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Uber is changing its power structure as it prepares for a massive SoftBank investment

Travis Kalanick’s power will be curtailed as part of the grand bargain.

Uber CEO Dara Khosrowshahi on a bike at the Allen And Company annual meeting in Sun Valley, Idaho.
Uber CEO Dara Khosrowshahi
Scott Olson / Getty Images

Uber’s board on Tuesday approved a series of governance changes that are expected to curtail Travis Kalanick’s power and pave the way for a massive investment by SoftBank, the Japanese investment giant that is set on acquiring a piece of the private market’s most valuable company.

The sweeping deal is provisional on SoftBank finalizing its investment, but would include expanding the 11 board seats to as many as 17 people, an enormous group of decision-makers for what is already a fraught board. That will include three independent directors voted on by the board, including a chairperson, and up to three seats for SoftBank, depending on the size of the investment.

The deal is set to be signed on Wednesday at noon.

But what is most important is that the changes will reshape the power structure and perhaps cool down the incessant and damaging drama at the ride-hailing company. The proposal approved has a “one share, one vote” provision that would strip Uber’s earliest backers of some of their voting power, including Kalanick, Uber’s founder, and its largest investor, Benchmark. The once-close allies have been warring with one another in court, with the rest of the board caught in the ugly crossfire — though that legal case could now eventually be dropped if the SoftBank deal is approved.

“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,” Uber’s board said in a statement. “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."

Kalanick said in a separate statement: “Today the Board came together collaboratively and took a major step forward in Uber's journey to becoming a world class public company. We approved moving forward with the Softbank transaction and reached unanimous agreement on a new governance framework that will serve Uber well. Under Dara's leadership and with strong guidance from the Board, we should expect great things ahead for Uber.”

As Recode previously reported, the quarreling board decided on a split-the-baby compromise, peeling out more stringent terms that would have further attempted to put guardrails around Kalanick while also giving more power to CEO Dara Khosrowshahi.

Gone are several of the provisions pushed by some investors, such as requiring that some of the independent board members be executives at Fortune 100 companies, according to multiple people familiar with the deal. Those are wins for Kalanick. The two individuals he appointed to the board on Friday evening in a surprise power play are also here to stay.

Now the focus can be on the IPO and fixing Uber’s many business problems, including its lawsuit with Waymo, repairing its toxic culture and hiring new execs to fill an empty roster.

Any SoftBank deal would still require finding existing stockholders who hope to sell their positions. And it could still fall through should the sale price not be high enough and if there is not enough interest in the so-called “tender offer” sale process.

SoftBank would invest between $1 billion and $1.25 billion at the company’s current valuation of close to $70 billion, sources said, and would spend up to $10 billion to buy shares from existing investors at a valuation of about $50 billion. SoftBank is co-leading an investment coalition alongside Dragoneer Investment Group.

Ads publicizing the multi-billion dollar stock sale are set to be published in national papers like The Wall Street Journal and The New York Times in the next few days.

As part of the deal, said one person familiar with it, Uber would be required to go public by late 2019, or otherwise allow early and large shareholders to sell their stock freely to interested parties. Any CEO change before that 2019 date would require approval by two-thirds of the board.

The legal case brought by Benchmark against Kalanick was not formally ended as part of this deal, but might happen in the near future if the deal finalizes. That case is currently in private arbitration.

Not everyone is happy, though. Shervin Pishevar, one of Kalanick’s closest allies and a former board observer at the company, previously had promised a lawsuit for tens of billions of dollars should the proposal on voting changes be approved.

“The board's action today was unfair and illegal and we will be relentless in rectifying this wrong,” he said in a statement after the vote, alleging that it takes more valuable shares away from early owners like himself. “We will hold these people accountable under the law.”

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