Uber Case Study

Rong Sun 37021

Raman Srinivasan 43162
Sanket Pardhi 44306
Asish Abraham 42997
Elia Marmora 43788
Contents
Introduction ............................................................................................................................... 3
Uber’s corporate governance issues 2019 ............................................................................... 4
Can you relate Uber´s governance structure to the problems mentioned in the case study
that led to the resignation of CEO Kalanick? ........................................................................... 5
In a start-up company like Uber that plans to go public through an IPO, what governance
structures do you think should be appropriate for investors to be willing to invest in such
company? .................................................................................................................................. 8
In your opinion, which of the following would you prefer: Kalanick with his
entrepreneurial energy, or Khosrow Shahi with better governance? .................................. 10
What insights can you get from this case study which could be applicable to other
comparable corporate settings? ............................................................................................. 11
Conclusion ............................................................................................................................... 13
Appendix .................................................................................................................................. 15
Introduction

Uber Technologies Inc. or Uber was a start-up that was founded in 2009 by Travis Kalanick,
Garett Camp and Ryan Graves. The idea was conceived by the founders altogether, the idea
of using a mobile phone application that would create a bridge between private drivers and
potential customers, this later on became a big success, however the seed of the idea came
from personal life experiences, as the two friends Kalanick and Camp were facing difficulty in
getting a cab ride during the daytime.

The impulse then developed into a plan and then the plan to idea and so on and so far, now
that there is none in the world that would bless them for innovating such a service not only
locally, globally all around the world. The smartphone application connects drivers and the
passengers who are in need of or who would like to commute from one place to other using
an application.

Since the start, the growth of the organization as a whole was enormous and astounding and
the welcome among the people were quite amusing that the company expanded all around
the world in 58 countries(approximately) and more than 250 cities(approximately) which is
also said to be one of the fastest international expansion during the recent times.

The company offered two levels of services which is UberBlack and UberX, the former being
create a connection between passengers and professionally licensed vehicle drivers and latter
connecting passengers with drivers who did not have professionally licensed and used their
personal vehicle on a flexible basis suited to their own needs to transport passengers.

Uber uses its app to determine pricing, post completion of the ride the fare is being charged
automatically from the card which has been provided by the customer during the time of
setting up the application. Also, it is well known, uber uses the “peak pricing” strategy when
the demand is too high or whether the ride is happening during super busy working hours.
The use of algorithm and making advantage out of the situations that makes the customer
vulnerable and outraged.
Having said all the above, the business or organization after a huge peak certainly has to face
a fall as due to presence of human errors or machine related errors, in the case of Uber this
stage showed up and the time which was so good for the company in terms of performance,
growth, expansion and much more, started dimming down a bit as there started to arise
issues with related to lot of internal and external issues.

The phase where there seems to be a little shake down in the business with regards to internal
issues, legal issues, regulatory challenges, global issues. There should be complete and
convenient support of the government and the people when the business is for the
betterment of people as a whole and they should be regulated and encouraged. The welcome
wasn’t so welcoming as some countries, cities were not ready to support or promote in any
form to regulate the business.

As the organization grew bigger and better, the revenue, profit, business standards,
expansion of markets everything got better with time and with all those things the problems
or issues associated to them were also getting bigger and in fact started getting worse due to
more public attention.

Uber’s corporate governance issues 2019

Like each and every organization in the world where issues and problems are part and parcel
of the business itself, Uber was nothing exceptional to that. The issues, challenges started to
grow along with the company and then evolved into much more than normal trouble.

There were so much of lawsuits on the firm with regards to issues in social responsibility,
regulatory issues, data breach issues, data quality issues and much more. The organization
has faced lawsuits from various individuals, organizations, state and government. Some of the
famous ones are Waymo Lawsuit with relation to theft of patents, civil and criminal
investigations from United States Justice Department’s inquiry, issues with Apple and FTC
with regards to violation of policy and procedures and data breaches.
Aside to the issues that are popping up from the outsiders, Uber had issues within the
organization itself due to its own culture. The issues were brought to light from one of the
former employees, the organization was portrayed as a workplace that is not safe for anyone
filled with sexism, harassment and discrimination. The employees of the organization were
interviewed, and the issue was brought to light by not one but by more than 300 employees
reported such kind of shady practices.

The organization actually had to go through a complete restructuring from the top
management was the report or suggestions given by the lawyers who handled the cases. The
organization had to go through a new transition, adopt new practices, change the leadership
structure, to be more precise the organization had to change the way it thinks itself and
functions itself.

After an extensive look at the organization’s issues, we as a group have decided to deep dive
into the common issues that possess the concern and that have caused the situation to
become chaotic and also trying to explore and give recommendations in general.

Can you relate Uber´s governance structure to the problems mentioned in the case study
that led to the resignation of CEO Kalanick? 1

According to Dec.29th The New York Times, Travis Kalanick, co-founder and former CEO, had
sold more than $2 billion of his Uber shares when his accomplishment on the sale of his
remaining stake in the company, he severed last tie with Uber, after his director for 8 years
from 2009.2 He successfully led to Uber Technology Inc. transformation from a start-up to
‘behemoth’3.

He firstly tends to leave in 2017, when Travis Kalanick was essentially resigned from Uber's
board of directors in 2017, following a string of scandals and bad PR4 that convinced

1
https://www.nytimes.com/2019/12/24/technology/uber-travis-kalanick.html
2
https://www.nytimes.com/2019/12/24/technology/uber-travis-kalanick.html
3
Same as front.
4
https://www.ft.com/content/e4fa1ed2-fab0-11e6-9516-2d969e0d3b65
investors, and Kalanick was replaced with former Expedia chief executive Dara
Khosrowshahi.5

Referring to one of Uber’s issues, which is the scandal of sexual harassment in Uber, it was
formerly exposed by a former software engineer, Susan Fowler, saying the unpleasant
experiment during working in Uber. Following up public claims of sexual harassment by the
engineer, over one hundred6 Uber’s female employee reported to CEO Kalanick as well that
Uber might have a ‘systematic’ sexism problem. But the elephant in the room7 is not being
paid attention by Mr. Kalanick. What’s more, Mr. Kalanick wrote an impassioned memo and
using a word “abhorrent”8 describing that public claim coming by the engineer and ordering
an “urgent investigation” to an outsider report, which was prepared by former US attorney-
general Eric Holder, and by Tammy Albarran, both partners at the firm Covington & Burling,
commissioned by the engineer in the central of whole scandal.

The report is the result of an external investigation into the issue of corrupted company
culture. During the four-month preparation of the report, Uber’s was taking a repose, and
trust it would be good chance to clarify and help the company out from the scandal that have
engulfed the company. Uber wanted the report to solve some investors questioning how
much the ride-hailing company will ultimately be worth.

Unfortunately, they should not rely on the report because in Holder’s report “Covington
Recommendations for Uber”, it recommended firstly to changes to senior leadership.
Furthermore, it directly pointed out to review and reallocate the responsibilities of Travis
Kalanick, since Mr. Kalanick has historically possessed responsibilities, enduing him with
shared or given outright9 to other members of senior management. Therefore, it
strengthened the power unbalanced inside the corporation, and the solution is to find a Chief
Operating Officer.

5
https://www.inc.com/justin-bariso/ubers-ceo-just-made-a-huge-mistake-it-just-may-signal-end-of-uber.html
6
Same as footnote 3.
7
Same as front.
8
https://www.ft.com/content/6f7b8a36-4ff3-11e7-bfb8-997009366969
9
Covington Recommendations for Uber, https://www.scribd.com/document/351186221/Covington-
Recommendations-for-Uber#from_embed
So, Kalanick will present in front of all employees10 with the findings of this report, along with
a lot of severe comments. As a result, Uber’s board voted to adopt ALL the recommendations
of the Holder report11, and they appointed a new independent board member, Wan Ling
Martello of Nestlé.

It is hard to judge nowadays if Travis Kalanick’s confidence to the result of that investigation
is from his extreme trust to the company culture itself or the superior PR performance that
Uber Inc. had, even when oven one hundred claims and a clarified report issued. But the thing
we know from the continuous things shows, neither company nor PR capability complied with
his self-confidence and abhorrence to the result, which totally contradicted to public
willingness to solve the issue under a good PR. And there were several serious governance
structure problems inside the whole company, which are: 1) misbehavior in governance and
2) reputational challenges.

Firstly, regarding misbehavior in governance, it can be seen the superior power and wrong
attitude to governance of Mr. Kalanick caused his resignation. There was an early interview
with Wall Street Journal (WSJ) encapsulated the company’s viewpoint (See Appendix 1),
which refers to Kalanick’s straight forward attitude when running his company.

According to one research of corporate governance conducted by Harvard Law School, the
company repeated this formula in cities around the world: 1)Build a critical mass of drivers
and passengers; 2) If local authorities challenge Uber’s legality, continue to grow while
arguing until the services could not be restricted by ambiguities and omissions in the
regulatory framework; and finally 3) after the firm base by users’ and passengers’ enormous
amount, drivers will achieve sufficient size to compete local regulators to curtail local
operations. The working model frequently causes frictions with local, and their solution it to
enhance the friction until one-side give up. These behaviors taken could help people perceive
how Uber ran when it was under the superior power - Mr. Kalanick’s control.

Coming to the second point, reputational challenges are also aroused by previous sets of
problems. Not only because of the aggressive expanding strategy taken place all over the

10
Same as footnote 7.
11
Same as front.
world, but also referring to all the issues mentioned, including sexual harassment and bad PR.
Nevertheless, besides the worst sexual harassment cover-ups, firm was accused of as well as
price gouging, false advertising, illegal operations, IP theft and more.12

Concluding all the issues it met, unavoidably it results in the resignation of Mr. Kalanick.
Same as previous point of view, he might be a rule-breaker, but it is not complied with
scientific governance model, and it is harmful to the governance.

In a start-up company like Uber that plans to go public through an IPO, what governance
structures do you think should be appropriate for investors to be willing to invest in such
company?

The root of problems within Uber was a result of its corporate structure. Kalanick made sure
that voting power was firmly consolidated in the hands of the cofounders. Board seats and
voting shares were only to be awarded to a very few special top investors. Kalanick kept the
right to appoint two directors of its choice on the board. Although the approved number of
directors was 11, he filled only seven or eight seats and he kept other vacant to appoint
member of his choice as the need arises. Uber also maintained dual class share structure like
many other tech startups. Dual structure in Uber gave 10-to-one voting power to class-B
shareholders.

Being a privately held company, with the control firmly in the hands of its founder, Kalanick,
Uber neglected many complaints related to its corporate culture and governance. Board
representative of VCs were not also happy with the meddling of Kalanick in the board affairs.
When Kalanick was made to resign as a CEO, he used his power to appoint two board
members unilaterally. Thus, it was clear that Kalanick wanted to keep the control in his hands.
For the successful IPO, newly appointed CEO, Dara Khorsraowshahi had to make sweeping
changes in the corporate structure of the company.

Many investors frown upon the dual class share structure for the very same reason displayed
in the case of Uber. Lyft, the ride-hailing company which directly compete against Uber, was
urged by a group of pension funds, unions and asset managers to scrap its proposed dual-

12
The Uber Board Deliberates: Is Good Governance Worth the Firing of an Entrepreneurial Founder?
class share structure ahead of its initial public offering, but it pushed ahead with the structure
when it listed during the summer.13 This resistance to abolishment of the dual-class structure
often creates agency problem, because founders start to act in their interest instead of the
company’s best interest.

Thus, if a startup company wants to go public through an IPO, it needs to make thorough
changes to its corporate structure beforehand and change the corporate culture as well. The
first change it needs to bring in is reorganization of the board composition and share
structure.

The dual-class structure gives abnormal voting power to certain group of shareholders even
though they hold minority states, which can later result into the governance problems. Thus,
abolishing dual-class structure can instill confidence investors.

The board also needs to have more independent directors in letter and spirit, and they should
not act as a proxy to the founder of the company. Ideally, separation of CEO and chairman of
the board should be followed as will reduce agency costs.

Although a founder-CEO can prove to be very successful, it has been shown that an
independent CEO creates much more value for the shareholders. Thus, appointing an
independent CEO is another step tech startup should follow before going for IPO.

One recurring feature of corporate governance controversies of tech startups was failure of
monitoring mechanism. Many of the tech startups have toxic culture which they fail and
arrest to monitor. Because most of the companies remain private for longer duration, it is
more common not to have a proper monitoring mechanism in place internally. It is crucial to
establish and increase the scope and power of various internal monitoring committees such
as audit and ethics committees to address the issues before going public.

In a nutshell, start-ups should follow the good governance model and overhaul their board
structure and simplify their complex shareholding structure to one-share-one-vote structure,

13
https://www.ft.com/content/bc220535-5055-47ce-811d-fc4a56d32937
and make the board truly independent, to increase oversight of their internal operations, if
they want to win confidence of the investors of their IPO.

In your opinion, which of the following would you prefer: Kalanick with his
entrepreneurial energy, or Khosrow Shahi with better governance?

Khosrowshahi with better governance would be our preference rather than Kalnick way of
running UBER. In addition to excitement-seeking and melancholy, Kalanick's top qualities
contained authority-challenging tendencies.

Khosrowshahi has taken on the roles of flatterer, diplomat, negotiator, and salesperson since
joining the organization. He was chosen by Uber's board of directors in part because of his
demeanor: affable, unthreatening, and at ease with the type of corporate speak that investors
find soothing. Travis Kalanick, Uber's previous CEO, had grown the firm into a huge success.
It also developed a bad image under his leadership, as the personification of a kind of Silicon
Valley culture that prioritizes outcomes over all else.

However, in 2017, a group of investors forced Kalanick to resign as CEO. Uber was investigated
by the federal government on five distinct fronts. A slew of legal cases has been brought
against the corporation, including gender discrimination, driver complaints, and a massive
data breach in 2016 that the company failed to disclose. The sudden deterioration of Uber's
reputation has rocked Silicon Valley, which loves to think of itself as a force for good, even
when evidence to the reverse is presented.

One of Khosrowshahi's first activities as CEO was to compile a new set of cultural values, which
he derived from employee suggestions. He stated that the company's priority in 2018 would
be on enhancing driver and rider safety. Barney Harford, the former CEO of Orbitz, and Tony
West, a former Justice Department official and Pepsi's senior legal officer, are among the
experienced executives he's hired. This shows he has given much importance to the values of
employees and customers.

Khosrowshahi is also attempting to position Uber for a public offering, in part by being more
selective in the concepts he pursues, this has made the company growing from private
authority.
He had a roundtable session with drivers to hear their grievances, where drivers discuss about
their greater portion of profits and shadowed Uber's customer service employees to hear
what clients were saying in his first two weeks of being CEO. He also met the company's
employee-run groups, which help individuals from all walks of life. "UberHue," which
promotes black diversity, "Women of Uber," "Los Ubers," which promotes Latino diversity,
and "UberPride," which supports LGBTQ inclusiveness, are among them.

When Khosrowshahi’s took over uber, the company was facing lot of challenges, and we could
see where his mind was at and how different was his way of leading the company compared
to previous CEO Kalnick.

Insiders and outsiders say Khosrow Shahi has demonstrated how different his leadership style
is from Kalanick's no-apologies mantra. And employees were very motivated and was happy
for new CEO response towards working to improve the culture. At the same time new norms
have slowly but steadily spread positive change across the company.

While Kalanick was CEO, he had to deal with high-profile lawsuits, revelations about a fake
app designed to deceive government regulators, and a profanity-laced brawl with an Uber
driver caught on video. This shows he is not the leader employers wants as he is not able to
understand their problems. Khosrowshahi also imposed he idea of getting rid of the high-
vote shares — really going to one-share, one-vote for everyone at Uber so everyone has an
equal voice. governance improvements like these were critical as UBER becoming a public
company in2019.These leadership and taking care of company in respect of the employees
is the important part for firm success.

What insights can you get from this case study which could be applicable to other
comparable corporate settings?

This case study perfectly highlights how the CEO of a company can have either a positive
impact on its firms or a negative one. As the paper underlines, Uber lost its reputation and
investor confidence under the lead of Travis Kalanick due to his being a habitual rule-breaker.
To restore the previous reputation, the board in August 2017 needed to elect Dara
Khosrowshahi as new Uber’s CEO.
The matter that can be identified even in other companies is that a not well-designed
management approach can drastically harm the company. Instances of this common problem
can be found in other companies such as Papa John and Wells Fargo.

The aforementioned companies highlight two cases which are extremely similar to the Uber’s
one, as both CEOs of these companies (Papa John’s, and Wells Fargo) like Travis Kalanick have
put at risk the reputation of the company due to some relevant misconducts.

Taking into account the case of Papa John’s, back in 2017 Papa John’s was the official pizza of
the NFL. However, during that year their partnership started getting worse, as Papa John’s
CEO John Schanatter released some difficult comments to digest, complaining that the “take
a knee” protestors in the NFL were negatively impacting the revenue of the company (14).

After this statement, Papa John’s shares started plummeting, and Schanatter lost his CEO title
(15). This situation made the problem run far deeper, as many newspapers started
investigating on this matter. Newspapers such as Forbes were among the pool of those that
have interviewed some Papa John’s employees. During the investigations has been brought
to light that Schanatte’s behaviour ranged from spying on his workers to sexually
inappropriate conduct according to N. Kirsch (Forbes,2018).

Regarding Wells Fargo which is the fourth biggest bank in the US by assets, it has been fighting
its way back from scandal since 2016. In 2020, “Wells Fargo agreed to pay $3bn in criminal
and civil penalties for fraudulently opening millions of costumer accounts in a scandal that
federal authorities said reflected a “complete failure of leadership at the US bank” (16). Under
the lead of the CEO John Stumpf, the bank started opening credit card accounts for customers
that they did not know anything about, in addition to charging these costumers with late
payment fees on the previously mentioned accounts. This scandal involved 5300 Wells Fargo
employees. Finally, Stumpf resigned in October of 2016, but before stepping down he even
tried to shift the blame to lower-level employees.

_____________________________
(14) Here's How 3 of the World's Worst CEOs Almost Killed Their Companies by Creating a Toxic Culture |
Inc.com
(15) The Inside Story Of Papa John's Toxic Culture (forbes.com)
(16) Wells Fargo to pay $3bn for fake-accounts scandal | Financial Times (ft.com)
Concluding, the analysis of these three situations clearly puts forth that leadership extremely
matters. People who cover high positions such as CEO are the pillars of the whole company.
Their behaviors can radiate negative effects along the whole firm, ending up having devasting
outcomes for the company in terms of performances and reputation. When a CEO gets fired,
this scenario opens up the possibility for the culture to break down. So, the board needs to
consider past performance, industry experience and public reputation as they pertain to
cultural development, when it comes to narrowing the choices for a new CEO. Consequently,
failing to address these issues could trigger even worse future scenarios.

Conclusion

Taking into consideration all the factors of the Uber, we have made the recommendations
with the knowledge that we gathered from the sources such as papers and journals that have
been published, business reviews by top institutions.

Our recommendation is that Khosrowshahi should continue the work as the CEO of the
organization as he is much more than just a leader, he is compassionate about the people and
not just the organization. He has been people made CEO, he is the one with a clear vision and
direction for the organization, who can take the organization towards not only the success
but also in the direction that it is supposed to go which will be of a fruitful position not in
short term but in long term.

When it comes down to the corporate governance and structure before the IPO, we
recommend that the company should have independent board which will increase the
transparency to the shareholders, which should be one of the main motives for any company
that is running public, to maximize and protect the shareholder’s trust and value. We also
would like to suggest to the organization, “ONE SHARE, ONE VOTE STRUCTURE”, as this
reduces the bias in the top management influencing the whole organization towards to
downfall. This will be thereby reducing the concentration of power in hands of few individuals
which could undermine the independence of the board.
All in all, the organization should focus on to ensure that it is for the betterment of the
shareholders, society, employees as a whole and it should work on a single vision which will
make the organization grow in a good way and attract and invest more customers, investors
and also will hold much more welcome in the market.
Appendix

1. https://hbr.org/2017/11/when-founders-go-too-far
2. https://hbr.org/2008/02/the-founders-dilemma
3. https://corpgov.law.harvard.edu/2017/10/19/the-unicorn-governance-trap/
4. Elizabeth Pollman, "Startup Governance," University of Pennsylvania Law Review
168, no. 1 (December 2019): 155-222
5. Covington Recommendations for Uber,
https://www.scribd.com/document/351186221/Covington-Recommendations-for-
Uber#from_embed
6. The Uber Board Deliberates: Is Good Governance Worth the Firing of an
Entrepreneurial Founder?
7. https://www.cnet.com/news/ubers-u-turn-how-ceo-dara-khosrowshahi-is-cleaning-
up-after-scandals-and-lawsuits/
8. https://corpgov.law.harvard.edu/2018/01/20/governance-gone-wild-misbehavior-
at-uber-technologies/
9. Here's How 3 of the World's Worst CEOs Almost Killed Their Companies by Creating a
Toxic Culture | Inc.com
10. The Inside Story Of Papa John's Toxic Culture (forbes.com)
11. Wells Fargo to pay $3bn for fake-accounts scandal | Financial Times (ft.com)