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When companies go wobbly, the board wants everyone to think business as usual. That’s how you can tell it’s not.

When you see a board of directors act like Uber’s, it means one thing. Get ready for change.

The one job you don’t want right now is being a board director of Uber

In discussing company’s problems with insiders, I wasn’t able to find anyone willing to defend CEO Travis Kalanick or the company’s reputation (meaning refute the charges). If key employees aren’t willing to stand up, the board gets shaky. They lose faith in a leader faster than you can say ‘meeting adjourned’. It means Kalanick is out. The team of rivals making up the committee will be like an interim CEO writ large. It is someone’s to win or lose. A leader will emerge.

What happened?

Everything, and I mean everything, got volatile. The reasons are both human and corporate. When it became clear to the board that Kalanick was the face of the problem, they worried more about the human terrain more than the corporate terrain. Pushing him out was easy. What to do next was the hard part.

Conversely, as the board may find out, an imperfect chief executive can be a liability, but lack of leadership can drive employees and customers to do crazy things. That is why I say get ready for change, and not just the CEO kind. So a corporate governance remedy like asking a chief executive to take a leave of absence is only done deliberately. The conclusion, it was a last resort.

Eric Holder

When the board brought on former Attorney General Holder, it was because they heard from customers, drivers, and employees who felt change was the only remedy. Better to change one boss then try and change the market.

I would estimate the cost of Holder’s engagement at $10-$20 million for a few months of the bulk of the investigation. Even to a rich company, this isn’t trivial. It brings up the question of whether the board took the right action? Were they experienced enough?

This is an ultra board made up of significant players like publishing entrepreneur Arianna Huffington and Silicon Valley guru, Bill Gurley. If you were going to find two people at the Nobel Prize level of business, it would be those.

By experience and reputation, no board could have been as well prepared for the difficult decision to review a founding CEO. This wasn’t any “safe spaces” exercise nor a politically correct review of the transgressions. You can be sure they looked at the cold facts without emotion. Their conclusion: save the company, dump the CEO.

Leave of absence

The timing was complicated by the recent tragic death of Kalanick’s mother in a freak boating accident. But I do not believe it was “take time off for personal reasons.” I reject this because even in the case of tragedy, a CEO takes a leave only when his or her condition absolutely prevents working, as did Steve Jobs’ disease.

If Kalanick was making the decision, he would have appointed his COO so the company would stabilize, his leadership would feel preserved, and he could depart quietly for a short time. It would not be called a leave of absence, just vacation. By placing him on a leave, the board was indicating this was their decision not his choice.

By taking an immediate leave prior to implementation of the Holder report, it was a sign the board wants a clean slate. That is not a precursor to bringing someone back. My guess is he could return as a non executive chair or vice chair, a role that protects his legacy but gives him no power.

We don’t have all the facts. One thing we do know, and it’s a Silicon Valley truth. Startups are worth billions these days. Uber is proving companies of its size are treated as if they are are public. Boards will have to prepare for a new level of scrutiny and a new set of awesome responsibilities.

Author’s Bio

Jeff Cunningham is an advocate for enlightened global leadership, which he calls the most valuable natural resource in the world.

 

He is a Professor at ASU’s Thunderbird School of Global Management and was the former publisher of Forbes Magazine, startup founder, digital content CEO, and ran an internet venture capital fund.

He travels the globe in search of iconic leaders. As an interviewer/host, he created a YouTube interview series, Iconic Voices, now co-produced by @Thunderbird, featuring mega moguls from Warren Buffett to Jeff Immelt. His articles on leadership have been featured in the Arizona Republic, LinkedIn and Medium via JeffCunningham.com.

 

His career experience includes publisher of Forbes Magazine; founder of Directorship Magazine; CEO of Zip2 (founded by Elon Musk), Myway.com, and CareerTrack.com; venture partner with Schroders. He serves as a trustee of the McCain Institute and previously as a trustee of CSIS and Middle East Institute, and as an advisor to the Nobel Peace Prize Committee.

 

He has also been a board director of 10 public companies.

 

The views expressed in this article do not necessarily reflect those of Thunderbird School of Global Management or Arizona State University as a whole.