CXO

How Uber's toxic culture forced Kalanick out

Facing pressure from investors, Uber CEO Travis Kalanick officially resigned from the company. The move illustrates why it's crucial for businesses to treat employees well.

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Image: ZDNet

Travis Kalanick, CEO of ride-sharing company Uber, was forced to step down from his position on Tuesday, according to a report from The New York Times. Uber, the multi-billion dollar Silicon Valley startup founded in 2009, has faced a litany of scandals over the last six months—everything from charges of sexual harassment, discrimination, trade secret thefts from competitor Lyft, and manipulation of government regulators.

On Tuesday, in a letter entitled "Moving Uber Forward," five major investors from the firms Benchmark, Fidelity, First Round Capital, Lowercase Capital, and Menlo Ventures, requested that Kalanick resign immediately. Facing pressure, Kalanick agreed, saying in a statement "I love Uber more than anything in the world and at this difficult moment in my personal life I have accepted the investors request to step aside so that Uber can go back to building rather than be distracted with another fight."

Investors clearly saw Uber's chain of scandals as bad for business. And Kalanick may have already seen the writing on the wall. Last week, as reported by ZDNet, he took a leave of absence.

While Uber has faced a series of damaging allegations, including a lawsuit from Waymo about the theft of self-driving secrets, perhaps its most widely-publicized scandal involved former engineer Susan Fowler, who alleged that she and other women at the company were sexually harassed and reported toxic workplace practices, prompting an independent investigation. The report over sexual harassment resulted in the firing of more than 20 employees. Last week, David Bonderman, a founder of private equity firm TPG Capital, an Uber investor, resigned from the board after making a sexist comment.

All of these signals about Uber's culture matter. "Uber wants to court investors, employees, drivers, and riders," said Bryant Walker Smith, professor at the University of South Carolina and one of the leading experts on the legal aspects of self-driving cars. "Particularly for the first two, image and vision matter—and can be heavily influenced in fact and perception by a public-facing leader."

Seeing a space to capitalize on Uber's mishaps, a number of competitors have sprung up, hoping to lure customers away from the ride-sharing giant, toward more socially-conscious alternatives.

Beyond its title as the ride-sharing giant, Uber has many other ventures in tech as well: In 2016, it unveiled self-driving fleets to the public in Pittsburgh and purchased Otto, a self-driving trucking company. The company has also invested heavily in AI, launching Uber AI Labs. It even claims to be working on flying autonomous cars.

Uber's problems highlight issues with culture at Silicon Valley startups. It's common knowledge that many tech companies, especially Silicon Valley startups, have a diversity problem. Uber was recently accused of using an algorithm to set pay, which led to female employees being paid less, which is a charge has been brought against other Silicon Valley tech companies as well.

And it's still unclear whether Kalanick's departure will have a significant impact on the company's bottom line.

SEE: Uber president quits over 'beliefs' and 'leadership,' highlighting toxic company culture

Michael Ramsey, autonomous vehicle analyst at Gartner Research, said he is surprised the board forced Kalanick to step down—that, in fact, Kalanick's bravado may have contributed to the company's success. "The same aggressive behavior that sometimes put Uber in a bad light is why Uber muscled its way into a leadership position in ride-hailing," said Ramsey. "Time will tell if it was the right move."

It is not, Ramsey said, unusual for CEOs to leave, although it is not common. "Apple pushed out Steve Jobs and Tesla's board tried to push out Elon Musk at one point," he said.

"There are a few other instances like this," said Ramsey, "though the circumstances are different."

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About Hope Reese

Hope Reese is a Staff Writer for TechRepublic. She covers the intersection of technology and society, examining the people and ideas that transform how we live today.

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