Chaos at Uber reverberates in industry known for ‘frat-boy’ culture

Even by Silicon Valley standards, Uber is an outlier for its volume of harassment charges and other ethical controversies. But the scrutiny is resulting in a mandate for change from the firm's board.

Beset by scandals and challenges on every side, Uber resembles a huge army where the troops have survived while the officer corps has been decimated.

The international ride-hailing service, with 12,000 employees, is currently operating without a chief operating officer, chief financial officer, chief marketing officer, or head of engineering. They have either resigned or been fired. On Tuesday, a billionaire board member resigned after a sexist remark at an all-employee meeting. Chief executive Travis Kalanick is also stepping down for an indefinite time.

So what Uber desperately needs is a reputable leader who can right the ship and begin to dismantle the rule-breaking, sexist culture that grew up around Mr. Kalanick. If nothing else, the chaos at the top illustrates the limits of Silicon Valley’s frat-boy culture when it comes to running a modern corporation. It also is a test of corporate redemption – for Uber and, possibly, for Kalanick himself.

All this may augur for a woman to lead the turnaround as a very visible sign that the company is changing.

“Women in leadership positions serve as a significant deterrent against a permissive culture towards sexual harassment,” says Shiva Rajgopal, the incoming vice dean of research at Columbia Business School. “You rarely hear of such issues at Yahoo where Marissa Mayer was the CEO…. [Facebook’s Mark] Zuckerberg has [chief operating officer] Sheryl Sandberg to temper the frat-boy culture.”

Uber has begun to get a taste of change. While board member David Bonderman resigned Tuesday after joking at an all-employee meeting that adding a woman to the board would mean more talking, Arianna Huffington – the lone woman on the eight-member board – has emerged as a key spokeswoman for the company.

“Even one instance of harassment – sexual or otherwise – is one too many…. No brilliant jerks will be allowed,” she told employees Tuesday. “From the crucible of the last few months, a new Uber will emerge fueled by empathy, collaboration, and putting people first.”

A Valley of riches ... and controversy

Putting that promise into practice will take effort, and many see Uber as just the most visibly troubled edge of a Silicon Valley culture in need of ethical overhaul. As The Christian Science Monitor and others have reported, the prosperous tech industry has faced mounting pressure in recent years to improve its hiring and treatment of women.

Firms such as Google and Facebook now annually issue updates on staff diversity, in an industry where employment skews white and male. And a few firms are attempting to chart a new course that seeks to balance start-up drive with a culture of inclusiveness and respect. Yet a 2016 LinkedIn survey of venture capitalists and tech-company founders revealed what LinkedIn senior news editor Caroline Fairchild called “a massive gap between attitudes toward diversity and prioritizing any action” between women or nonwhites and white men in the poll.

In the poll, nearly eight in 10 founders said their startups are also not supporting initiatives to increase workforce diversity. A separate survey of senior-level women in the industry, conducted in 2015 and titled “Elephant in the Valley,” found 60 percent saying they’ve experienced unwanted sexual advances and 66 percent saying they felt excluded from social and networking opportunities afforded to men.

So although Uber is an extreme case, it’s being watched partly because action there is symbolic of a wider need.

Ms. Huffington announced Monday that Nestlé executive Wan Ling Martello will join Uber's board, bringing the female representation to 25 percent.

A range of missteps

The hand of Uber’s board seems to have been strengthened as the string of missteps and revelations have begun to take its toll on the company's business. Only 40 percent of respondents have a favorable impression of Uber in the latest Morning Consult Brand Intelligence survey, down significantly over the past week and Uber’s lowest rating since the survey began in 2016. Its main competitor, Lyft, has narrowed its gap with Uber in US downloads of their competing apps over the past year.

The most recent string of problems for Uber began in January when an Uber tweet appeared to undermine a pro-immigration taxi strike in New York and sparked a #deleteuber campaign among consumers. In February, a former Uber engineer, Susan Fowler, published a blog charging that her claims of sexual harassment were ignored by the company. Other employees began reporting transgressions that management overlooked.

A few days later, autonomous car company Waymo sued Uber, saying Uber manager Anthony Levandowski (a former Waymo employee) had stolen key technical documents.

In March, a New York Times report said Uber had used a program, Greyball, to keep government regulators and investigators from hailing rides in cities where it was operating illegally. The Department of Justice is now investigating Greyball.

This month, an internal investigation found 215 claims of inappropriate behavior that led to the firing of 20 employees, including some executives. Uber also fired an Asia-Pacific manager who obtained the medical files of a woman in India, because he thought her claims of rape by an Uber driver might be false.

On Tuesday came the biggest revelation of all: The board released to employees the independent report it had commissioned from former Attorney Gen. Eric Holder. Among his 47 recommendations: a board oversight committee, a rewrite of Uber’s cultural values, less alcohol at work events, and a prohibition on intimate relationships between employees and their bosses.

‘I also need to work on Travis 2.0’

Making such reports public and firing key people are difficult but key moves if Uber hopes to right the ship, say management professors and researchers of corporate scandals. But a big question remains: Will Kalanick lead the turnaround?

“It would certainly be simpler to change the organization if he was gone,” Peter Cappelli, a management professor at the Wharton School, writes in an email. “We've seen bigger corporations drop CEOs for far less.”

In an email to employees Tuesday, Kalanick said he was stepping aside for an unspecified time: “If we are going to work on Uber 2.0, I also need to work on Travis 2.0 to become the leader that this company needs and that you deserve.”

The board, which has already voted unanimously to implement all of Mr. Holder’s recommendations, said it would appoint an independent board chairman and, upon Kalanick’s return, would hand some of his duties to the chief operational officer.

Despite its long list of woes, Uber retains formidable resources. Its valuation is nine times that of Lyft. It operates in more than 70 countries and 460 cities, compared with US-focused Lyft, which operates in 350 US cities.

But the optics are important, especially for the employees of the company, its drivers (whom the company considers independent contractors), and its customers.

“It’s very hard to change culture without changing leadership,” says Ed deHaan, a professor of accounting at the University of Washington’s business school who has researched how companies recover from scandal. “They need to make it very visual to the employees and customers that they're doing this…. The biggest message is getting an outsider.”