Although the measures adopted by Uber Technologies significantly shores up its corporate governance and reputation, it has however ticked off early Uber investors since it cuts off their super-voting rights which gives them 10 votes per share. This could potentially lead to yet another lawsuit.
In a significant development, Uber Technologies Inc’s fragmented board has finally put behind months of strife after unanimously passing a series of measures which shore up corporate governance, bring in SoftBank and diminish its former CEO, Travis Kalanick’s power.
These steps are likely to result in the shoring up of Uber’s reputation which was marred by a series of scandals and a legal battle between an Uber investor group led by Benchmark Capital and Kalanick.
However, the agreement could be subject to a lawsuit and is contingent on the multi-billion dollar investment by Japan’s SoftBank Group Corp.
The terms of the agreement preserves Uber’s $69-billion valuation.
“SoftBank’s interest is an incredible vote of confidence in Uber’s business and long-term potential,” said Uber’s board in a statement.
Benchmark’s Bill Gurley, who was replaced by a colleague on Uber’s board in June, said by email, “It was a good day for Uber, a good day for Uber’s employees, and good day for Uber’s new CEO.”
Kalanick described the development “a major step forward in Uber’s journey to becoming a world class public company.” He went on to add, the changes in Uber’s governance changes should serve it well under Dara Khosrowshahi.
Incidentally, the policies adopted by the board would make it difficult for Kalanick to return as CEO.
As per a person familiar with the matter at hand, Uber’s board will require a two-thirds majority vote to hire a replacement for Khosrowshahi before it holds an initial public offering.
Uber is set to come out with an IPO by autumn 2019, said sources, who went on to add, its board will also expand from 11 directors to 17. The increase will include four new independent directors for a total of seven. While five board seats will go to company insiders or co-founders, and five would be representatives of investors. The chairperson would be one of the independent directors.
Two of the six new seats would go to SoftBank, the sources said. The other four would be selected by a nominating committee of the board.
Despite these positive momentums, Uber still faces lawsuits.
Early Uber investors, Shervin Pishevar and Steve Russell, stated after Tuesday’s vote that they would sue to block the change, which cuts the super-voting rights that give them 10 votes per share.
If successful, such a lawsuit could threaten the other terms of the boardroom compromise.
“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,” said Pishevar and Russell.