Letter To Uber Staff: Benchmark Says It Should Have Sued Ex-CEO Sooner
Silicon Valley venture capital firm Benchmark, one of the Uber investors that pressured Uber CEO Travis Kalanick to step down as CEO in June due to company leadership failures, issued an open letter to the company’s employees today explaining why it sued Kalanick last week.
Benchmark says Kalanick failed to honor his written promise, made more than 50 days ago, to sign voting agreements to ensure that Uber’s board “was composed of independent, diverse, and well qualified directors.”
Kalanick (pictured) still hasn’t signed the agreements, Benchmark says, although the venture firm warned him more than a month ago that it would take him to court if he didn’t.
“Travis’s failure to make good on this promise, as well as his continued involvement in the day-to-day running of the company, has created uncertainty for everyone, undermining the success of the CEO search,” Benchmark said in the letter. “Indeed, it has appeared at times as if the search was being manipulated to deter candidates and create a power vacuum in which Travis could return.”
That kind of interpretation had received some support through a Recode account on July 30 that Kalanick was openly telling friends he was aiming to duplicate a turnabout coup by Apple co-founder Steve Jobs, who regained control of Apple in 1996 after being deposed as its leader by a company board fed up with his behavior.
Kalanick, however, issued a statement reported by Axios today maintaining that he supports the search for his replacement.
“I continue to work tirelessly with the board to identify and hire the best CEO to guide Uber into its next phase of growth and ensure its continued success,” Kalanick said in the statement.
The Uber ex-CEO also commented on Benchmark’s suit: “Like many shareholders, I am disappointed and baffled by Benchmark’s hostile actions, which clearly are not in the best interests of Uber and its employees on whose behalf they claim to be acting. Since 2009, building Uber into a great company has been my passion and obsession.”
Some among Uber’s staff reportedly hadn’t agreed with the decision to remove him as CEO.
Benchmark, in its letter to Uber staffers, said, “We believed then, as we believe now,
that failing to act would have meant endorsing behavior that was utterly unacceptable in any company, let alone a company of Uber’s size and importance.”
Benchmark said the firm understood that many employees also wanted to know why it sued Kalanick. “Perhaps the better question is why we didn’t act sooner,” the firm said.
“We are sorry that it has taken us so long to do the right thing,” Benchmark stated in the letter to Uber employees.
Kalanick’s departure as CEO came in the wake of an investigation into Uber’s workplace environment, which was commissioned by the company’s board. The board’s action came after Susan Fowler, a former Uber engineer, wrote a widely shared blogpost in February that not only accused the company of failing to protect female staffers from sexual harassment, but also of maintaining a divisive and inefficient management style.
The in-house inquiry, by former U.S. Attorney General Eric Holder and Tammy Albarrán, who are partners at the law firm Covington & Burling, ended in sweeping recommendations for changes in both Uber’s culture and leadership structure.
Since then, a power struggle has broken out, not only between Kalanick and some of Uber’s investors, but also within the board itself, where Kalanick has allies, as Mike Isaac detailed in the New York Times late last month.
The conflicts have now pitted investor against investor.
The fractured Uber board is now considering proposals by investing groups that want to buy Uber shares from existing holders of the company’s shares, according to an account of the internal deliberations by Isaac and Katie Benner in the Times on Sunday.
One of those investor proposals would affect Benchmark’s holdings in Uber and its seat on the Uber board, the Times reported. An investing consortium led by Shervin Pishevar, co-founder and managing director of Uber investor Sherpa Capital, wants to buy 75 percent of Benchmark’s shares in Uber—a move that would leave Benchmark without a board seat.
Recode, describing Pishevar as a Kalanick loyalist, recounted on Friday, Aug 11, that Pishevar and other investors had called on Benchmark to sell its Uber shares and exit the company board. Those investors claimed that Benchmark was working against Uber’s interests by pushing for Kalanick’s ouster as CEO and by suing him.
While Pishevar’s group proposes to buy shares from existing investors at a price that corresponds to Uber’s reported valuation of $68.5 billion, the two other investing groups, led by SoftBank and the Dragoneer Investment Group, propose to pay less, the Times reports.
Media reports on these proposed sales haven’t said how much lower a price these investors want to pay for shares in Uber, a privately owned company.
All this leaves observers to wonder whether existing investors will sell up, and if they do, why? Will they be seeking a quicker payoff from their investments, or would they act on a belief that Uber’s valuation is likely to sink?
Benchmark, in its letter to Uber employees, tried to reassure them about the company’s future in the midst of its internal turmoil and Benchmark’s own lawsuit. “We deeply believe that Uber’s best days are ahead,” the venture firm wrote.
But Benchmark didn’t repeat more upbeat statements it made via Twitter on Aug. 7.
“Despite speculation to the contrary, Benchmark is incredibly optimistic about Uber’s future,” the venture firm wrote then, less than a week before suing Kalanick. “We are long Uber: Benchmark’s comparative valuation analysis shows Uber could comfortably be worth over $100B in just two years.”
In today’s statement, Benchmark did say, “Uber is the most important and promising company of our generation.” But the venture firm said Uber will only reach its full potential “if we get rid of the roadblocks and distractions that have plagued Uber, and its board, for far too long.”
In spite of the fact that Uber’s board agreed to adopt a raft of recommendations by Holder and Albarrán of law firm Covington & Burling, “many of the most important issues agreed to by the board remain unaddressed,” Benchmark wrote.
Not only is the CEO position vacant, but Uber has also operated without a chief financial officer for more than two years, Benchmark said.
“This cannot be justified, given the scale and complexity of the business, and is symptomatic of the broader problems with past management practices,” Benchmark wrote to Uber employees. “We hope that our lawsuit will help expedite the CFO search.”