Uber Chairman Warns Directors of Duties as Kalanick Hires Uber Staff

Former Uber CEO Travis Kalanick lately has gone on a hiring spree to staff his latest startup, CloudKitchens—snapping up at least four senior engineers from Uber. And that appears to have sparked an unusual warning from Uber Chairman Ron Sugar at the company’s latest board meeting two weeks ago.

Mr. Sugar told his fellow directors—who include Mr. Kalanick—that they should remember their “fiduciary duty” to the company, which includes not doing anything that would hurt Uber, said a person with direct knowledge of the board meeting. He didn’t mention anyone by name. But his comments came after he’d heard complaints from Uber management about Mr. Kalanick’s hiring of Uber employees, said two people with knowledge of the episode.

The Takeaway

Travis Kalanick’s new startup CloudKitchens has hired several senior engineers from Uber, including two from UberEats, irritating Uber management. Uber Chairman Ron Sugar reminded directors at a recent board meeting that they had a fiduciary responsibility to Uber.

Uber CEO Dara Khosrowshahi and other Uber executives have been annoyed by Mr. Kalanick’s hiring in part because two of the senior Uber engineering managers hired by Mr. Kalanick had been helping to lead the engineering team at Uber Eats, the company’s food delivery unit, which has been under pressure from rivals, said one of the people. Uber tried hard to retain the engineers.

An Uber spokesman said the company, and Messrs. Khosrowshahi and Sugar, would not comment on board affairs. Through a spokeswoman, Mr. Kalanick did not comment for this article.

CloudKitchens, which Mr. Kalanick acquired last year, is a supplier to Uber Eats and other food-delivery services. The company leases physical kitchen space to restaurants that provide meals to delivery services like Uber Eats and DoorDash. Some restaurant chains, such as Fat Sal’s sandwich chain in Los Angeles, use it to extend their deliveries into areas beyond their physical locations. CloudKitchens has plans to expand to San Francisco, Chicago and New York as well as China, according to a report in the South China Morning Post.

Relations between Messrs. Kalanick and Khosrowshahi have been chilly at times since Mr. Khosrowshahi was hired in the fall of 2017 to succeed Mr. Kalanick, who was ousted amid a series of controversies centering on Uber’s hard-charging culture. Since then, Mr. Khosrowshahi has taken steps to distance Uber from the Kalanick era. At the company’s May IPO, for instance, Mr. Kalanick was not allowed to stand on the New York Stock Exchange podium for the traditional bell-ringing ceremony on the day of the stock offering. Mr. Kalanick remains a significant shareholder, owning a 6.7% stake in the company after the IPO, according to Uber’s securities filings.

Earlier this year, Bloomberg reported that CloudKitchens had recruited some former Uber employees after they left the ride-hailing firm. At that time, Uber management asked Mr. Kalanick to not recruit from Uber, according to the report.

The managers who recently jumped to Mr. Kalanick’s company from Uber include five-year Uber veterans Anthony Tran and Minh Tran, who helped oversee Uber Eats engineering. (They are not related.) Ashley Quitoriano, an engineering manager who had worked on Uber's core ride-hailing business for five years, and Matt Gode, who spent four years at Uber and Uber Eats, also joined.

"Travis understands that as a member of the board he has a fiduciary duty. We are comfortable that he takes those seriously and doesn't have any issues with them."

Mr. Kalanick earlier this year told at least one person at Uber that some of the company’s employees simply wanted to leave and work with him. Uber management believes Mr. Kalanick was personally involved in their hiring, said one of the people with direct knowledge of the situation. It could not be learned if Mr. Sugar, the board chairman, spoke separately with Mr. Kalanick about the issue. Mr. Sugar referred The Information’s inquiry to Uber’s public relations team.

A person familiar with Mr. Kalanick's thinking said "Travis understands that as a member of the board he has a fiduciary duty. We are comfortable that he takes those seriously and doesn't have any issues with them. There is nothing at all wrong with [CloudKitchens] hiring people from Uber. Legally speaking, because they are competitors for labor, if there was an agreement between them that CloudKitchens wouldn't recruit Uber employees, that would be unlawful."

Furthermore, as a major shareholder of Uber, "the notion that he is doing something that would hurt Uber doesn't make any sense." The person also said that Mr. Kalanick didn't cold call senior executives from Uber.

Uber, which went public in May, is under financial pressure to show it can grow quickly while losing less money. Lately Uber has gone in the wrong direction, and its stock price has fallen since the IPO. Uber Eats, which is supposed to be Uber’s second big hit after ride-hailing, has been particularly challenged. In the first quarter of the year, Uber Eats’ adjusted quarterly revenue grew by 30.6% to $239 million from $183 million a year earlier. Uber Eats generates around 10% of Uber’s adjusted net revenue. Uber reports its second quarter results later this week.

Amir Efrati is executive editor at The Information, which he helped to launch in 2013. Previously he spent nine years as a reporter at the Wall Street Journal, reporting on white-collar crime and later about technology. He can be reached at [email protected] and is on X @amir