Business Law & Compliance
Uber shareholder claims Travis Kalanick should have been sued sooner
3 min read
15 August 2017
VC company Benchmark Capital sued Uber founder Travis Kalanick a month after his resignation – and has finally made the reasons behind its decision clear.
The lawsuit against Kalanick was initially fuelled, according to recode, by the refusal to rescind his right to appoint three seats to the company’s board. “This power,” it reported, “gave him direct and indirect ownership in common and preferred shares” – something he promised to give up in his resignation letter.
Recently discovered court documents – filed by Benchmark – also noted Kalanick was aware of “Greyball,” a programme allowing drivers to avoid authorities in areas the service was banned. A culture of poor background checks had given rise to passenger assaults and Google was still angry at potentially having its self-driving car technology stolen.
Despite these claims, many worried Benchmark’s endeavour would tarnish the company’s reputation during a crucial overhaul attempt. It’s an issue recode delved into, suggesting “the lawsuit contains an awful lot of information about internal woes. While it aims at Kalanick, Uber is obviously going to get strafed too.”
Of course, the debate has caused Benchmark to defend its decision. In an open letter to Uber staff, it made clear its reasons – and even pondered why it hadn’t filed a lawsuit sooner.
“As you know, Kalanick resigned at the request of shareholders, one of which was Benchmark. It was a rare and extremely difficult step for us. But we acted out of a deep conviction that it would be better for Uber, its employees and investors to have a fresh start.”
Not proceeding with such an attack, it claimed, would mean promoting unacceptable behaviour. That, and Kalanick was one of many “roadblocks and distractions” preventing real change.
“We need to focus on the work ahead – on building a company that everyone is proud to be associated with: employees, riders, drivers and the cities you serve. You deserve that. You have always deserved that. We are sorry that it has taken us so long to do the right thing.”
One of the key issues it hopes to address is the hunt for a new CEO – an endeavour that started over 50 days ago. This too, Benchmark suggested, was an issue caused by Kalanick.
The VC business explained: “He agreed in writing to modify the company’s voting agreement to ensure the board was composed of independent, diverse and well qualified directors. Despite agreeing in writing to sign these amendments, he has still not done so.
“His 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. Indeed, it has appeared at times as if the search was being manipulated to deter candidates and create a power vacuum in which Kalanick could return.”