Uber’s Week: Kalanick Takes Leave As Board Tackles Ailing Workplace Culture

The chain of events set off in February when a former Uber engineer’s blog post about sexual harassment went viral reached a dramatic juncture this week as CEO Travis Kalanick agreed to take an indefinite leave of absence, and his board accepted sweeping recommendations to change the company’s frat house-style workplace culture.

The company Kalanick (pictured) co-founded in 2009 has become the largest ride-hailing network in the world, but its future now depends on rebuilding trust, not only among its workers, but also among riders, drivers, host communities, and the investors who could stem the flow of funds that subsidize Uber’s low fares.

The blog post nearly four months ago by former engineer Susan Fowler, who described harassment of women as well as a chaotic management culture at Uber, led the company to hire the law firm of former Attorney General Eric Holder to conduct a probing investigation of its work environment.

Some of the fallout from that inquiry, and another review by a second law firm, started to emerge last week, when Uber fired 20 staffers accused of harassment or other misconduct.

The housecleaning continued through Monday, purging two executives who were among Kalanick’s closest associates. Eric Alexander, Uber’s president of business in Asia, was fired. Alexander had been under scrutiny for allegedly getting hold of the medical records of a woman who had accused an Uber driver in India of raping her. Emil Michael, Uber’s senior vice president of business, also left the company. The rape victim has now sued Uber, Kalanick, Alexander, and Michael for allegedly accessing and discussing her records in an attempt to discredit her account of the crime, CNET reported Thursday.

Uber’s board now faces the task of reconstituting the company’s gutted leadership team, which lacks a chief operating officer, a chief financial officer, an active CEO, and other key executives. The C-suite executives now occupying the highest positions are Chief Technology Officer Thuan Pham, Chief Security Officer Joe Sullivan, Chief Product Officer Jeff Holden, and Chief Legal Officer Salle Yoo, Business Insider reported on Thursday.

The board has pledged to remedy an alleged pattern of discrimination, gender bias, and poor management controls, as recommended in a report by Covington & Burling, the law firm of Holder, the former attorney general.

But the board’s efforts got off to a rocky start. Another leadership casualty arose from events at a meeting Tuesday to update staff on the company reforms. As the board discussed including more women directors, board member David Bonderman made a sexist remark. Soon afterwards, he resigned.

The top recommendations in Holder’s report were designed to check the powers of Kalanick by reallocating some of the CEO’s responsibilities and making the chief operating officer a full partner of the CEO, with a clear division of duties.

Other recommendations were advanced to re-formulate Uber’s workplace values; increase staff diversity; create multiple mechanisms that workers could use to register complaints about harassment, discrimination, or retaliation; and track these reports over time to identify repeat offenders.

It’s not clear how long Kalanick will stay away. While the turmoil at Uber prompted him to take time off to regroup, Kalanick is also grappling with the sudden death of his mother, and injuries to his father, in a recent boating accident. His power to steer the company, however, remains substantial because of his holdings in Uber “super-voting shares” that give him greater voting power than regular shareholders.

While the remaining Uber leadership struggles to right the ship internally, the company faces increasing outside pressures due to its testy relationships with its drivers, its customers, and government regulators in the United States and abroad.

What’s more, Uber has yet to demonstrate to investors that it has a plan to achieve profitability and justify its reported valuation of $70 billion. The core problem is that Uber’s expansion on a global scale relied on investor funding that allowed it to beat the prices of traditional taxis and other transportation alternatives.

“But Uber is worth $70 billion only as long as its venture investors are willing to pay up to be part of its club,” Los Angeles Times columnist Michael Hiltzik wrote in an opinion piece Wednesday. “That willingness could vanish in an instant.”

After the upheavals of the past few weeks, more than one commentator has remarked that healing Uber’s internal relationships isn’t the biggest challenge the company faces.

Hiltzik says Uber is not only floating on a cushion of investor money, but is also keeping costs down by crimping on drivers’ pay and resisting regulations that apply to other transportation businesses. Even with those savings, Uber lost $708 million on revenue of $3.4 billion in the first quarter this year.

Many observers have called for Uber to raise its rates, but that comes with the risk of losing riders to competitors such as Lyft. And on the cost side, drivers continue to press to have the status of employees, rather than remain as independent contractors without benefits. Cities and national governments are pressuring ride-hailing companies more aggressively to comply with labor and safety rules, as well as other regulations.

The timeline may be fairly short for Uber to solve its central business dilemmas, as Los Angeles Times writers Paresh Dave, David Pierson, and Makeda Easter suggested this week. Uber has $7 billion in reserves, but at its current rate of operations it will need to raise more money by the end of 2018, they say.

“Financial analysts have long expected Uber to slowly raise prices for customers to demonstrate a clearer road to profits by next year, when it might hold an initial public offering of its stock,” the writers say.

Bernadette Tansey is Xconomy's San Francisco Editor. You can reach her at btansey@xconomy.com. Follow @Tansey_Xconomy

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