Fluent Essays

While Uber technologies (Uber) had tasted great success in the run-up to its planned IPO in 2019, its journey had been a bumpy one. On June 21, 2017, co-founder Travis Kalanick stepped down as CEO of Uber in the face of a shareholder revolt that made it untenable for him to stay on in that position. Kalanick’s resignation came after a review of practices at Uber that included allegations of sexual harassment, a corporate theft lawsuit, defiance of government regulations, reports of misbehavior, and a toxic corporate culture, leading to the departure of some key executives. In early 2018 Dara Khosrowshahi, the newly appointed CEO of Uber, faced numerous obstacles in the path of reaching Uber’s 2019 IPO objective: fixing Uber’s culture and helping it evolve some of its own core cultural practices to foster growth and improve stakeholder relationships; contending with lawsuits over a massive data security breach; working with a splintered board and ushering in corporate governance reforms; and regaining the confidence of Uber’s investors, employees, and customers. There are 2 accompanying videos suggested by the case writers. Assignment Question: Dara Khosrowshahi, the newly appointed Uber CEO, has hired you as a strategic management consultant and asked you to prepare a report for him that focuses on the following items: • An assessment and analysis of Uber’s corporate culture prior to his arrival inclusive of the key features of the culture; • An analysis if what issues and/or problems need to be prioritized prioritize in order to rebuild and improve the culture at UBER; • An analysis of what he has completed thus far; and, • What additional actions he could take that would make an even greater contribution toward turning things around at UBER. Prepare a report for CEO Khosrowshahi focusing on these findings Chaos at Uber: The New CEOs Challenge (2018) While Uber technologies (Uber) had tasted great success in the run-up to its planned IPO in 2019, its journey had been a bumpy one. On June 21, 2017, co-founder Travis Kalanick stepped down as CEO of Uber in the face of a shareholder revolt that made it untenable for him to stay on in that position. Kalanick’s resignation came after a review of practices at Uber that included allegations of sexual harassment, a corporate theft lawsuit, defiance of government regulations, reports of misbehavior, and a toxic corporate culture, leading to the departure of some key executives. In early 2018 Dara Khosrowshahi, the newly appointed CEO of Uber, faced numerous obstacles in the path of reaching Uber’s 2019 IPO objective: fixing Uber’s culture and helping it evolve some of its own core cultural practices to foster growth and improve stakeholder relationships; contending with lawsuits over a massive data security breach; working with a splintered board and ushering in corporate governance reforms; and regaining the confidence of Uber’s investors, employees, and customers. There are 2 accompanying videos suggested by the case writers. https://www.youtube.com/watch?v=HU43KHdMgMw https://youtu.be/42q4Kj1DNAw Assignment Question: Dara Khosrowshahi, the newly appointed Uber CEO, has hired you as a strategic management consultant and asked you to prepare a report for him that focuses on the following items: • An assessment and analysis of Uber’s corporate culture prior to his arrival inclusive of the key features of the culture; • An analysis if what issues and/or problems need to be prioritized prioritize in order to rebuild and improve the culture at UBER; • An analysis of what he has completed thus far; and, • What additional actions he could take that would make an even greater contribution toward turning things around at UBER. Prepare a report for CEO Khosrowshahi focusing on these findings (3-4 pages maximum). tho75109_case31_C392-C405.indd C-392 12/18/18 07:52 PM Chaos at Uber: The New CEO’s Challenge Syeda Maseeha Qumer ICFAI Business School, Hyderabad Debapratim Purkayastha ICFAI Business School, Hyderabad “I have to tell you I am scared,” 1 wrote Dara Khosrowshahi, newly appointed CEO of ride- hailing service Uber Technologies Inc., in a memo to his former team at Expedia, Inc.2 Besides growing Uber’s business, analysts said Khosrowshahi had the task of changing the dysfunctional culture within the company and improving corporate gov- ernance that had cost co-founder and former CEO Travis Kalanick his job. On June 21, 2017, Kalanick stepped down as CEO of Uber in the face of a share- holder revolt that made it untenable for him to stay on in that position. His resignation came after a review of practices at Uber including allegations of sexual harassment, a corporate theft lawsuit, defi- ance of government regulations, reports of misbe- havior, and a toxic corporate culture leading to the departure of some key executives. Uber’s corporate structure ensured that its founders held super-voting shares and had dispro- portionate control over the company. Kalanick, because of the special class of shares he owned, enjoyed sweeping authority on the Uber board and nearly complete autonomy in running the company. According to some industry observers, Uber ignored corporate governance in its pursuit of growth and valuation, and flouted ethical norms while hiding behind notions of disruption and innovation. This was fine with investors until the beginning of 2017 when the company’s public image crumbled amid allegations of sexual harassment, they said. “The board chose to ignore the fundamentals of their gover- nance role and failed to provide guidance in correcting a trait which would ultimately endanger the company in many ways.”3 said Prabal Basu Roy, a fund manager. The chaos inside Uber’s boardroom escalated in August 2017 when a small group of sharehold- ers aligned with Kalanick dissented against Uber’s biggest investor Benchmark Capital,4 after it filed a lawsuit to oust Kalanick from the board. Benchmark Capital had accused Kalanick of fraud and of inter- fering in the search for a new CEO—accusations that he had denied. Some analysts felt that Uber’s board needed to grow up as the constant bickering among the members was hurting the company. According to them, the board’s aggressive infighting was spreading confusion and uncertainty among Uber’s investors, customers, and shareholders, and putting the com- pany’s nearly $70 billion market valuation at risk. As Khosrowshahi began his new role at Uber, he had the daunting task of dealing with a fraught Uber board and mending the frayed relations among investors. “Boards are so unpredictable, and this one seems as if they’re at each other’s throats. It’s hard to know if he’ll have the force of personality to navigate that,”5 said Alice Armitage, director of Startup Legal Garage.6 Khosrowshahi would have to figure out a way to unite the divided board and end the acrimony among them. Moreover, he would also have to con- tend with the legacy of Kalanick who continued to remain on the Uber board. Khosrowshahi said that as Uber’s CEO he wanted to set the course for the future of the company, which included innovating and growing responsibly as well as acknowledging and correcting mistakes of the past. He planned to take the company public by CASE 31 ©IBS Center for Management Research Final PDF to printer tho75109_case31_C392-C405.indd C-393 12/18/18 07:52 PM Case 31 Chaos at Uber: The New CEO’s Challenge C-393 2019. “The culture went wrong, and the governance of the company went wrong and the board went in a very bad direction. But if the product is good, then if you can bring in good leadership, you can ultimately bring it together,”7 he said. However, some analysts wondered if the company valued at around $68 billion as of January 2018 could maintain its valuation as it pre- pared for an IPO. BaCKGROUND NOTe Uber was co-founded by Kalanick8 and Garrett Camp9 in 2009. The duo was in Europe attending LeWeb, an annual European tech conference. On a snowy night in Paris, Kalanick and Camp could not get a cab. This was when the two came up with the idea of launching an on-demand car-service app. After getting back to San Francisco, Camp convinced Kalanick to partner with him in the new project that could fill the large and lucrative gap in the car service market. UberCab, as it was then known, started its service in San Francisco in the summer of 2010 with only a few cars, a handful of employees, and a small seed round. After entering credit-card information on the app, customers could book a car at the press of a button. The cost was automatically charged to the customer’s account. Uber required its drivers to have their own car and to pass a background check. In August 2010, Ryan Graves, Uber’s first hire, was briefly appointed as CEO of the company. In October 2010, the company was renamed Uber after some regulatory bodies objected to the use of “cab” in UberCab’s name as the entity was operating without a taxi license. Uber closed a $1.25 million seed funding in 2014. Chris Sacca of First Round Capital was its first institutional investor and he invested about half a million dollars in the company. Other investors included Napster co-founder Shawn Fanning, venture capital fund Lowercase Capital, and venture capitalist Mitch Kapor. In December 2010, Graves stepped down as CEO and Kalanick stepped into the position. Graves stayed on as Uber’s head of global opera- tions. In February 2011, Uber closed an $11 million Series A funding round that valued the company at $60 million (see Exhibit 1). Benchmark Capital led the round and its partner Bill Gurley joined Uber’s Board of Directors. In May 2011, Uber was launched in New York City and thereafter it expanded to Seattle, Boston, Chicago, and Washington D.C. In December 2011, Uber raised $32 million in its Series B of fund raising from Amazon Inc’s CEO Jeff Bezos, Menlo Ventures, and Goldman Sachs. In July 2012, Uber unveiled its low-cost “Uber X” service. In August 2013, Uber entered India and Africa, and closed a Series C funding round which saw a massive $258 million investment from Google Ventures. In July 2014, Uber entered China after a $1.2 billion funding round. In August 2014, Uber launched its UberPOOL service. Notwithstanding strikes by angry taxi driv- ers over Uber threatening their livelihood and break- ing local taxi rules, and unresolved questions of legal liability, the cab service expanded rapidly. The company continually rolled out new services from freight and helicopter rides to food delivery to driverless cars. Uber upended the tightly regulated taxi industry in many countries and changed the transportation landscape. In 2016, its gross bookings hit $20 billion, double that of the previous year (see Exhibit 2). As shown in Exhibits 3 and 4, net revenues were $6.5 billion for 2016, although losses were high at $2.8 billion. As of 2017, Uber had a presence in 724 cities in more than 84 countries.10 With a valua- tion of nearly $68 billion, it was by far the richest of the Silicon Valley’s private unicorn technology com- panies (see Exhibit 5). Analysts said that while Uber had tasted great success, its journey had been a bumpy one. According to them, the company was synonymous with contro- versies. Since its launch, Uber had been the subject of ongoing protests from taxi drivers and regulatory bod- ies who argued that the company should be subjected to the same regulations that they faced. From non- compliance issues to regulatory concerns and lack of driver background checks, Uber drew scrutiny and criticism. The service was banned in The Netherlands and in parts of Thailand and China. Uber’s surge pric- ing had been one of the most controversial aspects of the company’s business model. Customers equated it with price gouging as it took advantage of users in unfortunate situations. Uber had also been embroiled in a long-standing battle with some labor organiza- tions as it classified its drivers as independent con- tractors and not employees, which deprived them of various benefits. There had also been cases of sexual assault on passengers, which some activists said hap- pened because the background checks on drivers had not been stringent enough. Uber’s critics went to the extent of saying that the company ignored ethical and legal standards in the name of disruption and valued money, power, and control above morality. Final PDF to printer tho75109_case31_C392-C405.indd C-394 12/18/18 07:52 PM C-394 PaRT 2 Cases in Crafting and Executing Strategy EXHIBIT 1 Uber Funding Rounds Date Amount/Round Valuation ($ billion) Lead Investor Investors April 2017 Undisclosed Amount — — 1 July 2016 $1.15 billion/Debt Financing — Morgan Stanley 4 June 2016 $3.5 billion/Series G — Saudi Arabia’s Public Investment Fund 1 May 2016 Undisclosed Amount/Series G — — 1 Feb 2016 $200 million/Private Equity — Letterone Holdings SA 1 Aug 2015 $100 million/Private Equity — Tata Capital 1 July 2015 $1 billion/Series F — — 6 Feb 2015 $1 billion/Series E — Glade Brook Capital Partners 9 Jan 2015 $1.6 billion/Debt Financing — Goldman Sachs 1 Dec 2014 $1.2 billion/Series E 40.0 Glade Brook Capital Partners 8 June 2014 $1.4 billion/Series D 18.2 Fidelty Investments 9 Aug 2013 $363 million/Series C 3.5 GV 4 Dec 2011 $37 million/Series B — Menlo Ventures 11 Feb 2011 $11 million/Series A 0.06 Benchmark Capital 6 Oct 2010 $1.25 million/Angel — First Round 29 Aug 2009 $200 thousand/Seed — Garrett Camp Travis Kalanick 2 Source: Crunchbase. EXHIBIT 2 Uber Gross Bookings (Q1 2015–Q3 2016) ($ in millions) $0.00 $1,512 $2,149 $3,800 $5,000 $5,400 $2,000.00 $3,000.00 $4,000.00 $5,000.00 $6,000.00 $1,000.00 *Q3 2015: data not available Q1 2015 Q2 2015 *Q3 2015 Q12016 Q22016 Q32016 Source: www.businessinsider.com. Final PDF to printer tho75109_case31_C392-C405.indd C-395 12/18/18 07:52 PM Case 31 Chaos at Uber: The New CEO’s Challenge C-395 EXHIBIT 3 Uber Quarterly Net Revenues, 2012–2016 ($ in millions) $ 1 $0 Q 1’ 12 Q 1’ 14 Q 2’ 14 Q 3’ 14 Q 4’ 14 Q 1’ 15 Q 2’ 15 Q 3’ 15 Q 4’ 15 Q 1’ 16 Q 2’ 16 Q 3’ 16 Q 4’ 16 Q 1’ 13 Q 2’ 13 Q 3’ 13 Q 4’ 13 Q 2’ 12 Q 3’ 12 Q 4’ 12 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 $ 2 $ 4 $ 8 $ 1 3 $ 1 9 $ 2 9 $ 4 2 $ 4 6 $ 5 7 $ 1 1 4 $ 2 2 8 $ 2 7 4 $ 3 8 9 $ 4 6 7 $ 5 6 0 $ 9 6 0 $ 1 ,1 0 0 $ 1 ,3 2 0 $ 1 ,5 8 4 Source: www.investing.com/analysis/2017-39;s-uber-ipo-200170565. Q 1’ 12 Q 1’ 14 Q 2’ 14 Q 3’ 14 Q 4’ 14 Q 1’ 15 Q 2’ 15 Q 3’ 15 Q 4’ 15 Q 1’ 16 Q 2’ 16 Q 3’ 16 Q 4’ 16 Q 1’ 13 Q 2’ 13 Q 3’ 13 Q 4’ 13 Q 3’ 12 Q 2’ 12 Q 4’ 12 $0 $ 4 $ 4 $ 5 $ 7 $ 7 $ 8 $ 1 2 $ 1 8 $ 5 2 $ 1 0 9 $ 1 7 5 $ 2 5 0 $ 3 8 5 $ 6 0 2 $ 4 5 0 $ 5 0 0 $ 5 2 0 $ 7 5 0 $ 7 5 0 $ 7 5 0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 $600 $650 $700 $750 $800 $850 $900 EXHIBIT 4 Uber Quarterly Losses, 2012–2016 ($ in millions) Source: www.investing.com/analysis/2017-39;s-uber-ipo-200170565. Final PDF to printer tho75109_case31_C392-C405.indd C-396 12/18/18 07:52 PM C-396 PaRT 2 Cases in Crafting and Executing Strategy EXHIBIT 5 Top 10 Privately Owned Technology Unicorns in the World (as of august 2017) Rank Company Latest Valuation ($ in billions) Total Equity Funding ($ in billions) Last Valuation 1 Uber $68.0 $12.9 June 2016 2 Didi Chuxing 50.0 15.1 April 2017 3 Xiaomi 46.0 1.4 December 2014 4 Airbnb 31.0 3.3 March 2017 5 Palantir 20.0 1.9 October 2015 6 WeWork 20.0 4.4 July 2017 7 Lufax 18.5 1.7 December 2015 8 Meituan-Dianping 18.3 4.4 January 2016 9 Pinterest 12.3 1.5 June 2017 10 SpaceX 12.0 1.1 January 2015 Source: http://graphics.wsj.com/billion-dollar-club/?co=Uber. UBeR’s CORPORaTe sTRUCTURe Uber followed a “founder-friendly” governance struc- ture wherein some board seats carried more voting power than others. In this kind of a dual-class share structure, one class of shares carried one vote while the other class shares came with 10 votes each or more. According to Uber’s articles of incorporation, the company had 11 board seats, 9 of which were controlled by shareholders with super-voting rights. Co-founders Kalanick and Camp along with long- time Uber employee Graves held super-voting shares and controlled a majority of shareholder votes. The trio held sway over company decisions leaving other independent directors who were mostly outsiders with fewer rights and little influence. Kalanick who had a larger stake in the com- pany compared to Camp and Graves owned a spe- cial class of voting stock that gave him control over Uber irrespective of what percentage of shares he owned. He reportedly held approximately 10 percent of Uber’s stock, including approximately 16 percent of its voting power and 35 percent of its Class B com- mon stock. According to Davey Alba, a tech writer, “It just so happened that at the time VCs were flush with cash, Uber was the hottest investment opportunity. So it raised gobs of money without having to dilute Kalanick’s power on the board. Investors just wanted to get a stake.”11 As of 2016, Kalanick had kept the Uber board small, leaving four board seats empty as shown in Exhibit 6. At the end of 2016 Cheng Wei, founder and chairman of Chinese ride-hailing service Didi Chuxing (Chuxing) joined Uber’s board after Uber sold its China operations to Chuxing in exchange for the company investing $1 billion in Uber. THe CRIsIs UNFOLDs The crisis at Uber began in February 2017 when Susan Fowler, a former software engineer at Uber, went public with her account of sexual harassment, discrimination, and extensive sexism inside the com- pany. In a blog post, she described how the human resources department had ignored her complaints, which included being propositioned by her manager. Fowler wrote that even after she had lodged a com- plaint with HR and higher management, she was told the manager was a “high performer” and he would not be disciplined for his actions. Fowler’s account was allegedly so condemning that it inspired other women Final PDF to printer tho75109_case31_C392-C405.indd C-397 12/18/18 07:52 PM Case 31 Chaos at Uber: The New CEO’s Challenge C-397 EXHIBIT 6 Uber Board of Directors (as of 2016) As of 2016 Travis Kalanick Garrett Camp Yasir Al Rumayyan Ryan Graves Bill Gurley David Bonderman Arianna Hu�ngton Co-founder Co-founder Chief Executive of Saudi Arabia’s Public Investment Fund SVP of Global Operations, Uber General Partner at venture capital firm Benchmark Capital Co-founder of private Equity Fund TPG Capital Founder of media platform Hu�ngton Post Four Empty Board Seats Matt Cohler (replaced Gurley) Wan Ling Martello David Trujillo (replaced Bonderman) Cheng Wei General Partner at Benchmark Capital Executive Vice President for Asia, Oceania, and sub-Saharan Africa at Nestlé Partner at TPG Capital Co-Founder & CEO of Chinese ride-hailing service Didi Chuxing As of August 2017 New CEO Khosrowshahi Garrett Camp Ryan Graves Matt Cohler Wan Ling Martello David Trujillo Cheng Wei Open SeatTravis Kalanick Arianna Hu�ngton Yasir Al Rumayyan CEO Travis Kalanick Garrett Camp Ryan Graves Bill Gurley David Bonderman Arianna Hu�ngton Yasir Al Rumayyan employees at Uber to come forward with their own stories. This eventually led to at least 200 claims of sexual harassment against the company. Fowler also wrote about the organizational chaos at Uber saying that there was a “Game of Thrones” kind of a politi- cal war raging within the ranks of the upper man- agement. According to her, projects were frequently abandoned and Objectives and Key Results (OKRs) were changed multiple times each quarter.12 Earlier in January 2017, Uber was accused of undermining a taxi union strike at JFK airport in New York protesting United States President Donald Trump’s refugee ban.13 Subsequently, more than 200,000 users uninstalled their Uber accounts as Final PDF to printer tho75109_case31_C392-C405.indd C-398 12/18/18 07:52 PM C-398 PaRT 2 Cases in Crafting and Executing Strategy use of a secret software tool called “Greyball” that used data collected from the Uber app and other techniques to identify and evade government offi- cials who were trying to clamp down on Uber in areas where its service had not yet been approved. Analysts said the controversies took a toll on Uber’s management team as several of the compa- ny’s key executives either resigned or were forced out. Since the start of 2017, 13 high-profile executives had reportedly departed, and Uber had yet to fill many of those roles (see Exhibit 7). Key executive positions including the post of COO, CFO, president, general counsel, and senior vice president of engineering were left vacant at the company. For quite some time, the corporate culture at Uber had been under attack. Critics alleged that the company had a “bro culture” enabled by the top management—covering up sexual harassment at the workplace and cutting ethical corners. One Uber manager, who was later fired, was said to have groped several female co-workers at a company retreat in Las Vegas. Another manager had reportedly threat- ened to beat an underperforming employee’s head in with a baseball bat. The ride hailing service was also accused of using a woman’s confidential medical record to contradict her claims that she was raped by an Uber driver in India. An internal email leaked part of the #DeleteUber campaign triggered by Kalanick’s decision to be a part of Trump’s business advisory council. Kalanick subsequently resigned from the council. In February 2017, Google’s parent company Alphabet’s self-driving arm Waymo filed a lawsuit against Uber for theft of trade secrets and intellectual property. Alphabet alleged that one of its former exec- utives, Anthony Levandowski, had decamped with 14,000 confidential files related to self-driving car technology that he had downloaded onto an external hard drive. He later started his own self-driving truck company, Otto, which Uber acquired in August 2016. Thereafter, Levandowski was appointed as the head of Uber’s self-driving car program. Alphabet claimed that Uber was using the stolen documents that Levandowski had allegedly taken to advance its self- driving technology. Though Uber fired Levandowski in May 2017, experts said the move would not protect the company from the explosive charges contained in the lawsuit. To add to its list of problems, Kalanick was caught on a dashcam video berating an Uber driver for questioning him about the company’s treatment of drivers. The video went viral, prompting Kalanick to apologize. In May 2017, the U.S. Department of Justice launched a criminal investigation into Uber’s EXHIBIT 7 Top executive Departures at Uber Name of the Executive Designation Jeff Jones Uber President Ryan Graves SVP Global Operations Emil Michael SVP of Business Amit Singhal Senior Vice President of Engineering Raffi Krikorian Senior Director of Engineering at Advanced Technologies Center Charlie Miller Senior Engineer of Uber’s Autonomous Driving Division Ed Baker Vice President of Product and Growth Gary Marcus AI Labs director Brian McClendon Vice President of Maps Rachel Whetstone Head of Policy and Communications Anthony Levandowski Head of Uber’s self-driving car unit Final PDF to printer tho75109_case31_C392-C405.indd C-399 12/18/18 07:52 PM Case 31 Chaos at Uber: The New CEO’s Challenge C-399 in 2013 said Kalanick had allegedly instructed Uber employees at a company party on the ground rules for partying and having sex with co-workers. According to some Uber employees, the culture at the company was aggressive and demanding with emphasis on hustling, toe-stepping, and meritocracy. “This is a company where there has been no line that you wouldn’t cross if it got in the way of success,”14 said Hadi Partovi, an Uber investor. However, the final nail in the coffin was the blog post by Fowler. Calling the behavior meted out to Fowler “abhorrent & against everything we believe in,” Kalanick tweeted that “anyone who behaves this way or thinks this is OK will be fired.”15 He announced that the company would launch an independent investigation into Fowler’s claims. He hired former U.S. attorney general Eric H. Holder Jr. and his colleague Tammy Albarrán, partners at the law firm Covington & Burling LLP, to probe the matter and conduct a review of Uber’s corporate culture. On March 1, 2017, Uber’s Board of Directors unanimously approved a resolution establishing a Special Committee of the Board16 to look into the allegations. The team also involved board member Arianna Huffington and the company’s newly appointed human resources chief, Liane Hornsey. Meanwhile, Uber investors Freada Kapor Klein and Mitch Kapor wrote an open letter to Uber’s board and investors criticizing the company for choosing a team of insiders to investigate the matter. According to them, Holder had previously worked on Uber’s behalf to advocate the company’s concerns while Huffington was on the board of the company. Hornsey reported to the executive team. “We are disappointed to see that Uber has selected a team of insiders to investigate its destructive culture and make recommendations for change. To us, this decision is yet another example of Uber’s continued unwillingness to be open, transparent, and direct,”17 they wrote. In response to the letter, the review committee said it would conduct the investigation impartially. THe HOLDeR RePORT On June 13, 2017, Uber released the results of the highly anticipated internal investigation. Lack of oversight and poor governance were some of the key issues running through the findings of the report. The Holder report specifically identified Kalanick as part of the problem as the first line of the report read, “Review and Reallocate the Responsibilities of Travis Kalanick.” The report in total made 47 recom- mendations including emphasizing more on diversity and companywide performance reviews, and install- ing an independent chair and oversight committee to handle ethics issues. In the area of corporate gover- nance, the report advised that the board should have greater independence and the additional board mem- bers should be directors with meaningful experience on other boards and should exercise independent oversight of Uber’s management. The same day, Kalanick in an email to employ- ees announced that that he was taking time off to mourn his mother, who was killed in a boating acci- dent. Kalanick said the company would be run by an executive committee and that he would be avail- able if needed. Uber’s SVP and business leader Emil Michael, a close confidante of Kalanick who had reportedly been pressured to resign following the investigation, also left the company. In addition, at least 20 other employees were fired as a result of a separate investigations related to sexual harassment and discrimination by law firm Perkins Coie. Uber’s board unanimously decided to adopt all the recommendations for improving corporate gov- ernance including sexual harassment prevention and improving workplace diversity. However, during the meeting, Uber board member David Bonderman made a sexist remark18 and had to resign thereafter. David Trujillo, a partner at the private equity firm TPG Capital, replaced Bonderman. Also, Uber appointed Nestlé executive Wan Ling Martello (Martello) to the board. She was the second woman after Huffington to serve as an Uber Director. INVesTORs ReVOLT When Uber became embroiled in a series of legal and ethical scandals, the investors who until then saw little wrong with Kalanick’s aggressive antics became suddenly combative. They felt that their investment in Uber was at risk and started agitating for change at the top as the #DeleteUber campaign and Fowler’s complaints gained traction. Exhibit 8 illustrates the impact of the scandals on Uber’s market share. The Board of Directors, who were under fire themselves, decided to replace Kalanick but that was easier said than done. According to Richard Mahony, an expert in communication strategy and investor relations, “[Kalanick’s super-voting shares] has made the task of removing him much more complicated. It took a former Final PDF to printer tho75109_case31_C392-C405.indd C-400 12/18/18 07:52 PM C-400 PaRT 2 Cases in Crafting and Executing Strategy connections) at last found their voice, he had little choice but to step down. Quite simply, he needs their money.”20 Kalanick, however, continued to serve on Uber’s Board of Directors. “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,”21 he said in a statement. A day after his resignation, Gurley, who pushed Kalanick to leave, resigned from the Uber board. He was replaced by his colleague, Matt Cohler, also a partner at Benchmark Capital. CORPORaTe GOVeRNaNCe FIasCO Experts attributed the root of Uber’s problems to weak corporate governance marked by a rapid chase after growth, the cult of Kalanick, and the company’s failure to address workplace issues. They felt that Uber’s Board of Directors did not care about gover- nance issues and let Kalanick run the company the way he did as long as profits were generated and attorney general and a nearly constant stream of media leaks to pry Mr. Kalanick out of his seat.”19 Five of Uber’s major investors—Benchmark Capital, First Round Capital, Lowercase Capital, Menlo Ventures, and Fidelity Investments—which together controlled 40 percent of the company’s votes and owned more than a quarter of Uber’s stock, demanded Kalanick’s resignation. In the letter titled “Moving Uber Forward,” the investors wrote to Kalanick that he must immediately leave. On the other hand, some Uber board members including Camp and Huffington extended support to Kalanick as they believed that his leadership was necessary for Uber to survive in the aggressive taxi industry. Huffington even attested to Kalanick’s willingness to change. The shareholders’ unrest, however, made it untenable for Kalanick to stay on at the company. Finally, after hours of negotiations and consultations with his confidants, Kalanick agreed to step down on June 21, 2017. According to Fast Company’s Ainsley Harris, “Kalanick held on to Uber’s reins in the face of scandal after scandal—sexual harassment, discrimina- tion, obstruction of regulatory enforcement, privacy vio- lations. But when shareholders (with checkbooks and EXHIBIT 8 Impact of senior Leadership scandals on Uber’s U.s. Market share 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Before #deleteuber campaign (Week up to Jan 29) 20.9% 21.3% 79.1% 83.5% After #deleteuber campaign (Week up to Feb 19) Following Susan Fowler Story (Week up to Feb 24) Uber Lyft 78.7% 16.5% Source: TXN Solutions. Final PDF to printer tho75109_case31_C392-C405.indd C-401 12/18/18 07:52 PM Case 31 Chaos at Uber: The New CEO’s Challenge C-401 investors and the board members asking Benchmark Capital to withdraw the lawsuit, divest its shares, and step down from Uber’s board. According to them, the tactics of Benchmark Capital were “ethically dubious and, critically, value-destructive rather than value enhancing.”27 They accused Gurley of holding Uber hostage to a public relations disaster by demand- ing Kalanick’s resignation. Calling it a “fratricidal” move against Kalanick, the investors said the lawsuit could harm Uber’s valuation, risk the company’s abil- ity to raise funds, and hinder the …