It looks like Travis Kalanick is preparing for all-out war in the Uber boardroom.
The Uber co-founder and former chief executive officer – who retains control over three board seats, including his own – has finally filled his long-vacant seats. And guess whom he picked to fill them? Former Xerox Corp. Chairwoman and CEO Ursula Burns…and former Merrill Lynch Chairman and CEO John Thain, "ratcheting up a Machiavellian battle for control of the world’s most valuable startup" as Bloomberg put it. Uber immediately challenged the appointments, calling them "a complete surprise."
“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,” Kalanick said in a statement emailed to Bloomberg. “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 many may remember, Thain was the last CEO and chairman of Merrill Lynch before it was absorbed by Bank of American during the financial crisis. The last leader of an independent Merrill Lynch was roundly criticized for the same venal behavior as other too-big-to-fail CEOs – BOA paid a $16.7 billion fine in 2014, at the time the largest single settlement in US history, partly for Merrill's witholding of crucial information (namely, that the products were stuffed with garbage subprime loans while being marketed as AAA) to buyers of its MBS and CDO products. There was, of course, also the whole $35,000 "commode on legs" incident as part of Thain's $1.2 million office redecoration (which also included $17,100 traveling toilet boxes and a $15,000 dog umbrella stand).
Thain was, appropriately, singled out for criticism by former President Barack Obama, who accused him of "lining his pockets" – and those of his employees – at the taxpayers' expense by handing out massive bonuses after BofA accepted $45 billion in TARP funds.
Kalanick – who resigned as CEO on June 20 after a longrunning battle between him and the company's largest shareholder, Benchmark Capital – is making the appointments without consulting the rest of the board, according to the Wall Street Journal, which broke the story. He was granted control of three board seats as part of $3.5 billion investment from a Saudi wealth fund in 2016.
The appointment is particularly controversial because Kalanick is presently being sued by Benchmark, who claim he mislead the company's investors in order to gain control over an additional board seat, and as such the appointments appear to be the latest salvo in Kalanick's war with Benchmark.
As WSJ noted, the appointments could serve to push back against Benchmark, which also holds a board seat and led other members in a coup to push Kalanick out, which has proposed a new voting structure for shareholders allowing them to vote based on the size of their stake, rather than the current system which rewards the earliest investors with greater voting power. Travis confirmed as much in a statement to WSJ, when he said he believed the "full board should be in place" before boardmembers vote on the proposal.
“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,” Mr. Kalanick said in the statement. “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.”
It's also notable that the appointments come just days after Softbank, which is in talks to potentially invest as much as $10 billion in the cash-burning ride-sharing company, reportedly struck a deal with Benchmark to do everything in its power to oppose Kalanick's efforts to be reinstated as CEO if it becomes an Uber shareholder and gains a board seat.
According to Bloomberg, Uber expressed concern at Kalanick’s announcement: "The appointments of Ms. Burns and Mr. Thain to Uber’s board of directors came as a complete surprise to Uber and its board," the company said. “That is precisely why we are working to put in place world-class governance to ensure that we are building a company every employee and shareholder can be proud of.”
Uber’s board had been scheduled to vote Tuesday on a plan to revamp the company’s corporate governance, a person familiar with the matter said.
Kalanick remains supportive of Khosrowshahi, the person said. The former CEO saw the two appointments as a way to improve the company’s board of directors ahead of the impending vote on Uber’s governance structure, the person said.
To be sure, Kalanick has reportedly told friends and family that he has no intention of returning as CEO – though he might be interested in some kind of senior-level operations position. However, his actions would suggest something entirely different. Of course, considering the astounding run of scandals that erupted under his watch – from claims of sexual harassment, a federal bribery investigation, and the revelation that Uber intentionally blocked law enforcement agents from using its app – the notion of Kalanick returning as CEO seems almost incongruous. Since leaving, his legacy has only been further tarnished by the London taxi regulator's decision to revoke the company's operating license, citing abuses that largely occurred during his tenure.
But regardless of whether Kalanick's ultimate aim is to return as CEO, there's a more pressing matter at hand: Preventing Benchmark, his primary boardroom nemisis, from asserting even more control even as skepticism continues to grow about the mega valuation of the cash-burning, regulator-flouting Silicon Valley unicorn he helped create.
via http://ift.tt/2xKuNaN Tyler Durden