– 668 –
Chaos at Uber: The New CEO’s
Challenge
Overview
While Uber technologies (Uber) had tasted great success in the run-up to its planned IPO, its journey had
been a bumpy one. On June 21, 2017, co-founder Travis Kalanick stepped down as CEO of Uber in
the face of a shareholder revolt that made it untenable for him to stay on in that position. Kalanick’s
resignation came after a review of practices at Uber that included allegations of sexual harassment, a corporate
theft lawsuit, defiance of government regulations, reports of misbehavior, and a toxic corporate culture, leading
to the departure of some key executives.
Uber had heretofore followed a “founder-friendly” governance structure wherein Kalanick, because of the special
class of shares he owned, enjoyed sweeping authority on the company’s board of directors. Uber’s boardroom
battle escalated in August 2017 when a small group of shareholders aligned with Kalanick dissented against
Uber’s biggest investor Benchmark Capital, after it filed a lawsuit to oust Kalanick from the board. Critics and
industry observers at the time opined that Uber had developed a dysfunctional corporate governance structure
in its pursuit of growth and valuation, and had flouted ethical norms in the pursuit of innovation and industry
disruption.
Suggestions for Using the Case
We feel that the Uber case is ideally suited to illustrate many aspects of the role of corporate governance in the
strategy process, covered in Chapter 2.
*
case 31 teaching note
Case 31 Teaching Note Chaos at Uber: The New CEO’s Challenge
669
Chapter 2 notes that every corporation should have a strong independent board of directors that:
Is well informed about the company’s performance
The case is also suitable to drill students on an action agenda to accomplish the ten strategy execution tasks
presented in Chapters 10–12, outlined in Figure 10.1. Students should be able to describe how Uber might evolve
its strategy and set about building an execution-capable organization by, among other possible action steps:
Assembling a strong management team
If you have already covered “Transforming core values and ethical standards into cultural norms” in Chapter 12
(“Corporate Culture and Leadership”), the case can be specifically used to discuss unhealthy cultures and the
appropriate role of the leader in transforming those problem-laden cultures into healthy cultures.
The assignment questions and teaching outline presented below reflect our thinking and suggestions about
how to conduct the class discussion and what aspects to emphasize.
To facilitate your use of study questions and to make them available to students, we have posted a file of the
assignment questions contained in this teaching note for the Chaos at Uber case in the instructor resources
section of the Connect Library.
You may also find it beneficial to have your class read the Guide to Case Analysis that is also posted in the
instructor resources section of the Connect Library. Students will find the content of this Guide particularly
Case 31 Teaching Note Chaos at Uber: The New CEO’s Challenge
670
Assignment Questions
1. How would you describe the crisis at Uber? What grade would you assign to Uber’s board of directors based
on actions it has taken in the past or is now taken in the aftermath of that crisis that could appease Uber’s
stakeholders? Explain.
2. How would you assess Uber’s corporate culture prior to the arrival of CEO Dara Khosrowshahi?
3. What does incoming CEO Khosrowshahi need to prioritize in building and upgrading Uber’s culture?
Teaching Outline and Analysis
1. How would you describe the crisis at Uber? What grade would you assign to Uber’s board
of directors based on actions it has taken in the past or is now taken in the aftermath of that
crisis that could appease Uber’s stakeholders? Explain.
To begin the discussion of this case with students, we find it is useful to ask them to list the some of the
events prior to—and then after—Travis Kalanick’s tenure as Uber’s CEO. Then, proceed to discuss the
normative role of the board in providing effective oversight and governance.
Recapping the situation at Uber prior to Kalanick’s termination as CEO:
At least 200 claims of sexual harassment against the company
Reports of a “Game of Thrones” kind of a political war raging within the ranks of the upper management
Case 31 Teaching Note Chaos at Uber: The New CEO’s Challenge
671
Uber’s corporate structure, which ensured that its founders held super-voting shares and had
disproportionate control over the company
A June 13, 2017, report from former U.S. Attorney General Eric Holder that specifically identified
Kalanick as part of the problem as the first line of the report and enumerated 47 recommendations,
including:
• Emphasizing more on diversity and companywide performance reviews,
On June 21, 2017, Kalanick stepped down as CEO of Uber in the face of a shareholder revolt that made
it untenable for him to stay on in that position
Kalanick’s resignation came after a review of practices at Uber, including:
• Allegations of sexual harassment,
Uber’s board unanimously decided to adopt all the recommendations for improving corporate governance
including sexual harassment prevention and improving workplace diversity
• During the meeting, Uber board member David Bonderman made a sexist remark and had to resign
thereafter
Case 31 Teaching Note Chaos at Uber: The New CEO’s Challenge
672
Recapping the situation at Uber after Kalanick’s termination and upon Khosrowshahi’s installation as CEO:
In November 2017 the company announced that it had discovered a major data breach as part of a board
investigation into its business practices
• Uber had concealed a massive cyber-attack that had taken place in October 2016 affecting nearly 57
million driver and customer accounts
Corporate governance and the role of the board of directors
Per Chapter 2 in the text, every corporation should have a strong, independent board of directors that:
1. is well informed about the company’s performance
2. guides and judges the CEO and other top executives
2. How would you assess Uber’s corporate culture prior to the arrival of CEO Dara Khosrowshahi?
A company culture that is consistent with the requirements for good strategy execution can energize
employees, deepen their commitment to execute the strategy flawlessly, and enhance worker productivity
in the process.
Case 31 Teaching Note Chaos at Uber: The New CEO’s Challenge
673
These features are listed in Table 1, “Key Features of a Corporate Culture and Assessment of Uber’s Culture.”
Students should be directed to review case Exhibit 10 to ascertain elements of Uber’s culture.
TABLE 1. Key Features of a Corporate Culture and Assessment of Uber’s Culture
Hallmarks of a healthy corporate culture Uber’s Corporate Culture
Values, business principles, & ethical
standards
Hyperbolic pronouncements, such as “Champion’s mind-set”,
“Superpumped”, “Always be hustlin’”
Ocial policies, procedures, & practices
guiding employee behavior
Focus on the individual: “Let builders build,” “Be an owner, not
a renter”, “Be yourself”
Atmosphere & spirit Toxic: “Put everything you have on the field to overcome
adversity and get Uber over the finish line”
sustainability
As shown in the table above, Uber exhibits several distinctive characteristics of an unhealthy corporate
culture as evidenced by the presence of counterproductive cultural traits that adversely impact the company’s
work climate and company performance.
Five particularly unhealthy cultural traits that evolved into a toxic atmosphere at Uber were:
1. Hostility to people and also to change
2. Heavily politicized decision-making
Remind students that, by contrast, healthy, strongly implanted corporate cultures assist in executing strategy
because company managers can use the traditions, beliefs, values, common bonds, or behavioral norms as
levers to mobilize commitment to executing the chosen strategy.
Companies that are able to develop a strong culture have:
A founder or strong leader who establishes core values, principles, and practices that are viewed as
having contributed to the success of the company
Case 31 Teaching Note Chaos at Uber: The New CEO’s Challenge
674
Conversely, weak or unhealthy corporate cultures provide little or no assistance in executing strategy
because there are no traditions, beliefs, values, common bonds, or behavioral norms that management can
use as levers to mobilize commitment to executing the chosen strategy.
3. What does incoming CEO Khosrowshahi need to prioritize in building and upgrading Uber’s
culture as well as its resources and capabilities?
When a strong culture is unhealthy or otherwise out of sync with the actions and behaviors needed to execute
the strategy successfully, the culture must be changed as rapidly as can be managed.
4. To what extent have Khosrowshahi’s eorts to transform Uber’s corporate culture, at least
thus far, been the result of centralized vs. decentralized decision-making?
As indicated in Chapter 12, shifting from decentralized to centralized decision-making provides senior
executives more authority and control in driving the cultural change. This has indeed been what has been
taking place at Uber under Khosrowshahi’s leadership:
Uber hired a new set of executives to replace the 11 executives that had already departed (according to
case Exhibit 7)
Case 31 Teaching Note Chaos at Uber: The New CEO’s Challenge
675
5. What specific additional actions could Khosrowshahi take that would make an even greater
contribution to turning things around at Uber? How might these actions dovetail with the
long-term interests of Uber’s stakeholders?
As indicated at the end of the case, Khosrowshahi needs to:
Keep sales and earnings growth at Uber on track to permit a higher company valuation
Reduce reputation-damaging incidents
Case 31 Teaching Note Chaos at Uber: The New CEO’s Challenge
676
Wrapping Up The Class
This is a good place to wind up the discussion of the case by reminding students that:
Boards of directors that lack the backbone to challenge a strong-willed or “imperial” CEO or that
rubber-stamp almost anything the CEO recommends without probing inquiry and debate abdicate their
fiduciary duty to represent and protect shareholder interests, and this is precisely what appears to have
happened at Uber under the former CEO’s Travis Kalanick regime (even though at this writing, company
founder, Kalanick remains on the Uber board of directors)
Epilogue
In 2018, Uber faced several new crises, including the death of a woman who was struck by an Uber self-driving
car in Arizona in March of that year. The company also experienced several more executive departures and faced
internal questions about the behavior of Khosrowshahi’s handpicked No. 2, Barney Harford.
In early August 2018, New York City passed legislation to halt new vehicle licenses for ride-hail services,
potentially capping Uber’s growth in one of its biggest markets.
On August 15, 2018, Uber announced that it had posted a loss of $891 million for the second quarter of fiscal
2018, compared with a loss of more than $1 billion during the same period a year earlier. The company took in
$12.01 billion in gross bookings in the quarter—or the amount of passenger fares and food delivery fees—up
In early September 2018, Uber announced that that it would spend $10 million to help cities develop more
efficient transportation policies and reduce congestion and vehicle emissions. Meanwhile, critics of the company,
including taxi owners and drivers, pointed out that Uber was a major reason congestion has gotten worse in many
cities.
In late September 2018, Uber announced that it would pay $148 million to all 50 U.S. states plus the District
of Columbia to settle a nationwide investigation into a 2016 data breach, in which a hacker managed to gain
access to information belonging to 57 million riders and drivers. The breach included names and driver’s license
numbers for 600,000 drivers.