Where technology and economics collide
Travis Kalanick has resigned as Uber’s CEO under pressure from five of the company’s biggest investors, the New York Times reports.
The announcement caps a tumultuous six months in which Uber suffered a seemingly endless string of scandals and controversies. They culminated last week with a report by attorney general Eric Holder that found systematic problems with workplace sexism. In the wake of that report, Uber fired one of its top executives, Emil Michaels. And Kalanick himself agreed to take a leave of absence from the company, leaving the company under the control of a committee of Kalanick subordinates.
But hardly anyone was satisfied with that outcome. As I argued on Monday, it left Uber rudderless at a time when it desperately needed decisive leadership. The company has several of its top jobs unfilled, and it would have been difficult to recruit strong candidates without an active CEO.
Investors evidently felt the same way. According to the New York Times, five of Uber’s biggest investors sent Kalanick a letter on Tuesday demanding that he step down as CEO. The investors who signed the letter control about 40 percent of the company’s voting power — less than the majority they’d need to oust him, but enough that Kalanick couldn’t ignore their concerns.
“I love Uber more than anything in the world and at this difficult moment in my personal life I have accepted the investors request to step aside so that Uber can go back to building rather than be distracted with another fight,” Kalanick said in a statement to the Times.
Now Uber needs to find a new, permanent chief executive. As a major Uber shareholder, Kalanick is likely to continue wielding significant influence from the sidelines. But it’ll be important that the company’s new chief executive be truly independent so that he or she can credibly promise to change Uber’s culture and start to put its many scandals behind it.
Uber’s new CEO will face big challenges
Since the start of 2017, Uber has faced a number of major controversies:
- In February, a former Uber engineer named Susan Fowler wrote a blog post alleging that she had experienced multiple incidents of sexual harassment and discrimination at Uber. She said that the company’s human resources department had done little to address the problems, and that other women have had similar experiences. The company asked an independent panel led by former attorney general Eric Holder to look into Fowler’s allegations. Holder delivered his findings to Uber’s board last week, confirming that Uber had a significant problem and ultimately precipitating Kalanick’s resignation.
- Uber is facing a federal criminal investigation over “Greyball,” software designed to mislead local regulators in order to prevent them from enforcing municipal taxi regulations. Uber reasoned that if city officials couldn’t identify Uber cars, they couldn’t write Uber drivers tickets for operating unlicensed taxi services. So it identified accounts belonging to government officials and provided them with a version of the Uber app that showed fake information and wasn’t able to actually summon Uber cars.
- Uber was sued by Waymo, Google’s self-driving car unit, for allegedly stealing technical details for a key Waymo-designed sensor. Last month Uber was forced to fire Anthony Levandowski, a star engineer who left Waymo last year and started a self-driving truck company that Uber bought for around $700 million. Levandowski was fired after he invoked the Fifth Amendment rather than turn over documents he allegedly stole from Waymo. The judge has also referred the case to federal prosecutors.
- In January, Uber agreed to pay $20 million to settle Federal Trade Commission allegations that it had overstated likely driver earnings. In May, the company admitted it had miscalculated driver pay in the New York area, costing thousands of drivers an average of $900 each. A February video showed Kalanick lecturing a driver about “responsibility” after the driver complained about declining fares — prompting Kalanick to publicly apologize. “To say that I am ashamed is an extreme understatement,” he wrote.
Looming on top of all that is Uber’s challenging business situation. The ride-hailing company lost $2.8 billion in 2016 and another $708 million in the first three months of 2017.
And there’s a real danger that Waymo, Tesla, or another rival could develop fully self-driving technology before Uber, which Kalanick himself has described as an existential threat to the company.
“If we are not tied for first, then the person who is in first, or the entity that’s in first, then rolls out a ride-sharing network that is far cheaper or far higher-quality than Uber’s, then Uber is no longer a thing,” Kalanick told Business Insider last year.