Money For Lunch – Dara Khosrowshahi needs to strike a London deal to send a clear message

Dara Khosrowshahi needs to strike a London deal to send a clear message

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No doubt his lawyers were complaining but Dara Khosrowshahi had no choice but to meet Transport for London (TfL) over its decision to revoke Uber’s operating licence in the UK capital.

Lawyers like to maintain a distance with the enemy, but any appeal is likely to be painful for Uber as its history in London will unfurl over a period lasting possibly a year. Much of it is likely to make grim reading for Uber just when they need to rebuild reputation ahead of a likely IPO.

More talks are planned and a negotiated trial license from TfL over a limited period would demonstrate Uber is trying to change and would be the best option for all concerned as Sadiq Khan, Mayor of London, could do without upsetting 3.5 million voting customers as well as send 40,000 Uber drivers looking for work.

It does mean Khosrowshahi would then have to make sure Uber does change, which might be a tall order, but there is no better way to send a clear message to employees, customers and regulatory bodies around the world that Uber is changing.

Employees always watch to see what leaders do rather than say. Talk is easy, will the leader actually do anything or just talk?

Uber has a major cultural problem which has been found to be sexist, macho and lacks concern for regulation of almost any sort. It won’t change without strong leadership and hiding behind lawyers won’t cut much ice. 

Travis Kalanick, who created Uber and its culture, is being slowly blocked out by investors. SoftBank have invested $1.3bn in the firm after changes to the board, but still want more and have demanded Kalanick be banned from executive office.

However, Kalanick has appointed two other directors as he battles to maintain his control. Surely this cannot end well for Kalanick as investors realise how disruptive he is likely to be.

Like many entrepreneurs Kalanick would rather risk damaging his business than letting go. His presence is also likely to perpetuate the old culture which Khosrowshahi has to persuade regulatory authorities, investors and customers is changing. 

That’s why a deal with regulators in London would help and one suspects the door is open to negotiation.

Khan will be keenly aware of the risk to his reputation as Uber would be missed by many in London.

Like TfL he wants transparency and compliance from Uber and reassurance of real change. Kicking out Uber is a last resort, following their previous warnings, but Khan does have a strong hand as TfL has deep pockets to fund legal processes and the next Mayoral election is not until 2020.

The legal process of the appeal will be tortuous for Uber as we will receive a blow by blow account of its shortcomings lasting months. The press will be full of bad publicity that would send some customers to competing apps, which have multiplied since the license termination.

Evidence of failure to co-operate with TfL and the police over alleged sex attacks by Uber drivers is likely to worry customers. By all accounts there seems to have been a significant number over the last year.

The courts will be in a difficult position as the safety of the travelling public will appear to be at stake. It may be difficult to retain any sympathy with Uber as we are exposed to its inner email traffic.

Indeed Uber’s experience in the courts elsewhere has often been less than successful. Perhaps legal process is the US way but not always the best way of doing business elsewhere. Working with regulatory bodies and responding positively to criticism is usually more effective in the UK. 

In addition to the license appeal there is litigation as to whether drivers are ‘workers’ qualifying for holiday and sick pay. Uber also avoids UK VAT, which if drivers are categorised as workers, may become payable. Indeed there might also be a significant back claim. One senses that only the lawyers are going to become rich out of these processes. Customers, drivers, Uber and Khan may all lose significantly. 

Defending the allegations will appear to customers as defending the Uber culture and its flouting of regulation. If there is a way of avoiding such a debacle Khosrowshahi should take it.

Leadership is often about sending clear messages and these take significant sacrifices. There is no better place to start than London.

The door is open, Khosrowshahi should negotiate a short license period to demonstrate change which will allow the appeal to be dropped. There is a deal to be done.

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