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

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.

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Ursula Burns, a former chief executive of Xerox, is one of Mr. Kalanick’s new appointees to the Uber board of directors. 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.

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John Thain, a former chief executive of Merrill Lynch and the New York Stock Exchange, was also added to the board by Mr. Kalanick. 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.

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Uber Founder Travis Kalanick Resigns as C.E.O.

Uber’s board said in a statement that Mr. Kalanick had “always put Uber first” and that his stepping down as chief executive would give the company “room to fully embrace this new chapter in Uber’s history.” An Uber spokesman declined to comment further.

The move caps months of questions over the leadership of Uber, which has become a prime example of Silicon Valley start-up culture gone awry. The company has been exposed this year as having a workplace culture that included sexual harassment and discrimination, and it has pushed the envelope in dealing with law enforcement and even partners. That tone was set by Mr. Kalanick, who has aggressively turned the company into the world’s dominant ride-hailing service and upended the transportation industry around the globe.

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Uber Investigation Leads to Shake-Up

An investigation into Uber’s troubled company culture has led to changes in leadership. The chief executive has taken a leave of absence and several others have been fired over the past two weeks.

By NEETI UPADHYE on Publish Date June 14, 2017. Photo by Mark Kauzlarich/The New York Times. Watch in Times Video »

Mr. Kalanick’s troubles began earlier this year after a former Uber engineer detailed what she said was sexual harassment at the company, opening the floodgates for more complaints and spurring internal investigations. In addition, Uber has been dealing with an intellectual property lawsuit from Waymo, the self-driving car business that operates under Google’s parent company, and a federal inquiry into a software tool that Uber used to sidestep some law enforcement.

Uber has been trying to move past its difficult history, which has grown inextricably tied to Mr. Kalanick. In recent months, Uber has fired more than 20 employees after an investigation into the company’s culture, embarked on major changes to professionalize its workplace, and is searching for new executives including a chief operating officer.

Mr. Kalanick last week said he would take an indefinite leave of absence from Uber, partly to work on himself and to grieve for his mother, who died last month in a boating accident. He said Uber’s day-to-day management would fall to a committee of more than 10 executives.

But the shareholder letter indicated that his taking time off was not enough for some investors who have pumped millions of dollars into the ride-hailing company, which has seen its valuation swell to nearly $70 billion. For them, Mr. Kalanick had to go.

Our Previous Uber Coverage

The five shareholders who demanded Mr. Kalanick’s resignation include some of the technology industry’s most prestigious venture capital firms, which invested in Uber at an early stage of the company’s life, as well as a mutual fund firm. Apart from Benchmark, they are First Round Capital, Lowercase Capital, Menlo Ventures and Fidelity Investments, which together own more than a quarter of Uber’s stock. Because some of the investors hold a type of stock that endows them with an outsize number of votes, they have about 40 percent of Uber’s voting power.

Benchmark, Lowercase, First Round, Menlo Ventures and Fidelity did not respond to requests for comment.

But on Twitter, Mr. Gurley of Benchmark, one of the earliest supporters of Mr. Kalanick at Uber, said of the executive, “There will be many pages in the history books devoted to @travisk — very few entrepreneurs have had such a lasting impact on the world.”

Mr. Kalanick’s resignation opens questions of who may take over Uber, especially since the company has been so molded in his image. And Mr. Kalanick will probably remain a presence there since he still retains control of a majority of Uber’s voting shares.

Taking a start-up chief executive to task so publicly is relatively unusual in Silicon Valley, where investors often praise entrepreneurs and their aggressiveness, especially if their companies are growing fast. It is only when those start-ups are in a precarious position or are declining that shareholders move to protect their investment.

In the case of Uber — one of the most highly valued private companies in the world — investors could lose billions of dollars if the company were to be marked down in valuation.

Uber, which has raised more than $14 billion from investors since its founding in 2009, has a wide base of shareholders apart from the ones who signed the letter. Uber’s investors also include TPG Capital, the Public Investment Fund of Saudi Arabia, mutual fund giants like BlackRock and wealthy clients of firms like Morgan Stanley and Goldman Sachs.

In the letter, in addition to Mr. Kalanick’s immediate resignation, the five shareholders asked for improved oversight of the company’s board by filling two of three empty board seats with “truly independent directors.” They also demanded that Mr. Kalanick support a board-led search committee for a new chief executive and that Uber immediately hire an experienced chief financial officer.

Mr. Kalanick is stepping down as Uber works to improve its relationships with some of its constituencies. Earlier Tuesday, the company emailed its drivers, who work as contractors, to let them know they would soon be allowed to take tips, which drivers had not been able to accept previously. The tipping change was among several new initiatives announced for drivers.

“Over the next 180 days we are committed to making driving with Uber better than ever,” the company said. “We know there’s a long road ahead, but we won’t stop until we get there.”

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State of the Art: One Way to Fix Uber: Think Twice Before Using It

In the United States, its rival Lyft has been growing its market share — and that growth has fueled a huge haul of fund-raising — but it still remains a distant second in the market. And remember, this is a supposedly hobbled Uber, one plagued by internal strife, an exodus of executives, a rapidly deteriorating brand and an existential lawsuit stemming from the shady origins of its purchase of a self-driving car start-up.

But what Uber lacks in autonomous tech it makes up for in autonomous customers. No matter what it does, a lot of us just can’t seem to quit Uber. I’m not judging. I used Uber a dozen times in the past month, including three times last week. I use it for the same reason you do — it works really well.

Across many cities in the United States, Uber is one of the cheapest, safest, most convenient ways to get around. In many parts of the world, Uber is even more than that. This year, I met drivers in India who said the company had significantly improved their lives.

And many transportation scholars are giddy over Uber’s potential. They say it could improve congestion and expand access to transportation to the poor and people with disabilities. It could reduce our dependence on private cars, the most expensive, dangerous and inefficient machines we buy. It could become a catalyst for public transportation systems — a way to solve the “last-mile problem” that bedevils commuter trains — or perhaps a replacement for them: What if, instead of building fixed bus lines, cities subsidized Uber rides, allowing people the flexibility of car travel for the price of a bus?

Yet while it’s plausible that a generic car-sharing company could become such a global force for good, the whole idea begins to seem naïve when you start talking about Uber specifically. In addition to the internal recklessness cited in Mr. Holder’s report, this is a company that has repeatedly deceived, threatened, defied or simply ignored regulators and the press. It has systematically mistreated its drivers. (It has promised to address their concerns in a coming report.)

Even riders aren’t safe from its misbehavior. Last week, the technology news website Recode reported that an Uber executive, Eric Alexander, conducted his own investigation after an Uber passenger in India was raped by a driver in 2014. Mr. Alexander obtained the victim’s medical records, and he shared them with other Uber officials, including Mr. Kalanick. The executives reportedly even wondered whether the victim’s story was a conspiracy cooked up by Uber’s Indian rival, Ola.

In April, when my colleague Mike Isaac asked Uber about the executives’ conspiracy theory, Mr. Alexander denied it through a spokesman. That was a lie, but Mr. Alexander was fired only last week after other reporters began asking. Uber declined to comment.

If you can’t trust a company to respect your medical records when you report a rape on its service — and can’t expect that its executives will tell the truth when confronted about it — how could we begin to trust it on some of the loftier civic goals it and its boosters outline?

We can’t, obviously. Instead, it’s your job and mine to verify. Uber says it’s going to make its workplace more inclusive. It will abandon many of its brash cultural values. Its war room will become a peace room (literally). It will become Uber 2.0.

We should all hope it does. But we should do more than hope: There’s an Uber app on your phone. Think twice about tapping it, because if Uber remains terrible after this, we have only ourselves to blame.

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Uber Weighs Leave of Absence for Chief Executive

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.

Video

Uber Investigation Leads to Shake-Up

An investigation into Uber’s troubled company culture has led to changes in leadership. The chief executive has taken a leave of absence and several others have been fired over the past two weeks.

By NEETI UPADHYE on Publish Date June 14, 2017. Photo by Mark Kauzlarich/The New York Times. Watch in Times Video »

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.”

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