At a crucial time when Uber Technologies Inc. is looking to fill a leadership void, repair a foul corporate culture, salvage morale, fend off rivals worldwide, prove it didn’t benefit from stolen trade secrets and deal with a host of other issues, the ride-hailing company is forced to hit the pause button.
Benchmark, a major shareholder, declared what is essentially a state of emergency at Uber. The venture capital firm filed a lawsuit against Travis Kalanick, the recently ousted chief executive officer, seeking to remove him from the board, while eliminating two additional board positions. Boardroom schisms have become standard operating procedure at Uber this year, but the decision to bring a case to court is a remarkable twist.
The suit is likely to paralyze the company, which already has a long list of essential tasks piling up. (Fortunately, they solved the problem of what to call a controversial conference room known as the War Room.) Even if Uber directors manage to decide on a CEO everyone likes, who would want to report to a board in disrepair? “It puts the company in limbo and prevents them from moving forward,” said Arun Sundararajan, a New York University professor and author of The Sharing Economy. “This kind of fight is going to hurt Uber significantly in the short term.”
Benchmark argues that such a drastic move was necessary. Although the firm helped orchestrate Kalanick’s resignation as chief in June, it believes the gesture didn’t go far enough.
Kalanick still holds great sway over the board, a position he acquired by defrauding board members, according to the complaint. Benchmark claims Kalanick breached his contract and violated his fiduciary responsibilities by withholding information from Uber’s board before it voted last year to
allow him to add three directors of his choosing. A spokesman for Kalanick called the lawsuit “completely without merit and riddled with lies and false allegations.”
Time is a big factor. Benchmark may have recognised this and asked for a preliminary injunction to remove Kalanick from the board while the matter is decided in Delaware Chancery Court. Delaware law mandates that challenges to directors’ elections or appointments be heard in an expedited fashion to ensure companies can have properly functioning boards, said Larry Hamermesh, a Widener University professor who specialises in Delaware corporate law.
Uber investors should look to Viacom Inc. as a cautionary tale. Sumner Redstone’s attempts to remove board members landed him and the company in a multi-month courtroom saga over control of his $40 billion media empire. The fight exposed details about the billionaire’s personal life and mental health, and pitted him against his granddaughter and old friends.
The ride-hailing business was far more reliant on Kalanick for guidance than Viacom was on the 94-year-old media mogul in recent years. Uber is more vulnerable, too. That’s why executives hoped to quickly hire a new chief, whose many duties will include preparation for an initial public offering. But the infighting has already cost Uber at least one viable candidate. With the lawsuit acting as a hazard notice to all on the outside, the timing is now anyone’s guess.
Uber rival 99 embarks hiring spree
Brazil’s unemployment rate is near its record, but at the headquarters of ride-hailing app 99 it’s nowhere in evidence.
The country’s biggest taxi-beckoning tech company is outgrowing its Sao Paulo office after just 17 months as it seeks to quintuple its workforce in 2017 to 1,000 employees. Backed earlier this year by Didi Chuxing and Softbank, 99 is planning to expand into the rest of Latin America in the near future and is on the hunt for more capital — executives were recently in San Francisco digging around.
Even with a hefty competitor in Uber, the company sees no end in sight to the potential.
“I can’t even predict how big the market in Brazil will be,” said 99’s head of legal, policy and communication Matheus Moraes in an interview at the company’s Sao Paulo headquarters. “We try to forecast, but we just can’t.”
The new additions to the staff will help 99 grow in a country with poor infrastructure and a meager public transportation backbone. Traffic in the biggest cities is intolerable, with trips sometimes taking five times longer than they should.