Chaos in Uber

Silicon Valley venture firm, Benchmark, an early investor of Uber, has sued former CEO Travis Kalanick.

Both Benchmark and Kalanick hold seats in the board of directors at Uber. If the lawsuit is successful, then Kalanick would be removed from the board.

Background

Travis Kalanick is one of the co-founders of the ride-sharing technological company, Uber. Started in 2009, it currently has operations in 633 cities across the world. Kalanick became the CEO in 2011 and held that position till 2017.

Considered to be one of the most successful companies in the world, Kalanick was forced to step down in June 2017 after an internal revolt by five of Uber’s largest investors. He remains on the company’s board.

After he resigned from the position, Kalanick said, “I love Uber more than anything in the world and at this difficult moment in my personal life I have accepted the investors request to step aside so that Uber can go back to building rather than be distracted with another fight.”

Kalanick’s fall from grace was jumpstarted by a series of controversies that have plagued Uber especially in 2017. This includes claims by former employees about the working conditions within the company. A blog by a former employee Susan Fowler about the sexual harassment rampant at Uber went viral. This led to Uber firing more than 20 members of its staff and taking action against others following a review of more than 200 HR complaints that included harassment and bullying. The company has been repeatedly accused of harboring a “frat boy” culture within its walls.

Analysis

Benchmark was one of the earliest investors of Uber. It is also one of its largest shareholders. It has filed a suit against Kalanick in Delaware Chancery Court.

In the court filing, it has accused Kalanick of packing Uber’s board of directors with his own allies to further his agenda. It notes, “Kalanick's overarching objective is to pack Uber's Board with loyal allies in an effort to insulate his prior conduct from scrutiny and clear the path for his eventual return as CEO—all to the detriment of Uber's stockholders, employees, driver-partners, and customers."

Benchmark is disputing a June 2016 decision that increased the number of board members from 8 to 11. At the time, Kalanick was given the control to choose those seats. When he resigned as CEO, Kalanick gave himself one of those seats. There are two more seats that are yet to be filled in the board. Benchmark is concerned of Kalanick’s motives. It also accuses him of “gross mismanagement.”

Assessment

Platforms companies have serious issues with management and corporate governance and it would be hard for them to survive over time. A recent study by the Massachusetts Institute of Technology indicates that the average shelf life of Fortune 500 companies now is less than 15 years. This should worry companies like Uber.