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Comment by twblalock | Hacker News Reader

Here's the money quote:

> If Mr Gurley and the rest of the board cannot find an experienced candidate willing to work with Mr Kalanick, calls for him to step down may grow louder. But that is his decision to take. Uber is a prominent example of founders’ power at fast-growing tech firms. On its own, Uber’s board does not have the clout to change the CEO, because of his super-voting shares and those of his co-founder, Garrett Camp: together they control a majority of the voting stock.

Well, that's a pretty bad corporate governance problem. The CEO's behavior, and the culture he created at the company, have badly damaged the company's image and driven away senior executives and probably a lot of engineers too -- and yet the board can't get rid of him.

I would certainly think twice about investing in a company whose board is powerless to do anything about such a terrible self-inflicted wound.

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While I'm not sure I disagree with you, devil's advocate here...do you think you'd feel the same way as a founder who could prevent yourself from ever being fired from your own company? I can think of several situations where retaining that kind of control would be hugely beneficial and important (in the right hands of course, which is the whole issue here).

And that's why Google and Facebook (I think) both took steps for the founders to retain control in that manner. So that they would be able to focus on what's important to the company vs. bs next quarter results. And it's worked out well for both of them. But of course, they don't seem to have the "ethics" issues that Uber does.

If google had a ethics issues, i certainly never found something on that on the web :D

I suspect that most CEOs would like that level of control, but they shouldn't get it.

Care to elaborate on why? The initial condition here is founders having full voting rights. In a free marketplace, they're free to sell shares without (or with little) voting rights as they wish. If investors aren't happy with it (which doesn't seem to be the case), they're free to not invest.

You seem to be stating that there's a moral imperative that founders voluntarily give away voting rights to investors.

I don't know if I would call it a "moral" imperative, but it's a basic tenet of good corporate governance that the board, which represents the shareholders, should be able to prevent the management from harming the company or the shareholder's interests.

In the case of Uber, the CEO could run the company into the ground, and nobody would be able to prevent that.

A trend toward worse corporate governance could harm the entire economy eventually.

Got it, I can buy into the argument that pro-rata voting rights would lead to better performing companies than founder-controlled companies (in the long run and on average).

But, I don't see any reason why founders should be obligated to give away voting rights.

In other words, I would argue that if founder CEO's want that level of control, they SHOULD get it.

It's sort of weird to even phrase it as "get it". They already have it by default, and I don't see why we should have any right to force them to give it away.

Isn't that the "risk" part of private investment like this?

In theory if/when Uber goes public, the market can hammer his share price into submission. His choice then would be to step down and keep his money, or watch his valuation rapidly dwindle as low as the market dictates.

The investors came into the company knowing he will keep the control it was a risk they were willing to take. Even if he runs it into the ground they don't have a leg to stand on. They were not strong armed into investing it was a choice they made.

Problem is, every founder thinks theirs is the right hands.

It also raises another good question: how big of a fool would you have to be to take the job Gurley and the board are trying to fill? How do you rein in a CEO who has total, unchallengeable control of the company?

(Maybe if they offer enough money, it's worth it even if it's a suicide mission? Though "just cash the checks and wait for your inevitable dismissal" doesn't seem like an attractive offer for anyone who's good enough to have alternatives.)

There's practically a limitless supply of people that would do it for $10 million.

The problem is finding someone worth paying that much (and the pretense that whether someone is worth paying that much can be determined ahead of time).

In situations like this, in which an executive is hired to reform a company and is set against entrenched management and culture, golden parachutes seem entirely justified to me.

I'm not so sure. Wouldn't it be better for society overall if these companies were condemned to die by their own hand, instead of being able to be saved by an outsider? If they're saved, then all the people who participated in creating this toxic culture are rewarded. If the company goes belly-up, then any valuable assets can be bought by other firms for pennies on the dollar, and those and other competing, and hopefully better-run firms will have a shot at success, with this toxic company cleared out of the market and leaving a void.

I'm not following. Are you proposing that companies should not be allowed to hire someone from the outside to fix severe culture issues? The problem with such a policy is the mechanism through which we'd determine which companies are condemned.

From your comment, I gather that if it were up to you, you'd sentence Uber to death instead of giving them a shot at redemption. You wouldn't be alone in this perspective, but I think you're overlooking the thousands of GOOD people that would be adversely affected and punished by such a decision. All to punish a couple people you believe to be evil.

>Are you proposing that companies should not be allowed to hire someone from the outside to fix severe culture issues?

Not exactly, just that they shouldn't be able to offer them generous golden parachutes.

Of course, I'm not so sure about the legality of this, but perhaps within corporate law a law could be made that companies aren't allowed to promise enormous sums of money to people when they fail to fix the problem, and the company is now in dire financial straits. When the company is having severe financial difficulty, the first dibs should go to anyone it owes money to, not someone they promised a big golden parachute to in case he couldn't turn it around.

>I gather that if it were up to you, you'd sentence Uber to death instead of giving them a shot at redemption.

Absolutely. The good people should have found new jobs by now; all accounts now show this company to be truly toxic, at many levels (not just "a couple people"). They should not be rewarded with a shot at redemption. Now, if they can find someone willing to take on this challenge of turning the company around, who is willing to assume a great deal of risk in doing so (at least risk not getting paid much for it), then that's fine. I just don't think they should be allowed to offer a golden parachute if that person fails. Then, such people can evaluate such offers based on the true risk of the situation, instead of knowing they'll be safely off with their golden parachute if they can't make it work.

Thanks for clarifying.

The negative impact of such a decision wouldn't just be on Uber employees, but also the 500,000 drivers actively using their app; on average making $30K per year. A large fraction of these people are probably depending solely on this income to make ends meet.

In an ideal world, there'd be an immediate replacement for Uber for all these drivers to switch over. However, we all know that's wishful thinking. At best, capacity would only be halved, which still means you'd effectively be letting go of 250K people tomorrow.

Imo, even if your goal is to enact maximum punishment on Travis and Co, doing so THROUGH punishing the company is a really destructive way to accomplish said task.

You think Uber drivers can't just switch to the competition at the drop of a hat? Lots of them already work for both Uber and Lyft at the same time! They're the absolute last people I'm worried about hurting here. There are other "ride-sharing" companies out there, you know. And when Uber is clearly going down the drain, more competitors will pop up in anticipation of taking advantage of the situation.

What percentage of customers/drivers do YOU think would switch over to Lyft et al?

From my experience in growth/marketing, I would bet there would be around 50% drop off, but I could definitely be wrong! These things are hard to guess. (Customers need to switch as well as drivers)

Even a 1% drop off leads to 5000 people let go. Anything substantial would lead me to strongly considering other avenues of redemption.

To be sure, I'd want to better understand the magnitude of effect here before saying that sentencing Uber to death is "absolutely" the right thing to do.

>What percentage of customers/drivers do YOU think would switch over to Lyft et al?

Um, all of them? If Uber went under, what choice would they have? Why would customers give up on Uber/Lyft and go back to cabs, when there's at least one company that does almost the exact same thing and is a direct competitor? Why would they refuse to install the Lyft app, when they've already shown they're willing to install the Uber app? And why would drivers not go to work for the competition, esp. with a giant void left by Uber in the market?

I'm sorry, I think your argument is ridiculous. Right now, I'm eating some spaghetti for dinner that I just made. It's made with Brand X spaghettin and Brand A of sauce. Now if either of these brands suddenly went under and disappeared from the supermarket aisles, do you think I'm going to just stop eating spaghetti altogether? That's insane. And even that would make more sense than this Uber scenario. Uber is just a way to get you from point A to point B, and has succeeded so far because it's both cheaper and more convenient, in most cases, than the incumbent services. People aren't going to suddenly stop needing to get transported places without Uber around, nor are those incumbents improving enough to get them back, at least in many places (if they were, Uber would have a large loss of ridership there already). And Lyft is already there (in many markets at least), offering the exact same service as Uber, frequently with many of the same drivers. Why wouldn't people switch? There's only two reasons: 1) ignorace (easily countered with some advertising, plus word-of-mouth from drivers during Uber's last days), and 2) lack of availability of Lyft or other competitors in certain locations (I believe Toronto does not have Lyft for some odd reason). At least with my spaghetti example someone might say they love sauce brand C so much that they just wouldn't bother making much spaghetti without it and would eat other stuff.

I agree with the reasons you ended your last comment on. Ignorance and lack of availability (or rather a mismatch in supply and demand) would surely lead to drop-off. In addition, laziness will lead to drop-off i.e. "Uber was marginally better than taking the next best alternative for me. I'll just go back to that now because I'm too lazy to figure out this Lyft thing".

I'd guess the difference in our conclusions is based on your belief that these are "easily countered with some advertising".

Most of my background is in paid advertising, and reactivation on defunct company contacts is never close to 100% -- not even close.

I still don't see the problem. In this case, the people too stupid to figure out the Lyft app (seriously, if you can figure out the Uber app, then the Lyft app isn't any harder) can just go back to using cabs. So the cab drivers now are making more money, and the cab companies will need to hire more people, who could be former Uber drivers. What's the problem?

Keeping around rotten management because you don't want to disrupt the people below them is always the wrong thing to do, because then you're not fixing the problem, you're letting it fester.

If people go back to cabs then all is fine from an employment standpoint, but the problem is the section of customers whose best alternative is public transit, walking, cycling. (I'm in this group)

After thinking more about this, I think I actually agree with your argument that we should sentence Uber to death just because it's the 'right' thing to do even if it indirectly leads to unemployment of a lot of people.

However, we started this thread under a shared premise of utilitarianism. If we treat these 'death sentence' decisions on on a case-by-case (i.e. no future precedent set), it's hard for me to believe punishing the 'corrupt management' (which probably only amounts to a dozen individuals) is worth screwing with peoples' livelihoods. At Uber's scale, it just seems like a given that there will be hundreds of people whose lives will be SERIOUSLY screwed, albeit indirectly.

I think it's more than a dozen individuals; from what we're seeing with Uber, and what I know about corporate culture from experience, bad corporate culture permeates the entire company, from the top down. In Uber's case, this means not only their executives, but also their HR department (which backs up harassers), and also their engineering (which is very large for a company like that). The drivers are a different thing because they don't work directly with the corporate HQ people and are really just part-time contractors anyway. So I really don't have a problem with those hundreds of people at Uber HQ getting seriously screwed. Most of them will probably get jobs elsewhere anyway, though they'll now have the Uber resume stain, but these people aren't poor people living paycheck-to-paycheck, they're relatively wealthy Silicon Valley office workers (engineers, managers, etc.).

For everyone else, drivers, customers, etc., I really do think they'll just move on to other things and it won't be a big deal. Lyft seems to be doing fine, though it'd be nice if they eliminated the tipping.

Yeah, it sounds like nearly a nearly textbook definition of one of the problems capitalism (and a "free market" with low barriers to entry) are supposed to solve. You don't challenge someone's control of their company, you just challenge the company. "Good" employees and customers who object to their culture jump ship to yours; "bad" employees go down with the ship.

Of course, because of the innumerable real-world confounds to the model (not least of which is the artificial-or-otherwise high barrier to entry that most industries seek to ensconce themselves in), this doesn't happen anywhere else, but at least here with novel companies competing in their early stages, I don't see why anyone would bother "saving" a company that will be dragging against you every step of the way you can just invest in one of its competitors and let that dragging force drag your competition down, to your advantage.

If the "capitalism will save us" model can't succeed here of all places, I don't know why people still bother with it anymore.

I know Steve Jobs is the exception that proves the rule, but still, Apple fired Steve.

"I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. ..... I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it." - Steve Jobs

The Steve Jobs Apple fired was not the same man that returned to save the company. The caricature portrayal of him with an aggressive, petty, demanding, obnoxious style were all pretty much true back then. If Kalanick is at an equivalent stage, then Uber may really desperately need to get rid of him. Whether he ever vindicates himself and realises a greater potential remains to be seen, but it may well be that remaining at Uber regardless of his behaviour will just feed the negative side of his nature.

Except as twb points out, the Uber board can't oust him. And somehow I feel like a Jobsian journey of self-discovery is outside the reach of someone whose problems aren't coming from a perfectionist streak but rather a disdain for the customers/workers/employees using/building the service.

On the other hand, sounds ripe for some other company not struggling with the same culture issues nor saddled with the sizable VC debt to come in for the kill.

Uber's board can't, though.

Well the Captain should be the last one to leave the sinking ship that he ran into the iceberg. :)

At this point I don't know if even a new CEO could save this company.

> At this point I don't know if even a new CEO could save this company.

Honestly I am more concerned about saving the world from this company, because it still looks like they are going to win. Have you seen any signs that Lyft can compete in the worldwide market?

They are in deeper trouble than that. If they cannot resolve the Waymo lawsuit in an economical fashion they will just wither and die, Lyft or not.

They are valued at 70 Billion, how does that just wither and die? One lawsuit can be dragged out a long time and their lawyers will do their best to reduce and fees no matter how wrong Uber actually is (or isn't I don't know).

Consider the size of Uber now and compare that to the size of Microsoft 15 years in the DOJ antitrust trial. They are about the same size, that gives them lots of options.

Valued at means nothing really, it speaks to investment and while its not worth nothing they are currently burning about 3/4 billion per quarter [1], and have no profitable quarters anywhere on the horizon.

They have always been betting their future on autonomous cars and the Waymo lawsuit stands a good chance to set them back a decade and they do not have the current capital to withstand that.

MS was already public when they had the antitrust lawsuit and was making money. To try and compare MS and Uber is not close to the same thing.

[1] https://www.bloomberg.com/news/articles/2016-12-20/uber-s-lo...

$3 billion per year isn't that much at that scale, it would still take them many years to burn through their estimated cash reserves. That is if they did nothing and earned no money, but they earn something. They would have time to come up with a plan even if it were a backup backup plan that involved shedding a large fraction of the company.

If anything being public hinders options. Being private they can do a huge number of things public companies cannot, first and foremost is an IPO.

they don't have 70 billion in cash. They have raised 8.8 billion so far and have spent a fair chunk of that as is.

I never claimed they had 70 billion cash, just that they had large cash reserves. 8.8 is enough for two and half years if they don't earn a cent.

They have raised $15B+ and spent what, less than $5B? They have lots of runway left.

They are currently burning between 2-3B a year, that's not a lot of runway, especially with the Waymo lawsuit poised to set them back a decade.

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