The Uber drama continues after a late Friday "surprise" by former CEO and current board member Travis Kalanick that is being characterized by sources as a blatant move to undercut new CEO Dara Khosrowshahi and retain influence at the company. Kalanick announced the appointment of two new board members to empty seats on the board that are, under a change voted on by shareholders last year, up to Kalanick alone to fill but it was the issue of these empty board seats that's at the center of a lawsuit filed in August by major investor Benchmark Capital against Kalanick.
As Bloomberg reports, Kalanick welcomed former Xerox CEO Ursula Burns and former Merrill Lynch CEO John Thain to the Uber board, without the knowledge of the board or anyone at Uber. The filling of these two empty board seats comes days ahead of a planned board vote on some proposed company governance changes that are backed by Khosrowshahi, and are seen by many as designed to limit Kalanick's future power at the company.
In a statement emailed to Bloomberg, Kalanick wrote, "I am appointing these seats now in light of a recent board proposal to dramatically restructure the board and significantly alter the company’s voting rights. It is therefore essential that the full board be in place for proper deliberation to occur, especially with such experienced board members as Ursula and John."
As Recode notes, neither Burns nor Thain are necessarily objectionable choices to the rest of Uber's board, who will have to vote to officially appoint them when they meet on Tuesday and under the current bylaws they are obligated to abide by Kalanick's choices. Burns was already on Uber's shortlist of potential board candidates, and Thain was a mostly respected leader in his time at Merrill Lynch. However, a source tells Recode, "It’s the way Travis is doing this that is the problem.”
The proposed governance changes that Kalanick opposes include changes to how the three board seats under Kalanick's control get filled and it's unclear whether Kalanick's two new appointees will be able to vote on these changes themselves. It would leave two seats under Kalanick's control, his own and one other that would have new rules attached about candidates having to be of a certain executive level at a Fortune 100 company. One seat would be taken away from him and given to incoming Japanese investor SoftBank, and two new seats would be created, with one of those given to SoftBank. Also part of the changes would be altering the voting power of Kalanick's and Benchmark's "super-voting" stock, making it all "one share, one vote," and Khosrowshahi would be given nomination control of the three Class B board seats that are currently filled by Ryan Graves, Arianna Huffington and Wan Ling Martello, with approval required by the full board.
The three out of eleven board seats under Kalanick's sole control, including his own, were given to him in "better times," as Recode puts it, in June 2016, and Benchmark sued to get these taken away from Kalanick, seemingly in a move to prevent him from trying to reinstall himself as CEO after resigning in June. That suit, which alleges fraud on the part of Kalanick related to the various scandals that have dogged the company in the last nine months, is still pending.
It remains to be seen if this latest Machiavellian play by Kalanick to reassert his power at Uber will backfire, or if it will turn out to be a canny move as the company edges closer to a potential IPO.
Previously: Kalanick Reportedly Cries As He Passes Torch To New Uber CEO