Uber adds a board member as Kalanick’s fate remains in doubt

Uber chief executive Travis Kalanick. (Reuters, CBS, Handout)

The Uber board’s drive to pull one of Silicon Valley’s most closely watched companies out of its months-long nosedive moved ahead on Monday, with the departure of a controversial top executive and the addition of a new outside director amid the fallout from a report on workplace culture by former U.S. attorney general Eric Holder Jr.

Departing is Uber Senior Vice President Emil Michael, a close ally of chief executive Travis Kalanick, said a person familiar with the decision, speaking on the condition of anonymity. And joining the board, this person said, is Nestle Executive Vice President Wan Ling Martello. Kalanick himself, according to multiple reports, is considering a leave of absence.

The moves come ahead of Tuesday’s highly anticipated report from Holder, whose recommendations were accepted in total by Uber’s board during a marathon meeting on Sunday. The report to employees will include only the recommendations themselves, not the full report, because of concerns about the privacy of the hundreds of people who communicated their concerns about Uber’s allegedly toxic workplace culture to investigators. The company has fired 20 employees and reprimanded others because of findings related to the investigation.

The actions, taken together, leaves enormous unresolved questions about the future of the embattled ride-hailing company. Top among those is whether Kalanick will himself step down for a temporary leave of absence, a possibility that raises further questions about who could take his place. Reuters reported Monday that he is “likely” to do so.

But whoever winds up running Uber for the next few months, one thing is clear: He or she will inherit a mountain of challenges that’s so far gone unaddressed as the company’s lurched from crisis to crisis. As the controversies pile up, those problems could languish or worsen, throwing Uber into even greater disarray. Here’s what you need to know.

Uber’s many high-profile missteps this year have been reflected in customer trends, with some users choosing to switch away from the service in favor of rivals, according to outside analysts. Much of this change began in late January after the #deleteUber campaign began circulating on social media, in response to the way Kalanick handled President Trump’s travel ban for Syrian refugees.

“There was a nearly literally overnight shift in marketshare when #deleteUber first came out,” said Jonathan Wolf, chief executive of TXN Solutions, which uses credit card spending data to track consumer trends. “That shift has stayed — as Uber has run into subsequent woes, there’s been a slow steady drip [of people switching away from Uber].”

Uber’s main rival, Lyft, now accounts for 25 percent of all trips taken in the U.S. ride-hailing market, up from 18 percent at the beginning of the year, according to data from TXN. In recent months, Wolf added, even loyal Uber customers that have stayed with the service have also increased their spending on Lyft. Uber didn’t immediately respond to a request for comment.

Lyft’s own ridership figures appear to underscore the damage of Uber’s scandals on its own business. In the fourth quarter of 2016, Lyft said, its drivers were responsible for 52.6 million rides. But in the first quarter of 2017, ridership had surged to 70.4 million rides, significantly exceeding expectations.

“I think it’s safe to say that our growth trajectory shifted dramatically upward since the beginning of the year, and some of that growth is undoubtedly due to Uber’s problems,” said Adrian Durbin, a Lyft spokesman. Durbin declined to provide more recent statistics, but added that the company’s growth has continued at a higher rate than its initial internal projections.

Meanwhile, Uber continues to slog through a court battle with Waymo, the self-driving car outfit owned by Google’s parent company, Alphabet. Waymo has accused Uber of stealing the laser-sensing technology that allows driverless cars to see their surroundings.

The lawsuit has already led to the firing of a top Uber engineer who was responsible for the company’s automated vehicle development. Now, how the suit turns out could have massive ramifications for Uber’s long-term business model.

Kalanick has effectively bet the business on self-driving technology. Without it, he has said, Uber cannot hope to compete in a world of growing automation.

“What would happen if we weren’t a part of that future? If we weren’t part of the autonomy thing?” he said in a 2016 interview with Business Insider. “Then the future passes us by, basically, in a very expeditious and efficient way.”

A court ruling against Uber could be “disastrous” to the company’s efforts to develop its own self-driving cars, some analysts said, raising questions about its ability to survive in a world where everyone from Tesla to Ford are vying for dominance over the future of automated transportation.

“If a company like Waymo masters self-driving technology while Uber is legally forced to surrender or curtail its current efforts, it’s a handicap that could unravel Uber’s position in this rapidly-evolving field,” said Karl Brauer, an analyst at Kelley Blue Book. Other analysts said that falling behind on automation could put the company in jeopardy with investors, many of whom are also banking on Uber coming through with the technology.

And finally, there’s the matter of Uber’s IPO, which many investors and employees have been eagerly awaiting but could be undermined by the company’s troubles, according to some venture capitalists. In March, Kalanick told CNBC that he plans to delay the IPO “as late as possible.”

The lack of an IPO timeline brings us back to the problems that kicked off the investigation by former U.S. attorney general Eric Holder and his law firm, Covington & Burling. Widespread allegations of sexual harassment at Uber have contributed to the impression that employees suffer from a hostile work environment at the company. Yet many of those same employees own stock in Uber — and continued delays pertaining to the IPO, as well as restrictions on the private sale of shares, could make it difficult for them to sell. Employees in this position have been described by Bloomberg News as “stuck in limbo” and by the New York Times as wearing “golden handcuffs.”

While Uber in February announced a share buyback program to allow employees to sell some of their stock back to the company, the program is still subject to restrictions. Those who have worked for Uber for at least four years can sell up to 10 percent of their shares, but the payout occurs over a long period of time — during which employees must continue working at Uber, according to Bloomberg.

That policy allows employees to claim some of their stock earnings, but for those seeking to leave the company over its workplace environment, it does not allow much flexibility.

Whomever takes the reins at Uber for the foreseeable future will be forced to confront these and other issues that have been simmering for months. And how he or she manages them is likely to have an enormous impact on the fate of the business.