It has been clear for some time that imposing new procedures aimed at changing the company’s culture would require Mr. Kalanick to give up the reins as CEO.
In normal circumstances, the board would decide on a course of action, take a vote and the CEO would be out the door with a tidy press release and generous exit package.
Indeed, if any other CEO had presided over even half as many scandals as Mr. Kalanick did they’d have been whisked from the executive suite as soon as an Uber driver could get there.
But Uber is not a normal company. CEO Travis Kalanick has effective voting control. That has made the task of removing him much more complicated. It took a former attorney general and a nearly constant stream of media leaks to pry Mr. Kalanick out of his seat. And it is still not clear how long he will stay sidelined or if his influence will diminish.
How did this happen?
Once there was a time when the founders of innovative, fast-growing companies had to relinquish control in return for investment capital. That was the price demanded by venture investors, who didn’t want to take a risk on both a new business concept or technology and an unproven manager. And they were often right to do so. There were many brilliant founders who were ill suited to be managers.
But lately in Silicon Valley founders have been able to get both capital and control. At Uber, investors were willing to tolerate a warped governance structure to get a piece of a lucrative, category-busting business.
Mr. Kalanick’s super-voting shares didn’t seem to matter much until investors decided big changes were necessary. But there was little they could do except plead, complain and rally others to their side. Call it investor remorse.
Having surrendered their voting power, shareholders turned to the only form of pressure they had left – swaying public opinion through the news media. That helps explain why Uber’s boardroom has been as leaky as the Trump White House in recent weeks.
That was on full display Sunday evening, when news reports began to appear about the Uber board meeting to discuss the report from Mr. Holder and entertain the idea that Mr. Kalanick take an indefinite leave.
And sure enough, by Tuesday afternoon Uber announced that Mr. Kalanick would indeed take a leave of absence and the Holder report’s recommendations would be adopted.
Ironically though, the basic problem at Uber persists even with Mr. Kalanick’s exit. It’s not clear how it will accomplish such sweeping changes when the controlling shareholder doesn’t support them? It’s notable that Mr. Kalanick has been silent during the past several days.
Uber’s situation offers a potent lesson for investors in other high flying companies with founder-friendly voting structures. (Think: Snap, Facebook, Google.) Giving up your voting rights is fine until they really matter most.