Has Uber turned over a new leaf? For its business in London and globally it certainly should hope so. As reported in a New York Times (NYT) article, entitled “Uber’s Latest Big Test: London”, Adam Satariano wrote about the company’s attempt to overturn its loss of license to do business in one of its biggest markets outside the US. The matter, which was heard in London’s Magistrates’ Court and, as noted by Satariano, “has ramifications far beyond London, and, given changes the city has already wrung from Uber, it could embolden others grappling with how to regulate ride-sharing services. The ruling will offer a hint as to whether governments and regulators are becoming more receptive to Mr. Khosrowshahi’s conciliatory efforts as he seeks to move past the brusque manner associated with his predecessor”.
Uber lost its license in September 2017, barely one month in to the tenure of current chief executive, Dara Khosrowshahi. The ruling was made by Transport for London (TfL), the agency that oversees the city’s underground, buses and taxicabs, declaring that Uber was not sufficiently “fit and proper.” This ruling was based on the conduct of the company under its prior CEO Travis Kalanick. In a statementreleased at the time TfL said, “Uber’s approach and conduct demonstrate a lack of corporate responsibility in relation to a number of issues which have potential public safety and security implications.” The regulator went on to state, “TfL considers that Uber’s approach and conduct demonstrate a lack of corporate responsibility in relation to a number of issues which have potential public safety and security implications. These include:
- Its approach to reporting serious criminal offences.
- Its approach to how medical certificates are obtained.
- Its approach to how Enhanced Disclosure and Barring Service (DBS) checks are obtained.
- Its approach to explaining the use of Greyball in London – software that could be used to block regulatory bodies from gaining full access to the app and prevent officials from undertaking regulatory or law enforcement duties.”
Uber’s UK team in place at the time of the ruling immediately attacked the ruling as discriminatory and prejudiced towards the London black-cab drivers, who are both highly regulated and highly trained. This team shortly was replaced and Uber then took a more conciliatory approach. The conciliatory approach was continued by the new CEO Khosrowshahi who said in a tweet at the time, “that Uber was “far from perfect” and urged city regulators to work out a solution with the company.” Yet even Khosrowshahi threw in that “3.5mm Londoners depending on us” in the same tweet.
Satariano quoted André Spicer, a professor at the Cass Business School at City, University of London, who has been tracking the case, who said, “The trial is one of the first big tests of Khosrowshahi’s leadership of the company and new approach. The judgment will show whether authorities are willing to accept Uber with some of the harder edges knocked off, or whether there are more fundamental questions about the Uber model.”
Uber has worked to remediate the issues raised in the underlying license revocation. Uber has “introduced limits on how long a driver may continuously be behind the wheel, offered tools to report incidents to the police, and agreed to share traffic data with the city. A new management team was installed to run the company’s London operations, while three independent executives were recruited to a board that oversees operations in Britain.” Immediately after the underlying ruling, Khosrowshahi flew to London and met with regulators to try and begin the repair of the company’s reputation. That in and of itself was a breath of fresh air from the prior CEO.
On Tuesday the Magistrates’ Court ruled in favor of Uber, granting it a provisional 15 month license to operate in London. According to Alistair Smout, reporting in Reuters, said “Judge Emma Arbuthnot said that while Uber had not been fit and proper when that decision was made, an overhaul of its policies in the subsequent months had changed its position. “(Uber) has provided evidence that it is now a fit and proper person… I grant a licence to ULL (Uber London Limited),” she said in her judgment. The judge granted Uber a 15-month “probationary” licence to operate.” London Mayor Sadiq Khan said that it was “clear that the court ruling was no carte blanche for Uber in London.” In a tweet he said, ““No matter how big or powerful you are, you . he said in a tweet. Uber has been granted a 15-month licence to operate in London – but with a clear set of conditions that TfL will closely monitor and enforce.”
One of the most interesting requirements laid upon Uber by the Magistrates’ Court was that Uber must have “an independent assurance audit report every six months.” For this requirement I would suggest Uber engage an independent monitor which would oversee all the requirements laid down by the Magistrates’ Court, similar to the position of a Monitor in Foreign Corrupt Practices Act (FCPA) cases where their role is to report to the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) a company’s progress in implementing the mandated compliance solution agreed to in any settlement documents.
The London hearing was a huge test for Uber and pulled out all the (remedial) stops to garner its license to do business in London back. It is not only true for Uber’s biggest market in Europe but no doubt regulators across the globe were watching the hearing to see if Uber has truly turned a cultural corner and they can be seen as an ethical corporate citizen. For the US market, this hearing is the beginning of a crucial test of steps Uber must take if it wants to go public. Two critical steps it still must take are to hire a Chief Compliance Officer (CCO) and Chief Financial Officer (CFO). Without these positions filled, Uber may well have trouble certifying anything close to a Sarbanes-Oxley (SOX) certification or even giving the investment community comfort that it can move forward with appropriate corporate processes to facilitate both profitability and survival.
Equally important is the role a fulltime CCO would play. The CCO would help lead not only the efforts to reform and revamp the company but would work to continually improve the company’s compliance regime. This would benefit far more than compliance because given the data driven nature of Uber’s business model, that same data could be used for both compliance and to make the company run more efficiently and in compliance.
As a consumer, I am a huge fan of Uber. I have used it multiple times during my most recent trips. I always chat with the Uber drivers about their experiences with the company. They are 99% positive as is my experience as a customer. Yet Uber must get the culture right and then the regulatory response right to move forward from even a hugely success start up to a well-established player in the global transportation market. I hope they do so as I find their services to be such a positive experience. The Magistrates’ Court ruling will go a long way towards answering this and other questions about whether the company’s culture has truly changed.
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© Thomas R. Fox, 2018