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Uber CEO Travis Kalanick takes leave amid wave of scandals

Co-founder of the ride-hailing company will have a diminished role when he returns. The move comes after a probe by former Attorney General Eric Holder.

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Uber CEO Travis Kalanick is taking a leave of absence but hasn't said how long it will last.

James Martin/CNET

Uber CEO and co-founder Travis Kalanick said Tuesday he's taking a leave of absence. The news comes after an independent investigation recommended that changes to senior leadership are needed to mitigate the slew of scandals that have plagued the ride-hailing company over the past several months. 

"The ultimate responsibility, for where we've gotten and how we've gotten here rests on my shoulders," Kalanick, 40,  wrote in a memo to Uber employees. "For Uber 2.0 to succeed there is nothing more important than dedicating my time to building out the leadership team. But if we are going to work on Uber 2.0, I also need to work on Travis 2.0 to become the leader that this company needs and that you deserve." 

The announcement casts a cloud over Uber's future. The company, founded in 2009, managed to upend the taxi industry and become the world's most valuable startup, with a valuation of $68 billion. With its no-apologies attitude and notoriously aggressive co-founder, Uber is also now one of the biggest ride-hailing services on the planet. While this approach helped the company grow, it's unclear if it can be sustainable in the long run.

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"It's dangerously high-risk for the company to continue with a CEO who has yet to reach even an adolescent maturity," said Eric Schiffer, brand management expert and CEO of Reputation Management Consultants. "The knives are out in many corners because of what he has done with his approach to women, his approach to people in general and certainly his appropriateness as a CEO."

Kalanick and Uber's unraveling began with a blog post.

Engineer Susan Fowler wrote about her "very, very strange year at Uber" in February, detailing a chaotic company culture rife with gender bias, sexual harassment and unprofessional business practices.

After Fowler published her blog post, Uber hired former US Attorney General Eric Holder to lead an inquiry into allegations of sexual harassment at the San Francisco startup. He reportedly finished his investigation a few weeks ago and presented it to Uber's board of directors to review, along with a set of recommendations. Uber's board on Sunday unanimously voted to adopt all of Holder's recommendations.

During the investigation, Holder's team conducted more than 200 interviews with current and former employees. It also spoke with people who knew about Fowler's allegations and held focus groups with employees about perceptions of Uber's workplace culture. The final 13-page report has 10 main recommendations, which include everything from "changes to senior leadership" to "improvements to human resources and the complaint process."

"Implementing these 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," said Liane Hornsey, Uber's chief HR officer. "While change does not happen overnight, we're committed to rebuilding trust with our employees, riders and drivers."

For Schiffer, however, the report's recommendations all go back to issues with Kalanick's leadership.

"At this point there are many people who'd like to see that CEO buried alive in what appears to be a cesspool of evils," Schiffer said.

Top down

When Fowler published her post, Kalanick apologized and pledged to make Uber a better place to work. In an email to employees in February, he wrote he believes in "creating a workplace where a deep sense of justice underpins everything we do."

But less than two weeks later, Kalanick was caught in a dashboard video arguing with an Uber driver over fares. "Some people don't like to take responsibility for their own shit. They blame everything in their life on somebody else," Kalanick told the driver as he got out of the car and slammed the door.

Again, Kalanick apologized and promised to change.

"It's clear this video is a reflection of me -- and the criticism we've received is a stark reminder that I must fundamentally change as a leader and grow up," Kalanick wrote in an email to Uber employees. "This is the first time I've been willing to admit that I need leadership help and I intend to get it."

But Uber's scandals continued to mount.

In short: Google filed a lawsuit against the ride-hailing company, claiming it stole self-driving car technology; Uber's secretive Greyball tool meant to thwart police was uncovered; the ride-hailing company was caught using a program called "Hell" to spy on its rival Lyft; it was revealed Apple threatened to boot Uber from the App Store for violating privacy rules; and a long list of top executives have either been fired or stepped down.

The most recent to leave is Kalanick's right-hand man and Uber's senior vice president for business, Emil Michael. Also known for creating scandals, Michael said in 2014 he wanted to "dig up dirt" on Uber's critics in the media. Earlier this year he was accused of attempting to cover up a visit by Uber employees to a karaoke-escort bar in Seoul, South Korea.

By adopting all of Holder's recommendations, which include setting inclusion and diversity goals for the company's executives, Uber's board seems serious about change.

Last week, the company fired more than 20 employees after another investigation into sexual harassment allegations, this one conducted by the law firm Perkins Coie. Uber put another 31 people in counseling or training and gave written warnings to seven others.

Uber investors Mitch and Freada Kapor had some harsh words for the company after Fowler published her blog post, saying they've seen Uber continually "apologizing and vowing to change, only to quickly return to aggressive business as usual." After Holder's recommendations were released to the public Tuesday, they now appear cautiously optimistic.

"Everyone, from drivers to employees to investors, will be watching to see that the implementation of today's recommendations are handled professionally," the Kapors wrote in a statement. "At this point we believe that the company deserves some room to put the plan into effect and show us what can be done." 

Kalanick said one of the main reasons for his leave of absence is to grieve the loss of his mother, who died in a boating accident in late May. It's unclear how much time he'll take. When he returns he is expected to have a diminished leadership role and an independent chair will be appointed to the company's board to help limit his control. Uber is also actively recruiting a chief operating officer to "act as a full partner" with Kalanick and share in his day-to-day duties.

Even with a reduced role, however, Kalanick will still keep a tight grip on Uber. That's because he's amassed major voting rights power over the privately held company through stock shares he already owns and buybacks of shares from employees, according to The New York Times

Kalanick will also reportedly not be attending this year's Sun Valley Conference. His name was not on a guest list obtained by Bloomberg News, but it's unclear if he wasn't invited or chose not to attend. The annual Sun Valley Conference, held at Idaho's Sun Valley resort, typically attracts powerful people from the worlds of media and finance. 

As for Fowler, she's kept a low profile since she publicized her former employer's problems. But brand management expert Schiffer credits her for Uber's change.

"She was one of the calls to arms that helped alert the world to the terrible dysfunction and unhinged environment that was going on in that company," Schiffer said. "She should be lionized for having the guts and the strength to step up and speak her truth."

Fowler didn't return a request for comment.

First published June 13, 10:27 a.m. PT.
Update, 3:20 p.m.: Adds comment from Mitch and Freada Kapor.
Update, June 14 at 10:08 a.m. PT: Adds report of Kalanick not attending the Sun Valley Conference.

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