Uber investors want Benchmark off board a day after it sued founder for fraud

Uber investors want Benchmark off board a day after it sued founder for fraud
[Photo: @Kmeron/LeWeb12 Conference]

A group of Uber shareholders is asking Benchmark Capital to give up its seat on the company’s board of directors a day after the venture capital firm filed a lawsuit against former Uber CEO Travis Kalanick for fraud.

Axios first revealed the full letter, which apparently has been making its way around Silicon Valley. It accuses Benchmark of violating its fiduciary responsibilities by forcing Uber into a public relations disaster—effectively holding the company “hostage”—when it asked for Kalanick’s resignation and launched a suit against him. This has brought ill will against the company, the letter says. As such, this group of board members has asked Benchmark to divest of enough shares so it is not entitled to a seat on the board. The letter was signed by Sherpa Capital’s Shervin Pishervar, Yucaipa Companies’ Ron Burkle, and Maverick’s Adam Leber, according to Axios.

Since the beginning of the year, Uber has been running from one public relations debacle to the next. And it’s suffered a number of departures, both as a result of an investigation into its culture and possible discriminatory practices, and because people are tired of the drama just leaving.

The public bickering between board members will likely go unnoticed by Uber’s riders and drivers. But if the company was already having difficulty attracting a new CEO, the infighting probably isn’t helping. Regardless of how this shakes out, it seems the suit is doing damage to Benchmark’s brand. Already some startups are saying they aren’t so keen on taking money from a litigious VC that’s less supportive of founders than it purports to be.

Here’s the group’s request, from its email:

Naturally, we share your concerns about the problems that the Company has confronted in recent months, but we are greatly concerned about the tactics employed by Benchmark to address them, which strike us as ethically dubious and, critically, value-destructive rather than value enhancing.

Specifically, we do not feel it was either prudent or necessary from the standpoint of shareholder value, to hold the company hostage to a public relations disaster by demanding Mr. Kalanick’s resignation, along with other concessions, on a few hours’ notice and within weeks of a personal tragedy, under threat of public scandal. Even less so your escalation of this fratricidal course–notwithstanding Mr. Kalanick’s resignation–through your recent lawsuit, which we fear will cost the company public goodwill, interfere with fundraising, and impede the critical search for a new, world-class chief executive officer. Benchmark has used false allegations from lawsuits like Waymo as a matter of fact and this and many actions has crossed the fiduciary line.

Benchmark’s investment of $27 million is worth $8.4 billion today and you are suing the founder, the company and the employees who worked so hard to create such unprecedented value. We ask you to please consider the lives of these employees and allow them to continue to grow this company in peace and make it thrive. These actions do the opposite.

Accordingly, we would request that Benchmark help the Company realize its full potential by allowing the necessary work to be done in the Board Room rather than the Courtroom. To this end, at this point, in light of your suit against the Company, we believe it would be best, and hereby request, that Benchmark remove its representative from the Company’s Board and move promptly to divest itself of enough shares in the Company so as to cease to have Board appointment rights. We have investors ready to acquire these shares as soon as we receive communication from Benchmark that they are willing to withdraw their lawsuit and sell a minimum of 75% of their holdings.

We are also asking for a symbolic Board of Directors vote on this matter at today’s Board meeting to show how the Board of Directors stands on this lawsuit brought against the company, its founder and the 15,000 employees of Uber who have all worked so hard in concert to create the fastest growing company in history.