Corporate governance time and again. A Forbes

Corporate
governance controls the processes that govern the functioning of a company,
which includes, balancing interests of stakeholders, customers and government.
They all need to be maintained on the same page for the organisation to
function smoothly. The board of directors which includes founders and
executives and other independent members who have vast experience in leading
other companies and firms often play an important role in balancing the
interests and playing the policies.

A
company is known to have bad governance when it tolerates or supports activities
which are illegal. Selection of not unestablished auditors, resulting in publishing
of faulty financial reports, even the inappropriate compensation paid to executives
are instances of bad governance. When there is a differentiation between
minority and majority stake holders it also results in bad governance.  

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Better
governance is when the firm is transparent about its operations with
stakeholders. Stakeholders invest in the firms keeping good governance as one
of their main criteria. Although profit is important but having a good
governance is equally important.

Uber

Uber
showcased failed corporate governance time and again. A Forbes article dated
Dec 05, 2017 is rightly titled “Uber’s
Uber Breach: A Stunning Failure In Corporate Governance And Culture”. Uber
currently faces five criminal probes from the Justice Department. It faces an
intellectual property battle from Waymo, Alphabet Inc. with respect autonomous
driving technology. Apart from these, Uber is fighting civil lawsuits in
various countries. Uber is also accused of using a software to spy on
competitors and elude regulators. Further, Uber is being investigated in Asia
for bribery.

What
drove a company, valued at $70 billion today, in such a messy situation? With
notoriety become synonymous with Uber, is the leadership at Uber responsible
for its state today? Does organization culture play a crucial role driving the
health and success of a company? The report presents answers to these questions
and illustrates failure of corporate governance and organizational culture.

Uber
was initially founded as UberCab in 2009 by cofounder of StumbleUpon, Garett
Camp and founder of Red Swoosh, Travis Kalanick. Kalanick gives full credit of
the idea to Camp by saying, “Garett is the guy who invented that shit” at
an event in San Francisco. Camp always pondered upon ways to decrease the fares
of luxury car services and making them affordable by sharing the cost among
people which gave rise to the idea of Uber.

Uber
launched its mobile app services in San Francisco in 2011. Initially the
application was only for hiring a black luxury car for a fare that was 1.5
times of a taxi. Ryan Graves who was hired after responding to a tweet became
the first CEO after the launch. Soon after 10 months Kalanick succeeded Graves
as CEO. Ryan became the company’s COO.

UberCab
changed its name to Uber in 2011 because of rising complaints from local taxi
operators. The company hired physicist, neuroscientist and machinery expert to
identify demand for hiring cabs.

In
2012, CEO Kalanick realised, Uber will require in-house legal assistance and
roped in Salle Yoo. One of Salle’s initial assignments was to answer the question
as to whether Uber should ignore taxi regulations. During that time many
start-ups in San Francisco like Sidecar and Lyft Inc. were coming up with more
complex business models. Kalanick complaint these companies of breaking the law
but all of it went in deaf ears. He then asked Yoo to help him in preparing a
framework which is legal.

Later
in 2013, Kalanick’s view of the law changed. He tried to expand rapidly while
facing many blowbacks in the process. The company followed its CEO’s orders and
operated to outperform its competitors wherever the rules were not actively
enforced.

Uber’s
staff found an innovative way of outperforming competitors by convincing the
drivers of competitors to drive for them. Uber’s office in Sydney developed a
program called Surfcam which swept competitor’s data to find out how many
drivers are there on their system and their locations. This software was mainly
used on Grab which was Uber’s main competitor in South-East Asia.

On
the similar lines staff team at San Francisco also created another software
known as Hell. It helped Uber in locating Uber drivers in the city at any given
moment. The legal team observed that since the laws on scraping data were
unclear in US so they went ahead with the software and swept Lyft’s data.

The
investigation by federal authorities need to be creative and find ways of
prosecuting the company because as per co-director of Harvard University’s
Berkman Klein Center for Internet and Society, Yochai Benkler, whatever
regulations Uber has violated, none of them comes under explicit violations.