CEO Daily: Wednesday, 14th June
Fortune’s Adam Lashinsky literally wrote the book on Uber CEO Travis Kalanick (you can buy it here…or read the Fortune excerpt here.) Below are his thoughts on the brash CEO’s announcement yesterday that he’s taking a leave of absence:
On a brisk night last July, I took a long walk through the streets of San Francisco with Travis Kalanick. We walked and talked for more than three hours, and toward the end of our conversation I asked him if he liked running a big company. He’d been around since Uber was a mere handful of employees, and now it had many thousands.
His answer spoke volumes, especially in light of the blaring headlines about Uber and its CEO in recent days. “The way I do it, it doesn’t feel big,” he said. “You constantly want to make your company feel small,” he continued. “You need to create mechanisms and cultural values so that you feel as small as possible.”
On Tuesday, Uber released a list of recommendations by former U.S. Attorney General Eric Holder and a colleague based on a months-long investigation into those very company values. Their conclusion: Uber needs to change. What’s plain to all—perhaps even Kalanick, who announced he’ll take a leave of absence of undetermined length—is that while Uber was growing to become a global behemoth its CEO willfully continued to think of it as a brash startup.
There was good in that. Startups move quickly and big companies don’t. Steve Jobs use to boast that Apple was the world’s biggest startup.
Yet for Uber the bad outweighed the good. Smallness meant perpetuating the worst of chaotic startup life and a failure to grow into the mature corporation it needed to become. The Holder report revealed an undisciplined company with poor governance, weak accountability, a founder-dominated board, and values—the very tenets Kalanick treasured—that encouraged bad behavior. Holder recommended, for example, that Uber seek top-management “candidates with experience dealing with organizations that have complicated labor and operational structures.” That would not describe leaders at the typical Silicon Valley startup Kalanick so badly wanted Uber to remain.
What comes next? Kalanick’s letter to employees implies he’s not letting go completely, noting that he’ll “be available as needed for the most strategic decisions.” Presumably he’ll have a hand in hiring the critically important chief operating officer Uber seeks as well as a finance chief and other top leaders.
Fresh blood will help Uber. But existing woes won’t vanish. Late-to-the-party investors who valued Uber at nearly $70 billion might reasonably want their money back. Uber’s legal battle with Alphabet’s self-driving car unit could be perilous if it heads to trial as planned. And a potential Justice Department investigation into a deceptive practice known as “greyballing” suggests possible criminal allegations.
Uber is attempting to turn over a new leaf. But its wild ride continues.
Meanwhile, Uber director David Bonderman resigned yesterday after making a sexist comment in a meeting with staff. You can read about that here.
• Fed expected to raise interest rates
The Federal Reserve is expected to increase its benchmark interest rate on Wednesday due to a tightening labor market. The central bank—which is scheduled to release the decision at 2 p.m. Eastern time—may also provide some additional details about a plan to shrink the massive bond portfolio it amassed to help propel the economic recovery. Economists polled by Reuters overwhelmingly said they see the Fed raising its benchmark rate to a target range of 1.00% to 1.25% this week. The Fed embarked on its first tightening cycle in more than a decade in December of 2015. A potential quarter percentage point interest rate increase this week would be the second nudge in 2017, following a similar move that was announced in March. Reuters
• Anbang chairman steps aside
Anbang Insurance Group, one of China’s most aggressive buyers of overseas assets, said its chairman was temporarily unable to fulfill his duties, just over a week after denying reports he had been barred from leaving the country. The brief statement came hours after Chinese magazine Caijing reported Wu Xiaohui had been taken away for investigation. The article, citing unnamed sources, was removed shortly after it was posted online. Best known overseas for its 2015 purchase of New York’s landmark Waldorf Astoria hotel, Beijing-based Anbang has pursued a string of high-profile foreign acquisitions under Wu. But after a series of successful deal-making worth over $30 billion, Anbang ran into roadblocks, including the failure to close on a handful of investments and separately facing criticism over the company’s opaque shareholding structure. Reuters
• Sears cuts 400 jobs
Ailing department-store operator Sears says it is planning to cut 400 full-time jobs at the company’s corporate offices in Illinois, cuts that the company says is part of an ongoing restructuring effort aimed at delivering $1.25 billion in annualized cost reductions. Department stores have broadly suffered slowing traffic and sales trends for years as consumer spending migrates to online rivals and as younger shoppers increasingly avoid shopping at the format. Sears, meanwhile, has suffered more than most, resulting in dozens of store closures and asset sales like the move to unload the company’s Craftsman business. The retailer has said it will continue to take “all necessary action” to achieve profitability. CNBC
• Sprint aims at Verizon with new promotion
Sprint is offering free unlimited data, talk and text for a year in a promotion it launched this week aimed at Verizon customers in an oversaturated U.S. wireless market. Customers who switch to Sprint before June 30 and bring their own devices will get free service until July 31, 2018, Sprint said. After that, the company’s regular rates for unlimited plans will kick in, at $60 per month for a single line. The promotion, says Sprint, is mainly targeted at Verizon Communications customers through digital advertising. All four major U.S. wireless carriers have been sweetening their unlimited plan offers, prompting concerns from industry analysts about an accelerating price war. Reuters
Around the Water Cooler
• Apple CEO confirms self-driving car ambitions
Tim Cook has finally discussed one of Apple’s biggest initiatives: he says that the electronics device manufacturer is working on “autonomous systems” for cars. Cook, who didn’t elaborate on Apple’s work, would only say that he believes self-driving car technology is “very important” to his company. Apple has consistently remained tight-lipped about self-driving cars as rumors have swirled, only saying the company is working on car technology. Rumors around the initiative have shifted from the concept that Apple is working on its own car to talk that suggests Apple has moved on from the automaker operation and would instead just focus on vehicle technology. This year, the California Department of Motor Vehicles granted Apple a permit to test self-driving cars, lending even more credibility to the reports. Fortune
• McDonald’s leans on Snapchat for hiring
Fast-food giant McDonald’s is turning to social-media darling Snapchat as the restaurant chain aims to hire an estimated 250,000 jobs it will need to fill this summer. The company is calling the hiring tool “Snaplications.” Basically, a Snapchat user can view a 10-second video ad about how great it is to work at a McDonald’s and if the job prospect wants to know more, there’s a link in Snapchat to McDonald’s career page and to the job application. McDonald’s claims that Snapchat is an ideal way to connect with potential workers because so many of them spend so much time on social media. That pool of applicants is especially important to McDonald’s, as more than half of the people hired at company-owned restaurants are in the 16- to 24-year-old bracket and for many of them, summer jobs like the ones McDonald’s is looking to fill are their first jobs ever. USA Today
• The Fidget Spinner trend is over
Fidget spinners—a small, three-bladed trinket intended to minimize distraction—has taken the teen world by storm. Its rise has been so staggering that e-commerce data firm Slice Intelligence estimated that late last month, the toy accounted for 17% of daily online toy sales. But in the world of toys, fads can just as quickly fade, and fidget spinners are no exception. The term hit its peak popularity on Google search back in mid-May and has since fizzled. “Fidget spinner” first started to appear on Google trends in late January and the term increased in usage for the next few months, peaking in the U.S. on May 6. It has since declined in popularity: both for online sales and Google search results. A backlash also brewed: many schools recently began to ban the arguably therapeutic spinning contraption. Fortune
• Seinfeld-inspired company files for bankruptcy
Soupman, the company that licensed the name and recipes of the chef who inspired the tyrannical “Soup Nazi” character on the hit television show Seinfeld, has filed for Chapter 11 bankruptcy protection and says it has secured $2 million in new debtor-in-possession financing from an independent third-party investment firm that will be used to meet its working capital needs during the process. The bankruptcy filing is the latest woe for Soupman, who generated headlines in May when the company’s former chief financial officer was indicted for tax evasion after being charged with 20 counts of failing to pay Medicare, Social Security, and federal income taxes. Reuters
Summaries by John Kell; email@example.com; @johnnerkell