Engine Capital advocates for new Upwork board following 4% stake acquisition.

• Upwork's board is being urged to change by Engine Capital, which owns about 4% of the freelance marketplace.
• In a letter to the board on Friday, Engine stated that Upwork must address the "foundational issues" affecting the platform.
• Upwork shares are down 37% this year.

Engine Capital, an activist investor, owns approximately 4% of the shares in the freelance marketplace and is advocating for changes to the company's board.

On Friday, Engine wrote to Upwork's board about the need to address "core problems" that are affecting the platform. As a result, Upwork's stock price increased by over 3% during pre-market trading on Friday.

Upwork's board has not been adequately overseeing management, according to a letter obtained by CNBC, although the engine did not call for CEO Hayden Brown's removal.

"Arnaud Ajdler, founder of Engine, stated in a letter that Brown has been on her third management team in four years. The activist also mentioned that Brown has had three CFOs in the same time frame. Furthermore, former employees have expressed their dissatisfaction with the company's "lack of strategic clarity and focus.""

Several Upwork directors, including Chairman Thomas Layton and Greg Gretsch, were highlighted by Engine for their long-term service. Splunk general manager Gary Steele is also a member of the board.

Meanwhile, none of Upwork's directors have any apparent experience in staffing industry, Ajdler wrote.

Upwork has underperformed its closest peer and should simplify its platform, cut costs, and grow its enterprise business to improve its performance.

A representative for Upwork didn't immediately return a request for comment.

Upwork's stock has fallen 37% this year and is about 85% below its 2021 high. Despite its growth during the pandemic, the company's stock price has declined since its peak in 2021.

Upwork CEO predicts that companies will increase their hiring due to AI.