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Who[ber] took their eye off the ball?

28/6/2017

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So, Travis Kalanick has left the building, no longer the chief executive of Uber, the company he co-founded. The company, which makes money through the use of a ride sharing application, has grown rapidly in recent years. From a good idea, the company has become a colossus valued at over US$65 billion. Kalanick deserves credit for Uber's rise. However, Uber's reputation is not without tarnish; reports of a toxic culture, sexism and several scandals have blotted its copybook. The co-founder's pugnacious style hasn't helped either. 
Uber's widely-reported missteps raises some challenging questions about the role and function of the board of directors; questions that are strikingly similar to those asked following the Wells Fargo fake accounts scandal and the collapse of Wynyard Group, both in 2016:
  • Why was shareholder direct pressure necessary for action to be taken?
  • Why did the board not act earlier? The problems were not a secret (they had been widely reported over many months) and several managers have departed recently (a strong signal of underlying problems).
  • To whom did the board think it was accountable, or was accountability not a consideration?
  • In law, directors get one vote each, so why did one director (the CEO) wield so much control over the board? (That debate occurred within the boardroom, from one director anyway, is acknowledged.)
Uber was founded on a strong vision and its grew rapidly. The board was technically diverse and debate did occur in the boardroom at times, yet the evidence suggests that board lost its way and became ineffective.
Though tragic, the Uber situation is instructive for directors and boards elsewhere. Power seems to have been a significant factor.  ​If directors are serious about fulfilling their duties well—especially acting in the company's best interests and pursuing the future performance of the business—some shared understandings are crucial:
  • A commitment to pursue the agreed purpose of the company
  • A clear and coherent corporate strategy (to achieve the agreed purpose)
  • The role and function of the board (i.e., the practice of corporate governance)
  • A commitment to the tenet of collective responsibility
  • A strong and healthy workplace culture
However, the presence of these factors is insufficient in terms of predicting effectiveness or performance. Ultimately, the effectiveness of any board is a function of what the board does and how directors behave. Research is starting to understand the mechanism of corporate governance, but causality remains elusive. Directors take their eyes off these considerations at their peril.
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Dr. ​Peter Crow, CMInstD
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