The Super Irrelevancy Of Uber’s Board
“Not to toot our own horn, but being super relevant in your mid-30s and having five-plus years of venture investing is the dream scenario.” — Uber board director, Benchmark
The Benchmark directors on the Uber board actually do like to toot their own horn.
Among the most successful venture investors in Silicon Valley, Benchmark boasts Uber, Snap, Twitter on their funding shelf. What seems to have happened on Uber’s board, as the company grew beyond what any private company had done before, so did its problems but not the skill to deal with them.
The board of a venture company has one role, get it to market. Introducing potential buyers, finding skilled talent, and making sure the CEO stays focused, duties which resemble what a talent agent does for a celebrity. This may explain why the Uber board and Benchmark were so good at building a startup, and so negligent at governing a global giant.
Over a summer weekend, Uber’s board of directors met to select a finalist for CEO. Ordinarily, the occasion would be marked by a good a California pinot noir. After the hell the company has been through, it would seem natural to want a succession plan to be quiet and distinguished.
Instead, it was celebrated with a tweet from Jeff Immelt announcing his withdrawal, and a pointedly positive nod to the co-founders. His thoughts about board were notably absent. Why?
Immelt is to corporate governance what Arnold Schwarzenegger is to weight lifting. He’s done it all, done it well, and done it for a long time. If the CEO selection process failed at the board level with someone of Immelt’s stature, it means they blew it.
Was this just the board’s head fake to a prospective candidate? Not likely.
A recent USA Today article discussed Immelt’s strong prospects for being named the CEO, and the board permitted the story to be published without denial, lending credence to the story. All that was left was the meet and greet.
The backstory is a shocker. While negotiations with Immelt were ongoing, some divided factions on Uber’s board, particularly Benchmark, were engaged in deceptive collateral discussions, not just with one but two other candidates, HP’s Meg Whitman and the finalist. This news did not become public until after the succession plan blew up when Immelt bowed out. Can anyone blame him?
Uber’s directors behaved like a young couple bidding on their first condo, make several offers and try to snatch any of the properties with a lowball. It was not the first misstep in a botched succession plan marked by arrogance and immaturity, and typical of the Silicon Valley “not to toot our own horn” bro mentality, too clever by a half.
Like the time they brought in Eric Holder to investigate charges of sexism. This was a ruse to secretly oust Kalanick by bringing in someone with unimpeachable credentials to make sure firing Kalanick was the outcome.
Only in recruiting the high profile former Attorney General, the board ignored what they were getting. He is widely known around political circles as a henchman who will find a suitable scapegoat when needed. He was able to take a helping hand from banks during the financial crisis. Soon afterwards, when Occupy Wall Street reared its head, he found the serenity to drag bankers like JP Morgan’s Jamie Dimon through the mud as arch villains.
In solving Uber’s sexism issue, Holder was never going to play the part of the ‘The Wolf’ in Pulp Fiction, “Hi, I’m Winston Wolf. I solve problems.” The only problem Holder was going to solve was how to make sure he would be the highest paid investigator a company can bring in to sprinkle holy water. As a result, Holder’s investigation brought more attention than the problem itself.
The board wasn’t thinking clearly. They subsequently agreed to give Kalanick significant shareholder rights granting him three board seats. With the split on the board among the VCs, this effectively gave him majority control. Benchmark reacted precipitously by filing a lawsuit against Kalanick for fraudulently obtaining the board’s consent. One wonders what were the VCs drinking when they chose this route?
With Benchmark leading the charge, we can safely say this has been the most inept succession plan since Richard Nixon chose Spiro Agnew for the Vice Presidency.
Now Uber’s board leaves the company with huge unknowns.
Uber’s new CEO, Expedia’s chief, Dara Khosrowshahi, seems like a good choice, although even in the best succession plans things go wrong. Will we find out he lied on his resume, has sexist behavior somewhere in his past, or lacks experience dealing with global regulators? Matters like these will haunt the company and its valuation for some time. If this doesn’t work out, the board will have to search inside or go with a ceremonial CEO. There is an IPO on the horizon, or there was.
Then there is the Kalanick factor. He has clout, shares, and followers. The board has little control over how he votes or whether he sells his shares. He could sell them for billions but still hurt valuation, he could vote them in a divisive way, he could do anything he pleases and most likely will, because Benchmark went out of its way to humiliate him publicly.
In an interview before this process began, Benchmark claimed to Recode’s Kara Swisher they were hesitant to toot their own horn. Depending on your view, they are now playing taps or reveille because we are either looking at the end of the firm’s successful legacy or a loud wake up call.