By: Steve Masur and Cassidy Lopez
Ride-sharing giant Uber‘s Travis Kalanick has been forced to step down from his role as CEO of the company a week after taking an “indefinite leave of absence” amid growing backlash over his leadership and corporate culture at Uber. Uber has been rocked by what seems to be a never-ending series of scandals, PR crises, and staff departures (since the beginning of this year, the company has lost fourteen of its top executives), leaving investors to question whether Kalanick was fit to continue leading the company.
The company’s rough ride began on January 19th, when the Federal Trade Commission issued Uber a $20 million fine for misleading drivers about pay. A week later, a viral campaign to #DeleteUber was started after Uber turned off surge pricing at JFK airport in New York City to draw more customers during a taxi driver strike in response to President Trump’s travel ban. Kalanick also received backlash for joining Trump’s Strategic and Policy Forum, though a few days after unrelenting criticism on social media, Kalanick resigned from the economic advisory board. However, by February, the New York Times reported that almost 200,000 users had deleted the Uber app from their smartphones.
In mid-February, a former Uber software engineer published a powerful blog post alleging a culture of sexual harassment and gender bias at the company. An internal investigation into harassment and discrimination was launched, led by former U.S. Attorney General Eric Holder and Uber board member Ariana Huffington. The investigation has led to 20 firings so far. The firings were aimed at addressing deeply rooted cultural and managerial issues within the company, stemming from an inherent misogynistic culture within the Silicon Valley startup community. Holder issued a report in June recommending that the company reevaluate Kalanick’s leadership at the company as well as “enhance board oversight.” Many have criticized the “toxic bro culture” which exists in Silicon Valley. Investors have an affinity for favoring young, good-looking men, hustlers and go-getters, with an aggressive nature who will do what it takes to make sure the company takes off. “Bro” culture may have its perks in the beginning in leading start-ups to rapid growth and quick profits, but it also encourages ignoring the rules (or, at the very least, pushing boundaries beyond what’s traditionally acceptable) and doing whatever it takes to win no matter the circumstances. That attitude, which is what made Uber a $70 billion company, also, unfortunately, led to Kalanick’s downfall. Leslie Miley, a former software engineer at Slack, may have put it most precisely: “Maybe there’s no morality in money.”
Amid all of this scandal, Uber was also facing an intellectual property lawsuit by Alphabet Inc.’s self-driving car subsidiary Waymo and an investigation by the U.S. Department of Justice into software tools that were allegedly being used to deceive some law enforcement. UPDATE (2/9/2018): Waymo and Uber have reached a settlement their trade secret lawsuit over self-driving vehicle technology, in which Waymo will obtain 0.34% of Uber’s equity, valued at $245 million at a $72 billion valuation. In a statement, new Uber CEO Dara Khosrowshahi denied any allegations of unfair competition and trade secret misappropriation, but expressed “regret” over Uber’s actions and looked ahead to a cooperative partnership with Alphabet.
Kalanick’s “indefinite leave of absence” was not enough for some investors who were growing weary of the leadership at the head of a company they had pumped millions of dollars into. Five major shareholders, which include some of the tech industries top venture capital firms, notably Benchmark, LOWERCASE capital, Menlo Ventures, First Round Capital, and Fidelity Investments, and who together hold about 40 percent of Uber’s voting power, demanded Kalanick’s resignation. The shareholders are calling for a board-led search for a new Chief Executive Officer and are demanding that the company immediately hire an experienced Chief Financial Officer. In a day and age where venture capital funding has profoundly changed the U.S. economy, investors have a large influence over companies, as evidenced by the shareholder letter calling for the resignation of Kalanick. A 2015 Stanford University study found that 43% of all public companies founded since 1979 were backed by venture capital firms, and this number has only been on the rise two years later.
The venture capitalists funded Travis Kalanick to do exactly what he did, which is to ignore the rules, eat for lunch anyone who got in Uber’s way, and build an enormous amount of value. It was truly amazing how Uber was able to bust the national and world-wide monopolistic trusts of taxi and limousine authorities. However, Uber’s mistake was not transitioning sooner to a more upright American corporate culture the way other Silicon Valley startups have done. So the question now remains: who will be the new head of Uber? Kalanick will remain a part of Uber since he still owns a majority of Uber’s voting shares, but shareholders and board members are surely on the hunt for someone experienced, professional, and ready to get the company back on track and back in the good graces of millions of users around the world.