In summer 2016, Uber then-CEO Travis Kalanick sought to acquire a startup called Otto which specialized in self-driving vehicles. According to Bloomberg, then-General Counsel Salle Yoo “expressed reservations about the deal” and insisted on hiring Stroz Friedberg (cyber investigators) to assess any impropriety including the possibility, already known to her and Kalanick, that Otto co-founder Anthony Levandowski was bringing files from Google, his former employer.
Bloomberg reports that Uber’s board wasn’t aware of these concerns, the Stroz findings, or Levandowski’s retention of Google files.
In October 2017, Uber’s board voted to end the benefit that let early employees and investors get 10 votes per share, a benefit which had given those groups disproportionate control. In response, early Uber investors Shervin Pishevar and Steve Russell said they would sue to block the change. Their statement:
Today’s action by the board was the culmination of a blatant bait and switch, essentially robbing loyal employees, including the more than 200 early founding Uber employees and advisors, of their hard earned shareholder rights.
Former Uber CEO Travis Kalanick appointed two new members to the Uber board. Kalanick explained in a statement:
“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.”
Kalanick was responding to a proposal from Benchmark Capital, a large shareholder in Uber, seeking to eliminate super-voting power of shares held by Kalanick, other early executives, and investors. With two more board members receptive to Kalanick’s perspective, Benchmark’s proposal is correspondingly less likely to proceed. (Forbes called the appointees “presumed allies” to Kalanick.)
An Uber spokesperson indicated that Kalanick’s appointment of two new board members “came as a complete surprise to Uber and its board.” The New York Times reported that new Uber CEO Dara Khosrowshahi called Kalanick’s move “disappointing” in an internal memo to employees.
The New York Times called Kalanick’s approach a “power move.” Former Uber adviser David Plouffe indicated that events at Uber were crazy and that the Trump white house “seems sane by comparison.”
In response to a Delaware lawsuit by Uber investor Benchmark Capital Partrners, other investors in Uber asked Benchmark to sell its shares and step down from Uber’s board. Full letter from the other investors. In part:
We do not feel it was either prudent or necessary from the standpoint of shareholder value, to hold the company hostage to a public relations disaster by demanding Mr. Kalanick’s resignation, along with other concessions … Accordingly, we would request that Benchmark help the Company realize its full potential by allowing the necessary work to be done in the Board Room rather than the Courtroom.
Axious summarized the situation: “It was shocking enough for a major venture capital firm to sue the CEO of a highly-valuable portfolio company. For other VC firms to then make this sort of counter-move against a peer is similarly unprecedented. It’s a brave new world in Silicon Valley.”
In a lawsuit, Uber investor Benchmark Capital alleged that former Uber CEO Travis Kalanick is interfering with Uber’s CEO search. Benchmark says “various potential candidates have withdrawn from consideration because of Kalanick’s continued participation in the search and his efforts to re-assert influence over the company.” In a letter to Uber employees, Benchmark explains the impact of Kalanick’s actions:
Travis’s failure to make good on this promise, as well as his continued involvement in the day-to-day running of the company, has created uncertainty for everyone, undermining the success of the CEO search. Indeed, it has appeared at times as if the search was being manipulated to deter candidates and create a power vacuum in which Travis could return.
In a Delaware complaint, Uber investor Benchmark Capital Partrners challenged “the fraud, breaches of fiduciary duty, and breaches of contractual obligations perpetrated by” former Uber CEO Travis Kalanick “to entrench himself on Uber’s Board of Directors and increase his power over Uber for his own selfish ends.” The lawsuit focused in part on Kalanick’s “fraudulently obtain[ing] control” of three new seats on Uber’s boards through “his material misstatements and fraudulent concealment … of material information” that would have led Benchmark to reject the request.
Benchmark said Kalanick engaged in “gross mismanagement and other misconduct” which it summarizes as follows:
Kalanick’s personal involvement in causing Uber to acquire a self-driving vehicle start-up that, according to a confidential report not disclosed to Benchmark at the time (the “Stroz Report”), allegedly harbored trade secrets stolen from a competitor; an Uber executive’s alleged theft of the medical records of a woman who was raped by her Uber driver in India; a pervasive culture of gender discrimination and sexual harassment that ultimately prompted an investigation by the former U.S. Attorney General Eric Holder; and a host of other inappropriate and unethical directives issued by Kalanick.
Benchmark said Kalanick “knowingly concealed these matters from” it and other investors.
Benchmark explained its approach and its concerns in a letter to Uber employees.
In a statement, Kalanick replied: “I am disappointed and baffled by Benchmark’s hostile actions, which clearly are not in the best interests of Uber and its employees on whose behalf they claim to be acting.”
Kalanick moved to send the lawsuit to arbitration, avoiding a deposition that Recore said could have been “damaging.” On August 30, 2017, the Court agreed, ending the public litigation docket and putting all further proceedings in confidential arbitration.
In a meeting about the prevalence of sexism within Uber, board member David Bonderman made a joke about gender stereotypes. He resigned the same day. Details.