The newswires have aligned with the company’s description as “taking leave” and an eventual “diminished” role, but for all intents and purposes, Travis Kalanick is out as CEO of Uber. In an email to company employees, Kalanick announced he would take an indefinite leave, and the company decided to strip many of the founder-CEO’s responsibilities in the event he does return.
Kalanick’s decision to step aside caps several months of chaos at the company, during which the public’s perception of Uber cratered after scandals constantly distracted the company. Many of Uber’s top leadership have left Uber, and Kalanick struggled to replace several of the company’s most critical executive positions.
Once seen as having a transformational role in changing transportation in America’s cities, while freeing up citizens from the costs and burdens of car ownership, Uber instead became a caricature of the “bro culture” critics say still festers throughout much of Corporate America, especially in Silicon Valley.
Kalanick’s email capped off several days of a very public and agonizing discussion over whether he would stay or go. In fairness, he did lose his mother, who died recently in a boating accident in Fresno County’s Sierra Nevada foothills; his father is still in intensive care, and Kalanick reportedly has spent much time at his bedside. But the indecision sharpened criticism of Kalanick as many analysts charged that his wavering contributed even more to the instability at Uber.
“This bizarre Hamlet act — let’s be clear here that any other CEO, except in the founder-worshipping culture of Silicon Valley, would have been fired at this point — is causing intense turmoil among his top execs,” wrote Kara Swisher of the technology news site Recode only moments before Kalanick’s email went public.
Before and after Kalanick’s exit, many observers of Uber insisted that the company’s recent struggles were linked directly to its CEO. Long before the company’s most recent missteps, Uber became the symbol to many workers about what went awry with both the sharing economy, which has largely morphed into the “gig economy.” Last year, the company refused to take on additional safety measures after incidents in cities such as Kalamazoo, Michigan; Uber’s perceived thumbing of its nose at local communities and leaders eventually led the company be kicked out of cities including Austin, Texas.
Yet the company still roared along, dabbling in subprime auto loans for drivers who depend on Uber for their sole source of income. And it its drive for supremacy, Uber even lowered its rates in cities from San Francisco to New York in order to secure its stranglehold on local transportation systems. Many of these scandals could be traced to Kalanick, and he was often the one to tout the company’s controversial tactics.
The controversy certainly did not dissuade venture capitalists from Silicon Valley and beyond, who poured money into the Uber at such an astonishing rate that it rivaled global leaders Alibaba and Facebook in the total amount of funds companies have received in recent years. At one point, Uber became king of the Silicon Valley “unicorns” with its $70 billion valuation, though some analysts have said the realities of a ridesharing company’s business model limits its value at less than half that amount.
But even while Uber remained the darling of both Wall Street and Bay Area tech titans, the news only became worse for Uber, and Kalanick was at the center of the storm.
First came Kalanick’s decision to join a Trump Administration advisory board. That did not mean he was politically aligned with the new president, but it proved to become bad optics. Uber then stumbled badly in January during the first Trump travel ban firestorm, which drowned out Kalanick’s pledge to financially support any Uber drivers caught in the chaos.
Then came the mounting charges of a work culture rampant with sexual harassment, summed up in excruciating detail by Susan Fowler, a former Uber engineer. More accounts of similar behavior went public, and former U.S. Attorney General Eric Holder led an investigation that resulted this week in a list of recommendations in an attempted overhaul of what smacked as a fraternity boy culture.
While the company grappled with public perception of a boys’ club run amok, Uber’s strategic decisions landed it in even more hot water. Uber’s agreement to buy a seven-month-old start-up company, Otto, for $680 million turned some heads while causing many analysts to scratch theirs. But the acquisition then made sense after Google filed a lawsuit alleging that Otto’s founder had stolen the ride sharing technology of that tech giant’s autonomous driving division, Waymo.
Uber has been focusing on self-driving cars for its long-term viability, as Kalanick believed that such technology investments comprised the only option in a world where automation keeps accelerating.
The risk for Uber, however was that it kept bleeding money, with no cauterizing on the horizon before it could eventually revamp its business model. The privately-held company reportedly lost almost $3 billion last year. As of last month, those numbers were “improving,” according to CNBC – the company pulled in $3.4 billion in revenues, but still lost $708 million. But that so-called boost came just as another Uber executive, head of finance Gautam Gupta, announced he was leaving the firm.
Meanwhile, Kalanick continued to personify Uber, but in an unflattering way. He was eviscerated on social media after he was videotaped berating an Uber driver who complained about Uber’s low, lowered and still lowered rates. Most recently, Uber’s insistence that it embarked on a course correction to get rid of its toxic man-boy culture looked hallow when it turned out the company was accused of using a woman’s confidential medical records to contradict her claims that she was raped by an Uber driver in India. Once again, this latest public relations fiasco appeared to have Kalanick’s fingerprints all over it.
If these shenanigans under his watch at a GE, GM or IBM, Kalanick would have been ousted long ago. But Uber’s weak corporate governance structure ensured Kalanick had disproportionate control. Kalanick allegedly has stacked Uber’s board with his allies; Ariana Huffington was recently added to the board, but she reportedly had little power, if any at all. Kalanick and his supporters can run the show because of the special class of shares they own.
Nevertheless, it became clear that investors have had enough. On Sunday, Uber’s board approved Holder’s recommendations. Whether the company can really emerge as a responsible corporate citizen is in doubt; Bloomberg has described many of the firm’s new commitments as “symbolic.”
Meanwhile, Uber’s main competitor, Lyft, now has a 25 percent market share, up from 18 percent from the beginning of this year, largely in part because Uber’s reputation has become toxic. If there is one hashtag that has worked over the years, it would be #DeleteUber.
In the end, while Kalanick may be technically on “leave,” the company would ignite a death wish if they welcomed him back with any measure of visibility and clout. Uber can only become relevant and trusted again if it severs ties with Kalanick; and if the company’s shareholders and board cannot accomplish that feat, public pressure, along with market forces, certainly will.
Image credit: JD Lasica/Flickr
Leon Kaye has written for TriplePundit since 2010, and became its Executive Editor in 2018. He's based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas. He's lived in South Korea, the United Arab Emirates and Uruguay, and has traveled to over 70 countries. He's an alum of the University of Maryland, Baltimore County and the University of Southern California.