poised to oust their founders if they prove damaging to the business. Like never before founders are unable to hide behind the old-fashioned mystique and are finding themselves being held to account just like everyone else. It’s worth remembering, in 2018 no one is bigger than the brand.

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