Photo by Patrick Tomasso on Unsplash
In May of 2019, Uber was on the upswing. The ride-hailing company was about to go public and its initial public offering was valued at more than $120bn. However, in the lead-up to its IPO on May 9 of that year, it pared back its valuation to $75bn and on the first day of trading, the company’s share price dropped more than 9 percent.
Concurrently, the company’s research and development teams ramped up ambitious projects — many of which left staffers scratching their heads.
“Products like Uber Chopper and Uber Submarine were being talked about. At a certain point, that just sounds insane,” former Uber staffer Maddy Nguyen, now co-founder and CEO of recruiting software firm Talentdrop, told Al Jazeera. “This is such a disruptive business at its core product and it’s driving all the money. Then, all the money goes to research and development for crazy ideas because they kind of have to for investors. It makes no sense.”
“The interest of the company and the investors are really not always aligned at all, and companies get pressure to do things that just aren’t really that smart for employees or founders,” Nyguyen added.
Such moves are often made in order to satisfy a concept known as shareholder supremacy, experts have said. As a 2019 Harvard Law School Forum on Corporate Governance paper explained it, “A corporation’s board owes its ‘fiduciary duties’ exclusively to shareholders, meaning that the board, as it makes decisions, is solely accountable to shareholders.”
In other words, companies are legally accountable to their shareholders to make the best financial decisions. In turn, executives make decisions to maximise shareholder profits, including by boosting share price, over just about everyone else involved – the workers, the consumers, and the product itself.
Publicly traded corporations put their shareholders first when making decisions even when that means developing products that leave a company’s own people confused and vulnerable to job cuts.
That can mean taking on ambitious projects that facilitate hypergrowth — a risky move that the tech sector has proved in recent months is a recipe for an industry-wide implosion.
Several companies, including Meta, Tesla, and even fashion brands Kate Spade and Co and recently Adidas, have been sued by their own investors after they allegedly failed to meet those obligations.
“The investors own the company. They have to have a duty to them first, that’s their legal duty,” Nguyen added.
Putting shareholders first is notoriously a rallying cry for both progressive Democrats and far-right Tea Party Republicans. Layoffs in the middle of it are just a vector for bad public relations.
Innovation is a key way companies try to appease shareholders without resorting to job cuts. In the case of Uber, the cornucopia of new products did not help its woes.
Even before the pandemic, its stock tumbled. Within months Uber began layoffs, and by October 2019, it had laid off more than 1,000 people. Like most companies, Uber’s layoffs kept piling up as its stock crashed at the height of the COVID-19 pandemic in 2020.
While 2021 was a good year for the company, that success was short-lived. Uber laid off 6,700 employees last year.
In January at the World Economic Forum, CEO Dara Khosrowshahi said there would be no company-wide layoffs. Less than a week later, the ride-hailing company announced it was cutting its Uber Freight division’s workforce by 3 percent or 150 jobs.
Since January’s downsizing announcement, its share price has increased by more than 50 percent.
Uber is far from the only one. Meta actually led the corporate pack amid the latest wave of layoffs.
The Facebook parent company went in too deep into its Metaverse efforts, which according to a poll from Morning Consult was doomed from the start as 68 percent of adults just are not interested in Meta’s virtual reality foray.
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