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June 14, 2017
SAN FRANCISCO — It's clear from former Attorney General Eric Holder's recommendations on how to fix Uber's dysfunctional management that the male-dominated company grew huge without even the most basic procedures to prevent sexual harassment, bullying and other bad behavior.
The 13-page document from Holder's firm Covington & Burling LLP released Tuesday exposes a startup-turned-goliath that permitted misconduct, had few policies to protect employees and ran with little board supervision.
The recommendations, adopted unanimously by Uber's board, show clearly that the next version of Uber, called 2.0 by CEO co-founder Travis Kalaninck, will have to be much different from the free-wheeling company that flouted regulations and disrupted the taxi business to become the world's largest ride-hailing company.
Kalanick told employees Tuesday that he'd be taking an indefinite leave of absence.
The Holder investigation started after former engineer Susan Fowler posted a blog in February detailing harassment during the year she spent at Uber, writing that she was propositioned by her manager on her first day with an engineering team. She reported him to human resources, but was told he would get a lecture and no further punishment because he was a “high performer,” she wrote.
After interviewing 200 witnesses, Holder had to make such basic recommendations as setting clear policies to protect workers from harassment, and that the human resources department get a better handle on keeping records and tracking employee complaints. It even suggests such simple procedures as using performance reviews to hold leaders accountable and requiring all employees to turn in receipts so the company can make sure expenses match its values.
The recommendations “definitely paint a picture of a company that was out of control and pretty chaotic,” says Elizabeth Ames, a senior vice president at the Anita Borg Institute, a nonprofit aimed at advancing women in the technology business.
Holder also suggests that Uber change its written cultural values to promote positive behavior, inclusion and collaboration. The company should eliminate values that justified poor behavior, such as “Let Builders Build,” “Always Be Hustlin',” “Meritocracy and Toe-Stepping” and “Principled Confrontation.”
Holder also called for trimming Kalanick's job duties, shifting day-to-day functions to a yet-to-be-hired chief operating officer. During Kalanick's leave, his leadership team will run the troubled company.
Kalanick wrote that he needs time off to grieve for his mother, who died in a May boating accident. He also said he's responsible for the company's situation and needs to become a better leader — echoing comments the 40-year-old CEO made earlier this year after a heated argument with an Uber driver over pay was captured on video.
Uber's board said it would review Kalanick's responsibilities and reassign some to others.
Ames said the recommendations were strong but indicated Uber had few policies, and the ones it had were not followed.
The board unanimously approved the recommendations on Sunday, including a suggestion that a senior executive be tasked with making sure they are implemented. Apparently because of distrust of some leaders, Holder recommended that care be taken to make sure the executive “is viewed positively by the employees.”
The company released only Holder's recommendations, not his full report, citing the need to protect employees who complained.
Liane Hornsey, Uber's chief human resources officer who started in January, said implementing the recommendations “will improve our culture, promote fairness and accountability, and establish processes and systems to ensure the mistakes of the past will not be repeated.”
Holder also recommended adding independent directors and replacing the board chairman, co-founder Garrett Camp, with an independent person. The board currently has eight voting members, three from within the company.
Uber was also advised to make sure its workforce is more diverse. The company's diversity figures are similar to the rest of Silicon Valley, with low numbers for women and underrepresented minorities. In the U.S., less than a third of the company's workers are female.
In addition, the report says that diversity and inclusiveness should be a key value for Uber that's included in management training.
After Fowler posted her blog, Uber Technologies Inc. made changes in human resources and opened a 24-hour hotline for employees. Last week, the company fired 20 people including some managers at the recommendation of Perkins Coie, which separately investigated 215 employee complaints.
On Sunday, Emil Michael, Uber's senior vice president for business and a close ally of Kalanick, left the company.
Under Kalanick, Uber has disrupted the taxi industry in hundreds of cities and turned the San Francisco-based company into the world's most valuable startup. Uber's valuation has climbed to nearly $70 billion.
Besides the sexual harassment complaints, in recent months Uber has been threatened by boycotts, sued and subject to a federal investigation over its use of a fake version of its app to thwart authorities looking into whether it is breaking local laws.
A company can be aggressive yet have strong values, said Joseph Holt, a business ethics professor at the University of Notre Dame. He cited Starbucks as example.
“Having a good reputation for ethics is a competitive advantage,” Holt said.
A culture change at Uber may be more difficult than Holder envisions. At an employee meeting to unveil the recommendations, board member David Bonderman, a hedge fund founder, remarked that if a woman was added to the board that there likely would be more talking, according to a recording obtained by Yahoo. He later apologized for the “disrespectful” comment in an email.
“It was inappropriate,” he wrote.
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