Uber Technologies Inc. will move forward with a major investment deal from SoftBank Group Corp. and approved a slate of governance reforms that will limit the influence of co-founder Travis Kalanick and early backers.
The 11-person board voted unanimously Tuesday to approve sweeping changes to the company’s power structure, the San Francisco-based company said. The plan would expand the size of the board to 17 seats, people familiar with the matter said. The unusually large board would accommodate two spots for SoftBank representatives and more independent voices. The SoftBank deal isn’t yet finalized, but board approval represents a major step.
SoftBank will invest $1 billion to $1.25 billion in Uber at last year’s valuation of about $70 billion, said the people, who asked not to be identified because the details are private. The Japanese technology conglomerate will spend billions more, alongside Dragoneer Investment Group and General Atlantic, on stock from shareholders to acquire roughly 14 percent to 17 percent of the ride-hailing company. Uber said in an emailed statement that it expects to finalize the SoftBank deal “in the coming weeks.”
Uber will also adopt a policy of one share, one vote, the people said. Kalanick, the controversial former chief executive officer, and venture capital firm Benchmark, the largest shareholder, were among those with outsize voting power before the latest changes. The board also set a deadline for the closely held company to go public in the next two years, the people said. If it doesn’t, Uber will lift some restrictions on shareholders from selling their stakes.
The agreement is a major victory for Uber’s new CEO, Dara Khosrowshahi, who is in London after meeting with taxi regulators there to appeal a looming citywide ban. Khosrowshahi was taken by surprise on Friday when Kalanick appointed two corporate titans — former Merrill Lynch CEO John Thain and former Xerox Corp. CEO Ursula Burns — to the board with little notice. But Khosrowshahi was able to bring directors together to push through changes that limit Kalanick’s influence.
It has been a rough 2017 for the global ride-hailing giant. Allegations of sexual harassment spurred the company to hire former U.S. Attorney General Eric Holder to investigate Uber’s corporate culture. The company lost many of its top executives and faced worldwide political protests. And all of that backlash only emboldened its global competitors.
Kalanick, in an emailed statement, described the changes as “a major step forward in Uber’s journey to becoming a world-class public company.” He will keep his board seat, as will Thain and Burns. Benchmark declined to comment.
The moves are expected to end a legal fight between Kalanick and Benchmark. The venture capital firm agreed to drop its case against Kalanick, now in arbitration, if the SoftBank deal closes and the governance changes are fully adopted, two people familiar with the matter said. The reforms are also contingent on the deal going through.
Uber’s enormous board is a bit of an unhappy compromise. Rather than take a seat from any existing board members as Khosrowshahi had previously considered, Uber added three spots for independent directors, plus another for an independent chair, and two more for SoftBank. It will make the board more than twice as large as the average private company and bigger than most public firms, according to the National Association of Corporate Directors, a trade group.
Many of the changes have the effect of restricting Kalanick’s role at the company, while not specifically targeting him.
Kalanick, along with other former and current employees, is barred from chairing the board’s committees or subcommittees under the new rules, according to a person familiar with the matter. That provision also applies to Khosrowshahi.
Any new CEO — until 18 months afters Uber’s IPO — would need two-thirds of board votes, a person familiar with the matter said. If any former Uber executive became CEO, some transfer restrictions would go away, allowing investors to sell. Effectively that would mean that if Kalanick ever became CEO again, Benchmark would be able to sell its shares.
Kalanick will, however, have a role selecting the new independent directors — as will Benchmark. Those directors still must be approved by a majority of the full board or a majority of shareholders.
The last time Uber’s board went into such heated deliberations, it was weighing two high-profile candidates to replace Kalanick as CEO: General Electric Co.’s Jeffrey Immelt or Hewlett Packard Enterprise Co.’s Meg Whitman. Instead, the board opted for a surprise pick in Expedia Inc.’s Khosrowshahi. This time, Khosrowshahi made sure there weren’t any big surprises.