Fans of the ride-sharing app Uber woke up to the news that its chief executive officer and founder Travis Kalanick has resigned.
Kalanick’s departure follows revelations that the rapid growth of the company often promoted a culture internally that harassed female employees, or that took short cuts that frequently ran the company up against regulatory issues in the 650 cities worldwide where the company is responsible for 40 million rides each month.
Uber, founded by Kalanick in 2009, now has a valuation approaching $70 billion–twice the market cap of car manufacturing giant General Motors.
Many analysts are hailing the decision, stating that Kalanick’s exit is necessary for the company to continue growing in a responsible fashion. This poses interesting questions for investors in companies–what happens when the founder is asked to leave?
Worries when a founder exits
Often company founders who build the brand are necessary for the company’s success, or they’re synonymous with it. Think of Warren Buffett and Berkshire Hathaway, or Steve Jobs and Apple.
In fact, Apple’s board of directors ejected Jobs in 1985, for being headstrong and impulsive, and soon after the company that created MacIntosh computers was hit with sagging sales.
Jobs’ return in 1997–as a much-chastened executive who focused on leading the company–corresponded to the company’s current heyday as one of the most valuable companies in the world.
More recent examples include Spencer Woodman, the founder of high performance video camera GoPro. In that company’s annual report, it says much of the company’s growth depends on Woodman maintaining his leadership role there.
Start-ups and culture: It matters
In early days, tech startups often succeed because they’re founded by people willing to take risks and push the envelope in a particular sector or industry
A company with a small team may be able to get by with a “whatever it takes” attitude in order get a great product or service out into the world. But this can cause big problems when and if it adds hundreds (or thousands) of employees or goes global — which can lead to harassment, poor workplace morale and lack of oversight among teams.
“It’s critical for a growing start-up to create a culture of accountability from the very beginning,” says Stash co-founder and chief executive Brandon Krieg. “What employees want is to do a great job in a great company and feel safe when they come to work.”
When it comes to understanding public reaction to Kalanick resigning from Uber, here are some things to keep in mind:
- Uber is still a private company. Unlike Apple or Berkshire Hathaway, you can’t buy or sell its stock in the public markets. Nevertheless private companies can still have private shareholders who own shares of the company.
- All corporations, whether they’re private or not, are required to have a board of directors. The board is responsible for representing the shareholders, overseeing corporate policies including enforcement of regulations forbidding harassment, as well as hiring and firing executives.
- Uber is not the only Silicon Valley tech company that has had difficulties with workplace and regulatory issues in recent years. Others include the human resources outsourcing firm Zenefits, and consumer products company Quirky, which filed for bankruptcy in 2015.