San Francisco - Uber directors plan to vote on wo new members by ousted chief executive officer (CEO) Travis Kalanick, two people familiar with the matter said.
Those two coordinated moves could drastically reshape the
ride-hailing company’s governance, while officially kick-starting what
could end up being the largest private stock sale in history.
Kalanick, a co-founder who resigned as CEO under fire in June,
stunned the board Friday when he named two former corporate titans to
the startup’s embattled board of directors. The nominations of former
Merrill Lynch CEO
John Thain and former Xerox CEO
Ursula Burns came as Uber’s board considers a slate of changes that
would strip Kalanick of much of his power.
The moves present yet another challenge for the ride-hailing company,
valued at about $70bn, that has been beset this year by multiple
lawsuits, investigations by US authorities, sexual harassment
allegations, fights over operations with municipalities from New York to
London and an array of vacancies at high-level positions including
chief financial officer.
With or without his appointees - it’s still not clear which -
Uber’s board plans to vote on the changes and whether to move forward
reforms, and whether to go forward with a $10bn stock sale to
SoftBank, said the two people, who asked not to be identified discussing
private deliberations. Bloomberg
reported in July that some Uber shareholders, led by Benchmark,
discussed a stock deal with the Japanese company that has backed some of
the startup’s ride-hailing rivals in Asia.
The reforms have three major objectives: create equal voting power
among shareholders, move the closely held company toward an initial
public offering in the next two years, and limit Kalanick’s power as a
shareholder and board member.
Kalanick sees the changes as poor
corporate governance, meant to shift authority to new CEO
Dara Khosrowshahi and away from the board, a person familiar with the
matter said. And many of the proposals - including a mechanism to push
Uber toward an IPO if more than a third but less than half the board
support - are indeed unusual.
“I hope nobody puts this into a model of good corporate governance,”
Ken Bertsch, executive director of the Council of Institutional
Investors. “But they’re dealing with a specific problem in any way they
can, and the problem is excessive power for the former CEO, who has the
potential to undermine the authority of the new CEO. So I am pretty
sympathetic to them.”
Kalanick, who hugged Khosrowshahi at an all-hands meeting in
September, has tried to show his support for the new CEO. But Kalanick’s
decision without warning to name two board members late Friday
afternoon put him at odds with his successor.
In an email to employees,
Khosrowshahi called the decision “disappointing,” writing, “Travis
appointed two new members to Uber’s Board without discussing it with me
or the Board of Directors more broadly. Anyone would tell you that this
is highly unusual.”
There are some questions about Kalanick’s power to unilaterally
appoint the directors. For one, Uber’s largest shareholder, Benchmark,
is suing Kalanick for fraud to strip him of those two seats and a third
one that he occupies. That suit was sent into private arbitration and
the sides are in the process of selecting an arbitrator. The
investor plans to legally challenge Kalanick’s board appointments,
according to a person familiar with the matter.
As of Sunday, Thain and Burns still weren’t official board members of
the San Francisco-based company, one of the people said. It’s not clear
whether the pair will join the board, though at least one current
director believes the group will embrace Kalanick’s appointees, a person
familiar with the matter said.
READ: Former Uber chief names two directors, surprises board
Uber’s board held a phone call Saturday to discuss the governance proposals. Burns and Thain did not participate.
The governance proposal, written with the help of Goldman Sachs, would shift Uber shareholders to one share, one vote. That would
significantly reduce the voting power of Kalanick and Benchmark.
Benchmark is a major proponent of the changes while Kalanick is opposed.
The reforms would also give Khosrowshahi the authority to fill three
board seats if the current board members who occupy them vacated their
seats. At least half the board and half of shareholders would need to
approve his appointments, however.
The plan would strip Kalanick of one of his board seats and give it
to SoftBank as part of the potential share purchase. Kalanick’s other
seat would require Khosrowshahi’s approval and would need to be filled
by a C-suite member of a current Fortune 100 company.
Now that Kalanick has moved to fill his two seats, it’s not clear what will become of those provisions.
The reforms would also create a high hurdle for Kalanick to return as
CEO. Any former officer of the company would require two-thirds vote of
support from shareholders and the board.
SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.
Read Fin24's top stories trending on Twitter: