The Consequences of Negligent Leadership at the Board Level

I really hoped I wouldn’t have to write about Travis Kalanick, former CEO and founder of Uber, again. As regular readers know, I’ve had a lot to say about Kalanick and the toxic workplace culture that led to his resignation as CEO. Now it looks like his investors are gunning for his spot on Uber’s Board of Directors as Benchmark Capital sues him for fraud, breach of contract and breach of fiduciary duty. Had Uber’s board heeded my advice they would have avoided this whole mess. My prediction: Uber cannot survive this.

Photo credit: Inforum

What to Do When Your Boss Asks You to Compromise Your Ethics

Employees being asked to act immorally by their boss have become far too common. The dilemma is—what to do? And how to do you weigh the price that whistleblowers usually have to pay such as lack of advancement, alienation and even reprisal? Daniel Victor in the New York Times’ Smarter Living column explored this question recently and based on my research forFrom Bully to Bull’s-Eye: Move Your Organization Out of the Line of Fire, I disagree with some of the advice he offers.

I agree with Victor that employees should first make sure that they didn’t misunderstand their supervisor’s request. There are times when things are poorly stated and it’s imperative that this isn’t misinterpreted. But let’s say that the request was crystal clear—what do you do next?

 First, determine if this request restricted to just this manager in this department, or is it something being enacted throughout the organization? Second, forego human resources, which in my experience is usually part of the problem, and send an anonymous note to the audit committee of the Board of Directors apprising them of an ethics issue and request an investigation. In your note indicate that if there is no response within a set limit of time you will seek external recourse with legal representation, the media, or both.

Under no circumstances would I recommend following Victor’s advice to expose the situation internally—this could be fraught with danger. Had the employees who went from victim to villain at Wells Fargo exposed the scandal in the manner I advocate, their story would have had a far happier ending.

Photo credit: BIGSTOCK

Where are the Waldos?

Do you remember the children’s puzzle books, Where’s Waldo? by British illustrator Martin Handford?You would have to find the skinny guy in the red-striped shirt and glasses in a thickly populated illustration.  The Board of Directors at Uber are starting to remind me of this popular series. No matter how hard they look they can’t seem to find someone to take responsibility for what goes on in the company.

I’ve written quite a lot about Uber this year, from the shocking revelations of sexual harassment made by a former employee, to the assurances of board member Arianna Huffington that the company had no systemic problems, to the heartrending suicide of one of their engineers, Uber has been dominating the business news. Now they’re again grabbing headlines, this time for pocketing millions of dollars of drivers’ commissions due to a “miscalculation.” The company has been basing its percentage on a driver’s entire fare, rather than what the driver makes after taxes. Uber spokeswoman Rachel Holt has issued a statement according to the New York Times that “We are committed to paying every driver every penny they are owed — plus interest — as quickly as possible,” but I have to wonder how a company of this size could make not only this mistake, but expect drivers to pay the taxes on fares instead of passing that cost on to the customer.

Where is the board’s oversight in this? Either they’re ignorant of what is going on here and therefore negligent, or they’re complicit. The solution is simple. Rather than trying to find a chief operating officer to babysit CEO Travis Kalanick, they’d be better off replacing him. The buck, like their fares, has to stop somewhere.

 Andrew Faas is the author of From Bully to Bull’s-Eye: Move Your Organization Out of the Line of Fire

Illustration credit: Where's Wally at Wemberley?

Being Wells-Fargoed Should Keep Top Executives and Boards of Directors Up at Night

The news broke this morning that Wells Fargo’s board has decided to revoke compensation valued at $41 million from the company’s CEO, John Stumpf, in relation to the sham customer accounts created by employees to fluff sales numbers. Additionally, Wells Fargo’s former head of the community banking division that is the source of the scandal, Carrie Tolstedt, has also been financially penalized. I was surprised to hear that these two were being reprimanded for the scandal by Wells Fargo – but then, it occurred to me just how similar this was to the Volkswagen scandal. As I’ve written about before in Directors & Boards Magazine, both companies initially found that a swath of employees were to blame, before moving up the chain to management-level employees who were turned out only after it became increasingly clear to the public just who was to blame for their respective breaches with the public trust. In short, Wells Fargo is scrambling, just the way VW did when the emissions scandal broke.

I’ve said it before, and I’ll say it again – CEOs need to be aware of what is going on in their businesses. Transparency is the name of the game here – not just with handling scandals in the public eye, but in managing employees in every sector of business. Firing scapegoated lower-level employees and revoking the huge payouts to executives is fundamentally a band-aid approach to fixing the problems that lead to scandals. Firstly, Tolstedt should not have been allowed to retire peacefully with a few penalties imposed on her severance package – Wells Fargo should have made a point of firing her. Additionally, if it is revealed that Stumpf was fully aware of the sham accounts and covered up for them, he should also be dismissed publically. However, before either of those two steps could be taken, the most important course of action for Wells Fargo (and any similarly scandalized corporation) is to conduce a full, comprehensive and objective investigation into the root causes of the wrongdoing that occurred. Having a complete picture is essential to actually curing the problems present in any organization – and it makes a more convincing argument to the public whose trust those organizations are trying to regain.

At the end of the day, Wells Fargo’s behavior is yet another stain on the already-tainted US banking industry. The pervasive nature of short-term goal oriented cultures will almost always result in similar scandals that further erode the public’s trust in those institutions they have no choice but to invest in. It’ll be a long time before those 5,300 employees let go for their “rogue” behavior will be able to get a job again, just like it will be a long time before the employees let go for whistleblowing will feel comfortable standing up for their principles again. Depending on how far this particular scandal goes, perhaps the entire board will need to be replaced before anyone is willing to give Wells Fargo their money again. 

Image: Stumpf on Capitol Hill last week. Image Credit: Gabriella Demczuk for NYT