Corporate governance includes rules and processes that govern
the control and functioning of a company. It involves balancing the interests
of stakeholders such as shareholders, customers, vendors, government, and the
like. Board of directors play a crucial role in creating and influencing the
corporate culture. The Board often includes internal members such as the
founders, executives and independent members who are included in the Board for
their vast experience of directing other companies.
A company is known to have bad governance when it tolerates
or supports illegal activities. Selection of not so established auditors,
resulting in publishing of faulty financial results, the inappropriate
compensation of executives are also instances of bad governance. When the board
does not put efforts to protect the interests of the minority shareholders
along with the majority shareholders results in bad governance.
A company demonstrates good governance when it is transparent
about its framework of operation with stakeholders. Moreover, a company with
good governance is fair to its shareholders. Shareholders while investing often
not only look at profits but also a company’s corporate governance.
Uber showcased failed corporate governance time and again. A
Forbes article dated Dec 05, 2017 is rightly titled “Uber’s Uber Breach: A Stunning Failure In Corporate Governance And
Culture”. Uber currently faces five criminal probes from the Justice
Department. It faces an intellectual property battle from Waymo, Alphabet Inc.
with respect autonomous driving technology. Apart from these, Uber is fighting
civil lawsuits in various countries. Uber is also accused of using a software
to spy on competitors and elude regulators. Further, Uber is being investigated
in Asia for bribery.
What drove a company, valued at $70 billion today, in such a
messy situation? With notoriety become synonymous with Uber, is the leadership
at Uber responsible for its state today? Does organization culture play a
crucial role driving the health and success of a company? The report presents
answers to these questions and illustrates failure of corporate governance and
Uber was initially founded as UberCab in 2009 by cofounder of
StumbleUpon, Garett Camp and founder of Red Swoosh, Travis Kalanick. Kalanick
gives full credit of the idea to Camp by saying, “Garett is the guy who
invented that shit” at an event in San Francisco. Camp always pondered
upon ways to decrease the fares of luxury car services and making them
affordable by sharing the cost among people which gave rise to the idea of
Uber launched its mobile app services in San Francisco in
2011. Initially the application was only for hiring a black luxury car for a
fare that was 1.5 times of a taxi. Ryan Graves who was hired after responding
to a tweet became the first CEO after the launch. Soon after 10 months Kalanick
succeeded Graves as CEO. Ryan became the company’s COO.
UberCab changed its name to Uber in 2011 because of rising
complaints from local taxi operators. The company hired physicist,
neuroscientist and machinery expert to identify demand for hiring cabs.
In 2012, CEO Kalanick realised, Uber will require in-house legal
assistance and roped in Salle Yoo. One of Salle’s initial assignments was to
answer the question as to whether Uber should ignore taxi regulations. During
that time many start-ups in San Francisco like Sidecar and Lyft Inc. were
coming up with more complex business models. Kalanick complaint these companies
of breaking the law but all of it went in deaf ears. He then asked Yoo to help
him in preparing a framework which is legal.
Later in 2013, Kalanick’s view of the law changed. He tried
to expand rapidly while facing many blowbacks in the process. The company
followed its CEO’s orders and operated to outperform its competitors wherever
the rules were not actively enforced.
Uber’s staff found an innovative way of outperforming
competitors by convincing the drivers of competitors to drive for them. Uber’s
office in Sydney developed a program called Surfcam which swept competitor’s
data to find out how many drivers are there on their system and their
locations. This software was mainly used on Grab which was Uber’s main
competitor in South-East Asia.
On the similar lines staff team at San Francisco also created
another software known as Hell. It helped Uber in locating Uber drivers in the
city at any given moment. The legal team observed that since the laws on
scraping data were unclear in US so they went ahead with the software and swept
The investigation by federal authorities need to be creative
and find ways of prosecuting the company because as per co-director of Harvard
University’s Berkman Klein Center for Internet and Society, Yochai Benkler,
whatever regulations Uber has violated, none of them comes under explicit
Uber also signed for Greyball, which tagged selected
customers and showed them different version of the Uber app. The company also
applied the same approach with law making bodies by helping Uber drivers
avoiding tickets. The software is under scrutiny of Justice Department. Uber
also settled allegations over privacy concerns under Federal Trade Commission
for a tool called God View.
Kalanick always wanted Yoo to be ‘more innovative’ and also
mentioned the same in her first performance review. Yoo realised that the legal
issues existing in Uber are altogether different for her, ones she has never
experienced ever. But at the same time it made her feel liberated because she
could tackle these issues her way without worrying much about the best
practices. However, at times she failed to challenge Kalanick and other
deputies whenever they had difference of opinion.
Yoo tried her best to settle the incident which
happened in Delhi, where a female passenger was raped by a Uber driver by
bringing in Khaitan and Co., a law firm to assess the situation. Also, Kalanick
tried moulding company’s response by putting allegations of staging the whole
incident on their main rival in India, Ola. It is said that Kalanick and Yoo