Even though the sexual harassment suit against Tinder has already been settled, the IAC-owned startup is still facing fallout from the HR nightmare. Justin Mateen, the Tinder CMO who allegedly called his former coworker and girlfriend a "whore," was quickly forced to resign. Now Forbes reports that Tinder founder Sean Rad has been driven out as CEO.
Rad has been demoted to president, a decision he says tells Forbes he "strongly disagreed" with. IAC's board of directors have the ultimate say because the holding company owns 60 percent of Tinder's stock. Rad has chosen to stay in his diminished role—and is still talking to the press as though he's the one in charge:
"We're looking for an Eric Schmidt-like person," says Rad of the upcoming search. "There is no CEO coming in the door that I don't get along with—that would be corporate suicide."
Ultimately, IAC felt Rad had built a club instead of a proper company. There were no social barriers between employees and a weak sense of ethics. Wolfe reportedly took a $1 million settlement, much less than she was asking for. But Rad made his allegiance to Mateen known. The bros showed up together at Forbes' 30 Under 30 conference and hung out in Rad's hotel room after he got the bad news:
In the room him was Justin Mateen, his best friend and the former Tinder CMO. In many ways Rad's predicament could be traced to Mateen. In July a former Tinder executive—and former Mateen girlfriend—named Whitney Wolfe went public with a salacious sexual harassment lawsuit that generated awful press and the CMO's quick suspension. In September Mateen officially resigned. But while Mateen is out as far as IAC is concerned, he remains a consigliere to Rad, who believes his friend got a raw deal. They still talk four times a day. They eat dinner with each other's families. When I visited Rad in Los Angeles, where Tinder is based, he had just totaled his military-grade $115,000 Mercedes G Class wagon—and so he picked me up in Mateen's, who had purchased a matching version, down to the jet black color.
Even in Forbes' piece about his demotion, Rad manages to break IAC's request not to discuss the lawsuit. Instead he throws Wolfe under the bus:
Rad was in a tough spot. His team, his friends and Mateen's family lobbied Rad to defend his friend and cofounder, but IAC ordered everyone at Tinder to stay mute. "Justin could have defended himself and made some nasty evidence against Whitney public," says Rad. "But that would have dragged the company in the mud. He shut up, hurt himself and spared the team the drama."
IAC had been looking for a way to keep Rad in line. The corporation used the lawsuit and Rad's refusal to cut ties with Mateen as an opportunity to assert control, which has always been in the hands of IAC executive chairman Barry Diller.
IAC was not about to watch its new potential cash machine get derailed by more amateur mistakes. Rad had the title of founder, but he didn't have control over his own fate at the company. Which led a few weeks later to the call [in which Rad was demoted]. "If the Whitney thing didn't happen it would be difficult for IAC to demote Sean, because they'd have a lot to answer for," says one insider. "But the lawsuit gave them an out."
It's not all bad for Rad: he still retains 10 percent ownership of the startup valued north of $1 billion. He'll also keep his seat on the company's board. But Rad's ego is bruised, and he's already forecasting his ousting will lead to disaster: "I might be naïve in saying this, but the soul of a consumer company is the product. You take away the product leadership, and the company dies."