In Power Move at Uber, Travis Kalanick Appoints 2 to Its Board

https://www.nytimes.com/2017/09/29/technology/uber-travis-kalanick-board.html

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SAN FRANCISCO — The divisions between Uber and its former chief executive, Travis Kalanick, are widening.

For the past few weeks, Mr. Kalanick, who had resigned as chief executive in June, had kept a low profile. Uber had last month installed a new chief executive, Dara Khosrowshahi, and the company appeared to be trying to get past a turbulent period that included questions about its culture and changes in its top echelons.

But behind the scenes, Mr. Kalanick and Uber’s board were continuing to wrestle over who had control of the privately held company through the amount of stock they owned and the voting rights that those shares conferred.

And on Thursday, Uber made a proposal to the board that would reduce Mr. Kalanick’s voting power at the company, according to people briefed on the negotiations, who asked to remain anonymous because they were not authorized to speak publicly. The board could vote on the proposal as early as Tuesday, this person said.

In response, Mr. Kalanick made a move late Friday to reassert his control. The former chief, who holds outsize voting rights at Uber, said he had added Ursula Burns, a former chief executive of Xerox, and John Thain, a former chief executive of Merrill Lynch and the New York Stock Exchange, to the eight-member board.

Because of that proposal, it is “essential that the full board be in place for proper deliberation to occur,” said Mr. Kalanick in his statement.

In a statement, Uber said Mr. Kalanick’s move “came as a complete surprise to Uber and its board.” Uber added that that was why it was “working to put in place world-class governance” at the company.

The moves underscore the increasingly dysfunctional relationship between Uber and Mr. Kalanick, the company’s co-founder. Mr. Kalanick stepped down as C.E.O. after some of Uber’s investors said he could not remain. Since then, the former chief, who holds a seat on Uber’s board, has battled with other board members, including Benchmark, a venture capital firm that was an early investor in the company.

Benchmark had previously contended that Mr. Kalanick had too much power over Uber and had sued him in an attempt to reduce that control. The suit has been moved to arbitration. Benchmark declined to comment on Friday.

The back-and-forth also present a problem for Mr. Khosrowshahi, who has to contend with a deeply divided board.

The power plays have been spurred by a move that Mr. Kalanick made in 2016 that allowed him to obtain outsize control of several Uber board seats. At the time, Mr. Kalanick got Benchmark to approve an amendment to the company’s charter that gave him the right to nominate three new directors to add to Uber’s eight-member board. Mr. Kalanick occupies one of those seats, and he has contended that he gets to fill the other two seats.

The proposal to reduce Mr. Kalanick’s voting right was put forth on Thursday not only by Uber but by another investor in the company, Goldman Sachs, according to a person briefed on the matter. It would also reduce voting power for other early shareholders and board members, including Benchmark, Lowercase Capital, and Menlo Ventures.

The fight over voting speaks to an issue that has become more controversial in Silicon Valley, where the balance of power has swung to the entrepreneurs when they negotiate for venture financing. When Benchmark sat on the board of the messaging company Snap, the firm supported a measure to give Evan Spiegel, one of the company’s founders, voting control. Benchmark also allowed Mr. Kalanick to amass an unusual amount of power by letting him create three new board seats that he exclusively controlled. Details of those board seats were documented in Benchmark’s lawsuit.

These sorts of bare-knuckled fights usually unfold behind-the-scenes in venture capital, where investors and founders are incentivized to maintain a positive public persona. Entrepreneurs start companies more than once, and have to tap the same pool of firms for money over time. The firms need to be perceived as founder friendly in order to cozy up to the most promising deals.