BOARD OVERBOARD

Now that Uber has a new CEO, employees say its board needs to “grow up”

Uber employees are relieved to finally have a new CEO. At his first all-hands meeting on Aug. 30, Dara Khosrowshahi made a gentle but sly dig at the protracted search process that had pitted him against corporate icons Jeff Immelt of General Electric and Meg Whitman of Hewlett Packard.

“A week ago, I did not think I was going to get the job, so this is pretty freaking cool,” Khosrowshahi said to laughter, and added, “Based on everything I read!” which prompted more laughter, cheers, and applause.

That reaction said a lot about how Uber staff feel about their company’s board of directors right now. Over the previous two weeks, leaks to the press had alternated between positioning Immelt and Whitman as the board’s favorite. When it finally chose Khosrowshahi, who had spent 12 years as CEO of Expedia, his name leaked publicly within minutes of the vote, though the board had promised to tell staff first. “Everyone was following along on Twitter during the board meeting because they knew something was going to leak,” one longtime Uber employee told Quartz. “It’s just not how a company should work, and it’s really disappointing.”

The board’s antics are getting hard to ignore

For much of this year the dysfunction on Uber’s board has been overshadowed by the tumult within the company itself: allegations of sexual harassment, a trade-secrets lawsuit from self-driving-car maker Waymo, and several scandals implicating Kalanick and a small circle of his closest advisors, such as a 2014 visit to an escort-karaoke bar in Seoul, South Korea. But even before Kalanick stepped down, attention to the board’s dramas and mis-steps was growing.

David Bonderman, a partner at private equity firm TPG, resigned from the board in mid June after making a disparaging comment about women at an all-hands meeting on tech culture and sexism. Investors at Benchmark, a venture-capital firm that is one of Uber’s biggest backers, sued Kalanick (whom they had reportedly helped oust) and Uber in a struggle that was partly over board seats. Garrett Camp, Uber’s lesser known co-founder and also a board member, has rankled staff, the longtime Uber employee said, by sending company-wide emails and positioning himself as a “Travis surrogate” after being relatively absent for the last eight years.

The latest gaffe came from another Uber board member, media mogul Arianna Huffington. At the Aug. 30 all-hands, in a question-and-answer session with Khosrowshahi, she began to say, “and your CFO at Expedia” before he cut her off in mid-sentence. The remark prompted speculation that Expedia CFO Mark Okerstrom might join Khosrowshahi at Uber as its CFO, a position that has been open since Gautam Gupta left Uber in May. Expedia announced later that day that Okerstrom would succeed Khosrowshahi as CEO. (Huffington, through a spokesperson, declined to comment.)

“Everyone’s really embarrassed by the board right now,” said the longtime Uber employee who, like others interviewed for this story, spoke on the condition of anonymity. “Travis had to go and the company is doing a reset, and it feels like things are moving in the right direction but the board feels like the thing that’s still not working.”

The board enabled Uber’s growth but also its problems

The board of directors is an essential governing body at any startup, but especially so at Uber. Though the company’s valuation of $68 billion exceeds the market capitalization of behemoths such as Ford and General Motors, it is still privately held, meaning it has to submit to far less shareholder scrutiny than those listed firms. Though a board does not run a company, it typically ratifies all major strategic decisions, such as financing, acquisitions, and changes to senior leadership. Board members have a so-called fiduciary duty to put the interests of the company and its shareholders before their own.

In theory, Uber’s board should have provided a check on Kalanick, who spent years breaking laws and waging fiery political battles to spread the ride-hailing model worldwide. Uber’s disregard for the law was never a secret—quite the contrary, deliberately flouting laws and regulations was the way the company opened up markets and created demand for its service. That demand translated into public pressure on cities, states and countries to change rules protecting their established taxi industries.

But the board didn’t seem to care about the law-breaking until this year, when the company’s public image crumbled amid allegations of sexual harassment and US regulators opened a federal probe into one of Uber’s more egregious efforts to evade law enforcement. Indeed, Benchmark investor Bill Gurley a few years ago praised Kalanick for being “remarkably audacious and ambitious” at at time when Uber was already in plenty of legal trouble. (We contacted Benchmark for comment, but it has not replied.)

Enhancing the board’s capacity for oversight was a key recommendation (pdf) of a report on Uber’s culture and management compiled by former US attorney general Eric Holder. The report, made public in June, called for Uber to add independent board members with no financial stake in the company; to install an independent board chairperson; and to create a standing oversight committee that would push for “ethical business practices, diversity, and inclusion within the organization.” The board unanimously adopted the recommendations and added Wan Ling Martello, an executive vice president at Nestle, as an independent board member in June.

The general sentiment among employees is that Uber’s board needs to “grow up,” and that the bickering is hurting company morale. “You can make allowances for the drama around the cultural issues because they have to be dealt to move forward,” a second employee said, alluding to Uber’s efforts to clean up its workplace culture. “But many of the employees are tired of making allowances for the board.”

The new CEO’s task: unite and conquer

At the Aug. 30 all-hands, Khosrowshahi alluded jokingly to some of the board’s troubles. “I know there’s a lot of criticism around our board,” he said. “I love our board. They picked me. So, awesome.” He also mentioned the leaks there had been in the run-up to his appointment. “Listen, leaks are a symptom of a problem, which is a company or a leadership team or a board that is not aligned,” he said.

Getting both the board and Uber’s staff aligned is now Khosrowshahi’s challenge. Uber’s roughly 15,000 employees worldwide have pushed for many of the changes that the company has made to improve its culture and treatment of its drivers since the start of the year. Many supported adding tipping to the Uber app, as well as other updates under Uber’s “180 days of change” campaign to improve conditions for drivers. Employees also pressured Kalanick to resign from US president Donald Trump’s business advisory council, which he did in early February.

Khosrowshahi will have to repair the rift and distrust between his staff and the board. He’ll also need to navigate a split within the workforce itself. A small fraction of the employees remain loyal to Kalanick; more than 1,000 signed a letter in June asking for him to return in an operational role. At the all-hands the new CEO downplayed this split, saying, “things start with Travis.”

Still, a third staffer told Quartz, “the overwhelming majority of employees are not tech bros or engaged in or care about gamesmanship on the board, but are keeping their heads down and doing really good work.” Uber declined to comment, referring us instead to Khosrowshahi’s comments at the all-hands.

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