The Uber board of directors has done more in the last six months than many boards do in six years, but it took pressure from a group of prominent investors for it to make its biggest move: accept the resignation of the CEO.
As widely reported today, Uber’s CEO, Travis Kalanick stepped down from the company after several large investors asked for a change in the ride-sharing startup’s leadership. It is only the most recent example of activist investors pressing for change at various Fortune 500 companies—a flurry of activity that some experts say should be a wake-up call to all boards. The lesson: If you aren’t taking an active role looking out for the shareholders’ best interest, activist investors may take matters into their own hands.
How directors should work and deal with activists remains a thorny issue. According to a 2016 National Association of Corporate Directors survey, 20 percent of the respondents were approached by activists during the previous year, but 46 percent of those surveyed had no plan in place to respond to the challenges. Experts say that boards need not only a plan to deal with activist investors, but also become more activist themselves. “Boards can adopt a private equity perspective by prioritizing and aligning around issues that impact the enterprise value of the company,” says Nels Olson, co-leader and vice chairman of Korn Ferry's Board and CEO Services practice.
It’s ironic that Uber became a symbol of activist investing because Uber’s board, on its own, had taken several high-profile steps to address a series of issues. It hired a law firm to investigate some internal complaints and commissioned another law firm, led by former U.S. attorney general Eric Holder, to review the company’s broad leadership and culture—and accepted its recommendations.
But the one action the board didn’t take was changing the CEO. Uber’s board first accepted CEO Kalanick taking an indefinite leave of absence, which he announced last week. However, it would turn out that wasn’t enough for several prominent investors in Uber’s private stock.