Vishal Garg Still Employed: How is the Former Better.com CEO Still Working?

The Continued Employment of Vishal Garg at Better.com

Recent events at Better.com have prompted widespread questioning regarding the continued employment of its CEO, Vishal Garg, despite a series of controversies.

On December 10th, Better.com employees received notification, via email from the board of directors, that Garg would be taking an immediate leave of absence. This decision followed what the board described as “very regrettable events” occurring the previous week.

Crisis Management and Initial Reactions

An employee, requesting anonymity, revealed that the digital mortgage company had engaged a crisis management firm prior to this announcement. This move was anticipated by those closely following the unfolding situation.

However, the surprising aspect remains that Garg has not been asked to fully resign from his position. Initial speculation suggested his control stemmed from super-voting shares, allowing him to override opposing votes.

Analyzing Better.com’s Ownership Structure

A thorough review of the S-4 filing submitted by Better.com’s SPAC partner, Aurora Acquisition Corp., in November, disproved this theory.

The filing with the U.S. Securities and Exchange Commission indicates that entities connected to Better’s Founder and CEO, Vishal Garg, will hold approximately 17.5% of the company’s outstanding common stock. However, they will control roughly 22.7% of the voting power.

Further investigation, including unexercised stock options and varying voting rights across share classes, confirmed that Garg does not possess the absolute voting control necessary to prevent his removal.

Collective Voting Power

Other executives also hold stock with voting rights, but collectively, “Better Home & Finance directors and executive officers as a group” control between 35% and 37% of the combined Aurora-Better entity, according to the same SEC filing. This percentage fluctuates based on redemptions within the SPAC transaction.

Implications and Lessons Learned

The lack of forceful action from the company’s investors suggests they are not currently pushing for Garg’s complete removal, despite the ownership structure potentially allowing for it.

The case of Vishal Garg serves as a cautionary tale regarding granting CEOs unchecked, permanent control over their companies. Had Garg’s Class B shares carried ten votes each – a common practice – his removal would have been significantly more challenging.

Ultimately, the situation highlights the importance of balanced corporate governance and the potential risks associated with concentrated voting power.

Executive Compensation and Accountability at Better.com

Recent filings have brought to light substantial stock option grants awarded to executives at Better.com. Notably, CFO Kevin Ryan, currently serving as interim CEO following recent workforce reductions, received 1.182 million stock options.

Furthermore, several leaders within the organization, including both Garg and Ryan, benefited from “partial recourse loans” provided by Better. Garg secured a loan of $41,029,200, while Ryan received $5,980,920. These loans were designed to facilitate the exercise of stock options before their standard vesting schedule, exchanged for restricted stock shares.

While generous executive compensation isn't inherently problematic, allegations have surfaced regarding the role of these same leaders in the recent layoffs. A post on Blind.com, attributed to an anonymous employee, claims that Ryan initially proposed the layoff strategy months prior.

Another source, speaking with TechCrunch, indicated that Garg initially intended to offer only one to two weeks of severance to the 900 impacted employees. However, he was compelled to provide 60 days’ severance to comply with U.S. regulations concerning advance notice for mass layoffs, as reported by Insider.

The motivations behind retaining Garg are complex and raise ethical questions. Attempts to obtain comment from Better.com have, as yet, been unsuccessful.

One potential rationale is to ensure the successful completion of the planned SPAC merger, with a possible removal of Garg following this event. However, the continued presence of the CEO, even in a reduced capacity, appears to be a deliberate decision by the company.

Details of Executive Loans

• Garg received a loan of $41,029,200.
• Ryan was loaned $5,980,920.
• The loans enabled executives to exercise stock options early.
• The exchange involved shares of restricted stock.

Stock options represent a significant component of executive compensation at Better.com. The loans facilitated access to these options before their scheduled availability.

The situation highlights a potential disconnect between executive benefits and the treatment of laid-off employees. The allegations regarding the initial severance offer and the origin of the layoff plan are particularly concerning.