Saturday, September 30, 2017

"Uber, Silicon Valley's Longest Running Soap Opera, Keeps Getting Weirder"

From Forbes:
Pop quiz: What do the government of Saudi Arabia, a now legendary blog post, and a former adviser to President Obama have in common? Answer: They are all linked to Uber, whose year of turmoil took another insane turn yesterday. The ousted CEO Travis Kalanick appointed two members to the board without consulting anyone else on the board, a move he was able to make thanks to the Saudis, and one which prompted David Plouffe -- the erstwhile Obama adviser -- to tweet: "Thinking of my former colleagues at @Uber tonight. The Trump WH seems sane by comparison. Confident Dara will find a way forward." Ouch.

Dara is, of course, Dara Khosrowshahi, the man who replaced Kalanick as CEO and has doubtless already learned he has his work cut out for him. Uber is staring down a ban in London, one of its most critical markets worldwide, and has a boardroom drama that is more that is increasingly more "The Bold And The (Not So) Beautiful" than a Horatio Alger tale.

Kalanick was able to appoint Ursula Burns, the former CEO of Xerox, and John Thain, the former CEO of CIT Group because of a deal he made last year when the Saudi government's sovereign wealth fund invested $3.5 billion in the company. It gave Kalanick control of three board seats, one he used for himself after being ousted as CEO. The other two he has not put in the hands of presumed allies. That one is a woman of color brings needed to diversity to the board but in a rather strange way. That the other is one of the murky figures of the 2008 financial crisis just adds to the intrigue and the oddity. That this privilege was an essentially irrelevant add-on to the Saudi deal just shows that unintended consequences have a way of cropping up at very inopportune times.

Uber itself described the appointments as a "complete surprise" but they couldn't really be shocked. Kalanick's control of those board seats is a major bone of contention in what might be described as Act II of this tragicomedy (Act I being his ouster). Early investor Benchmark, who made its mark betting on eBay, and stands to make 11 figures of profit from buying into Uber, is suing Kalanick over these very board seats. They feared he would pack the board and try to engineer his return as CEO.

But yesterday's move wasn't so much about a plan to reclaim the throne. It was instead about the board's efforts to control and defang Kalanick. A plan was set to be voted on, reports Recode, that would both limit the voting power of early shareholders and also take away Kalanick's power with respect to those board seats. He'd have to give on to Softbank, which bizarrely remains interested in acquiring a multibillion-dollar stake in Uber. The others Kalanick could still give to himself and a selection of his choosing: but only with approval of a board majority.

This nonsense where early investors exercise voting control disproportionate to their shares and where boards are "independent" overseers in name only is part of a greater trend in Silicon Valley during the last decade toward minimal corporate governance and maximum founder control. This trend is celebrated in the Valley, where the founder has become a sort of living demigod, who is ostensibly so capable and brilliant, checks are both unnecessary and only server to interfere with the company's race to greatness.

Facebook is structured in such a way that gives Mark Zuckerberg an extraordinary amount of control. But even that wasn't enough for the company, which recently tried -- and failed -- to allow Zuckerberg to maintain control even while shrinking his stake....MORE