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Examining Uber's Executive Woes

July 11, 2017

For many companies, legal issues and challenges are not the result of a single direct violation, but rather are the outcome of the corporate culture permeating the organization. A prominent example of this idea can be found in the recent challenges faced by the Uber executive team. The company has undergone dramatic changes to its structure following a slew of complaints and lawsuits. The future of the company now hinges on how well it can reorganize its board and corporate governance policies in ways that can improve its overall culture.

Uber CEO Steps Down

Uber CEO Travis Kalanick recently stepped down after a shareholder revolt made it unworkable for him to stay on with the company. In a letter titled “Moving Uber Forward,” five major investors in Uber wrote that the company needs a change in leadership, and demanded that Kalanick resign immediately. The investors also called for improved oversight of the company and for “truly independent directors” to be appointed to vacant board positions. 

The five investors consist of some of the most prestigious venture capital organizations in the technology industry, all of which invested at an early stage of Uber’s company life. They are:

  • Benchmark
  • First Round Capital
  • Lowercase Capital
  • Menlo Ventures
  • Fidelity Investments

The move follows months of questions regarding management tactics, as well as its workplace culture, which has been described as aggressive and unrestrained. The organization’s legal impediments have recently included:

  • Sexual harassment allegations
  • An intellectual property lawsuit from Waymo, a subsidiary of Google’s parent company, Alphabet
  • A federal inquiry into the use of a software tool that the company may have used to sidestep law enforcement
  • Lawsuits from former employees alleging verbal abuse

Additional Executive Exits

Compounding the difficulties associated with Kalanick’s resignation is the string of exits in other important positions. Uber faces vacancies in many key positions, including:

  • COO
  • CFO
  • General Counsel
  • Chief Marketing Officer
  • Senior Vice President of Engineering
  • Chief Diversity Officer

In particular, the lack of clarity at the uppermost positions will likely make it difficult for the company to recruit new talent. High-level executives are often risk-averse when it comes to filling in during such circumstances. 

On the other hand, one aspect that may be working in Uber’s favor is that business operations continue to grow quickly, as the company remains somewhat decentralized by region. This may allow day-to-day operations of the business to run independently and with little disruption in service to customers. 

Recommendations to Improve Uber’s Corporate Culture

Former U.S. Attorney General Eric. H. Holder Jr. provided a comprehensive report containing recommendations for overhauling Uber’s culture and board leadership. The report contains over 45 points, most of them consisting of basic management and corporate governance strategy recommendations. Uber’s board adopted all of the recommendations and also announced them in a meeting to the company’s 14,000 employees.

The 10 main areas outlined in the report are:

  • Changes to Senior Leadership
  • Enhance Board Oversight
  • Internal Controls
  • Reformulate Uber’s 14 Cultural Values
  • Training
  • Improvements to Human Resources and the Complaint Process
  • Diversity and Inclusion Enhancements
  • Changes in Employee Policies and Practices
  • Address Employee Retention
  • Review and Assess Uber’s Pay Practices

Other actions recommended in the report include:

  • Adding independent board members
  • Reallocating Kalanick’s responsibilities
  • Creating an independent chair
  • Enhancing board diversity and inclusion
  • Mandatory leadership and human resources training
  • Hiring a COO who has experience reworking corporate cultures
  • Clearer guidelines on alcohol and use of controlled substances
  • Nominating a senior executive team member to oversee implementation of the recommendations

While many of these changes seem basic, it is necessary to address such points in clear language to avoid confusion moving forward. The recommendations are comprehensive enough and cover enough detail to potentially serve as an outline for other companies. 

Summary

The disarray at Uber highlights the importance of having sound corporate governance and board policies in place. Governance measures should not only take existing pressures into account, but they should also be prepared for future exigencies as well. In particular, succession planning and replacement of board members are especially important for the long-term protection of any company. 

If you have any questions, concerns, or issues regarding board policies and corporate governance, contact us today at Kessler Topaz. As one of the leading law firms in the U.S. representing shareholders, we have deep experience utilizing the courts to achieve significant governance changes and reform. We also employ direct action such as bylaw amendments and director nominations to enhance board functioning and composition.