As Uber Confirms CEO Pick, A Real Change of Control?

The board of embattled ride-hailing giant Uber late Tuesday confirmed its decision to hire Expedia chief executive Dara Khosrowshahi as its new CEO.

The vote was unanimous, the board wrote in an upbeat letter to Uber employees.

“We’re really fortunate to gain a leader with Dara’s experience, talent and vision,” the note said. “The Board and the Executive Leadership Team are 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.”

Khosrowshahi met Uber employees at an all-hands gathering Wednesday. The outgoing Expedia CEO, in an e-mail to the staffers he’s leaving behind at the Bellevue, WA-based online travel conglomerate, said he was “scared” but energized by his new challenge, according to the text of the e-mail published by GeekWire.

Khosrowshahi (pictured) emerged as the winner in a competition with former General Electric CEO Jeff Immelt and Meg Whitman, leader of Hewlett Packard Enterprise, after a string of presentations to Uber’s board by the three finalists starting Friday, according to an account of the process in The New York Times. Immelt dropped out early Sunday. Whitman may have lost her shot, according to the Times’ account, when she tried to negotiate conditions up-front to clarify the roles of the board and of Uber founder Travis Kalanick. Recode reported that Whitman’s conditions would have curbed the influence of Kalanick, who resigned as CEO in June under pressure from some of Uber’s investors.

But Khosrowshahi, in his own pitch to the board, also tried to set terms that would cement his authority as the top leader at Uber—tempering Kalanick’s remaining, substantial power over the company as board member and shareholder, as well as the board’s active role in decision-making, Recode reported. In reference to this stance, one slide in Khosrowshahi’s pitch deck reportedly read, “Don’t call me, I’ll call you.”

Nothing has been disclosed as yet about the terms of the contract Uber has been negotiating with Khosrowshahi, who is taking on a formidable challenge, and also giving up a rich compensation package at Expedia.

Uber has weathered a year of damaging disclosures under the leadership of Kalanick, who is seen as an inventive but sometimes heedless tech buccaneer. The scandals include conflicts with drivers, allegations of workplace sexual harassment, business setbacks, legal battles with a unit of Google’s parent company, and government investigations. Its board has been squabbling internally, and as part of the power struggle, an investor with a seat on the board is suing Kalanick for allegedly trying to maintain his grip on company operations. A judge today moved the case to arbitration, Reuters reported. In the midst of all this, the $68.5 billion valuation ascribed to Uber by the private company’s financial backers has come under question. Even so, at least some members of the board want the new CEO to lead Uber through an IPO, Bloomberg reported.

Khosrowshahi told the Uber all-hands meeting Wednesday that the company could go public in 18 to 36 months, according to Reuters.

Can Khosrowshahi be the adult in the room who brings order to Uber’s turbulence? It’s hard to avoid comparisons to retired Marine Corps general John Kelly, who was recruited to impose discipline on a chaotic White House in late July.

Khosrowshahi, an experienced leader with a reputation for being cool and competent, now faces the task of bringing cohesion to a huge organization with bickering factions among its top executives, while also stopping an unpredictable principal from doing further damage.

Uber’s new CEO faces other challenges similar to Kelly’s:

—Uber’s top executive ranks are understaffed. The company hasn’t had a permanent CFO since 2015. Its management corps has thinned out as some leaders merely decamped amid the turmoil, and others were fired in the wake of a company-ordered investigation of Uber’s internal culture.

—Uber is, and has been, the subject of multiple federal government investigations. The latest of these has just been made public. The U.S. Department of Justice is investigating whether Uber broke a federal law against bribing foreign officials to gain business advantages, as Business Insider  recounted. In May, the DOJ opened an investigation on Uber’s alleged use of “greyball” software to mask its operations and evade regulators in cities where it still awaited approval. Local authorities are also probing this practice. This month, Uber settled charges brought by the Federal Trade Commission, which accused Uber of failing to protect the personal information of both riders and drivers from prying by its own employees.

—A major Uber initiative, the development of self-driving cars, is blocked by a lawsuit claiming that Uber stole intellectual property from Waymo, a unit of Google parent company Alphabet.

—Uber has seen an erosion of public support due to the cultural and ethical climate that developed under Kalanick. The former CEO was captured on video berating one of Uber’s drivers. The company has also faced general criticisms of its lack of diversity, as well as claims that women endured sexual harassment and gender bias amid a frat-house environment—the subject of an influential blogpost in February by former Google engineer Susan Fowler, who also described a dysfunctional management culture.

—Uber’s financial honeymoon period is over, and its term of dominance could end fairly quickly unless it shapes up, one of its critics, New York Times op-ed contributor Steven Hill, suggested today. Investors are questioning the company’s underlying business model, because its leadership has not presented a convincing plan to stem its enormous losses, Hill wrote.

Can Khosrowshahi be the leader who executes what could be a long campaign to drag Uber out of the mire, while maintaining the loyalty of the former chief executive?

Kalanick, for his part, says he’s delighted to welcome Khosrowshahi, Axios reported. “I couldn’t be happier to pass the torch to such an inspiring leader,” Kalanick’s statement read in part.

Uber-watchers will be waiting to see if the mood holds.

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

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