NEW YORK - Uber Technologies directors plan to vote
Tuesday on board reforms and whether to pursue a major stock deal with SoftBank
Group despite the surprise appointment of two new members by ousted Chief
Executive Officer 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 $70 billion,
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
$10 billion 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,” said 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.
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 Group Inc., 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.