Home World Business Why Uber has to turn its back on former chief Travis Kalanick

Why Uber has to turn its back on former chief Travis Kalanick

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There are two recent stories about Travis Kalanick, the former chief executive and current board member of Uber Technologies, that caught my eye.

The first, which appeared last Friday, reported that Kalanick planned to sell $1.4 billion worth of Uber stock– 29 per cent of his holdings-to Softbank Group Corp. as part of the Japanese tech investor’s move to acquire 15 per cent of the company.

Former Uber chief Travis Kalanick still has many fans within the company. Former Uber chief Travis Kalanick still has many fans within the company. Photo: AP

The second was Thursday’s explosive expose by Bloomberg Businessweek about a secret tool called Ripley that was used in 2015 and 2016 and allowed Uber executives in San Francisco to shut down the computers in any foreign Uber office. Ripley’s purpose, said the article, was to “thwart police raids.” It was used “at least two dozen times.”

The Businessweek article never actually mentioned Kalanick by name; rather, it suggested that the tactic was the work of Joe Sullivan and Salle Yoo, the former heads of the company’s security and legal departments respectively. Both left Uber last fall, months after Kalanick himself had resigned as CEO. But can there really be any doubt that Kalanick fostered the warped culture that would encourage executives to come up with such a tool?

At the height of its power, Uber was valued at around $US68 billion. At the height of its power, Uber was valued at around $US68 billion. Photo: AP

In 2014, the billionaire investor Peter Thiel described Uber as the most “ethically challenged” company in Silicon Valley. At the time, Uber was riding high, Kalanick was widely admired as a classic “disrupter” of an outmoded industry, and Thiel’s remarks were dismissed as the grousing of a Lyft investor.

But it turns out that Thiel didn’t know the half of it. He was responding to Uber’s efforts to sabotage Lyft by booking rides and then cancelling, or trying to persuade Lyft drivers to switch to Uber. We now know that Uber’s treatment of Lyft barely scratched the surface of Uber’s unethical conduct under Kalanick.

In March, for instance, the New York Times reported that Uber had developed the means to “identify and circumvent officials who were trying to clamp down on the ride-hailing service.” One place it used that tactic was Portland where city officials had banned the service.

The company used yet another insidious software tool, this one called Surfcam, to monitor drivers for Grab, its chief competitor in Southeast Asia.

Uber CEO Dara Khosrowshahi has a lot of work to do to restore Uber's battered reputation. Uber CEO Dara Khosrowshahi has a lot of work to do to restore Uber’s battered reputation. Photo: AP

Kalanick hired a star engineer from Alphabet, who allegedly brought with him trade secrets about self-driving cars, which Uber was trying to develop. (Although the engineer was eventually fired, Alphabet is suing Uber for $US2.7 billion.) He bred a misogynistic “bro” culture that was exposed last February in a blog post written by Susan Fowler, an engineer who had walked away from Uber in disgust. Ultimately, Kalanick’s Uber had contempt both for the law and for the ethical norms that constrain most corporations.

These practices have had significant consequences. To start with, Uber is the target of five, yes-five, federal investigations, according to Bloomberg News. There’s that lawsuit by Alphabet, which it has a good chance to win. Uber’s hope of being an early adopter of self-driving cars, something it probably needs to do if it is ever going to make money, is dashed for now.

Female engineers don’t apply for jobs at Uber. Talented male engineers have been fired because of their inappropriate behaviour. The city of London has banned Uber-perhaps temporarily, perhaps not. Other British cities have followed suit along with a number of countries Uber had hoped to penetrate. Europe’s top court has ruled that it is a transportation company (not a tech company), and should therefore be regulated like taxis.

The point is, even though Kalanick is no longer the chief executive-and even though the new CEO, Dara Khosrowshahi, has vowed to “do the right thing”-Uber has no friends. Every market it hopes to enter views it with suspicion. Nobody is willing to give it the benefit of the doubt. That is Kalanick’s doing.

The missteps and wrongdoing have also hurt the company’s valuation. At its peak, it was said to be worth $US68 billion. But when Softbank made its investment, it bought in at valuation that was 30 per cent lower. Uber plans to go public in 2019. That means it has plenty of time to recover its reputation. But the initial public offering is no longer the slam dunk it once was. Who knows what other devious schemes, devised on Kalanick’s watch, will emerge between now and then.

One thing Khosrowshahi ought to do, it seems to me, is get out in front of the bad stuff. Instead of letting reporters break stories about old Uber tactics, he should have the company release the news itself. That would make the revelations less shocking and would show that Uber really is trying to turn the corner.

But Kalanick still has many admirers inside Uber, and that has to change as well. Even after resigning as CEO this summer, he caused trouble by placing several allies on the board without informing the other directors. This caused Uber’s primary venture backer, Benchmark, to sue him. The Softbank investment was predicated in part of Kalanick’s power being pared away along with the lawsuit against him. Thankfully, both things happened.

The new CEO has promised to change the culture of the company and has apologised for several of the tactics that have been exposed. He is putting at least some distance between himself and Kalanick. But he should explicitly and publicly repudiate Kalanick. He should tell Uber staffers who still view Kalanick as a great leader to leave. And he should make it clear that while Kalanick remains a board member, Uber will not be looking to him for advice.

Uber made Kalanick a billionaire. It still has the potential to make many others wealthy. But only if it turns its back on its former boss.

Bloomberg

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