Uber, what once was just a German adjective, is now internationally known as the world’s leading ride-sharing service. Similar to a taxicab, Uber actually went by the name Ubercab until October of 2010, when it decided to drop the “cab” from its name. Not only did this company compete with its yellow and black counterparts, but Uber took the industry by storm and has nearly wiped-out the traditional taxi cab service. Along the way the company has had many successes, but has encountered several failures and ethical challenges as well. In the following pages, we will take a deep dive into all things Uber including a background of the company, why we think it is important to study Uber, some past issues and scandals that have come up, what the new CEO is doing in response to these issues, and our overall thoughts on the company as a whole.
One night in 2008, Garrett Camp and Travis Kalanick were having trouble finding a ride in Paris, when suddenly they came up with the idea that would allow users to hail a cab electronically, using only their cell phone. By utilizing their cell phone, users could avoid the nuisance of physically hailing a cab, ensure the driver took the most direct route, and drivers could track the exact location of riders. This idea was what would later take the world by storm, named as Uber. Uber is an application that allows users to connect to drivers in their cities and request a ride within minutes.
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How it works
The company first launched in San Francisco and became a quick success in the transportation industry, making a name for themselves among young people looking for a cheap and easy way to hail a cab. By the end of 2011, the company was valued at an estimated $330 million. Three years later, Uber was in over 100 cities worldwide. Uber’s rapid growth was nothing short of amazing, but it unfortunately came with its fair share of downfalls. The ride-sharing company’s ethical issues included its treatment of employees, flawed background checks, troubling corporate culture, and other issues that ultimately led to a need for major changes in the company.
Motivations for Studying
In typical practice, almost all companies’ ethical decisions may be considered ethical from some viewpoints, but unethical from others. However, Uber is a unique case study in that we can safely say their practices are unethical from each and every ethical viewpoint. There are multiple reasons why a study of Uber is important for anyone interested in the application of ethics in real life. First, it is important to understand exactly how Uber got to this point, and the attitudes and practices which helped them arrive there. Uber is a unique company in a relatively new industry, leaving them the ability to operate in ethical grey areas which naturally exist in any new industry.
However, the practices of Uber have far surpassed operation in what could be conceived as an ethical grey area and have entered the area of clearly unethical. Next, it is important to understand how these practices have affected public perception of the company and thus their ability to generate revenue. When any company has negative scandals that continue to come to the public’s attention, the public’s perception of that company will be negatively affected as well. Due to the fact that a high level of trust and reliability is required in any ride-sharing or ride-hailing service, the impact of these scandals has caused a significant amount of fallout and thus lost revenue.
Finally, it is most important to understand how Uber has addressed these shortcomings, their plan to correct the course of the business, and the trajectory of the new and improved Uber. While a change at the top was most certainly required in order for Uber to continue growing, it is important that we do not simply accept this change at face value. We need to evaluate whether the company is truly making a commitment to improving their core ethical values and attempting to “right the ship” or if they are simply making an attempt at a publicity stunt in order to convince the public that they are headed in the right direction ahead of their initial public offering (IPO).
By understanding the scandals which Uber has had come to light, we may be able to reach an understanding of the character and actions that have caused Uber much of this negative attention. Uber has shown repeated indifference to ethical values, and has shown a propensity to prioritize revenues and the bottom line over anything else. Their business practices have evidenced a “beat competitors at all costs” mentality, shown by multiple instances of corporate espionage.
The upper level of management has shown repeated failure to recognize serious acts of misconduct and has set a horrendous tone at the top, failing to both “walk the walk” and “talk the talk.” The continuous negative publicity, which has resulted from the waves of scandals that have come into the public’s view, has allowed us to reach an understanding of Uber’s ethical environment that likely would not be possible due to the fact that it is a private company. We will expand further on a few scandals below, but are not able to speak in length about each and every scandal. We chose scandals which we believed characterized the decision making and overall corporate environment of Uber, due to the fact that they are evidence of a larger and more troubling issue within the business.
Uber’s business model is set up so that it allows the company to earn a large return without having to put forth much of their own resources. A business’ main component is its employees, and in the case of Uber, they are able to keep their employee wages relatively low by classifying their drivers as independent contractors. Because each of their drivers are independent contractors, Uber is not required to pay them minimum wage, nor are they required to provide them with unemployment packages.
This employment classification presents many issues – some that even venture into being unethical. Depending on the city and the current rates, some drivers can work full-time and still earn under the minimum wage. Additionally, Uber’s drivers would never have the opportunity for unemployment benefits in the case of losing employment. The absence of these two benefits that most companies provide their employees portrays Uber as having motivations that are more focused on profits and protecting themselves than having a healthy relationship with their drivers.
Perhaps one of the most troubling aspects of Uber’s business is their driver screening process. To become a driver with Uber, there are three basic sections that you must pass before you begin your first ride. First, a driver is required to meet certain requirements. Among these, a driver must possess a valid driver’s license, drive an eligible four-door vehicle, and meet the state-assessed age requirement. Second, required documentation proving residency, driver’s license, and insurance on your vehicle must be submitted along with a vehicle safety inspection. Lastly, a driver screening must be completed online that reviews driver records.
These background checks are performed by a third party to detect major driving violations and criminal convictions. However, in a California litigation case, prosecutors claimed that in San Francisco and Los Angeles, Uber’s screening process did not catch 25 drivers that had criminal records. Included in this 25, one had a history of 26 years in prison related to a second-degree murder charge. Many cities reacted to these relaxed backgrounds check by requiring fingerprint scanning for any driving services, but Uber has not made this a requirement to drive. This is yet another example where the company has obvious ethical issues, but they decided not to make effective changes to better their image.
Since its inception, Uber has been plagued by a corporate culture marred in controversy. This stemmed from the tone at the top, starting with founder and former CEO Travis Kalanick. From callousness towards drivers to inappropriate behavior, he elicited controversy at every turn. Kalanick was noted for his propensity to party, as well as accusations of sexism within the workplace. This attitude was fully exposed when two different events occurred. In the first instance, an email surfaced that Kalanick had sent out to all employees prior to a 2013 company outing in Miami.
The inappropriate email outlined “policies” that Kalanick wished to institute regarding sex and drug use during their party-focused trip. This kind of behavior certainly alienates some employees, especially women considering the wording of the email. Using this type of objectifying language is not the kind of behavior you would want to see from anyone, let alone the top executive at a company of Uber’s magnitude and reach.
The second example comes from a video that leaked of Kalanick berating an Uber driver during a trip with said driver. In the video, you can see Kalanick using harsh and disrespectful language towards the driver. As the drivers are such an integral piece to Uber’s business, this video is a terrible example of a CEO instituting a positive tone from the top. This type of behavior under Kalanick permeated throughout the entire company.
Several accusations of sexual harassment have been launched against Uber, with a former female employee composing a blog that outlined a culture of sexual harassment and gender bias at the company. This culminated with several high-ranking executives leaving Uber in a short span during 2017. Among them was Amit Singhal, senior VP of engineering, who was experiencing allegations of sexual harassment concurrent with his departure. Not much later, Uber fired over twenty employees as a result of an internal investigation. The reasons ranged from discrimination, sexual harassment, and unprofessional behavior. All of these scandals finally culminated in the company’s largest investors demanding Kalanick’s resignation in June 2017.
In addition to a culture of sexism and inappropriate behavior, Uber has also utilized many questionable business tactics in an attempt to further its’ business. Among these was the use of employees to try and recruit Lyft drivers over to Uber by setting up fake Lyft accounts and requesting rides. The riders would then spend the entire trip attempting to convince the driver of why they should transition to working for Uber. Uber employees also requested and cancelled many Lyft rides to disrupt the drivers’ schedules and lower the number of available Lyft cars. However, this is not the only corporate espionage in which Uber has been involved.
In 2014, Uber instituted the use of a shady program called Greyball in an effort to circumvent authorities in cities where the application was either resisted or banned completely. Greyball began as part of a program called VTOS, short for “violation of terms of service.” The original intention of VTOS was to identify people Uber thought were using its service improperly or violating its terms and conditions. However, in practice, Greyball helped Uber to evade the authorities in cities in which the company did not have permission to operate.
Law enforcement officials in these cities would call rides in an effort to expose Uber’s operations in their city. The data collected by Greyball would help identify these authorities, and the app would then cancel their ride and populate the app with fake cars in their area in order to distract and confuse them. Uber’s use of Greyball was finally uncovered in late 2014 by a code enforcement inspector in Portland, Oregon, who hailed an Uber car as part of a sting operation against the company.
Many of Uber’s highest-ranking employees were aware of the use of Greyball to evade authorities. The program was approved by the company’s legal team, and Senior Vice President of Global Operations Ryan Graves, one of Uber’s first employees, was also implicated in the scandal. At a time when Uber was already under scrutiny for its unethical corporate culture and business practices, Greyball demonstrated the lengths the company was willing to go to in order to expand its business.
Any company that has continuous scandals come to public light in the manner that Uber has will most certainly see negative effects upon their business. The practices of Uber have caused many negative ramifications upon the company, and have caused large losses of potential revenue. Due to the fact that Uber operates in an industry in which a high level of trust in the company is required, these scandals have had significant effect on their revenue generation. Hundreds of thousands of users have turned away from Uber and grassroots movements, such as the #deleteuber movement, have led to less users. In under five days, the backlash of users related to this movement caused Uber to lose over 200,000 riders.
This has led to a lower market share and users opting for Lyft, a substitute service which is seen as prioritizing rider safety more than Uber. Also, Uber has been banned in many municipalities due to their failure to properly vet drivers and ensure the safety of all passengers. Examples of this include the entire country of India, where Uber was banned for multiple years, London, where Uber was unable to attain the proper license to operate for a year, and a majority of Oregon (excluding Portland), where Uber is actually illegal. Internally, Uber has had negative ramifications in the form of many high level executives leaving the company due to the waves of scandals.
The majority of these scandals have been related to various sexual harassment claims, where the executive opted into stepping down before their “dirty laundry” was aired publicly. Uber is also planning on having an IPO in the near future. After the continuous scandals, however, it is almost certain that there will be significantly lower levels of investment in Uber due to the perception of a low ethical environment.
While the board and owners’ attempts to steer Uber in the correct direction is a step forward, we need to be wary of the fact that it may be a publicity stunt in order to reverse the public’s view of them. In order to truly understand whether this is an attempt to correct the corporate culture of Uber, we must understand changes that the new CEO is making, the attempts of upper management to change the culture, and how these attempts will truly affect each level of Uber’s operations.
In August of 2017, Uber hired a new CEO by the name of Dara Khosrowshahi (Dara). The company was in desperate need of new leadership after the former CEO, Travis Kalanick, left the company in a bad position. Before taking his role at Uber, Dara previously held the title of CEO at Expedia. According to his profile page on Uber’s website, Dara was able to lead Expedia to great heights which included making it one of the largest online travel companies.
The profile also states that he was “beloved” by his employees during his time with the company, and was recognized by Glassdoor as being one of the top CEOs around. Dara is described by Peter Holley in his Washington Post article written in April of 2018 as “soft-spoken, disciplined, and undeniably mature.” Clearly, Uber saw the same things in Dara and snatched him up to right the ship.
Upon taking the job as CEO, Dara knew that radical changes were needed in order to put the company on a better path to success. One very important thing that he did was institute stronger background checks for drivers, which was a much needed change. According to an article by CBS News in April of 2018, Uber implemented a policy to begin doing annual criminal background checks on all U.S. drivers along with hiring a company that actively tracks criminal arrests. These actions were taken in order to better protect riders using Uber. Other features on the app itself to help protect riders include options to allow them to call 911 in cases of emergency, and updates to the app that make it simpler for riders to share their location with others.
Inside the company itself, Dara has attempted to repair the damage done by the former CEO using several methods. These methods included bringing on a Chief Diversity Officer and looking at employee salaries to make sure everyone was being compensated fairly, particularly focusing on women and minorities. He also decided to move away from the competitive culture created by former leadership and replace it with “inclusion” and “teamwork”, according to Holley in his Washington Post article. In a LinkedIn post written by Dara himself in November of 2017, he released a set of eight recently implemented cultural norms.
These norms include, “We build globally, we live locally, We are customer obsessed, We celebrate differences, We act like owners, We persevere, We value ideas over hierarchy, and We make big bold bets.” The other one, that isn’t mentioned in the list in the previous sentence reads, “We do the right thing. Period.” This one statement really jumps off of the page due to all of the previous issues and scandals that the company went through prior to Dara taking over, and shows us that Uber is willing to own their past shortcomings and use them as a learning point on which to grow moving forward.
Dara sat down for an interview with CNNMoney towards the end of August in 2018 to discuss how his first year as CEO went and what all he learned during that time. In the interview, he said, “If there’s one area that I would have liked to change faster, it is to execute more fully on our cultural transformation as a company internally, across all levels at the company.” He went on to explain that cultural transformation isn’t something that can be finished, but it’s a continuous process that takes time and effort to improve. Plus, Uber was an ethical disaster when Dara took over, so this particular cultural transformation will likely take a significant amount of time.
In looking at the changes Dara has made and his overall personality, we believe Uber is heading in the right direction in order to gain back favor with the public. With the company planning its IPO for the very near future, it is essential that Uber continues to win back the goodwill of the public in order to have a successful IPO. As we have discussed in class, it takes a long time to build trust with customers, but an incredibly short time to lose it. Given the various scandals and unethical practices Uber has been plagued with in their short time as a company, trust is not going to magically appear again overnight, or even in the course of a few years.
It is going to take quite some time for Uber to show the public that they are a trustworthy company that is worth the investment. Dara’s implementation of a list of cultural norms, his hiring of a Chief Diversity Officer, and his commitment to treating people of all genders and ethnicities as equally as possible are great steps toward bettering Uber as a company. The ride-share business as a whole is still very young as well with it being less than a decade old. With any new market comes a vast amount of challenges that must be overcome to make it as successful as possible. There are going to be learning curves that everyone in the ride-share business will have to deal with in the future if the market is going to continue being profitable.
- Textbook Article: Uber in 2016: Can it Remain the Dominant Leader of the World’s Fast-Emerging Ridesharing Industry?
- Thompson, Peteraf, Gamble, and Strickland, Crafting and Executing Strategy: The Quest for Competitive Advantage, 21st ed.