How Uber Backers Orchestrated Kalanick’s Ouster as CEO



Uber CEO Travis Kalanick Resigns

Travis Kalanick’s decision to step down as chief executive of Uber Technologies Inc. stunned his more than 12,000 employees and rippled through Silicon Valley, but it was the culmination of weeks of maneuvering by some of the firm’s biggest backers to oust the nearly $70 billion company’s co-founder.

Mr. Kalanick was in Chicago on Tuesday to interview a candidate for his top deputy position when he received unexpected news about his future, according to people familiar with the matter.

Matt Cohler and Peter Fenton, two partners at venture-capital firm Benchmark, one of Uber’s biggest investors, flew out to Chicago to confront Mr. Kalanick, presenting him with a letter signed by five major shareholders. The letter demanded the 40-year-old CEO immediately resign after a series of scandals consumed the company, these people said.

After hours of deliberating, Mr. Kalanick capitulated and informed the board he would resign, the people said, ending a seven-year reign at the ride-hailing service he built into the world’s most valuable private company.

Even in the midst of a number of controversies, Mr. Kalanick’s abrupt surrender was a stunning fall for one of the most celebrated careers in Silicon Valley in recent years. Tech entrepreneurs idolized the pugnacious Mr. Kalanick for snubbing convention and prioritizing winning at all costs, and investors hailed him as the model for a founder.

Mr. Kalanick, who is expected to remain an influential presence at the ride-hailing company: He will keep a seat on Uber’s board of directors and he retains control of a majority of Uber’s voting shares.

“I never thought I would be writing this,” Mr. Kalanick emailed to employees on Tuesday evening, some 2,000 miles from Uber’s headquarters in San Francisco. “As you all know, I love Uber more than anything in the world, but at this difficult moment in my personal life, I have accepted a group of investors’ request to step aside.”

Only three months earlier, in March, Uber’s board publicly stood by Mr. Kalanick, with director Arianna Huffington telling reporters he had their full confidence as the company searched for a chief operating officer. Mr. Kalanick had admitted he needed to “grow up” and get “leadership help” following a spate of scandals, highlighted by allegations in February from engineer Susan Fowler Rigetti that Uber’s workplace allowed sexual harassment and sexism to fester.

But a few weeks ago, partners at Benchmark began hatching a plan to pressure Mr. Kalanick to resign, according to the people familiar with the matter. Benchmark’s partners, who include Uber’s longtime board member Bill Gurley, were concerned that the firm’s reputation would be sullied by all of Uber’s problems, these people said.

Mr. Kalanick didn’t respond to a request for comment.

Mr. Gurley declined to comment. On Wednesday, Mr. Gurley resigned from Uber’s board and was replaced by Mr. Cohler, according to a person familiar with the matter.

Uber at the time was close to learning the results of a workplace probe the company had ordered be conducted by the law firm of former U.S. Attorney General Eric Holder. Uber also was challenging a lawsuit from Google parent Alphabet Inc. over trade-secret theft, while the Justice Department was just beginning an investigation into Uber’s use of technology to evade regulators.

The Holder investigation, as well as the controversies around Mr. Kalanick, also were threatening to further hamper a critical search for a chief operating officer, which was entering its fourth month and from which several candidates had walked away, according to people familiar with the matter.
It became clear from conversations with potential COO recruits that few would take the job if Mr. Kalanick stayed, they said. One board member, David Bonderman of private-equity firm TPG, voiced impatience with Mr. Kalanick over how slowly the search was going, one person said.
Several investors believed it was time for Mr. Kalanick to exit, but they felt they had little sway over the company’s decisions, let alone over a chief executive whose voting shares protected him from a forced ouster, people familiar with the matter said.
The investors believed a letter signed by a group of influential shareholders was the only way to force out Mr. Kalanick, two people said. If the letter was released and nothing changed, the board would be seen as defending Mr. Kalanick, these people said.
Mr. Kalanick took an indefinite leave from Uber starting last week, a move he said was necessary to mourn the sudden death of his mother in May and to focus on returning as a reinvigorated leader. The Holder report, meanwhile, recommended nearly 50 changes be made to improve Uber’s culture, including expanding the role of a future COO, more independent board seats and mandatory leadership coaching.
Expecting his leave would be short, Benchmark decided it needed to act before Mr. Kalanick returned to his daily role as CEO, two of the people said.
By Monday of last week, Benchmark had found four additional investors to sign the letter, including First Round Capital; Lowercase Capital; Menlo Ventures and Fidelity Investments, according to people familiar with the matter. Benchmark’s Mr. Gurley attempted to get other board members to sign, but at least one refused out of reluctance over being represented by Mr. Gurley, according to one person with knowledge of the matter.​
The next day, Mr. Bonderman resigned from the board and apologized after he made a sexist remark during an all-hands meeting to address Uber’s employees about the results of Mr. Holder’s investigation. TPG is replacing Mr. Bonderman with David Trujillo, a partner who helped source the firm’s initial investment in Uber, according to a person familiar with the matter. Uber last week also named its second female director, Wan Ling Martello, a Nestlé SAexecutive.
When Uber announced Mr. Kalanick’s leave last week, the company said it would be run by a committee of 14 executives. The structure remains in place while Uber seeks a new CEO
After receiving the letter on Tuesday, Mr. Kalanick sought counsel including with another board member, according to people familiar with the matter. He decided the pressure from investors was too great and stepped down, they said.
Mr. Kalanick’s departure exposes Uber’s leadership shortcomings and raises the question of who can lead a company whose defiantly competitive startup culture and leadership style reflected the pugnacious chief executive. In recent months, Mr. Kalanick had lost about a half-dozen direct reports and several other senior executives—through resignations or firings—including the leaders of operations, marketing, finance, communications and self-driving car development.
The CEO role at Uber is a doubled-edged sword. Recruiters describe it as a once-in-a-generation opportunity to run a company that generated $6.5 billion in revenue last year and has become a default mode of transportation for millions of people around the world. At the same time, any successor will have to contend with scandals on numerous fronts, a leadership team gutted by executive departures and ousters, and a workplace culture criticized for its alleged chauvinism.
“The investors are going to be looking for not only someone who is transformative but a big public-relations success,” said Bart Friedman, a corporate governance expert and senior counsel at law firm Cahill Gordon & Reindel LLP. “It is going to have to be a headsnapper.”
A number of talented executives who didn’t want Uber’s No. 2 spot would be interested in being CEO, said Jeffrey Cohn, managing director of global CEO succession planning for DHR International, an executive-search firm. He cited Tom Staggs, the former No. 2 at Walt Disney Co. , as one such possibility. Uber had interviewed Mr. Staggs to be second in command, The Wall Street Journal previously reported. Mr. Staggs couldn’t immediately be reached.
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