Company issues warnings over workplace environment in public disclosures filed to the SEC
When Uber filed the paperwork for its initial public offering on Thursday, the quintessential bad boy startup signaled to the world that it was ready to grow up. In a letter to potential investors, the CEO, Dara Khosrowshahi, acknowledged the “greater responsibilities” the company will take on once it goes public, and promised to act with “passion, humility, and integrity”.
But references to the company’s checkered past are littered throughout the more than 300 pages of public disclosures filed to the Securities and Exchange Commission. Here’s a rundown of some of the biggest “risk factors” from Uber’s past that may come back to haunt its $100bn future:
When Uber’s ride-share rival Lyft went public with its own pre-IPO disclosures in March, its “unique culture” was referenced as a positive aspect of the company dozens of times; any possible loss of that culture in the future was identified as a risk factor.
For Uber, the challenge is the opposite. “Our workplace culture and forward-leaning approach created significant operational and cultural challenges that have in the past harmed, and may in the future continue to harm, our business results and financial condition,” the disclosure states. That culture included such well-known problems as Uber’s “focus on aggressive growth and intense competition” and “failure to prioritize compliance”, as well as less public struggles, like “a lack of transparency internally” resulting in “siloed teams that lack coordination and knowledge sharing”.
But as the world learned after the former Uber employee Susan Fowler detailed allegations of sexual harassment and gender discrimination in a 2017 blogpost, Uber’s problems extended beyond the former CEO Travis Kalanick’s aggression and competitiveness. Fowler’s allegations “that we had a toxic culture and that certain sexual harassment and discriminatory practices occurred in our workplace” merit a mention in a section on Uber’s brand and reputation.
The company also acknowledges that “challenges related to our culture and workplace practices”, in addition to all the negative publicity they attracted, “led to significant attrition and made it more difficult to attract high-quality employees”.
Additional reputational baggage
Fowler’s blogpost was just one in a series of hits to its reputation that Uber suffered in 2017, starting with the #DeleteUber campaign that took off after Uber was perceived to be attempting to profit from a taxi strike in protest of Donald Trump’s initial Muslim ban. In the documents, Uber’s unbearably awful 2017 is alluded to as a series of “adverse publicity events”.
The company claims that its reputation has also been harmed by “events outside of our control”, such as a series of suicides by New York City taxi drivers, and foresees future bad press from a transparency report it plans to release this year “which will provide the public with data related to reports of sexual assaults and other safety incidents claimed to have occurred on our platform” in the US.
There’s really no end in sight to the negative press, Uber acknowledges, because its background checks are not perfect and it does not “independently test drivers’ driving skills”. “Consequently, we expect to continue to receive complaints from riders and other consumers, as well as actual or threatened legal action against us related to Driver conduct,” the document states.
Criminal investigations and legal liabilities
The dreadful spate of negative press Uber endured in 2017 didn’t just harm its reputation: it also led to Uber becoming the “subject of DOJ criminal inquiries and investigations, as well as related civil enforcement inquiries and investigations by other government agencies in the United States and abroad”. Uber says that the subject of these investigations include, “among other matters, the use of a tool to limit the vehicle views available to regulatory enforcement authorities (known as Greyball), alleged deceptive business practices and fraud, the use of alleged inappropriate means to obtain a rape victim’s medical records, and our disclosures to certain investors”.
Another 2017 scandal with a long shadow was the high-profile legal dispute between Google’s self-driving car company, Waymo, and Uber. That case revolved around Waymo’s allegation that its former employees, Anthony Levandowski and Lior Ron, stole intellectual property when they left Google to start their own company, which was then acquired by Uber.
While the lawsuit between Waymo and Uber was eventually settled, Google also pursued arbitration claims against Levandowski and Ron. The SEC documents reveal that in March, an arbitration panel issued Google an interim award of $127m from Levandowski and $1m from Ron. The total award could still go up, and it’s possible that Uber will have to pay to claims since it agreed to indemnify Levandowski and Ron when it acquired their startup.
The giant elephant in the room with Uber has always been its treatment of drivers, which it has long classified as “independent contractors”, making them ineligible for minimum wage, overtime, worker’s compensation insurance and other benefits. In the disclosures, Uber notes that if it is forced to start classifying drivers as employees, it will have to “fundamentally change” its business model.
The company acknowledges that many of its drivers are unhappy, writing: “While we aim to provide an earnings opportunity comparable to that available in retail, wholesale, or restaurant services or other similar work, we continue to experience dissatisfaction with our platform from a significant number of Drivers.”
And it points out that it is likely to make the drivers even more unhappy in the future, both because it is investing in autonomous vehicles to reduce the numbers of drivers it needs, and because it plans to reduce payments to drivers in order to increase its chances of turning a profit: “As we aim to reduce Driver incentives to improve our financial performance, we expect Driver dissatisfaction will generally increase.”
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