The descent of Uber into corporate chaos reached a critical juncture Monday as the company shed yet another top executive, added a new outside board member and prepared for a day of reckoning over allegations of widespread harassment of employees.
The fate of the company’s polarizing chief executive, Travis Kalanick, hung in the balance throughout the day amid reports that he was likely to take a leave of absence. But the departure of a controversial top lieutenant and Kalanick confidant, Emil Michael, underscored the seriousness of a board-led push to revamp the company’s top leadership.
More changes were expected with Tuesday’s release of recommendations from a sweeping investigation into Uber’s corporate culture, led by former U.S. attorney general Eric H. Holder Jr. and fueled by reports from hundreds of employees.
“There’s a huge vacuum at the top,” said Carl Tobias, a University of Richmond law professor who follows Uber. “I don’t know what the future of the company is.”
The bulk of Holder’s long-awaited report will remain secret, said a person familiar with the company’s plans, to protect the privacy of those who shared their concerns with Holder and his team at the law firm Covington & Burling. Tobias said that by not releasing the full report, the company could also assert attorney-client privilege to keep its details from becoming evidence in lawsuits by employees.
The board accepted all of Holder’s recommendations at a marathon meeting in Los Angeles on Sunday.
The stakes could hardly be higher as the board seeks to simultaneously resolve a leadership crisis, bolster the confidence of 14,000 employees and fend off increasingly aggressive rivals, such as Lyft, that are showing signs of making inroads in Uber’s core business.
At risk are nearly $70 billion in investor value and the future of a company once widely celebrated as a worthy exemplar of Silicon Valley’s start-up culture, in which disrupting entrenched business models such as the taxi industry is revered nearly as much as getting fabulously rich in the process.
“I’m not worried about the survival of the company,” said Arun Sundararajan, a professor at New York University’s Stern School of Business. “But I think that the next year or year and a half is going to be even more challenging than the last six months, because it involves changes to the company’s culture and getting used to an entirely new leadership while not having time to stand still and take stock, because they have competitors nipping at their heels in every market.”
As part of the internal investigation led by Holder, Uber already has fired 20 employees while issuing reprimands and requiring new training for others amid 215 reports of possible sexual harassment, bullying, retaliation and other unprofessional conduct. (Some cases remain open pending further investigation by a second law firm, Perkins Coie.)
The ranks of departed senior executives over the past year includes Eric Alexander, who left the company last week after he acquired medical files on woman in India raped by an Uber driver, according to news reports.
Monday’s announcement about the departure of Michael, the senior vice president for business, leaves the company without one of its top executives and one who reportedly had Kalanick’s ear on many matters. In an upbeat email to company employees, Michael called his nearly four years at the company “the experience of a lifetime” but did not describe the reasons for leaving. He said that David Richter, vice president of strategic initiatives, was taking over.
Also Monday, Uber said it had tapped Nestle executive Wan Ling Martello to fill one of several empty seats on a board that, until recently, was dominated by Kalanick and close allies who had outsize voting power under corporate rules. The move adds another female board member to help lead a company under siege over allegations of sexual harassment and a male-dominated “bro” culture.
The prospect of a Kalanick leave of absence — reportedly for three months — comes amid both corporate turmoil and a personal tragedy. A boating accident last month killed his mother and seriously injured his father.
Should he depart, even temporarily, it might ease the public scrutiny of the company but would challenge further the company’s thinning ranks of top executives. Kalanick had been publicly searching for a new chief operating officer for months. But that job, along with several others, remains unfilled.
Uber’s leadership crisis comes amid sinking popularity for the company. Only 4 in 10 Americans say they have a favorable impression of the company — the lowest number since tracking began last year — with a drop of nine percentage points in just the past week, according to data published Monday by the research firm Morning Consult.
Uber’s top rival in the ride-hailing industry, Lyft, meanwhile has been gaining ground amid the company’s many controversies, which in January spawned a movement on social media known by the hashtag #DeleteUber.
“There was a nearly literally overnight shift in market share when #DeleteUber first came out,” said Jonathan Wolf, chief executive of TXN Solutions, which uses credit-card spending data to track consumer trends. “That shift has stayed. As Uber has run into subsequent woes, there’s been a slow, steady drip.”
Lyft now accounts for 25 percent of all trips taken in the U.S. ride-hailing market, up from 18 percent at the beginning of the year, according to data from TXN. In recent months, the company found, even loyal Uber customers that have stayed with the service have also increased their spending on Lyft. In the first quarter of 2017, ridership had surged to 70.4 million rides, significantly exceeding expectations. Uber didn’t respond to a request for comment.
“I think it’s safe to say that our growth trajectory shifted dramatically upward since the beginning of the year, and some of that growth is undoubtedly due to Uber’s problems,” said Adrian Durbin, a Lyft spokesman. Durbin declined to provide more recent statistics, but added that the company’s growth has continued at a higher rate than its initial internal projections.
The public mood over Uber began to turn when Kalanick joined an advisory board for President Trump and appeared to undermine a New York taxi strike related to the president’s controversial effort to impose a travel ban, sparking the #DeleteUber movement.
A scathing blog post by former Uber engineer Susan Fowler, who reported that an unwanted sexual advance by her boss was ignored by company management, triggered a wave of denunciations of the corporate culture at Uber.
The Justice Department then launched a criminal investigation over allegations that the company used a software tool to evade regulators. At the same time, Uber got in a highly public legal battle with Waymo, the self-driving-car unit of Google’s parent company, Alphabet, over alleged theft of intellectual property. Uber fired the head of that program, Anthony Levandowski, last month for failing to comply with a court order to turn over documents in the case
Waymo has accused Uber of stealing the laser-sensing technology that allows driverless cars to see their surroundings. The legal fight’s outcome could have serious ramifications for Uber’s long-term business model.
Kalanick has effectively bet the business on self-driving technology. Without it, he has said, Uber cannot hope to compete in a world of growing automation.
A court ruling against Uber could undermine to the company’s efforts to develop self-driving cars, some analysts said, raising questions about its ability to survive in a world where companies from Tesla to Ford are vying for dominance over the future of automated transportation.
“If a company like Waymo masters self-driving technology while Uber is legally forced to surrender or curtail its current efforts, it’s a handicap that could unravel Uber’s position in this rapidly evolving field,” said Karl Brauer, an analyst at Kelley Blue Book. Other analysts said that falling behind on automation could put the company in jeopardy with investors, many of whom are also banking on Uber coming through with the technology.
The company’s troubles also threaten to delay the possibility of an initial public offering, which many investors and employees have been eagerly awaiting. In March, Kalanick told CNBC that he plans to delay the IPO “as late as possible.”