By Robert Cyran
NEW YORK (Reuters Breakingviews) - Two rights at Uber are in danger of making a wrong. Travis Kalanick’s newly appointed directors add useful expertise to a flawed board. And the effort by incumbents to limit the ousted founder’s power as part of a deal to raise capital from SoftBank also makes sense. Both stand to lose, though, if they dig in too firmly against each other.
Kalanick stepped aside this summer as chief executive after a series of scandals, but he is still a force at the ride-hailing firm last valued at nearly $70 billion. A fresh attempt to shrink Kalanick’s influence prompted him to trigger his ability to install two additional board members. He picked former Xerox boss Ursula Burns and John Thain, who used to run Merrill Lynch and the New York Stock Exchange.
Uber could use their skills. The board is overstocked with early investors and short on big-company experience. Burns not only adds needed diversity but knows a thing or two about distressed tech goliaths with recognizable brands. Thain brings with him some baggage, including having spent $1.2 million of shareholder money redecorating his Merrill office, but his banking and markets know-how could prove valuable as Uber sputters toward a potential initial public offering in 2019.
Amid broader shake-ups that include new CEO Dara Khosrowshahi, Uber is also trying to freshen up its governance. Moving to a one-share, one-vote system, as is under discussion, would be preferable. Preferred holders, such as venture-capital firm Benchmark, and Class B owners with super-voting stock like Kalanick, are currently in direct conflict and can nearly veto important actions such as accepting new investments.
It wouldn’t be surprising to see Kalanick’s directors oppose measures being considered. For one thing, Kalanick would need two-thirds support from investors and directors to return as CEO. The company also would be allowed to expand the board if more than one-third, but less than half, voted in favor of an IPO.
Since directors are already suing each other, it’s conceivable that investors could go to court to remove Kalanick’s appointees and that continued dysfunction prevents important reforms from being enacted. That might deter new money and further hurt Uber’s valuation. Compromise would prevent a costly collision course.
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