Uber under pressure from sexual harassment wave

Leadership vacuum in top ranks of ride-hailing firm a worry to investors

Uber founder Travis Kalanick, whose company is under pressure from a sexual harassment inquiry that has seen 20 employees fired.

Uber founder Travis Kalanick, whose company is under pressure from a sexual harassment inquiry that has seen 20 employees fired.

 

When Uber employees learned that the company had fired more than 20 of their colleagues as part of a harassment inquiry, it fell to an external lawyer and the head of human resources to present the far-reaching findings.

Travis Kalanick, the company’s co-founder and chief executive, who has shaped Uber in his image over the past eight years, has been on temporary leave due to a family tragedy.

For Kalanick, a leader known for being hands on, this is a painful enforced absence at a difficult time. For Uber and its investors, it has exposed an uncomfortable fact about the ride-hailing company: there is no one to call the shots when Kalanick is not around.

Founders often play an outsized role in Silicon Valley start-ups, but in the case of Uber the leadership vacuum in the top ranks of the company has become more pronounced in recent months as scandals have sent senior executives running for the exits.

Since February, six of Kalanick’s direct reports have left, leaving his management team hollowed out.

Unfilled positions

Key unfilled positions include chief operating officer, chief financial officer, chief marketing officer and general counsel – an astonishing list for a company that has more than $7 billion (€6.25 billion) in annual revenue and which was valued at $68 billion (€60.7 billion) by investors last year.

Among the leaders who remain, few have experience running a mature, global company of Uber’s size, an issue that is worrying shareholders.

Uber has acknowledged that it needs to bulk up its leadership, and this week hired Frances Frei, a professor from Harvard Business School, as vice-president of leadership strategy. Part of her job is helping put a new senior team in place around Kalanick.

“I would say that the leadership team needs to catch up with the growth in the organisation,” Frei said. “I think that it is fully capable of doing that, particularly with the collection of four people that we get to bring to the team,” she added, referring to the unfilled senior positions.

One of her priorities is to make sure that the executives who fill the roles can work together as a “complementary team”, she said, suggesting that this was not previously the case.

“It has not been a priority in this organisation for the individual leaders to function as a team, and that is crucial for an organisation of this size,” said Frei.

However, the search for a chief operating officer and a finance chief has dragged on – the search for the former began in March, while the latter position has been empty for more than two years – highlighting the challenges of bringing top talent to a company known for being a one-man show.

The core issue for Uber’s governance is that Kalanick and two of his friends control the company, giving the board relatively little power. Kalanick’s shares, combined with those of co-founder Garrett Camp and senior vice-president Ryan Graves, account for a majority of the voting rights.

“Travis wants to hold control,” said one shareholder close to the company. “The board has certainly lost any ability to guide him or to negotiate with him – once he became this global icon, and so surpassed expectations, and also made them so wealthy.”

Independent director

Uber’s board has only one independent director, Arianna Huffington, who joined last year and who has been a staunch supporter of Kalanick. The other voting members of the board are three Uber investors – David Bonderman of TPG, Bill Gurley of Benchmark and Yasir al-Rumayyan of Saudi Arabia’s public investment fund – and three Uber insiders, Kalanick, Graves and Camp.

Adding more independent directors to the board, an idea advocated by some shareholders, would in practice make little difference if Kalanick and his allies still controlled the majority of voting rights.

The recent executive exodus has been particularly concerning to those who worry about the checks on Kalanick. Rachel Whetstone, the head of policy who quit in April, was seen as being one of the few people willing to stand up to the chief executive. The departure of Jeff Jones, who was a top executive at Target before coming to Uber, also underscored the company’s inability to retain top managers hired externally.

Meanwhile, the series of recent crises has meant Kalanick has had to rely ever more heavily on his coterie of insiders – precisely the group that shareholders worry about.

“He should have built a team of equals, but he hasn’t,” said a second shareholder. “The biggest deficit is the so-called A-team.”

Other than Kalanick, the most powerful executives at Uber include Emil Michael, a close associate of Kalanick who has been with the company for nearly four years; Rachel Holt, who leads Uber’s North American business; and Graves, who was Uber’s first chief executive and who has been with the company from the start.

The impact of Uber’s leadership dysfunction has been on display this week, as the initial results of an investigation into 215 complaints of sexual harassment and bullying were announced on Tuesday. Twenty employees were laid off as a result of the investigation, and more than 50 of the claims are still under review.

In one of the complaints, an Uber executive obtained the medical records of a rape victim in India, who was found by a court to have been assaulted by her Uber driver, and showed them to people at Uber, according to Recode, the tech news site.

Uber confirmed that the executive in question was no longer working for the company, and declined to comment on the case.

More incidents like this could continue to surface, as a second report which will cover culture and diversity at Uber will be published next week.

Kalanick has been mainly on leave since a tragic boating accident nearly two weeks ago killed his mother and left his father in hospital. Kalanick has been spending time with his father.

“Since the tragedy he has not been as visibly involved in terms of being at the office, and I think he is really focusing his involvement on fewer people, and giving broader rein to people,” said Frei.

“My hope is that the leadership could give him the confidence to grieve in the best way possible for him,” she added. “I hope that he has the confidence that he doesn’t need to be involved in as many decisions and processes as he usually is.” – (Copyright The Financial Times Limited 2017)