We're in an investee's market right now. Investors are throwing large amounts of money at anything that might have a positive return. This gives the founders/CEOs/etc. a lot more power to get away with this kind of stuff. If their behavior scares off one investor, there will still be a line waiting to give them money.
When things swing the other way, and not as much money is floating around waiting to be invested, investors will be able to hold the investees to higher standards.
When things swing the other way, and not as much money is floating around waiting to be invested, investors will be able to hold the investees to higher standards.