Extreme Fighting on Uber’s Board

The power struggle at Uber is escalating quickly, with the company’s board proposing late last week to reduce former CEO and founder Travis Kalanick’s voting clout on the board, and Kalanick responding by filling two board seats that he controls with former Xerox CEO Ursula Burns and former Merrill Lynch CEO John Thain.

Uber and investor Goldman Sachs have made a proposal to the board that would reduce Kalanick’s voting power, while expanding the power of new CEO Dara Khosrowshahi in preparation for an initial public offering sometime in the next two years. The board is scheduled to discuss the proposal tomorrow.

While the boardroom battle is making headlines, Kalanick is acting well within the rules—at least until Uber’s board votes to change them.

“This is how extreme fighting is played in the boardroom,” Jeffrey Cunningham, professor of global leadership at Arizona State University’s Thunderbird School of Global Management told Chief Executive. “The board handed the reins to Kalanick when he was building a $60 billion giant. That is the mistake here, not his trying to hold onto power—we all like to do that. As a major shareholder with voting rights, he has every right to stack the board. That’s why they gave him these powers. Should he not use them?”

“Kalanick is probably acting like a wounded water buffalo, because he is. But I doubt his moves are not in the company’s best interests.” – Jeffrey Cunningham

The root of the matter, Cunningham says, revolves around Uber’s looming IPO, which Kalanick has delayed intentionally to grow the company further. Uber investors, however, are worried their profits may be negatively impacted if they wait any longer.

“They have in effect put a gun to the new CEO’s head—he must IPO by 2019,” Cunningham says. “What if there is a recession? They don’t really care. An investment in Uber’s early round of $10,000 is now worth $50 million.”

Though the public posturing shows Kalanick is willing to publicly flex his muscles on the board, it isn’t likely that he plans to take the ship down with him should the board move to reduce his voting power.

“Kalanick is probably acting like a wounded water buffalo, because he is,” Cunningham says. But I doubt his moves are not in the company’s best interests.”