Uber board reduces Kalanick voting rights in light of SoftBank deal
Ride-hailing service Uber is experiencing a fresh round of turmoil as new chief Dara Khosrowshahi begins his reign.
As reported by the New York Times, on Tuesday, the firm's board of directors voted to rebalance the distribution of executive powers in an attempt to re-shape Uber's management system and battered reputation.
Last week, Khosrowshahi and investing bank Goldman Sachs put forward a proposal to the 11-member board which reduces the power of former CEO Travis Kalanick, alongside a number of other early Uber shareholders.
This proposal has been accepted, although the publication notes that other measures which would have made Kalanick's potential return as chief in the future difficult were dropped beforehand.
A number of internal changes, however, were accepted to ease the process for SoftBank to invest.
Japanese conglomerate SoftBank's proposed investment, which could reach up to $1.3bn, has been approved, but this is dependent on some early Uber investors selling their stock.
Some of these investors carry Class B common stock, which originally came with 10-to-1 voting rights.
Under the new terms, all kinds of stock will only come with one vote per share.
"SoftBank's interest is an incredible vote of confidence in Uber's business and long-term potential, and we look forward to finalizing the investment in the coming weeks," Uber said.
In addition, Uber also outlined plans to launch an IPO by 2019 and new board members will be appointed, bringing the number from 11 to 17. Out of these new members, which hinges on the fresh investment going through, SoftBank will secure two seats.
In a statement, the ride-hailing service said the board "voted unanimously to move forward with the proposed investment by SoftBank and with governance changes that would strengthen its independence and ensure equality among all shareholders."
Kalanick has been pushing back at attempts to change the way voting operates, and last week, appointed two new members to the board, Ursula Burns, and John Thain, without consulting other executives.
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The move would have potentially given the former chief more clout at the table, but now the new changes have been accepted, more trouble is brewing than simply an argument over stock voting value.
Two prominent investors that own both Class B shares and preferred stock, Shervin Pishevar and Steve Russell, called the reducing in voting rights "illegal," and have instructed lawyers to pursue the matter.
In a statement, the pair said they would sue to stop the changes.
"They may think they have won a battle today but rest assured they will lose the war," Pishevar and Russell said. "Today's action by the board was the culmination of a blatant bait and switch, essentially robbing loyal employees, including the more than 200 early founding Uber employees and advisors, of their hard-earned shareholder rights worth billions in value."
"Today's action is a naked violation and repudiation of these rights," the investors added. "We will not stop until the employees' rights are fully vindicated."