Ride-sharing giant Uber Technologies, Inc. has faced continuing steep operating losses since its launch seven years ago. Headquartered in San Francisco, Calif., the company has autonomous app-based operations in roughly 270 cities in 60 countries globally. Uber also invests in self-driving technology, with engineering sites in the United States and elsewhere. Since the corporation is owned by venture capital firms and individuals, and not the general public, its market value of some $69 billion is only an estimate. Eric Newcomer of Bloomberg Technology reported that Uber’s adjusted 2016 losses amounted to $2.8 billion.
The governance structure of Uber is dissimilar to that of a publicly owned company. The board of directors is said to consist largely of personal allies of former CEO and cofounder Travis Kalanick and of venture capitalists who have large investments in the company. They appear to have exercised insufficient oversight and allowed an overbearing management style and culture of bullying and harassment to become widespread. The company has faced lawsuits from drivers, regularly fought with regulators, and endured inappropriate comments from Kalanick.
Uber’s emphasis on a competitive “win at any cost” culture under the guise of meritocracy rather than a teamwork approach has been viewed as the cause of much of the turmoil and trouble. According to a July 2, 2017, story in the Chicago Tribune, all of Uber’s negative coverage and bad news led to a decline in its market share both at the Chicagoland level and in the U.S. as a whole while that of its major competitor, Lyft, has increased. “Uber has not shown that it can profitably produce better taxi service under competitive conditions,” says Hubert Horan, a transportation consultant who has written extensively about the company at nakedcapitalism.com. “A battle between fragmented, poorly capitalized incumbents and Silicon Valley billionaires supplying billions in predatory subsidies is not neutral market competition.”
The beginnings of better management accountability began in early 2017 when Susan Fowler, a former software engineer, circulated a critical blog post that outlined systemic sexual harassment at Uber and went viral. Since then, senior executive turnover has been extreme:
February 28, 2017: Amit Singhai, senior vice president of Engineering, is asked to resign.
March 15, 2017: Zoubin Ghahramani is appointed Uber’s new chief scientist.
March 19, 2017: President Jeff Jones quits.
May 30, 2017: Gautam Gupta, head of Finance, leaves the company.
May 30, 2017: Anthony Levandowski, head of the driverless car project, is fired.
June 12, 2017: Emil Michael, senior vice president of Business, announces resignation.
June 13, 2017: CEO Travis Kalanick announces indefinite leave of absence.
June 20, 2017: Kalanick announces forced resignation.
Kalanick and Michael resigned after the release of the report of law firm Covington & Burling’s months-long investigation of Uber’s culture. The project was set in motion by a special committee of the board of directors after the uproar caused by Susan Fowler’s blog post titled “Reflecting On One Very, Very Strange Year At Uber.” The Covington report contains 12 pages of recommendations, many of which may be relevant to most corporations and of interest to management accountants and financial managers who are tasked by the IMA Statement of Ethical Professional Practice to “contribute to a positive ethical culture.” The report focuses on four areas: tone at the top, trust, transformation, and accountability.
The recommendations are organized into 10 categories, many of which deal with human resources, including: change senior leadership, enhance board oversight, implement training, improve the Human Resources function and the complaint process, enhance diversity and inclusion, change employee policies and practices, address employee retention, and review and assess Uber’s pay practices.
Two of the categories of greater interest to management accounting and finance professionals involve internal controls and reformulating Uber’s 14 cultural values. The Covington report recommends improvement in all internal control areas, particularly disbursement controls involving travel and entertainment expenditures. Uber’s culture apparently didn’t emphasize proper record keeping, which was mentioned in many of the recommendation categories. The report also recommends expanding audit committee responsibilities to include oversight of the code of conduct.
Uber hasn’t disclosed its core values publicly, but former employees and media reports have confirmed them. The Covington report recommends eliminating values “that have been used to justify poor behavior including Let Builders Build, Always Be Hustlin’, Meritocracy and Toe-Stepping.” Continuing, the report states that Uber should adopt and put into practice values that “are more inclusive and contribute to a collaborative environment, including emphasizing teamwork and mutual respect…not as an end in itself, but as a fundamental aspect of doing good business.”
The Uber board of directors concurred with the Covington recommendations to achieve a workplace environment where “all the great minds gather to work and succeed.” Their conclusion gives special emphasis to recommendations concerning increasing oversight by the board of directors. Covington suggests Uber create a standing board committee on ethics and culture whose mission is to enhance a culture of ethical business practices, diversity, and inclusiveness within the organization. The committee could establish and monitor compliance with Uber’s business values and promote an ethical and inclusive environment.
IMA ETHICS HELPLINE
For clarification of how the IMA Statement of Ethical Professional Practice applies to your ethical dilemma, contact the IMA Ethics Helpline.
In the U.S. or Canada, dial (800) 245-1383. In other countries, dial the AT&T USA Direct Access Number from www.usa.att.com/traveler/index.jsp, then the above number.
The IMA Helpline is designed to provide clarification of provisions in the IMA Statement of Ethical Professional Practice, which contains suggestions on how to resolve ethical conflicts. The helpline cannot be considered a hotline to report specific suspected ethical violations.
September 2017
