Inside Uber's Choice of a New C.E.O.

Mike Isaac
Dara Khosrowshahi, Uber's pick for CEO, listens during the GeekWire Summit in Seattle, Washington, U.S., on Tuesday, Oct. 4, 2016.
Bloomberg | Getty Images

By last Friday afternoon, most of Uber's eight directors had gathered in San Francisco for a board meeting. Their agenda was simple: Pick a new chief executive for the ride-hailing company.

What unfolded over the next 72 hours was anything but straightforward.

In discussions at the Four Seasons Hotel downtown and at the offices of the private equity firm TPG Capital, which holds an Uber board seat, directors operated under the cloak of secrecy. They spoke in a kind of code about some of the candidates, limiting knowledge of the shortlist to a handful of people.

By Sunday morning, one of the finalists, the former General Electric chief Jeffrey R. Immelt, had publicly pulled out. Some board members were behind another finalist, Meg Whitman, chief of Hewlett Packard Enterprise, and some people close to the process had taken steps to prepare for an announcement of her appointment.

But as Sunday wore on, Ms. Whitman, emboldened by her front-runner status, started negotiating for increasing controlover Uber were she to accept the job, siding with one faction of the board that wanted to limit the clout of Travis Kalanick, the former chief. Those tactics deterred most board members, who then swung decisively in favor of Dara Khosrowshahi, the chief executive officer of Expedia.

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This account of Uber's C.E.O. selection is based on interviews with more than a dozen people with knowledge of the board's discussions, who spoke on the condition of anonymity because the deliberations were private. It illustrates the high-wire act of herding eight board members — many of whom have big personalities and some of whom are feuding with one another — toward consensus at the world's most valuable privately held company.

Is Uber in trouble?

It also gives a taste of the kinds of issues that Mr. Khosrowshahi may have to navigate at Uber. Late Tuesday, Uber formally announced the 48-year-old executive as its new leader, saying the board was "confident that Dara is the best person to lead Uber into the future building world-class products, transforming cities, and adding value to the lives of drivers and riders around the world while continuously improving our culture and making Uber the best place to work."

Earlier on Tuesday, in an interview at Expedia's offices in Bellevue, Wash., Mr. Khosrowshahi said of the ride-hailing company, "I would be happy to get started."

Mr. Khosrowshahi said he was attracted to the Uber role because the company is "reinventing the transportation industry and is one of the most powerful brands in the world," adding, "I'm excited to shape that unfinished story." One of his priorities, he said, is helping Uber's employees get back "to running a company they can be proud of."

That may be difficult given the numerous scandals that Uber has confronted this year, including a new development that surfaced on Tuesday: The Department of Justice is looking into whether Uber managers broke an American law, the Foreign Corrupt Practices Act, which governs acts such as international bribery.

Uber confirmed that it was cooperating with the Justice Department's preliminary review in the matter, which was earlier reported by The Wall Street Journal. The company declined to comment on its search for a new chief.

DOJ probes Uber over US foreign bribery laws -DJ

The process was already complicated leading up to last weekend. Since Mr. Kalanick resigned under pressure in June, the company's board had worked to put together a list of potential recruits with Heidrick & Struggles, the executive search firm. Over two months, that list was whittled down to three candidates.

Ms. Whitman, a veteran of the tech industry who had led multiple public companies, quickly became a favorite candidate of Benchmark, one of Uber's largest investors, which also has a board seat. Ms. Whitman, who was steering Hewlett Packard Enterprise through a challenging landscape for corporate technology, was intrigued by the possibility of leading a turnaround at Uber.

But in July, she publicly denied she wanted the Uber job in a series of tweets, taking herself out of consideration. Board members had all but written her off until recently, when Ryan Graves, an Uber director and early employee, coaxed Ms. Whitman to return to the process.

Mr. Immelt, who was on the verge of leaving G.E., was favored by Mr. Kalanick and a few other directors for his depth of experience running a public company. Mr. Khosrowshahi, the long-shot candidate, also gained favor with some directors.

On Friday, Mr. Immelt and Mr. Khosrowshahi made the trip to downtown San Francisco for the last leg of the selection. In an airy conference room on the 33rd floor of TPG's offices, the two candidates presented their visions for the future of Uber. Ms. Whitman met with some board members the next day at the Four Seasons Hotel, changing locations as a way to throw people watchers off the trail.

After the presentations, some board members grew concerned about Mr. Immelt. They questioned the success of his tenure at G.E., while others — particularly Benchmark — worried that he would serve only as a surrogate for Mr. Kalanick. And while Mr. Immelt had experience with large organizations, some board members felt he lacked the technical and strategic prowess to run Uber.

Mr. Immelt withdrew from the process on Sunday morning with a post on Twitter.

Uber's new CEO faces internal and external challenges

At the same time, Mr. Khosrowshahi continued to present himself as a low-key and steady hand. The fact that he was not publicly campaigning for the job — his name had not surfaced in the media — helped his cause.

Mr. Khosrowshahi said of the recruitment process: "When I was at Uber, they asked me if I knew my passenger rating."

Ms. Whitman also had many positives in her favor. Benchmark liked her track record of imposing order on a company, along with her no-nonsense approach to governance.

Yet others, like Mr. Kalanick, were wary. Mr. Kalanick viewed Ms. Whitman as potentially compromised by her strong affiliation with Benchmark, which has sued Mr. Kalanick for board control. (On Wednesday, lawyers for Benchmark and Mr. Kalanick will meet in Delaware Chancery Court over whether the case will go to arbitration.)

Some of Ms. Whitman's points to board members did echo Benchmark's. At one point, she suggested to Uber directors that it would behoove the company to box out Mr. Kalanick.

Throughout the recruitment, directors had agreed to pick their first- and second-choice candidates. While many leaned toward Ms. Whitman as a first choice, all of the directors continued including Mr. Khosrowshahi in their selections. Still, Ms. Whitman appeared to have an edge.

After Mr. Immelt dropped out on Sunday morning, things changed. Ms. Whitman, as the front-runner, negotiated for conditions including limiting Mr. Kalanick and potentially reshaping the board of directors. She also wanted an end to the lawsuit between Mr. Kalanick and Benchmark.

"I said Benchmark and Travis needed to settle their lawsuits and the board needed to put in place a functioning governance structure," Ms. Whitman said in a statement on Tuesday to The New York Times.

She added that "the directors, including Travis, seemed eager to take those steps on Saturday and Sunday morning, but by midday Sunday it was becoming clear that the board was still too fractured to make progress on the issues that were important to me."

Directors were put off by Ms. Whitman's tactics. A consensus grew among Uber board members that Mr. Khosrowshahi was a stronger candidate who came with fewer potential headaches.

By Sunday evening, that conclusion had hardened into a unanimous vote for Mr. Khosrowshahi.

The board also agreed to hold the news until it had time to formally offer Mr. Khosrowshahi the job and tell Uber employees that he had accepted. After months of turmoil surrounding the company, it was the least directors could do to instill confidence among the rank and file.

Minutes later, news of the board's decision leaked.