Uber ex-CEO Travis Kalanick sued by early investor
BENCHMARK Capital, an early investor in Uber and one of the prime architects of his ousting, has filed a lawsuit against Travis Kalanick in an effort to force him off the company’s board of directors.
Despite the fact Kalanick has been out of the CEO post since June, he has remained on Uber’s board because he still maintains a fair number of his founder shares. The lawsuit is targeted at rescinding his ability to fill three board seats and ultimately, end his time in the company.
According to Axios, who first reported on the lawsuit, Benchmark’s basis for wanting Kalanick out rests in the accusation he knowingly concealed various misdeeds from the board in a bid to remain in power, actions which continued to take place even after he had resigned.
Among those are the company’s ongoing legal struggle with Alphabet’s Waymo over autonomous car technologies, persistent sexual harassment allegations as well as the mishandling of a rape case in India.
The central conflict lies in the issue of three board seats which Uber’s board created back in 2016, before Kalanick resigned, thus expanding the number of voting directors from eight to 11. Kalanick is the only one with the right to fill those seats. Benchmark argues by concealing what he knew about Uber’s problems, Kalanick was attempting to consolidate his power by packing the board with allies.
Benchmark will be seeking a court injunction to block Kalanick’s right to appoint new directors on the basis he surrendered those rights when he resigned as CEO.
The move is startling, to say the least, as Silicon Valley investors are famously reluctant to take actions against startup founders; according to Reuters, some investors are calling this move “the nuclear option”. This latest development is unusual more so coming from an investor against a central – and by some accounts, internally popular – figure. In previous reporting, it’s been noted Kalanick’s long tenure at the helm of the ride-hailing startup is a result of abetting by a board that has allowed many of his indiscretions to pass without comment because of the expectation of high profits.
Uber is now valued at US$68 billion, meaning Benchmark, who controls 13 percent of Uber, would have a stake worth US$9 billion.
Soon after news about the lawsuit broke, Kalanick’s team released a statement, saying the lawsuit is “completely without merit and riddled with lies and false allegations”. They claim it appears to be a “transparent attempt to deprive Travis Kalanick of his rights as a founder and shareholder.” The statement goes on to accuse Benchmark of “acting in its own best interests contrary to the interests of Uber”.
Kalanick’s ally, Uber co-founder Garrett Camp hit the point home with a memo to employees from early in the week that reassured them Kalanick was “not returning as CEO”.
My sources say Kalanick NOT naming any new board members right now & @Uber directors NOT suing each other just met to figure this mess out
— Kara Swisher (@karaswisher) August 11, 2017
Also no one on @Uber board was informed of Benchmark lawsuit against Kalanick before it was filed
— Kara Swisher (@karaswisher) August 11, 2017
The relationship between Benchmark and Kalanick soured long before his resignation. Bill Gurley, who was the venture capitalist who first got Benchmark involved with Uber, resigned from the board in June because he grew tired of Kalanick’s behavior, sources told Reuters. Soon after, Benchmark joined a group of other Uber investors who conspired to force the embattled CEO to resign.
According to an entrepreneur expert from the University of Michigan’s Ross School of Business, Erik Gordon, Benchmark might have a hard time proving to the courts in Delaware their concern is borne out of true concern with regards to the company, rather than the fear their own power base would be diluted.
“Even if you assume Kalanick acted outrageously improperly, where was Benchmark when he was acting out?” Gordon said to Reuters.
“Did Benchmark fight tooth and nail against Kalanick’s conduct, or were they willing to put up with it as long as the company’s valuation, and the value of their investment in it, skyrocketed?”
Additional reporting by Reuters
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