Uber embraces strong reforms; CEO steps away

Developments part of flurry of actions
Travis Kalanick, the chief executive of the Uber, in New York on May 2, 2011.
Travis Kalanick, the chief executive of the Uber, in New York on May 2, 2011.

SAN FRANCISCO — In Uber’s continuing attempt to repair its reputation over a series of scandals stemming from its bad-boy culture, its co-founder Travis Kalanick said he would take a leave of absence as chief executive. The company also announced it would embark on a sweeping reorganization to ensure that executives are more closely supervised by the board of directors.

At a packed meeting with employees Tuesday morning, Uber released 13 pages of recommendations compiled as part of an investigation into sexual harassment and other wrongdoing conducted by former Attorney General Eric H. Holder Jr. and his law firm, Covington & Burlington.

But even as Uber promised to reform itself, an exchange between board members on stage highlighted the company’s challenges. In front of employees, board member Arianna Huffington talked about how having one female director typically leads to more female directors. David Bonderman, a fellow board member and a founding partner at the private equity firm TPG, replied that adding more women to the board would result in “more talking.” The remark left people aghast, according to those who were there, and set off a storm of criticism on Twitter.

Bonderman later apologized to Huffington and Uber’s employees in an email.

“It was inappropriate,” he said. “I deeply regret it.”

Before the meeting, Kalanick said in an email to employees that he would take time off to work on himself and reflect on building a “world-class leadership team” for the company. He did not specify how long he would be away, and he did not appear at the staff meeting.

Uber did not release Holder’s full report. Instead, the company highlighted the changes it would make to fix its problems. The recommendations included limiting Kalanick’s responsibilities by reallocating some of his duties and by giving a chief operating officer more responsibilities at the company.

Holder also recommended that Uber appoint an independent chairman and create an oversight committee on the board. The goal is to bolster the checks and balances on management, according to the recommendations.

The proposed changes amounted to a rejection of the practices and culture that Uber has used to build itself into a nearly $70 billion company and upend the way people use transportation worldwide. Under Kalanick, Uber flouted rules and regulations to bring its ride-summoning service to hundreds of cities, prized growth above all else and often turned a blind eye to corporate misbehavior.

Uber’s practices ballooned into a crisis starting in February, when a former employee wrote a blog post detailing what she said was a history of sexual harassment and lack of response from the company’s management. The post set off a deluge of complaints from staff members about Uber’s culture, exposing a toxic environment.

Uber has tried to clean up its act. It has fired 20 employees in the past few months for transgressions that included sexual harassment. Emil Michael, a top lieutenant of Kalanick’s, left the company this week. And many other executives have departed, creating something of a leadership void at the company.

On Sunday, Uber’s board met for nearly seven hours at Covington & Burling’s office in Los Angeles. Afterward, the board said it had unanimously voted to adopt all the recommendations in Holder’s report.

“Implementing these recommendations will improve our culture, promote fairness and accountability, and establish processes and systems to ensure the mistakes of the past will not be repeated,” Liane Hornsey, Uber’s chief of human resources, said in a statement Tuesday. “While change does not happen overnight, we’re committed to rebuilding trust with our employees, riders and drivers.”

Kalanick’s leave will be a significant change for a company that was molded in his image. He helped found Uber in 2009 and has been its fiercest supporter. Kalanick, 40, retains a large amount of control over the company, which is privately held, because it was structured to favor its founders.

The decision to take time off was largely left to Kalanick himself, people with knowledge of the situation have said. He has been under pressure for his aggressive management style and had acknowledged he needed leadership help after a video of him berating an Uber driver became public. He is also grappling with the death of his mother in a boating accident last month that sent his father to the hospital.

“The ultimate responsibility, for where we’ve gotten and how we’ve gotten here, rests on my shoulders,” Kalanick wrote in the email to employees. “There is of course much to be proud of but there is much to improve.”

His absence raises questions of how Uber will be managed while he is away. Kalanick said in the email that the managers who directly report to him will be in charge of the company, although he added that he will remain available as needed “for the most strategic decisions.” The managers who report to him include David Richter, the senior vice president for business, and Rachel Holt, the general manager in charge of Uber’s business in the United States and Canada.

The recommendations to change Uber’s culture consisted of 10 main categories aimed at creating accountability for Uber’s senior management, enhancing the board’s oversight and revamping the company’s internal controls.

Many of the recommendations involved professionalizing the way Uber is run. Those included performance reviews of senior leadership, better record-keeping in human resources, reformulating the company’s cultural values, mandatory manager and human resources training, and an emphasis on diversity and inclusion.

“We recommend that Uber focus on four prevailing themes with regard to taking the following remedial measures: tone at the top, trust, transformation, and accountability,” the report said.

Uber presented the recommendations to employees at its regular Tuesday staff meeting at its headquarters. A special subcommittee of Uber’s board took the stage, including Huffington, Bonderman and J. William Gurley, with each addressing the crowd and highlighting different deficiencies discussed in the report, along with how the company would have to overcome the problems.

“We’re in a reputational deficit, and it’s going to take us a while to get out of this,” Gurley, a venture capitalist at Benchmark, said to Uber’s employees. “We have to hold ourselves accountable to a higher bar.”

Huffington said that she understood how the scandals had taken a toll on Uber.

“I know how hard it has been to see demoralizing stories in the press and then go home and explain them to your friends and families,” she said, adding that changes had already begun.

A room at Uber called the War Room, for example, had been renamed the Peace Room, she said.

The recommendations immediately elicited a positive response from some. Mitch and Freada Kapor, who were among Uber’s early investors, said in a statement that Holder’s proposals were “both thoughtful and extensive” and that “the company deserves some room to put the plan into effect.”

Many employees, too, said they were largely happy with the detailed recommendations and report, according to current and former employees who spoke on condition of anonymity because they were not authorized to speak publicly.

But other employees said Uber executives should have listened to complaints years earlier. Susan Fowler, the former Uber engineer whose blog post sparked the firestorm over the company’s culture, suggested on Twitter on Tuesday that the recommendations were largely window dressing.

“They’ll never apologize,” Fowler said, referring to Uber. “I’ve gotten nothing but aggressive hostility from them. It’s all optics.”

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