Recommended Citation
Jennifer S. Fan & Xuan-Thao Nguyen, Founder Worship, Effective Altruism, and Corporate Governance, 113 KY. L.J. 1 (2024-2025)
Publication Title
Kentucky Law Journal
Document Type
Article
Abstract
Founders are the heart of any startup. Oftentimes, they are given considerable latitude in managing a company, particularly if they are hailed as a visionary founder in a pathbreaking new industry. Additionally, it is assumed that underpinning their actions is the desire to do good. Unfortunately, sometimes this leads to what we term founder worship where the promise of the founder and the innovation may lead to perverse outcomes because too much control is ceded to the founder and there is a lack (or sometimes complete absence of) corporate governance. When unlimited control is coupled with "do gooderism," which in this case was under the pretext of effective altruism, it can lead to disastrous consequences. This phenomenon of founder worship with do gooderism also exposes one of the shortcomings of private ordering. While private ordering in the venture capital setting allows for flexibility in when to implement corporate governance and other legal mechanisms, its very flexibility also may create loopholes for those founders who engage in unethical behavior and, in some cases, criminal behavior. This Article uses Sam Bankman-Fried and FTX as a case study on the dangers of founder worship, which are amplified by the do gooderism of effective altruism, and explores ways to mitigate the effects of such conduct.