He can't wait for Eric Holder's report to be issued.

By Irv Schenkler
March 2, 2017

Last week’s sexual harassment claim against Uber was not just about one indecent incident—it represented what has become perceived as part of the company’s culture, grounded in repugnant behaviors that have gone either “unnoticed” or without consequences. For a company that defines itself as a primary force for innovation, what’s to be said about how this colors its future, and especially its CEO, Travis Kalanick?

In the late 1990s, an array of well-known brokerage houses, including Smith Barney and Merrill Lynch, were sued over charges of sexual harassment. Smith Barney alone paid $150 million in settlements. Those were the days of the “boom-boom rooms,” where women were treated in a scandalously demeaning manner, and the impact of those charges were significant: Wall Street and much of corporate America was assailed for what was seen as a lack of “diversity” in the workplace and in senior management.

However, over time, one corporation after another came to see how changing the composition of management and the workforce could create a differential advantage compared to competitors by attracting employees whose diverse background and experiences could render added value to the organization. And, not coincidentally, these efforts contributed to enhanced corporate reputation. Mega corporations such as Microsoft MSFT , IBM IBM , Intel INTC , and Coca-Cola KO have all long pronounced their commitment to inclusion—these words were backed up by deeds. And as digital-age startups have sprouted, the recognition of human capital’s value to organizational success has only been reinforced. Millennials don’t fancy themselves as Mad Men.

So what is one to make of the charges of sexual discrimination and a culture of harassment at Uber?

The allegations of systemic disrespect harken back to the days of the “boom-boom rooms,” but a case can be made that, like racism, sexism will be a constant of organizational (as well as personal) life, and it requires an ongoing commitment to blunt its impact. Will Uber’s reputation as a “positive disrupter” be marred by these claims? Does it constitute a crisis?

I define a crisis by asking three questions. Does the problem threaten to severely affect the organization’s:

  • normal workflow and distract senior management?
  • financial well-being?
  • company’s reputation in the eyes of important stakeholders?

In this situation, each question receives a “yes.”

Uber has asked former attorney general Eric Holder to oversee an investigation (and presumably to report back in some form, most likely a document). This is a pretty well tried-and-true approach. Nike NKE did this in the late 1990s, bringing on Andrew Young, the civil rights leader and UN Ambassador, in response to a boycott fueled by accusations of human rights violations in Southeast Asia.

Often, the results and recommendations of these kinds of reports provide management with a starting point (which interested observers can also hold them to) that allows them to indicate how they have made progress over time. Nike, for example, remained in the crosshairs of many interest groups—NGOs— that stayed on their case for many years, and eventually, Nike changed many of its licensing practices.

But what about the back story? What kind of corporate citizen has Uber been? What kind of reputation does it have as a contributor to communities? Uber has sponsored several social strategy initiatives including “Uber Military,” which is intended to bring jobs to veterans, and it has also partnered with Carnegie Mellon in supporting an innovation lab with substantial financial backing.

Yet, it has also come under fire in a series of campaigns brought on by NGOs opposed to many of its policies; and the recent pushback against Kalanick’s alignment with President Donald Trump registered strongly, resulting in a change of direction when he left Trump’s advisory council. The allegations of a sexist culture pour more acid into the mix, and threaten to highlight Uber as something of a “bad boy” brand in the tradition of Calvin Klein, and more recently, Hollister and Abercrombie and Fitch. Does Uber really want to be lumped into that sector?

One of the complications for Uber—and every company caught in the glare of media attention—is the wildcard of social media. Whether the company can muster a credible counter-argument is an open question. But using social media to convey their intentions and commitment to remedying the problem is important. And it needs to be done now. The company can’t wait for the Holder report to be issued. The over-arching challenge involves how the company conveys authenticity—that its commitment to solving the problem supersedes operational concerns.

Reaching middle managers, technical staff, and angered customers will demand a wide net, and a complex set of messages. And let’s not forget an underestimated stakeholder group—the driver—who is the front-line representative to the consumer. The drivers are critical in conveying confidence in management and the company’s intentions. Kalanick learned this the hard way, as anyone who watched his videotaped diatribe against an Uber driver will attest.

Would the company benefit from a radical change—say, the resignation of the CEO?

Companies that replaced their CEOs in the face of ongoing crisis include VW (the emissions fraud), Wells Fargo WFC (customers swindled), Siemens SIEGY (corporate scandal), BP BP (explosion in the Gulf), Barclays BCS (inter-loan scandal), Boeing BA (personal CEO scandal), HP HPE (personal CEO scandal), and much earlier, Prudential PRU (customers swindled).

 

This happens when the current state of affairs is seen as untenable (usually by the board of directors), as the sweeping broom provides temporary cover, with the premise and promise of a change in direction. Often, the tactic works, and for the companies mentioned above, the change-over in the C-suite did not lead to any undue deleterious result. However, all of the aforementioned companies were publicly owned, and unlike Uber, where Kalanick has been pivotal in raising capital support, those CEOs were not so closely linked to the company’s identity. Yet how confident can investors be with a CEO who confesses to “needing help” and admits he “needs to grow up”?

Uber’s cascade of accusations reminds me of the sequence in Orson Welles’ film, The Lady from Shanghai, where toward the end, at every turn, Welles’ character sees his reflection in an unending set of mirrors. The heightened glare directed at Uber and the CEO may well augur a change in the C-suite. Given the fractured state of the company’s reputation, this could well be the tipping point, and an opportunity to head off consumer departures in favor of competitors—Lyft, for example—which are not burdened by these dark accusations.

Some crises dissipate as the next upsurge of outrage finds its resting place on the doormat of another corporation or vilified executive. Uber can only hope to be so fortunate.

Irv Schenkler is a professor of management communication at NYU’s Stern School of Business.

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