Uber founders Travis Kalanick and Garret Camp envisioned a great void in the taxi industry: its inability to adapt to emerging technologies and consumer trends. The founders transformed such a void into a powerful business opportunity by pioneering the ride-hailing service app.
In today’s globalized world, Uber is the most widely known and used ride-hailing service app – as it currently has more than 91 million monthly active riders and 3.9 million drivers across 63 countries.
Uber has achieved tremendous growth since its launch in 2009. However, such growth has been achieved through a bumpy and controversial journey.
Uber’s Struggling Reputation
The toxic corporate culture prevalent at Uber
In recent years and under Travis Kalanick’s leadership, Uber has been widely known for being a company whose workplace practices included sexual harassment, corporate theft, defiance of government regulations, reports of misbehavior, and a toxic corporate culture, which lead to the inevitable departure of some of the company’s key executives.
Kalanick, now Uber’s former CEO, was known for having nearly complete authority over the firm’s practices. The firm’s governance practices, for instance, ensured that the founders held super-voting shares and an unbalanced control over the firm’s guidance and direction. At the same time, Uber under Kalanick’s guidance was known for neglecting ethical and moral standards in its pursuit of profits and market share.
Moreover, even though Uber has radically shaped the terrestrial transportation industry since its emergence, it’s widely known that it has done so amid great controversies along the way.
Susan Fowler Publicly Denounces Uber’s Toxic Corporate Culture
Uber’s corporate culture crisis hit the top of the iceberg in February of 2007, when Susan Fowler, a former software engineer at Uber, publicly exposed the toxic culture of sexual harassment, intense sexism, and discrimination prevalent at the company.
She shared in her blog how Uber’s human resources department ignored all her complaints regarding sexual misconduct she and her colleagues experienced on a daily basis. Uber’s HR excused managers’ sexual misconducts by affirming that they were ‘top performers’ and would, therefore, not be disciplined.
However, Fowler explains that she reached her peak of tolerance when one of her female colleagues committed suicide after being unable to tolerate the daily sexual assaults from her managers. Her courage to come forward and publicly reveal Uber’s toxic work environment inspired hundreds of other Uber female employees to share their own stories – which led to Uber receiving more than 200 sexual harassment claims. Time Magazine highlighted and celebrated Fowler’s courage in exposing Uber’s toxic culture by naming her one of their Person of the Year. Uber has also faced strong setbacks from the several cases of sexual assault passengers have reported from its drivers.
Uber’s Never-ending fights with regulatory bodies
One of the company’s strongest and ongoing struggles has been the setbacks and protests faced from regulatory bodies and the taxi industry. Critics have accused Uber from taking drivers’ background checks very lightly.
Moreover, not all countries and cities have been very welcoming to Uber – as places such as the Netherlands, cities in China, Hungary, Northern Italy, and others have prohibited its use. Critics have also accused Uber from taking advantage of passengers in unpleasant situations by driving up the prices.
Classifying drivers as ‘independent contractors’ to avoid offering any benefits to them
Uber has been heavily criticized for considering its drivers as independent contractors rather than employees. By considering them independent contractors and not employees, Uber benefits by not providing any of the various benefits employers tend to entice employees with. Labor organizations have not taken such matter lightly, as they are in constant dispute with Uber over drivers’ wellbeing.
#Deleteuber Social Media Campaign
More recently, in January of 2017, more than 200,000 Uber users uninstalled their accounts after former CEO Kalanick decided to become part of Trump’s business advisory council. Even though Kalanick has shortly after decided to resign from the council, that didn’t stop thousands of users from engaging in the #DeleteUber campaign on social media.
Stealing Intellectual Property from Google’s Waymo Project
A month later, in February of 2017, Waymo – Google’s self-driving vehicle project – filed a lawsuit against Uber, accusing them of stealing both sensitive intellectual property as well as trade secrets from the company. The case began after Uber acquired Otto, a self-driving truck company run by a former Waymo engineer. As a result, Uber had to pay a $245 million settlement to Waymo.
Toxic Management Practices
Yet, perhaps the most worrisome problem Uber currently faces relies upon its management practices. It’s ‘founder- friendly’ governance structure, the human resources department covering sexual harassment complaints from those they considered ‘top-performers,’ the countless complaints from employees towards Uber’s HR department’s negligence, and its crisis over intellectual and property theft with Waymo all contributed towards the need for such urgent change in leadership.
Uber’s thirst and hunger for growth, power, and control seems to have taken over its values and regulatory standards. Without the right values instilled and its leadership failing to set the right work environment, Uber faced a bumpy and troublesome road ahead.
Desperate Leadership Change:
In June of 2017, after an endless amount of controversies at Uber, Kalanick stepped down as CEO. Shareholders decided that they will no longer be tolerating Kalanick’s dysfunctional leadership, toxic corporate culture, intellectual property theft, defiance of government regulations, and a culture of sexual harassment prevalent within his firm to go unnoticed. The situation demanded a new leader to set a new direction for the company.
Uber appointed Dara Khosrowshahi, an Iranian-American who was serving as Expedia Group’s CEO, as its chief executive. With Khosrowshahi, Uber envisioned a new road ahead. Khosrowshahi wanted to set a new course for Uber by leading and innovating in a responsible and sustainable manner. Among Khosrowshahi’s first moves was a company-wide acknowledgment of the catastrophic culture prevalent at Uber as well as a promise to correct mistakes from the past.
To help inject a new work environment at Uber, Khosrowshahi introduced eight new rules Uber’s corporate culture ought to be led by. These new rules were the following: “we build globally, we live locally; we are customer obsessed; we celebrate differences; we do the right thing, period; we act like owners; we persevere; we value ideas over hierarchy; and we make big bold bets.”
Yet, Khosrowshahi had a tough path ahead as Uber’s newly appointed CEO.
The most important one of all regarded the daunting task of prepping the firm for its long-awaited initial public offering (IPO). Khosrowshahi also had the challenge to harmonize Uber’s board of directors, as his predecessor, Kalanick, remained at Uber’s Board of Directors and was the company’s largest shareholder. At the same time, Khosrowshahi had to recuperate both Uber employees’ and customers’ confidence by transforming the toxic work culture into one that fosters personal growth, well-being, and healthiness.
In 2019, after a long-awaited decision, Khosrowshahi took Uber public.
Issues That Kept Uber from Listing its IPO Sooner:
Uber was considered one of the ‘unicorns’ of the century.
Unicorn is the term used by investors to describe those tech companies whose future not only look bright, but that would also draw the attention of countless individuals around the world. Therefore, Uber’s IPO created great expectations. The firm believed that they would reach a $120 billion valuation from its IPO. Yet, the reality proved to be totally different.
While many investors, analysts, and other stakeholders thought Uber would conduct its IPO way sooner than what they actually did, there were many factors that prevented Uber from listing its IPO sooner.
For instance, the firm was undergoing great scrutiny and criticism due to the unethical and immoral business practices the firm underwent under Travis Kalanick’s leadership.
Uber had to take some time to re-construct its public image and firm reputation from the negative footprint left by Travis Kalanick. The terrible mess Uber was involved in wasn’t something easy to overcome. For instance, the toxic corporate culture, the sexual harassment allegations, the ‘bro culture’ that prevailed in the company, the non- compliance issues to regulatory concerns, its problems with labor organizations, and its weak corporate governance where just some of the issues that were daunting the company.
Uber had to take some time to recuperate stakeholder’s trust in its business – which would take time, energy, and resources. Uber had to have its house in order first to then conduct its IPO; otherwise, the consequences would’ve been terrible.
Initial Stock Price vs. Stock Price Now:
Uber thought they could achieve a $120 billion valuation through its IPO. However, the results achieved were catastrophic. The firm’s stock went public at $45 per share and its stock price has since been dropping. Moreover, as the NYT’s article “How the Promise of a $120 Billion Uber I.P.O. Evaporated” details, Uber’s IPO is crowned as the “stock market debut that lost more in dollar terms than any other American initial public offering since 1975” (The New York Times). The matter of the fact is that Uber’s stock price did not even closely approached the initial $45 per share listed by the firm.
Today, Uber’s stock price is trading at $27.42 per share.
Here is a look at how Uber’s stock price has performed since its IPO according to Yahoo Finance:
How Has Uber’s Stock Performed? What is Plaguing the Stock?
As we can clearly see from the graph, Uber’s stock has not been performing as expected and its stock valuation is far from the $45 per share listed at the time of its IPO. The stock is currently under-performing. It’s evident that Uber has failed to reach its IPO’s goal.
There are many reasons why Uber’s stock is underperforming.
For starters, Uber has not yet reached profitability. Its business model has not effectively created a profit. The truth of the matter is that Uber is charging very low prices to capitalize on market share and consumer traffic. However, such low prices fail to make the company profitable. At the same time, Uber knows that if they raise prices, they will lure customers away.
Moreover, as The New York Times’ article “How Uber Got Lost” states, “Interest in shorting Uber stock has only grown since the I.P.O.” The fact that Uber has sought growth at all cost has created terrible consequences for the company, as it’s still recovering from the terrible reputation from Kalanick’s tenure as CEO. Moreover, Uber is still not accepted everywhere, as many countries across the globe either prohibited or suspended its operations.
Many analysts argue that Uber has a long-road to profitability. According to The New York Times, Uber will most likely break-even by 2023. Yet, there is a lot that could happen and change since then.
Yet, there is no doubt that Uber’s ride-hailing service app is a game-changer in the transportation landscape. The app has great potential and will continue to be both the most widely-known and used ride-hailing app in the world – giving it great potential to, if the right leadership is instilled, be a massive success.
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