A Delaware judge is expected to rule as soon as today on whether the broadcaster’s board can dilute the voting power of its controlling shareholder.
The party is strengthening its influence — often gaining direct decision-making power — on the international firms doing business in China.
The consumer products giant has had headquarters in both London and Rotterdam, the Netherlands, but is moving to simplify its corporate structure.
Because of the proposal to reduce voting rights, it is “essential that the full board be in place for proper deliberation to occur,” Mr. Kalanick said in a statement.
In its own statement, Uber said Mr. Kalanick’s move “came as a complete surprise to Uber and its board.” That is why, it added, the company is “working to put in place world-class governance.”
The moves underscore the increasingly dysfunctional relationship between Uber and Mr. Kalanick, the company’s co-founder. Mr. Kalanick stepped down as chief executive 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. That suit has been moved to arbitration, allowing Mr. Kalanick to keep his fight with Benchmark — and any potentially damaging disclosures — out of public view. Benchmark declined to comment on Friday.
Credit Scott Olson/Getty Images
The back-and-forth also presents a problem for Mr. Khosrowshahi, who has to deal with a deeply divided board. Mr. Khosrowshahi had already had a taste of Uber’s ups and downs in recent days, when the company was told that it would lose its operating license for London, one of the biggest cities where it does business.
The power plays on Uber’s board are centered on a move made by Mr. Kalanick last year that allowed him to obtain outsize control of several board seats. At the time, he 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 the right to fill the other two seats.
To prevent Mr. Kalanick from exercising that right, Uber and Goldman Sachs proposed on Thursday to reduce his voting rights. If approved, the proposal would also reduce voting power for other early Uber shareholders and board members, including Benchmark, Lowercase Capital and Menlo Ventures.
Credit Rob Kim/Getty Images
Uber is also negotiating a sale of some of its existing shares to new investors, including the Japanese conglomerate SoftBank. Goldman Sachs is also one of the financial firms that is managing Uber’s potential share sale to SoftBank.
The fight over voting speaks to the balance of power at young Silicon Valley start-ups. In recent years, entrepreneurs have asked for — and been given — more voting rights by venture capitalists and other investors who are eager to get into a hot deal. Other companies, like Snap and Facebook, also have structures that allow their founders to hold disproportionate voting power.
These sorts of bare-knuckle fights usually unfold behind the scenes in venture capital, where investors and founders have incentives 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. And the firms need to be perceived as founder friendly in order to cozy up to the most promising deals.
Mr. Kalanick’s two new appointees are well known in the business world. As chief executive of Xerox, Ms. Burns was the first African-American woman to run a Fortune 500 company. Ms. Burns, 59, received a master’s degree in mechanical engineering from Columbia University and worked at Xerox her entire career, beginning as an intern in 1980 and becoming the head of the company in 2009.
Mr. Thain, 62, was one of Wall Street’s best-known figures until the financial crisis hit Wall Street in 2008. He became the head of the New York Stock Exchange in 2004, then the chief executive of Merrill Lynch in 2007. He sold the firm to Bank of America during the financial crisis and was later chief executive of CIT Group, a lender to small and midsize businesses, until he retired in 2015.
Any reduction of his involvement in Uber — even if temporary — would be significant, given that he molded the ride-hailing service in his own brash image. Mr. Kalanick has faced particular scrutiny in recent months as Uber has worked to overcome scandals, including employees detailing sexual harassment and systematic attempts to evade law enforcement personnel in some cities.
The discussions by the nine-member board preceded a report from Mr. Holder’s investigation, scheduled to be released on Tuesday. In recent months, Uber has fired more than 20 employees for infractions including sexual harassment and discrimination.
“This starts at the very top,” said Micah Alpern, a principal at A. T. Kearney, a top management and consulting firm. “They need to start from scratch to create a new culture entirely.”
Uber declined to comment on the company discussions, which were held at the Los Angeles offices of Covington & Burling, the law firm where Mr. Holder works. Mr. Kalanick, through a spokesman, declined to comment. News of the discussions was previously reported by Reuters.
The internal drama at Uber has gripped the broader technology industry, as the ride-hailing company has come to symbolize how start-up culture can go awry. Yet even in Silicon Valley, where propriety can take a back seat to profits, the claims about Uber’s corporate culture have been startling, including widespread sexual harassment and the mishandling of the medical records of a woman raped by an Uber driver.
Uber Investigation Leads to Shake-Up
Uber’s current crisis stems from claims in February from a former engineer, Susan Fowler, that she had been routinely sexually harassed when she worked at the company and that the human resources department had done little to help her. An outpouring of other cases followed, and Uber retained at least two law firms — including Covington & Burling — to look into the matters.
Uber has since faced other problems, including an intellectual property dispute over self-driving car technology with Waymo, the self-driving car business that operates under Google’s parent company. Uber also is dealing with a Justice Department investigation into tools that it used to evade law enforcement personnel in cities where the authorities were trying to shut down its ride-hailing service. Many executives have left the company in recent months.
Even so, Mr. Kalanick’s position has for months seemed secure, especially because of how the company is structured. Uber’s board follows a “founder-friendly” governance structure, made popular in Silicon Valley by Google and Facebook. Seven of Uber’s nine board members hold so-called super-voting shares, allowing them to have a stronger say in the board room. Four director seats are empty.
Because Mr. Kalanick and a few allies hold a majority of those shares, his position has been safe — and would most likely remain so, even if he took a leave.
Some Uber board members have expressed support for Mr. Kalanick. Garrett Camp and Ryan Graves, who have been with Uber since its early days, have long believed that Mr. Kalanick’s leadership was necessary to buck an aggressive incumbent taxi industry. Arianna Huffington, the founder of the Huffington Post who is also an Uber board member, has publicly attested to Mr. Kalanick’s willingness to change.
J. William Gurley and David Bonderman, two venture capitalists and independent board members who also hold super-voting shares, were worried about the company’s management, the people with knowledge of the matter said. Outside investors were also nervous about the string of scandals and have called board members directly about their concerns.
Mr. Kalanick’s executive allies were in a trickier position. One of the recommendations in Mr. Holder’s report was that Mr. Michael, Uber’s senior vice president of business and a close confidant of Mr. Kalanick’s, be asked to leave the company, according to the three people. The firm’s recommendations also include other sweeping changes at the company.
Mr. Michael has not resigned, nor has he been asked to do so, according to a person familiar with the matter, but he was evaluating his options.
This year, Uber’s general counsel and some board members recommended that Mr. Michael take leave from his position at the company until the results of the Holder report were delivered, according to three people familiar with the matter.
Mr. Michael, who has been at the center of three controversies at Uber, refused to step down, and Mr. Kalanick did not force him to do so.
Mr. Michael did not respond to a request for comment.
Employees and close watchers of the company worry that even the most damning conclusions of the Holder investigation could be ignored.
“Any response without complete buy-in from the top is a complete waste of time,” said Stephen Hirschfeld, a partner at the labor law firm Hirschfeld Kraemer who regularly investigates corporate harassment issues. “It can have an even worse impact on company morale if people already know it’s a total joke.”