It makes it more painful, but shareholders can sue management and the board if their interests are not represented (see the numerous lawsuits against Yahoo). Or in other words "when there's a will there's a way".
The real reason they won't replace him is that he built a unicorn from nothing for them, making them very rich and cool in the process (imagine being able to say "I was an early stage investor in Uber"), and by all accounts he has not changed, with Uber being run as a large, efficient company that delivers globally with McDonald's level reliability.
Investors also know that what people say and do are very different things. In aggregate, customers will publicly complain and say they will take Lyft, but privately will vote with their wallet (after all who sees what you book), in the same way that publicly they decry energy wastage whilst they take holidays on other continents and drive SUVs to their giant McMansion. I literally cannot think of a company that "won" by promoting its ethical competitiveness, beyond conquering the few percent of the market who can afford to care and care enough to pay a premium. I wonder how many of the #DeleteUber reinstalled it quietly a few weeks later. The public has a very short memory - as a Frenchman I remember being called cheese-eating surrender monkey by the same Brits who today protest against "American imperialism".
Governments won't do anything since Uber has tons of positive externalities such as reduction in drunk driving, creation of many part time unskilled jobs and generally electorate happiness in having a reliable and affordable taxi service. They think in terms of net welfare and a few Californians having some issues at work is the least of their worries.
>I literally cannot think of a company that "won" by promoting its ethical competitiveness,
Just off the top of my head there's starbucks whose main marketing innovation when they opened up was that they use only "fair trade" beans. And there's American Apparel, which despite the recent controversy, started off with the marketing promise that they are sweatshop free.
I don't know how much ethics matters, but certainly it matters to some extent.
> Governments won't do anything since Uber has tons of positive externalities such as... ...They think in terms of net welfare and a few Californians having some issues at work is the least of their worries.
> I wonder how many of the #DeleteUber reinstalled it quietly a few weeks later.
I can't say I was a part of that hashtag "mob", but I got rid of it and haven't considered it since. Furthermore, even though they are one of the potential employers on the Udacity SDC Engineer Nanodegree "shortlist" - assuming I make it that far - I won't be sending my resume their way (or Otto's way, I guess); to me it seems like a toxic culture I want no part of at this moment.
Could they change? Sure - right now it is too early to tell, but I have noticed movement in that direction. They still have a long way to go, though. I'm not hitching myself to that boat just yet.
> The public has a very short memory
I understand that I am an exception to the rule, nor do I really consider myself a part of the "general public"; simply being a poster here sets anyone apart from that particular grouping, generally.
My memory about some things tends to run longer; Nadella's gestures to the open-source community aside, I am still wanting an apology for Microsoft's former business practices, especially their hostility toward Linux. I know I will never get it.
Secondly, I am still rather angry over how, a few years back, the Susan B. Komen Foundation did this:
> but I got rid of it and haven't considered it since ... I won't be sending my resume their way
From the Parent:
> beyond conquering the few percent of the market who can afford to care and care enough to pay a premium
That's pretty much a confirmation of the stated view - only people "who can afford to care". And by "afford to care", I'm gonna go out on a limb and say that is (with 99.9% likelihood) someone who posts on Hacker News and could send their resume to Uber (but won't).
Who's to say you'll crack the interview? They're a tough cookie to crack, regardless of your views on them, so this whole "I won't apply" doesn't really matter.
And, for how much they pay, they'll easily find a good/better coder anyways. Everything has a price, and if bad culture can be compensated with a big(ger) paycheck, people will continue to work and apply there.
Only in this tech bubble and in cities swallowed by it like SF.
If you live somewhere with a healthier balance of careers where not everything is focused around tech, it would come off as incredibly dull and tone-deaf.
Yeah, that's my reception as well, that's why I was surprised. Sure, investing requires skill and can get you very rich - but so does running a garbage truck company. I would assume that for most people, jet fighter pilots are cool, rock stars are cool, footballers are cool, even some poker pros are cool - but not investors.
Interesting question to ask on a site predominantly composed of people who have/want investment, run by a company which has invested in some really cool companies.
It's sort of the "why it works on paper" for capitalism. Nominally, it plus low barriers to entry/conversion plus anti-anticompetitive mechanisms/trust-busting/etc lead to power structure wherein only businesses which keep their customers happy thrive.
In practice, network effects/'brand name' recognition/QA make for a generally reliable customer base from those who don't remain informed or care about your policies/practices or are just used to your product, and that's even before high barriers to entry and other market factors limiting competition to those who engage in the same cost-cutting-oriented models and so end up optimizing the same way.
Even if investors could easily fire Travis, I doubt they would. This is the man who has taken the company from zero to $60bn. He has it embroiled in numerous commercial, political and technological battles around the world, most of which--until recently--Uber has been winning. Any replacement would, at the very least, need extensive mentoring from him.
Kalanick has described Uber as his baby. He won't properly mentor someone he's forced to accept as his replacement. This means a CEO totally unequipped to know where Uber's chips are, let alone play them properly. Keep in mind: Uber is largely forging new ground. We don't have a playbook for replacing a durable good purchased by consumers with technologically synchronised fleets.
Replacing a CEO is usually seen as a textbook cosmetic change. A swap at the top and nothing below. Bringing in a Schmidt to Travis's Page looks like the savviest option.
Uber has been drawn through the dirt for good reason. They need to change or die. That said, assuming they can get past the Waymo bullshit, there's nothing the press loves more than a turnaround story.
This is the man who has taken the company from zero to $60bn.
There's no reason to assume someone capable of taking a company from zero to $60bn is necessarily capable of taking it from $60bn to $120bn, or even just maintaining a $60bn valuation. Quite often the skills needed to start something are different from the skills needed to grow or to maintain something.
That isn't to say Travis can't do it. He's clearly incredibly capable of doing some amazing things. I'm just questioning the idea that he's automatically the right person to run Uber using a basis of the fact he started Uber. While he has done some astounding things he's also been CEO while Uber has done some very bad things too.
This is not a calm and reasoned debate about who is the right CEO for Uber. This is the press being angry that their reporting of several scandals at Uber hasn't resulted in a scalp.
First paragraph of the article: As the calamities amass at Uber, many people — including me — have called for new leadership. Usually, the job of hiring and firing a CEO falls to a company’s board of directors. Yet in a March 21 phone call with the press, board member Arianna Huffington said that Uber’s board had not even discussed the matter.
An honest reporter would have stopped there. Uber's CEO has not been fired because Uber's board does not seem to want to fire him. The rest of the article is conjecture. Surely the only reason the board hasn't fired him (as "many people — including me — have called for") must be that they can't because he has conned them into accepting his own supermajority. Their inability is so total that they can't even discuss the matter -- which, despite the writer's failure to secure even a single quote to support it, simply must be their foremost concern. After all, how could they possibly disagree with "many people — including me"? Inconceivable.
Snark aside, the board has plenty of leverage against Kalanick - they could definitely debate the issues, most likely take a vote of censure. If they have deep differences of opinion with him, and he resorts to overriding them with this supermajority, they can resign their seats, and mark down the value of their holdings in the company. His supermajority would not prevent Kalanick from finding himself CEO of a $20B company with no board.
>Surely the only reason the board hasn't fired him (as "many people — including me — have called for") must be that they can't because he has conned them into accepting his own supermajority.
Sort of like when there's any semblance of a financial scandal and HackerNews erupts, calling for not only a scalp but jail time (and worse, I've read here). SV execs get a pass?
> There's no reason to assume someone capable of taking a company from zero to $60bn is necessarily capable of taking it from $60bn to $120bn, or even just maintaining a $60bn valuation.
Sure. Now quick propose a concrete CEO candidate who investors will be convinced is a better fit for the job AND is likely available.
Well, the former CEO of target recently quit his job as president of uber saying "the beliefs and approach to leadership that have guided my career are inconsistent with what I saw and experienced at Uber"... So, uh, oops?
There's no reason to assume someone capable of taking a company from zero to $60bn is necessarily capable of taking it from $60bn to $120bn, or even just maintaining a $60bn valuation. Quite often the skills needed to start something are different from the skills needed to grow or to maintain something.
I don't think the Theranos comparison is appropriate. We can quibble about $12 or 25 or 68 billion. But Uber is selling over $5 billion a year [1]. There's something there. Theranos has nothing. It is, in my opinion, a fraud. That's different from a real business with--glaring as they may be--serious blemishes.
Theranos had that Walgreen's partnership, close ties to the DoD (a potentially huge client), and high hopes.
Uber may be selling over $5bn a year, but they are doing so at a tremendous loss. Regardless, judging from its current valuation, investors also seem to have high hopes for the future.
The initial success of both companies can be attributed to their respective CEOS; however, grandparent suggested that the skills needed to start something are different from the skills needed to grow or to maintain something and I believe that that suggestion is just as applicable to Uber. Just as Holmes failed to realize Therano's potential, Kalanick may fail at realizing Uber's potential. Many even expect this (seeing as we are discussing an article title Why Uber Won't Fire Its CEO).
Side note: I share your opinion that Theranos was a fraud in general, but Uber has been accused of that, and far worse, in recent times. Case in point, this other article currently on the front page: "Uber said to use “sophisticated” software to defraud drivers, passengers", https://news.ycombinator.com/item?id=14053011
I'm no completely certain, but I'm pretty sure I could sell 7-8 billion worth of services for 5 billion as well. Just because they are taking in such a high number as their revenue doesn't mean anything if it's because they are heavily subsiding their service
>But Uber is selling over $5 billion a year [1]. There's something there.
Anyone can do $5BB in revenue by selling dollar bills for fifty cents.
Uber is a cool idea, but it's pretty hard to judge demand when you're subsidizing the price. I'm skeptical that they'll be able to simply "turn up prices" once they've captured the market.
How much of Uber's value comes from it's self-driving fleet potential, which might be starting from scratch?
Which partly makes the CEO so key. Dispassionately, what Uber needs right now is someone who can convince investors to keep the money taps open. If you lose $X BILLION a year, you need $X Billion + y% to maintain that burn rate. So the question is:
Is there a CEO that can continue to raise money, OR that can turn a $X Billion loss into a mild loss, whilst still raising the money required to keep the enterprise alive?
100 people throw a 20-sided die; anyone who throws a 20 makes it to the next round, having "proven to have the skills making them capable of rolling a 20"...
Before they go public, maybe. After they go public (not the case with Uber) then having different classes of shares makes stock a bad version of bonds with a messianic belief that the founders will deliver returns.
There was an article about this on The Economist recently but I can't find it quickly enough.
On the other hand owning Google or Facebook shares was a good idea, no?
Be wary of "obvious" things that "should" be true. A lot of people said the Fed was pumping up the stock market with QE, that inflation would go crazy, etc. I ignored them and bought into the market heavily in 2009. Maybe the market is being irrational but I sure did make a lot of money (doubling my personal account and nearly tripling my retirement) by ignoring so called "obvious truths" and investing in a "rigged market".
Maybe in the long term you are right. You sure can lose a lot of money or miss out on a lot of gains that way too.
Yeah, it's basically tenure. And while you can argue against tenure in various circumstances, it does provide intellectual/strategic freedom and that allows someone to take bets they otherwise couldn't. Whether that's a good thing is up to the investor buying the shares.
And while tenure at public elementary schools could be up for debate, getting tenure at an organization you founded seems reasonable. You created the institution, your values are its values. That's kind of the point of tenure, it's like a marriage. It's saying "we believe in each others values, so let's stop asking whether we're going to have a relationship and just see how the relationship evolves."
I wasn't referring to consumers. What I meant was that $60 billion in value disappearing in a puff of smoke, because of one individual who couldn't be fired when the role outgrew him, would be a shattering event for SV investors, and negotiations around equity terms for founders would likely change.
I think the phrase "$60 billion in value" is roughly accurate, considering it's the tax-basis the IRS would use for shares sold. Any accountants on HN want to chime in?
> Oddly, no previous management research has looked at what the legal literature says about the topic, so we conducted a systematic analysis of a century’s worth of legal theory and precedent. It turns out that the law provides a surprisingly clear answer: Shareholders do not own the corporation, which is an autonomous legal person. What’s more, when directors go against shareholder wishes—even when a loss in value is documented—courts side with directors the vast majority of the time. Shareholders seem to get this. They’ve tried to unseat directors through lawsuits just 24 times in large corporations over the past 20 years; they’ve succeeded only eight times. In short, directors are to a great extent autonomous.
It depends, if I start a company and offer a share contract where I am the BDFL(Benevolent Dictator For Life) of the company, then any shareholder purchasing the stocks is buying it by agreeing to that term.
Sure the shares will not reach as high of a valuation as they would if shares didn't come with this condition, but there is no claim whatsoever that somehow shareholders somehow gain more power over the company than what they agreed to when purchasing the shares.
I'm not a lawyer, but I strongly suspect you have a fiduciary duty to all shareholders. If you are director-shareholder, you cannot act in the interests of your shareholding alone. Also, the idea that you can put any condition into a contract is naive. Many such conditions are legally unenforceable because they are incompatible with the corporate law framework.
I think there is something to increasing voting preference based on tenure of shareholding. Giving more control to longer-term shareholders leads to long term thinking aim governance.
Something like vesting for stock voting would be interesting. What if we had the number of votes equal to the number of years the stock was held by that investor (with some max)?
On the other hand, I don't agree with CEOs having board control. That prevents any company oversight (which is exactly the point of the board.) No one should be immune from reproach. The article gives examples of great CEOs being fired, but there are at least as many examples of poor CEOs retaining power.
> I think there is something to increasing voting preference based on tenure of shareholding. Giving more control to longer-term shareholders leads to long term thinking aim governance.
While I like any idea that would encourage longer-term thinking, wouldn't the founders be the longest-term shareholders with the most voting power, in this case? So, many of the problems of super-voting shares would still apply?
That's why there should be a max. So, for example, you get one vote per year up to a maximum of five votes. Anyone holding a share for longer than that (6, 10, 100 years) gets the same 5 votes per share.
Typically, yes. One of the most frustrating things about Reddit is the neverending cliched references. It's why HN comments are so much higher in quality.
> It's why HN comments are so much higher in quality.
Not always the case. Sometimes just boring. More relaxed attitude on reddit attracts more diverse expressions and sometimes that can be a bad thing, but sometimes it is a good thing.
You're absolutely right, it can be both good and bad. What's great is that since both Reddit and HN exists, there is space for both and no need to compromise on either side : relaxed on Reddit and high quality on HN
FTA: "That’s due in part to the dual-class share structure that savvy tech founders have come to embrace in recent years... with smart management techniques when setting up a board to guarantee control in perpetuity."
Though "savvy" and "smart" today, tomorrow other words might be used to describe this type of behavior.
> "Though "savvy" and "smart" today, tomorrow other words might be used to describe this type of behavior."
Iconoclastic and resolute.
Half-jokes aside, why do you think people will have a negative view of this sort of thing, in the future?
Its main purpose is to circumvent the short-term groupthink of investors that plagues all modern companies (I'm looking at you, Amazon). Even if this means the CEO sets course for shipwreck (ex. Uber), the people being hurt the most are investors.
They'll be seen as populists fighting the fat cats who can't keep their fingers out of everyone's cookie jars.
why do you think people will have a negative view of
this sort of thing, in the future?
The fear is when there are conflicts between the interests of investors and the interests of the CEO, the CEO will get what he wants and the investors won't.
Imagine a company has $x and has to distribute that money between investors' dividends and the CEO's bonus. The more control the CEO has, the larger his slice of the pie.
Or perhaps the CEO will decide he really feels like only working 2 days a week. Or he wants to appoint his idiot relative as a senior manager. Or he wants to use employees' time to run a political campaign. Or any of a lot of other things that he likes the sound of, but that investors don't.
Well, let's just wait how people will react when they will understand that they accepted to invest billions in assholes who got lucky but have as much vision and management skills as a 5 years old kid.
I'm actually not saying the future will be negative. Maybe it will be. Maybe it won't. But savvy and smart seems a bit too self-congratulating to those who have managed to negotiate this.
Like Stan Lee said in Spider-Man "with great power comes great responsibility". If anyone who currently has this type of power abuses it, they could really do some damage to others. Uber's CEO is already throwing a lot of red flags.
Ad some stock exchanges take a dim view of this sort of dual share class the Daily Mails parent company got kicked out of one of the FTSE indexes over this
> The argument for allowing a small set of founders complete control over their boards is the same one to be made for enabling benevolent dictatorships.
To me it feels like this is often the underlying (mis)understanding in articles like this one: "It's dictatorship; dictatorship is bad!". Well, I guess it's obvious to most here, but let me say it anyway: Companies are not democracies, they're not meant to be, and there's a hell of a difference between Travis clinging to power in Uber and say The Donald doing the same, but in the White House.
Putting his super-voting shares aside, should he be fired? Uber has been spectacularly successful and now is going through a bit of a rough time - is that enough to get rid of him?
I'm skeptical of dual class shareholders. Honestly, it's not a terribly inventive idea. So why hasn't it been done before on such a widespread basis?
If the ability to vote is valuable then that means investors will be willing to pay more for it. If it's not valuable then why do founders insist on reducing investor power?
There's a contradiction in there somewhere.
If capital were to suddenly dry up what would happen to the value of most of these companies? I would predict a significant drop in valuations for all companies that aren't monopolies (e.g. Google and Facebook).
Steve Jobs is often used as an example of why we need "CEOs for life." But let's not forget that Jobs had fairly little shareholder power in Apple - most of his billions came from Pixar.
So ironically, at the time Jobs was brought back to Apple it was basically equivalent to bringing in a non-founder CEO from the perspective shareholder power.
Maybe they can create a holding company (focusing on strategy) that is headed by Travis and under it put Uber (focusing on operations) headed by a new CEO. Something similar to what Google has done using Alphabet.
This would also be clever to decouple Uber-the-brand (which has immense value) from Uber-the-driver-exploiter (which has a unsavory aftertaste) and Uber-the-autonomous-driving-dilettante (which is a running joke).
Personally I think that more than market consolidation and siloing, it is this power that dual-class shares confers that is feeding our current neo-feudalistic economy.
On a humorous note, and I don't know if this was intended or not, but in the the picture of Travis Kalanick that leads the article, if you look closely, he seems to have stepped on some sh*t.
Maybe this was unintended, but the metaphor is definitely there.
Well, let's just wait how people will react when they will understand that they accepted to invest billions in assholes who got lucky but have as much vision and management skills as a 5 years old kid.
Ok, I'll bite: so what? Should I care about private investors losing money in Uber or something? Haha pass me the tissues, I feel tears coming up already. Poor oil sheiks! Poor rich people. Didn't do due diligence and are now losing money on a bad investment! The world is cruel and unjust. Something must be done!
All unethical stuff aside (that's not to say it's not important), he's brilliant. disrupting transportation industry - including logistics industry - is not something you can do without that.
The real reason they won't replace him is that he built a unicorn from nothing for them, making them very rich and cool in the process (imagine being able to say "I was an early stage investor in Uber"), and by all accounts he has not changed, with Uber being run as a large, efficient company that delivers globally with McDonald's level reliability.
Investors also know that what people say and do are very different things. In aggregate, customers will publicly complain and say they will take Lyft, but privately will vote with their wallet (after all who sees what you book), in the same way that publicly they decry energy wastage whilst they take holidays on other continents and drive SUVs to their giant McMansion. I literally cannot think of a company that "won" by promoting its ethical competitiveness, beyond conquering the few percent of the market who can afford to care and care enough to pay a premium. I wonder how many of the #DeleteUber reinstalled it quietly a few weeks later. The public has a very short memory - as a Frenchman I remember being called cheese-eating surrender monkey by the same Brits who today protest against "American imperialism".
Governments won't do anything since Uber has tons of positive externalities such as reduction in drunk driving, creation of many part time unskilled jobs and generally electorate happiness in having a reliable and affordable taxi service. They think in terms of net welfare and a few Californians having some issues at work is the least of their worries.