Uber still doesn’t un­der­stand its ills


Uber and its fans has­tened Tues­day to de­clare that, with the long-awaited pub­li­ca­tion of an in­ves­ti­ga­tion of its frat-boy of­fice en­vi­ron­ment by former U.S. Atty. Gen. Eric H. Holder Jr., the com­pany was ready to move on. As board mem­ber Ari­anna Huff­in­g­ton told an all-hands staff meet­ing, “This chap­ter comes to an end to­day.” Not so fast, Ari­anna. Yes, it’s true that Travis Kalan­ick, the Uber co­founder and CEO who is widely re­garded as the sun from whom ra­di­ates the com­pany’s bul­ly­ing ethos, is tak­ing an in­def­i­nite leave of ab­sence. The com­pany has fired more than 20 em­ploy­ees in con­nec­tion with its in­ves­ti­ga­tion of sex­ual ha­rass­ment claims. That process was launched in Fe­bru­ary after a former en­gi­neer, Su­san Fowler, pub­lished a hor­ri­fy­ing ac­count of life in an or­ga­ni­za­tion in which sex­ual dis­crim­i­na­tion and ha­rass­ment were ac­cepted, even glo­ri­fied, as part of the land­scape.

Yet the re­port by Holder and his law part­ner Tammy Al­bar­ran is merely a ros­ter of 47 rec­om­men­da­tions for fix­ing Uber’s dys­func­tional man­age­ment and em­ployee cul­ture. It doesn’t come close to ad­dress­ing the com­pany’s real prob­lems.

Peo­ple with a se­ri­ous in­ter­est in see­ing that hap­pen are unim­pressed. Fowler’s tweeted re­sponse was, “It’s all op­tics.” She added,

“I’ve got­ten noth­ing but ag­gres­sive hos­til­ity from them” since her ac­count was pub­lished.

These are more fun­da­men­tal than the at­mos­phere in the con­fer­ence rooms and hall­ways, and raise real ques­tions about its pu­ta­tive, and du­bi­ous, $70-bil­lion val­u­a­tion as a pri­vate com­pany. They in­volve, first, es­sen­tial ques­tions about the eco­nom­ics of a com­pany that still hasn’t demon­strated a path to prof­itabil­ity, but lives on the suf­fer­ance of its ven­ture cap­i­tal fi­nanciers. Uber, still a pri­vate com­pany, has been giv­ing the pub­lic a peek at its fi­nan­cials, which are swathed in red; last month it re­ported a loss in the first quar­ter of $708 mil­lion on rev­enue of $2.4 bil­lion, which were both bet­ter than the pre­vi­ous quar­ter. But the com­pany hasn’t re­leased year-over-year com­par­isons, which would be more re­veal­ing.

Then there’s its re­la­tion­ship with its driv­ers who ac­tu­ally make its busi­ness go. There are an es­ti­mated 200,000 of them world­wide, com­pared with the ap­prox­i­mately 12,000 en­gi­neers and sup­port staff who work in Uber of­fices.

The lat­ter are con­sid­ered em­ploy­ees, the former are not. In­stead, they’re clas­si­fied as in­de­pen­dent con­trac­tors. Even though Uber sub­jects them to its uni­lat­eral fare-set­ting and sets their work­ing con­di­tions, they pay their own ex­penses and have vir­tu­ally no em­ploy­ment rights. They’re cheap la­bor, which may help make Uber’s eco­nomic prospects look bet­ter than they re­ally are.

As a re­sult, says Nayan­tara Mehta of the Na­tional Em­ploy­ment Law Project, “even if the com­pany makes all the changes it needs to make on sex­ual ha­rass­ment, dis­crim­i­na­tion and other bad be­hav­ior, that doesn’t help the vast ma­jor­ity of Uber’s work­force.”

Uber’s at­ti­tude to­ward its driv­ers par­al­lels its ap­proach to laws and reg­u­la­tions, which is that it’s above them. When­ever a mu­nic­i­pal­ity pushes back, Uber re­acts as though that’s an af­front to the free en­ter­prise — wit­ness its at­tack, abet­ted by the U.S. Cham­ber of Com­merce, on a Seat­tle law grant­ing its driv­ers the right to union­ize. (A fed­eral judge has tem­po­rar­ily placed the law on hold.)

In­ter­est­ingly, the pub­lished ver­sion of the Hold­erAl­bar­ran re­port doesn’t men­tion the driv­ers even once. Ac­cord­ing to a tape and tran­script of Huff­in­g­ton’s re­marks at Tues­day’s staff meet­ing, she made a sin­gle glanc­ing ref­er­ence to “our driver part­ners.”

None of this is en­cour­ag­ing, es­pe­cially the Holder re­port’s fo­cus on Uber’s in­ter­nal poli­cies, when the com­pany also needs to re­work its ex­ter­nal re­la­tion­ships, says Cather­ine Bracy, ex­ec­u­tive di­rec­tor of the Bay Area’s TechEquity Col­lab­o­ra­tive. That in­cludes “re­think­ing how it treats its driv­ers, tak­ing a more col­lab­o­ra­tive ap­proach to work­ing with gov­ern­ment, de­vel­op­ing deep and trusted part­ner­ships with com­mu­ni­ties, or de­vel­op­ing other bet­ter busi­ness prac­tices,” Bracy told me by email.

The Holder re­port’s rec­om­men­da­tions are mostly cos­metic changes to hir­ing and hu­man re­sources pro­ce­dures, board struc­tures, “cul­tural val­ues,” etc., etc. “In­crease the pro­file of Uber’s head of di­ver­sity,” “cre­ate an over­sight com­mit­tee” of the board (isn’t “over­sight” the board’s whole job?), “de­vote ad­e­quate staff and re­sources to Hu­man Re­sources” — these are ideas that come right off the “20 ways to make your­self a bet­ter man­ager” bookshelf. Ex­cept for five rec­om­men­da­tions that in­volve hir­ing con­sul­tants, these are the sort of rec­om­men­da­tions that come free — they cost the board al­most noth­ing to im­ple­ment, some should have been done years ago and the process of en­force­ment is de­lib­er­ately left vague.

Only two seem to have any con­crete re­la­tion­ship to the prob­lem at hand. One is to bar ro­man­tic or sex­ual re­la­tion­ships be­tween su­per­vi­sors and their staffers, which might help to sup­press the sex­ual trawl­ing that Fowler re­ported, both to HR and to the pub­lic. An­other is to put a cap on al­co­hol and drug-tak­ing at work. (Lordy, how much of that has been go­ing on at Uber’s San Fran­cisco HQ? The re­port doesn’t say.)

Holder’s “full re­port” on Uber, which is how this doc­u­ment is billed, com­pares un­fa­vor­ably to the last in­ter­nal in­ves­ti­ga­tion re­leased by a ma­jor cor­po­ra­tion, the re­port on Wells Fargo’s re­tail bank­ing scan­dal. We la­beled the April 10 re­port a “white­wash” be­cause its au­thors at the law firm Shear­man & Ster­ling gave their clients, the board of di­rec­tors, a pass. But in all other re­spects it left the Uber pa­per in the dust. Run­ning 113 pages, com­pared with Uber’s 13, it laid out in painstak­ing de­tail the mis­deeds of em­ploy­ees and the su­per­vi­sors and ex­plained how Chief Ex­ec­u­tive John Stumpf and his man­age­ment team cre­ated the con­di­tions lead­ing to the scan­dal.

The re­port placed blame where it be­longed. Stumpf “right­fully ac­knowl­edged that he made sig­nif­i­cant mis­takes and helped cre­ate the cul­ture that re­sulted in sales prac­tice abuses,” it said, spec­i­fy­ing penal­ties that would cost the ex-CEO some $69 mil­lion in com­pen­sa­tion.

That in­ves­ti­ga­tion gave Wells Fargo’s board and man­age­ment sig­nif­i­cant in­for­ma­tion they needed to fix the bank’s prob­lems and to do bet­ter in the fu­ture. Not the Uber re­port. It men­tions Kalan­ick on only one page, in con­nec­tion with a vague rec­om­men­da­tion that the board “re­view and re­al­lo­cate” his re­spon­si­bil­i­ties. It doesn’t delve into Kalan­ick’s vot­ing power over the board, which has been re­ported to be unas­sail­able; the fail­ure to ac­knowl­edge that makes its rec­om­men­da­tions for board restruc­tur­ing point­less. Even sep­a­rat­ing the CEO and chair­man’s po­si­tions, a com­mon pro­posal among cor­po­rate good-gov­er­nance ad­vo­cates, is pro­posed as some­thing the board “should con­sider.” You can’t get much more mealy­mouthed than that.

Holder’s fail­ure to lay out ex­actly what has been hap­pen­ing at Uber leaves the un­mis­tak­able im­pres­sion of an ef­fort to sweep the facts un­der the rug. Fowler’s post in­di­cated that man­agers coun­te­nanced and en­gaged in overt sex­ual ha­rass­ment, HR per­son­nel were com­plicit and the com­pany threat­ened to fire Fowler for com­plain­ing, which is re­tal­i­a­tion and il­le­gal. It’s doubt­ful that any of this could hap­pen without the ap­proval, im­plicit or oth­er­wise, of Kalan­ick and his man­age­ment team.

We’re left to won­der how deeply Holder ex­am­ined Kalan­ick’s role. We’re left to de­duce it, re­mind­ing us of how the great muck­raker Ida Tar­bell de­scribed the Stan­dard Oil trust: “You could ar­gue its ex­is­tence from its ef­fects, but you could not prove it.”

In his staff mes­sage an­nounc­ing his leave of ab­sence, Kalan­ick still seemed to be dodg­ing re­spon­si­bil­ity; he at­trib­uted his leave largely to his need to mourn his mother, who re­cently died in an ac­ci­dent (we don’t doubt his grief is heart­felt). He said he would take the time “to re­flect, to work on my­self, and to fo­cus on build­ing out a world­class lead­er­ship team.”

That’s not sig­nif­i­cantly dif­fer­ent from what Kalan­ick of­ten says when he and his man­age­ment bros are caught do­ing some­thing ob­nox­ious or po­ten­tially il­le­gal, a role that in­cludes in­vad­ing pas­sen­gers’ pri­vacy, de­ceiv­ing driver re­cruits, ver­bally abus­ing an Uber driver, se­cretly un­der­min­ing ri­vals and al­legedly ly­ing in a fed­eral court pro­ceed­ing. He pledges to do bet­ter, next time.

But what signs are there that Uber re­ally is ca­pa­ble of change? Huff­in­g­ton’s state­ment that Uber is em­bark­ing on a “jour­ney to be­ing a com­pany that al­ways puts you, our driver part­ners, and our rid­ers first” is, just yet, in­dis­tin­guish­able from PR. The com­pany has been coast­ing on that $70-bil­lion val­u­a­tion, as though it should an­swer all ques­tions about its meth­ods and its ex­ec­u­tives’ be­hav­ior.

But Uber is worth $70 bil­lion only as long as its ven­ture in­vestors are will­ing to pay up to be part of its club. That will­ing­ness could vanish in an in­stant. Un­less the com­pany grows up, fast, its value, and its fu­ture, both could be as evanes­cent as the to­bacco cloud in a menonly cigar bar.

Spencer Platt Getty Images

UBER’S AT­TI­TUDE to­ward its driv­ers par­al­lels its ap­proach to laws and reg­u­la­tions, which is that it’s above them. Above, an Uber ve­hi­cle in New York.

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