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Published Jul 24, 2023

Carvana and Corporate Governance, Hollywood vs. Microsoft, and Oddity’s IPO | Prof G Markets

Scott Galloway delves into the successful IPO of beauty AI company Oddity, the ethics of insider trading, Carvana's corporate governance challenges, and the strategic shifts Hollywood needs to address tech giants like Microsoft.
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  • Governance Issues

    criticizes Carvana's governance, highlighting issues like related-party transactions and the company's debt restructuring. He argues that Carvana's board has failed to ensure that transactions with related parties are beneficial to the company and its shareholders. adds that Carvana's recent debt restructuring, which eliminated 83% of its 2025 and 2027 unsecured note maturities, has temporarily boosted investor confidence but doesn't solve the underlying issues.

    It's okay to have related party transactions as long as a special committee of the board and the company can show that this is a good relationship with market economics. That's okay as long as you've done the work and said this is a great relationship. It doesn't appear they've done that here.

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    The restructuring gives Carvana a few years to figure out a viable business model, but it still faces significant challenges 1 2.

       

    Board Diversity

    Scott emphasizes the importance of board diversity in improving decision-making and company performance. He shares his experience on the board of Panera, where he stepped down to make room for more diverse perspectives. Diverse boards are less likely to engage in groupthink and more likely to challenge the CEO and other executives.

    When you all have the same experiences in terms of life and business, you all kind of engage very easily in groupthink. And as Jonathan Haidt says, when you all bark up the same tree, you get stupid.

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    Scott argues that diversity is not just ethically right but also crucial for effective governance 3.

       

    Dual-Class Shares

    Scott criticizes dual-class shareholder structures, which separate ownership from control and can lead to poor governance. He points out that Carvana's dual-class structure allows the Garcia family to maintain control despite owning a small percentage of the company. This setup can lead to conflicts of interest and poor decision-making.

    I hate dual class shareholder companies. They started with media companies, now they've, they've perverted almost all technology companies.

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    Ed adds that this structure has led to questionable transactions and lawsuits against Carvana, further complicating its governance issues 1 4.

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