Less Defensible

“A founder previously might have said ‘I own the company, it’s mine, it’s an extension of me, I can do whatever I want,’” said David Larcker, a professor at Stanford’s Graduate School of Business who has studied the backlash against executive misbehavior. In the last year or so, that position has become less defensible, he added, “as other societal forces come to bear.”

The first chinks in founder armor came with the eventual resignation of Uber Technologies co-founder Travis Kalanick after complaints about sexual harassment, sexism and other kinds of unacceptable behavior at the rapidly growing ride-hailing company. (He still owns about 16 percent of the voting power and remains on the board.) Then Harvey Weinstein was convinced to step away from his namesake film production company after the New York Times made public allegations of serial rape, intimidation and harassment. Weinstein has pleaded not guilty to criminal charges of sexual assault.

Unlike executives, who can be dismissed, most founders, including Kalanick and Liberty’s Hewitt, hold substantial stakes, sit on the board and are deeply connected to their companies’ cultures. Convincing them to depart isn’t easy.

On July 19, Hewitt agreed to sell his 200,000 Class B shares, which entitle him to elect a majority of Liberty’s directors, to Vintage Capital Management LLC, a Florida-based private equity firm run by Brian Kahn. The firm will also buy Hewitt’s Class A shares.

Liberty Tax didn’t respond to repeated requests for comment. Phone calls to Hewitt through his lawyer weren’t returned. The stock, which lost as much as half its value in the months since news of the sex scandal broke in September, rose 26 percent Tuesday on the news of Hewitt’s resignation and sale.

Hewitt, now 69, is credited with developing tax-prep software at his first company, Jackson Hewitt. He lost control of the company when it was bought by HFS Inc. in 1997. Shortly after, he started Liberty, but the new company never became more than a distant third in the industry; even at its peak, it was only around 1/10 the size of H&R Block.

Office Sex

Hewitt’s personal comeuppance began with a July 2017 call to Liberty’s ethics hotline complaining about Hewitt’s romantic relationships with his employees and his penchant for noisy sex in his office. In response, the company board hired the New York law firm of Skadden Arps Slate Meagher and Flom LLP to conduct an internal investigation, which found “credible evidence Mr. Hewitt engaged in an array of inappropriate conduct, both personally and involving business matters, while serving as Liberty Tax’s CEO and Chairman,’’ board member John Garel wrote in a Nov. 10, 2017 letter filed with regulators.

More to the point, Hewitt treated Liberty’s female employees as his own personal Tinder, according to interviews with people familiar with Hewitt’s actions and the company’s operations. They estimated he’d had sexual relationships -- some long-term, some short -- with more than a dozen women who either worked at the tax-prep firm’s Virginia Beach headquarters or owned the company’s franchises.