
The rise of super-voting shares has given founders the ultimate job security - imartin2k
https://backchannel.com/why-uber-wont-fire-its-ceo-bd748df7151d
======
crdb
It makes it more painful, but shareholders can sue management and the board if
their interests are not represented (see the numerous lawsuits against Yahoo).
Or in other words "when there's a will there's a way".

The real reason they won't replace him is that he built a unicorn from nothing
for them, making them very rich and cool in the process (imagine being able to
say "I was an early stage investor in Uber"), and by all accounts he has not
changed, with Uber being run as a large, efficient company that delivers
globally with McDonald's level reliability.

Investors also know that what people say and do are very different things. In
aggregate, customers will publicly complain and say they will take Lyft, but
privately will vote with their wallet (after all who sees what you book), in
the same way that publicly they decry energy wastage whilst they take holidays
on other continents and drive SUVs to their giant McMansion. I literally
cannot think of a company that "won" by promoting its ethical competitiveness,
beyond conquering the few percent of the market who can afford to care and
care enough to pay a premium. I wonder how many of the #DeleteUber reinstalled
it quietly a few weeks later. The public has a very short memory - as a
Frenchman I remember being called cheese-eating surrender monkey by the same
Brits who today protest against "American imperialism".

Governments won't do anything since Uber has tons of positive externalities
such as reduction in drunk driving, creation of many part time unskilled jobs
and generally electorate happiness in having a reliable and affordable taxi
service. They think in terms of net welfare and a few Californians having some
issues at work is the least of their worries.

~~~
taway_1212
> making them very rich and cool in the process (imagine being able to say "I
> was an early stage investor in Uber")

Are there really people who think being an investor is cool ?

~~~
RodericDay
Only in this tech bubble and in cities swallowed by it like SF.

If you live somewhere with a healthier balance of careers where not everything
is focused around tech, it would come off as incredibly dull and tone-deaf.

~~~
taway_1212
Yeah, that's my reception as well, that's why I was surprised. Sure, investing
requires skill and can get you very rich - but so does running a garbage truck
company. I would assume that for most people, jet fighter pilots are cool,
rock stars are cool, footballers are cool, even some poker pros are cool - but
not investors.

------
JumpCrisscross
Even if investors _could_ easily fire Travis, I doubt they would. This is the
man who has taken the company from zero to $60bn. He has it embroiled in
numerous commercial, political and technological battles around the world,
most of which--until recently--Uber has been winning. Any replacement would,
at the very least, need extensive mentoring from him.

Kalanick has described Uber as his baby. He won't properly mentor someone he's
forced to accept as his replacement. This means a CEO totally unequipped to
know where Uber's chips are, let alone play them properly. Keep in mind: Uber
is largely forging new ground. We don't have a playbook for replacing a
durable good purchased by consumers with technologically synchronised fleets.

Replacing a CEO is usually seen as a textbook cosmetic change. A swap at the
top and nothing below. Bringing in a Schmidt to Travis's Page looks like the
savviest option.

Uber has been drawn through the dirt for good reason. They need to change or
die. That said, assuming they can get past the Waymo bullshit, there's nothing
the press loves more than a turnaround story.

~~~
onion2k
_This is the man who has taken the company from zero to $60bn._

There's no reason to assume someone capable of taking a company from zero to
$60bn is necessarily capable of taking it from $60bn to $120bn, or even just
maintaining a $60bn valuation. Quite often the skills needed to start
something are different from the skills needed to grow or to maintain
something.

That isn't to say Travis can't do it. He's clearly _incredibly_ capable of
doing some amazing things. I'm just questioning the idea that he's
_automatically_ the right person to run Uber using a basis of the fact he
started Uber. While he has done some astounding things he's also been CEO
while Uber has done some very bad things too.

~~~
sfifs
> There's no reason to assume someone capable of taking a company from zero to
> $60bn is necessarily capable of taking it from $60bn to $120bn, or even just
> maintaining a $60bn valuation.

Sure. Now quick propose a concrete CEO candidate who investors will be
convinced is a better fit for the job AND is likely available.

Draw a blank? So do I.

~~~
onion2k
I have no idea, but I'm quite sure that's a more of problem with my network
than there not being anyone up to the job.

~~~
sfifs
Actually it's not about your or my network. Capable proven leadership is one
of the rarest resources on earth.

No investor will fire a proven leader unless there is extrodinary liability or
(much more rarely) upside.

------
dingo_bat
I feel it is good that founders are increasingly able to keep their companies
under their control.

~~~
beejiu
It is not "their" company, however. The company belongs to all the
shareholders.

~~~
splintercell
It depends, if I start a company and offer a share contract where I am the
BDFL(Benevolent Dictator For Life) of the company, then any shareholder
purchasing the stocks is buying it by agreeing to that term.

Sure the shares will not reach as high of a valuation as they would if shares
didn't come with this condition, but there is no claim whatsoever that somehow
shareholders somehow gain more power over the company than what they agreed to
when purchasing the shares.

~~~
beejiu
I'm not a lawyer, but I strongly suspect you have a fiduciary duty to all
shareholders. If you are director-shareholder, you cannot act in the interests
of your shareholding alone. Also, the idea that you can put any condition into
a contract is naive. Many such conditions are legally unenforceable because
they are incompatible with the corporate law framework.

------
tyre
I think there is something to increasing voting preference based on tenure of
shareholding. Giving more control to longer-term shareholders leads to long
term thinking aim governance.

Something like vesting for stock voting would be interesting. What if we had
the number of votes equal to the number of years the stock was held by that
investor (with some max)?

On the other hand, I don't agree with CEOs having board control. That prevents
any company oversight (which is exactly the point of the board.) No one should
be immune from reproach. The article gives examples of great CEOs being fired,
but there are at least as many examples of poor CEOs retaining power.

~~~
Chaebixi
> I think there is something to increasing voting preference based on tenure
> of shareholding. Giving more control to longer-term shareholders leads to
> long term thinking aim governance.

While I like any idea that would encourage longer-term thinking, wouldn't the
founders be the longest-term shareholders with the most voting power, in this
case? So, many of the problems of super-voting shares would still apply?

~~~
tyre
That's why there should be a max. So, for example, you get one vote per year
up to a maximum of five votes. Anyone holding a share for longer than that (6,
10, 100 years) gets the same 5 votes per share.

------
elvinyung
Opinions on Uber aside, wasn't everyone complaining a while ago that VCs were
having too much control?

~~~
kristianov
Yin and Yang, my friend, Yin and Yang.

~~~
swampthinker
I thought it was Ying and Yang?

~~~
sika_grr
Does nobody on Hacker News watch Silicon Valley? Or are references in comments
frowned upon?

~~~
Trundle
References are generally frowned upon, at least when that's all there is to
the comment. There is a strong fear here of becoming reddit.

~~~
nebabyte
Uh

> comments saying that HN is turning into Reddit [...] a common semi-noob
> illusion, as old as the hills

------
milesf
FTA: "That’s due in part to the dual-class share structure that savvy tech
founders have come to embrace in recent years... with smart management
techniques when setting up a board to guarantee control in perpetuity."

Though "savvy" and "smart" today, tomorrow other words might be used to
describe this type of behavior.

~~~
stagbeetle
> _" Though "savvy" and "smart" today, tomorrow other words might be used to
> describe this type of behavior."_

Iconoclastic and resolute.

Half-jokes aside, why do you think people will have a negative view of this
sort of thing, in the future?

Its main purpose is to circumvent the short-term groupthink of investors that
plagues all modern companies (I'm looking at you, Amazon). Even if this means
the CEO sets course for shipwreck (ex. Uber), the people being hurt the most
are investors.

They'll be seen as populists fighting the fat cats who can't keep their
fingers out of everyone's cookie jars.

~~~
soufron
Well, let's just wait how people will react when they will understand that
they accepted to invest billions in assholes who got lucky but have as much
vision and management skills as a 5 years old kid.

~~~
bryanrasmussen
I don't know if it's lack of vision and management skills as much as it is
lack of a moral compass, and being jerks.

------
andriesm
Kalanick has done a stellar job of creating value at Uber.

He made the rules, and every investor either choses to accept Kalanick's
rules, or they can not invest.

I will do EXACTLY the same if I raised a lot of outside capital.

If you don't trust the founder's judgement, don't invest.

------
bjornsing
> The argument for allowing a small set of founders complete control over
> their boards is the same one to be made for enabling benevolent
> dictatorships.

To me it feels like this is often the underlying (mis)understanding in
articles like this one: "It's dictatorship; dictatorship is bad!". Well, I
guess it's obvious to most here, but let me say it anyway: Companies are not
democracies, they're not meant to be, and there's a hell of a difference
between Travis clinging to power in Uber and say The Donald doing the same,
but in the White House.

------
macspoofing
Putting his super-voting shares aside, should he be fired? Uber has been
spectacularly successful and now is going through a bit of a rough time - is
that enough to get rid of him?

------
tryitnow
I'm skeptical of dual class shareholders. Honestly, it's not a terribly
inventive idea. So why hasn't it been done before on such a widespread basis?

If the ability to vote is valuable then that means investors will be willing
to pay more for it. If it's not valuable then why do founders insist on
reducing investor power?

There's a contradiction in there somewhere.

If capital were to suddenly dry up what would happen to the value of most of
these companies? I would predict a significant drop in valuations for all
companies that aren't monopolies (e.g. Google and Facebook).

Steve Jobs is often used as an example of why we need "CEOs for life." But
let's not forget that Jobs had fairly little shareholder power in Apple - most
of his billions came from Pixar.

So ironically, at the time Jobs was brought back to Apple it was basically
equivalent to bringing in a non-founder CEO from the perspective shareholder
power.

------
rustoo
Maybe they can create a holding company (focusing on strategy) that is headed
by Travis and under it put Uber (focusing on operations) headed by a new CEO.
Something similar to what Google has done using Alphabet.

~~~
_pmf_
This would also be clever to decouple Uber-the-brand (which has immense value)
from Uber-the-driver-exploiter (which has a unsavory aftertaste) and Uber-the-
autonomous-driving-dilettante (which is a running joke).

------
627467
Personally I think that more than market consolidation and siloing, it is this
power that dual-class shares confers that is feeding our current neo-
feudalistic economy.

------
yCloser
let me tell you in 1char: '$'

------
ojosilva
On a humorous note, and I don't know if this was intended or not, but in the
the picture of Travis Kalanick that leads the article, if you look closely, he
seems to have stepped on some sh*t.

Maybe this was unintended, but the metaphor is definitely there.

------
dominotw
i don't understand, why would uber want to fire its CEO? Was there a theranos
like scandal ? Feel a little out of loop here.

------
known
AKA
[https://en.wikipedia.org/wiki/Stockholm_syndrome](https://en.wikipedia.org/wiki/Stockholm_syndrome)

------
soufron
I see many people comment with "so what".

Well, let's just wait how people will react when they will understand that
they accepted to invest billions in assholes who got lucky but have as much
vision and management skills as a 5 years old kid.

~~~
tehlike
i guess it's hard to call uber ceo visionless.

All unethical stuff aside (that's not to say it's not important), he's
brilliant. disrupting transportation industry - including logistics industry -
is not something you can do without that.

~~~
wcarron
Apparently it is also something one can't do without flagrantly disregarding
the law.

