Bloomberg reported that Kalanick lobbied to pick his own successor, former GE CEO Jeffrey Immelt. The Uber board rejected this proposal, suspecting that Immelt had promised Kalanick to serve only briefly, facilitating Kalanick’s return.
Bloomberg reported that Uber board member Arianna Huffington was accused of self-dealing. For one, she sought to have Uber provide driver hubs with “nap pods” from her new wellness company. Furthermore, Huffington’s new company received $50,000 in consulting fees from Uber, though Uber staff objected to those payments and the funds were ultimately returned.
Bill Gurley, a partner at Benchmark Capital and an early investor, became increasingly concerned about Uber’s tactics and activities. Bloomberg reports that he worried his firm’s investment in Uber, at that point nominally worth billions of dollars, could go to zero.
After the Uber board forced Kalanick to take leave, Bloomberg reported that other executives and board members suspected that Uber board member Arianna Huffington was serving as his proxy.
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. Bloomberg reported that the appointment was contrary to a prior agreement associated with Kalanick’s resignation.
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.”