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When Founders Go Too Far – How Entrepreneurs Become Tyrants
October 30, 2017 -
When the directors of Uber ousted its CEO and cofounder, Travis Kalanick, in June 2017, the move was paradoxically both long overdue and somewhat unexpected. For months Kalanick and the company had suffered a string of scandals, any one of which might have undone a typical chief executive. A female engineer had posted a long public account of rampant sexual harassment and the company’s “bro culture,” to which Uber’s HR department had turned a blind eye. The company had been caught ordering and canceling rides from its competitor Lyft, poaching Lyft’s drivers, and using software to surreptitiously track its own customers even if they closed the Uber app. During years of jousting with local taxi authorities over the legality of its car service, Uber had been discovered using a tool called Greyball that disguised the location of its cars and showed a fake version of the app to city officials. Kalanick himself was captured on video condescendingly berating an Uber driver who complained about falling fares.
Yet despite the near-weekly scandals, which led to customer boycotts and increasing calls for Kalanick’s dismissal, the 40-year-old founder seemed, for a time at least, untouchable. Even after the former U.S. attorney general Eric Holder, who’d been hired by the board to investigate, issued a scathing report on Uber’s culture, Kalanick and his directors initially decided that vague promises of coaching, the hiring of a chief operating officer, and a slap-on-the-wrist “leave of absence” for the CEO were sufficient remedies. That changed when key investors staged a revolt.
Why was Kalanick shown such extraordinary deference by Uber’s board? In a word, power. Kalanick controls the majority of Uber’s voting shares and until recently controlled most of its board seats. He is part of a generation of company founders who’ve managed to remain at the helm long past the point when VCs would traditionally have brought in “professional” CEOs. Although the specifics of this scandal may be unique, the governance issues Uber has faced are not. Zenefits, Hampton Creek, Tanium, Lending Club, and Theranos are all start-ups that have endured scandal and founder misbehavior—but some of their founders are still calling the shots. Rather than being an outlier, Uber illustrates the remarkable and little-understood ways in which founders, no longer systematically pushed aside as their start-ups grow, have come to dominate their boardrooms. I think of this trend as “the founders’ revenge.”
Harvard Business Review
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