Investor group demands changes to Uber’s board ahead of IPO

Finance news

John Thain

Adam Jeffery | CNBC

Investor group CtW demanded changes to Uber’s board of directors ahead of the ride-hailing company’s anticipated IPO, saying on Wednesday its governance “falls short of best practices.”

In a letter addressed to Uber Chairman Ronald Sugar, CtW called for the removal of former Merrill Lynch executive John Thain from Uber’s board, citing his “reputation of poor business judgement on financial matters.” The group also said Uber’s board members, including its chairman, should reduce their outside commitments ahead of the firm’s expected IPO on the New York Stock Exchange in coming weeks.

CtW is a union-affiliated pension fund adviser with more than $250 billion in assets under management. The group has previously scrutinized the board practices of companies like Tesla and said in the letter its funds intend to become “substantial” Uber shareholders.

The group was highly critical of Thain, who leads Uber’s Audit Committee. CtW referenced the former Merrill Lynch chief executive’s “close relationship” with Uber CFO Nelson Chai, who worked under Thain at NYSE, Merrill Lynch and CIT Group.

“We believe that Thain’s close relationship with Chai may inhibit him from effectively evaluating Chai’s performance as CFO and possibly from holding Chai accountable in the event of the company’s poor financial performance,” the letter said.

The group also attacked Thain’s business record, which came under scrutiny in early 2009 when he was fired from his role as CEO of Merrill Lynch. Thain oversaw Bank of America’s acquisition of the firm for $50 billion in stock and approved large executive bonuses at the peak of the financial crisis.

“Thain is an unsuitable steward of shareholder funds,” the letter said.

Uber did not immediately respond to CNBC’s request for comment and CNBC was unable to reach Thain for comment. Thain, who retired as CEO of CIT Group in 2015, also currently sits on the supervisory board of Deutsche Bank.

Uber overhauled its board structure in 2017 based on a set of recommendations by former U.S. attorney Eric Holder. The company adopted an independent chairman and limited the voting rights of Travis Kalanick, its embattled chief executive at the time. Uber CEO Dara Kohsrowshahi, who replaced Kalanick in August 2017, has made cleaning up Uber’s governance a key priority.

CtW acknowledged the progress Uber has made but urged the company to further consider director candidates that “are independent, objective and will represent the interest of all of the company’s shareholders.”

Uber’s chairman, Ronald Sugar, who was previously CEO of defense firm Northrup Grumman, currently sits on the boards of Apple, Amgen, Chevron and Air Lease Corporation. Arianna Huffington and co-founder Garrett Camp are among Uber’s other board members.

Uber is expected go public on the NYSE in the coming weeks under the ticker UBER. In a filing released last week, the firm said it will offer 180 million shares at $44 to $50 each, putting its valuation as high as $91.5 billion on a fully diluted basis.

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