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Uber CEO to Take Leave, Diminished Role After Workplace Scandals

Published on .

Uber CEO Travis Kalanick speaks during a session at the World Economic Forum Annual Meeting of the New Champions in Tianjin, China, on June 27, 2016.
Uber CEO Travis Kalanick speaks during a session at the World Economic Forum Annual Meeting of the New Champions in Tianjin, China, on June 27, 2016. Credit: Qilai Shen/Bloomberg

Uber CEO Travis Kalanick told staff he plans to take a leave of absence, without disclosing a return date. The company will strip him of some duties and appoint an independent chair to limit his influence after a slew of scandals, according to an advance copy of a report prepared for the board.

At a staff meeting Tuesday, the company will convey the results of a probe conducted by Eric Holder, the former U.S. attorney general whom Uber hired to look into allegations of harassment, discrimination and an aggressive culture. The 47 recommendations include creating a board oversight committee, rewriting Uber's cultural values, reducing alcohol use at work events, and prohibiting intimate relationships between employees and their bosses.

Uber's board met Sunday to review a detailed version of the report and voted unanimously to approve the recommendations. Afterward, the San Francisco-based company ousted Emil Michael, Uber's head of business.

Upon Kalanick's return, the board will move to diminish his role by giving some of the CEO's job responsibilities to a chief operating officer -- a position Uber has been actively recruiting for but has yet to fill. This person would "act as a full partner with the CEO but focus on day-to-day operations, culture and institutions within Uber," the report said.

Uber lost or removed much of its management team in recent months as scandal after scandal emerged. The 14,000-plus workforce lacks a clear No. 2 who could run things in Kalanick's stead. Uber has started taking steps to fill out Kalanick's bench. Last week, it hired Harvard Business School's Frances Frei as senior VP of leadership and strategy, and will add Nestle's Wan Ling Martello as an independent director.

Despite recent turmoil, Uber's business is growing. Revenue increased to $3.4 billion in the first quarter, while losses narrowed -- though they remain substantial at $708 million.

But Lyft has stolen some market share in the U.S., and Uber's internal strife could open opportunities for competitors globally to lure partners, raise funds or poach talent.

'More painful than we thought'
Executives at Uber had looked to the Holder report as a likely turning point in their efforts to put the company's past indiscretions behind them and provide a road map for the future. Holder, an attorney at law firm Covington & Burling, interviewed employees as part of a 14-week probe he conducted with his colleague Tammy Albarran. A separate examination by Perkins Coie LLP is reviewing 215 HR claims. More than 20 people have been fired as a result of that inquiry.

"The process was longer than we thought and more painful than we thought, but this chapter comes to an end today," Arianna Huffington, an Uber board member, said in a statement prepared for the staff meeting Tuesday. "Our task now is to learn, rebuild and move forward together to write Uber's next chapter."

The crisis was sparked by a Feb. 19 blog post by former Uber software engineer Susan Fowler. She alleged that her former manager had propositioned her for sex and that Uber's HR department told her it wouldn't punish him because he was a top performer. In addition to her sexual harassment allegation, Fowler's nearly 3,000-word post chronicled day-to-day indignities women faced at the startup. In one instance, female employees were told they would need to pay for their own leather jackets even though men were getting them for free; a manager explained to her that there weren't enough women to justify buying them in bulk, she wrote.

Fowler's accusations ignited an uproar inside the company and throughout the tech industry. Many women shared their own horror stories, and the controversy prompted companies throughout Silicon Valley to reexamine their diversity practices. At Uber, Bloomberg reported that at least a half-dozen members of the recruiting team left after their attempts to prioritize diversity hiring initiatives faced resistance from Kalanick.

While the public report doesn't address Fowler's individual claims, the board-approved changes offer a path to make Uber a more hospitable workplace for women and minorities. The company intends to raise the profile of the head of diversity, adjust executive compensation to incentivize good behavior, institute mandatory leadership training and establish an employee diversity advisory board. Uber published workforce demographics for the first time March, which show that only 15 percent of tech workers at Uber are women.

Holder's interviews with current and former Uber employees eventually became far broader than Fowler's initial complaints, including a look at a trip to a Korean karaoke bar in 2014 that was the subject of an HR complaint, the use of software called Greyball to help drivers avoid government officials and the mishandling of a 2014 India rape case.

'Always Be Hustlin''
However, anyone hoping that the report would name names or call out problematic incidents at the company will be disappointed. The report offers no such details. No new dismissals are expected Tuesday, but the other probe by Perkins Coie is ongoing.

Several of Uber's planned changes are symbolic. For example, a conference room known as the War Room will be renamed the Peace Room. The company also plans to scrap many of its cultural values, notably "Let Builders Build, Always Be Hustlin', Meritocracy and Toe-Stepping, and Principled Confrontation," which the Holder report described as being "used to justify poor behavior."

"Many of Uber's 14 cultural values, while well-intended, had been allowed to be weaponized," Huffington said in her statement. "That's completely unacceptable."

Chief Human Resources Officer Liane Hornsey, who joined Uber in January, said the company will reform. Uber is looking to improve its HR practices and daily life for employees, including flexible hours, clearer guidelines for attaining promotions, a revised performance review process and earlier on-site dinners so that the "benefit can be utilized by a broader group of employees, including employees who have spouses or families waiting for them at home," according to the report.

Uber will also create stricter guidelines for what's acceptable in the office. Several rules outlined in the report deal with alcohol, controlled substances and sexual relationships. "Uber should consider limiting the budget available to managers for alcohol purchases," according to one recommendation in the report.

The company hopes to "ensure the mistakes of the past will not be repeated," Hornsey said in a statement. "While change does not happen overnight, we're committed to rebuilding trust with our employees, riders and drivers."

Kalanick decided to take a leave while also coping with the death of his mother, whose funeral he attended Friday.

Uber has a long road ahead. The CEO is tied to some of the company's biggest scandals. The company's president and the heads of autonomous vehicles, growth, mapping, policy and software engineering all left this year, and Kalanick isn't filling holes in his leadership fast enough. No one is more central to the company's culture. As co-founder, Kalanick rapidly built a global workforce and molded the place in his image. He also helped craft the values that the company now plans to excise.

-- Bloomberg News

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