When boards are in awe of founder CEOs, bad things can happen. Just ask former U.S. Attorney General Eric Holder.
If Holder was to sum up the board’s role in the cultural meltdown at Uber that almost derailed the company, it is that directors gave too much deference to founder/CEO Travis Kalanick. This is something, he says, that boards need to pay particular attention to in an era of superstar founder/CEOs and unicorn valuations.
Speaking at the annual meeting of the Society for Corporate Governance in Washington on Thursday, Holder, who was called in to investigate what went wrong at the privately-held ride sharing pioneer amid a slew of scandals over workplace behavior, mistreatment of female employees, said he discovered a culture that had not grown up as fast as Uber’s fortunes and tended to cater to what board member Arianna Huffington described as “brilliant jerks.”
“You have to make sure that just because they have these skills they don’t get to do things that regular employees don’t get to do,” Holder said.
Davia Temin, president and CEO of crisis management firm, Temin and Company, agreed with this assessment when writing about founding CEOs. “It used to be that the board might either tolerate bad behavior, or publicly support a CEO while privately chastising him relentlessly. Regardless, he or she would stay. More recently, however, given the outsized attention to serious CEO misbehavior, boards really have little choice—they must react, and act, quickly and decisively,” she said.
Fortunately, Holder notes that the culture shift has begun at Uber. He credited new CEO Dara Khosrowshahi with creating more openness at the company. He says under the new CEO, personnel changes in the HR and legal departments have been made. The former A.G. said he learned a lot about what makes—and breaks—a company’s culture. “It’s hard to define,” he said, “but you know it when you see it and you know it when its not there.”
So what else did he learn from his time at Uber? Plenty. Some of his big takeaways for organizations, both at the CEO and director level:
PROBE, PROBE, PROBE. “Don’t assume things are going well,” within the company he said. Any large organization filled with people is going to have people problems, and silence is probably a bad sign, not a good one.
ENGAGE WITH EMPLOYEES. Direct interaction with HR, compliance and regular employees is critical. Walk the floor out in the company, and listen to what people are saying.
RED FLAGS. Two big red flags on culture for CEOs and directors to keep an eye out for: When leadership can’t speak to HR and large numbers of complaints about a particular thing by a particular group.
BLIND RESUMES. To encourage diversity, he said organizations should be open to ideas such as “blind resumes,” stripped of any racial or gender identifiers. Unconscious racial bias, he said “was not a Starbucks problem. That’s an American problem that manifested itself at Starbucks,” adding that “This is not something that just white folks have in this country.”
Another big lesson he discovered at Uber: Private companies will be held to the same standards as public ones. “Just because you’re private as opposed to public doesn’t mean the public won’t be interested in what’s going on.