Why did a group of Uber’s biggest investors push CEO Travis Kalanick out? A nice narrative would be that they demanded a real consequence for the culture he enabled, which led to the harassment scandal that has embroiled the world’s most valuable startup.
The truth is something else: The stakes have never been higher for Uber and in the end, it is always the money men who make the decisions.
Kalanick’s downfall has been almost as rapid as his ascent. Since Uber launched in 2011, the ride-hailing service has expanded into 662 cities around the globe. Valued at nearly $70 billion, investors have put out millions, and they believed that keeping him around could seriously hurt their return. Following several allegations of sexual harassment and workplace discrimination, alongside lawsuits, disputes with drivers, and regulatory headaches, Uber’s investors took control last Tuesday and effectively forced CEO Travis Kalanick to resign. The company said that “by stepping away, [Kalanick is] taking the time to heal from his personal tragedy while giving the company room to fully embrace this new chapter in Uber’s history.”
From many passengers’ perspective, Uber is a godsend — lower fares than taxis, clean vehicles, courteous drivers, easy electronic payments. Yet the company’s mounting scandals reveal something seriously amiss, culminating in a stern report from former U.S. Attorney General Eric Holder.
Holder’s investigation into Uber’s corporate culture listed 47 recommendations for how to clean up a toxic workplace culture at Uber. First on the list: “Review and Reallocate the Responsibilities of Travis Kalanick.” The recommendations come after a seeming litany of dark accusations of sexual misconduct, discrimination, and boorish workplace behavior.
Both Kalanick and Uber have faced a string of controversies in the past 12 months, significantly tarnishing the reputation of the company and its founder. The crisis began in February when departing Uber engineer, Susan Fowler Rigetti, described in a blog post her experiences – outlining a systemic discrimination and sexual harassment problem at the company. From the time her blog post was published, at least nine senior executives have either resigned or had been asked to leave the company. The result has seen more than 20 employees fired for various infractions, including harassment, retaliation, discrimination, and bullying. Almost 60 other employees have been disciplined, while dozens more remain under investigation.
The departures include Uber’s president, its head of PR, its head of engineering, its head of product, its head of mapping, and its Asia-Pacific regional chief. Some of these exits were voluntary (like PR chief Rachel Whetstone) and others were not (like Asia-Pacific exec Eric Alexander, who reportedly obtained the medical records of an Indian Uber passenger who was raped by her driver).
Susan Fowler Rigetti retweeted from her own tweet deck last week in which she said the Uber saga “is not about diversity and inclusion, it’s about laws being broken. Harassment, discrimination, retaliation are illegal. She added Tuesday, “I’m going to keep saying this until things actually change.”
The latest and most recent heart-breaking blemish on the Uber “white flag” comes from sexual assault allegations involving a driver for the service provider. A 46-year-old Uber driver with a felony record has been arrested on suspicion of sexual assault and kidnapping after an intoxicated passenger was taken to a hotel and attacked. The 24-year old woman fell unconscious in his car after enjoying a night of drinking in downtown LA, and instead of taking her home to Hollywood, the driver allegedly took her to a motel on Lankershim Boulevard and sexually assaulted her. Earlier this month, an Uber driver was accused of sexually attacking a passenger during a ride in the Bay Area. And in April, an Uber driver in Orange County was charged with raping a passenger who was riding home from a work-related event.
In January, state legislators enacted a law that forbids companies including Uber and Lyft from hiring drivers who are registered sex offenders, have been convicted of violent felonies or have had a DUI conviction within the last seven years. Some people attribute the company’s missteps to the personal failings of founder-CEO Travis Kalanick. These have certainly contributed to the company’s problems, and his resignation is definitely appropriate. Kalanick and other top executives signal by example what is and is not acceptable behavior, and they are clearly responsible for the company’s ethically and legally questionable decisions and practices.
It’s been suggested that the problem at Uber goes beyond a culture created by toxic leadership. The company’s cultural dysfunction seems to stem from the very nature of their competitive advantage: Uber’s business model is predicated on lawbreaking. And having grown through intentional illegality, Uber can’t easily pivot toward following the rules. Uber’s biggest advantage over incumbents was in using ordinary vehicles with no special licensing or other formalities. With regular noncommercial cars, Uber and its drivers avoided commercial insurance, commercial registration, commercial plates, special driver’s licenses, background checks, rigorous commercial vehicle inspections, and countless other expenses. With these savings, Uber seized a huge cost advantage over taxis and traditional car services. Uber’s lower costs brought lower prices to consumers, with resulting popularity and growth. But this use of noncommercial cars was unlawful from the start.
Uber publicists presented the company as the “epitome of innovation,” styling critics as incumbent puppets stuck in the past. As the company’s vision became the new normal, it was easy to forget that the strategy was, at the outset, plainly illegal. Indeed, Uber initially provided service only through licensed black cars properly permitted for that purpose. But as Lyft began offering cheaper service with regular cars, Uber had to respond. It was Lyft that first invited drivers to provide transportation through their personal vehicles. Despite the theoretical innovation of companies like Lyft & Uber, participation in the global community requires respect for and compliance with the law. Hopefully, the adverse domino effect won’t hurt anyone else, while the board attempts to clean up the myriad messes already made.