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The Underside of Uber

LONDON – The car-hailing app Uber’s board members and investors have received an outpouring of praise in recent days for forcing CEO Travis Kalanick to resign. They don’t deserve it. On the contrary, while Kalanick did indeed need to go, the move was long overdue – and it was delayed for all the wrong reasons.

Founded in 2009 as “UberCab” in San Francisco, Uber has grown from an innovative startup to a $68 billion global behemoth at an astonishing rate. With the help of multiple rounds of financing from major investors, including Amazon founder Jeff Bezos and Goldman Sachs, it has emerged as a massive industry disruptor, operating in 570 cities worldwide, in less than a decade.

But the company’s rapid ascent has been accompanied by a steady stream of revelations of dubious behavior, from violating customers’ privacy and deceiving local government regulators to mistreating drivers. When guests at its Chicago launch party in 2011 were entertained by the company’s “God View” system, which allowed them to see the whereabouts of all current drivers and riders, it was a clear privacy violation, but the demonstration at least kept its subjects anonymous.

The next one, at the same event, did not: it showed in real time the location and movements of 30 named people in Uber cars in New York City. It was a breathtaking – and breathtakingly casual – breach of trust. Yet the company faced only negligible repercussions: after a little bad press, it was back to business as usual.

In 2014, an Uber executive used the God View system to track a reporter without her permission. Another noted that he could dig up dirt on a reporter who had criticized the company. Again, after a flurry of news reports, Uber continued its forward march unchanged and undeterred, its investors silent.

The same year, a woman in India was raped by her driver. Uber had failed to conduct a proper background check on the driver, and then proceeded to violate the woman again, by obtaining and distributing her medical records internally.

These events are illustrative of a larger pattern and attitude. From the outset, Uber has tried, time and again, to railroad lawmakers in cities around the world, arrogantly ignoring safety rules and regulations. More recently, it was revealed that Uber may have been tracking and profiling individual drivers, as part of a so-called “Hell” program aimed at determining, among other things, the status of competitors’ drivers, including whether its own drivers also worked for its competitors.

Kalanick, who declared in 2012, “I like pissing people off,” was the most directly responsible for these decisions, and recent news coverage of Uber has rightly held him up as a poster child for leadership gone wrong. But Kalanick was no Übermensch, unbound by rules intended for mere mortals. He could not have continued on his destructive path if not for the investors and board members who – hungry for profits and full of excuses – allowed misogyny, disregard for ethics, and poor judgment to become entwined in the company’s managerial fabric.

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In fact, until recently, neither Uber’s board nor its other investors treated Kalanick’s attitudes toward privacy, workers’ rights, and women as serious issues, much less fireable offenses. They were too busy buying into – and, indeed, encouraging – Kalanick, who was often described in nod-and-wink terms like “brash” and “disruptive.” And each time an ethical misstep amounted to nothing, Kalanick’s – and, by extension, the company’s – sense of impunity intensified, enabling him and others to continue to push the boundaries of business ethics and human decency.

Even now that Uber has been forced to confront its failings, there are doubts about its commitment to change. Yes, Kalanick is out. And Uber’s board hired former Attorney General Eric Holder to review concerns surrounding the company. But will Holder’s recommendations – more than 40 in all – be implemented?

During a company meeting on the day Holder’s report was released, Uber board member David Bonderman equated the addition of more women board members with “more talking.” For a company facing sexual harassment claims, the comment displayed more than poor taste; it showed an appalling failure to grasp the gravity of the situation. The good news is that Bonderman resigned shortly after the meeting, suggesting that the company’s leadership may finally be ready to clean house.

Uber’s experience should serve as a cautionary tale for boards and investors far beyond Silicon Valley. Innovation and disruption are not the problem – far from it. But they must be linked to a sense of responsibility and corporate governance that ensures accountability.

For board members, this means recognizing the importance of a firm hand, beginning in the startup phase. For investors, it means looking beyond short-term returns, in order to avoid the damage to a company’s long-term health and wellbeing that can result when relationships with customers, suppliers, employees, and the communities in which it operates are not properly maintained. A company that allows disregard for ethics to become entrenched risks paying a steep price – as do its investors.

As for Uber itself, it may not be too late, though the company faces a long and difficult road ahead. The company needs root-and-branch change, accompanied by a genuine and concerted effort to rebuild trust with customers, drivers, partners, and lawmakers. Only then can it move past not just the lawsuits it faces, but also the public mistrust that could irreparably harm its future performance.

If Uber’s leaders fully commit to such a transformation, they could achieve one of the great turnaround stories of our time. If they don’t, Uber will become an acquisition target or, worse, a zombie company, unable to compete with more vital competitors that learn from it what not to do. Lucy P. Marcus is CEO of Marcus Venture Consulting.

By Lucy Marcus

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