New Uber CEO's "Welcome Aboard" Gift: Another Federal Investigation

Little more than a day after Dara Khosrowshahi decided to accept the Uber board’s offer to become the embattled ride-share company’s new CEO – after the company’s top two candidates dropped out of the running - he received a welcome-aboard present that was just so…Uber.

Namely, a report in the Wall Street Journal claiming that the DOJ is in the “preliminary stages” of an investigation into whether Uber executives violated the Foreign Corrupt Practices Act by allegedly paying bribes to government officials. Based on what it finds, the Justice Department may or may not decide to open a full-fledged FCPA investigation into Uber.

According to WSJ, it’s unclear whether US authorities are focused on one country or examining activities in multiple countries where the company operates. But if we had to guess, we’d bet that any alleged wrongdoing probably happened in China, where bribery and corruption proliferate. Uber’s foray into the world’s No. 2 economy famously ended in defeat one year ago when it sold its China division to local rival Didi Chuxing in exchange for a stake in the combined company.

In his first public remarks since accepting the job, Khosowshahi described the chance to run the ride-hailing startup as a “once in a lifetime opportunity.” But like they say: be careful what you wish for. Because, as Khosrowshahi absorbs his first blows in the unceasing media assault on Uber, he’s probably thinking to himself that he didn’t realize just how good he had it at Expedia – where his 12-year tenure was unblemished by scandal.

To add another layer of irony: He hasn’t even left yet.

Here’s WSJ:

“Even before he takes the job as Uber Technologies Inc.’s new chief executive, fresh challenges confront Expedia Inc. CEO Dara Khosrowshahi, with news of a federal bribery probe into Uber and public disagreement over how the board’s decision to hire him unfolded.

News of the probe, reported by The Wall Street Journal on Tuesday, came after Mr. Khosrowshahi made his first public comments since being voted in as CEO by Uber directors on Sunday. He would succeed Travis Kalanick, the Uber co-founder who was pressured to resign in June following a series of scandals and amid infighting on the board. Mr. Khosrowshahi was selected over two more seasoned executives in Jeff Immelt, chairman of General Electric Co. and Meg Whitman, chief of Hewlett Packard Enterprise Co.”

Khosrowshahi played up his relationship with former CEO and Uber co-founder Travis Kalanick, telling WSJ that “there’s mutual respect” between the two tech titans. We hope, for Khosrowshahi’s sake, that he’s being polite, not naïve. Because anybody who’s been following the Uber saga probably suspects that Kalanick would drive a knife into his successor’s back in a heartbeat if it would hasten his return as CEO.

“Speaking with the Journal at Expedia’s headquarters Tuesday morning, Mr. Khosrowshahi said his contract with Uber still needs to be finalized, but indicated he would take the job. He said Mr. Kalanick would remain involved with Uber and described as “budding” his relationship with the ex-CEO. “I think there’s mutual respect there,” he said.

‘He’s the founder of the company, he’s an incredible visionary, so he will be involved with the company going forward,’ Mr. Khosrowshahi said. ‘Exactly how, exactly when, is something that’s really up to Travis and the board.’"

When asked about the controversy surrounding his selection as CEO – he was chosen after two more-experienced candidates, HP Enterprise’s Meg Whitman and recently retired former GE CEO Jeff Immelt, publicly withdrew their candidacies - Khosrowshahi defended his selection.

“Mr. Khosrowshahi declined to discuss the controversy around the CEO search, saying ‘there has been too much obsession with the process.’

Despite the drama at Uber, Mr. Khosrowshahi said the offer to run it was too good to pass up. ‘It took a couple of pokes to get me interested,’ he said, ‘but the opportunity at Uber is once in a lifetime.’”

He added that his “first priority” at Uber would be focusing on the company’s employees, who’ve been without a leader for nine weeks.

“That part of the business maybe hasn’t been focused on as much,” he said, “and that comes first for me.”

But as much as Khosrowshahi would like to shoot the breeze by the water cooler, we imagine he’ll soon be busy putting out fires as the federal government is in the middle of multiple investigations into the company’s alleged misdeeds.

As WSJ notes, Uber faces growing pressure from U.S. authorities. In addition to the preliminary bribery probe, the Justice Department is separately pursuing a criminal investigation into “Greyball,” a software tool employees used to evade law-enforcement officials. And earlier this month, Uber settled Federal Trade Commission charges that it didn’t offer sufficient privacy protections for its users. The company didn’t admit nor deny the allegations as part of the settlement.

Good luck with the new job, Dara. You’re going to need it.
 

Uber Selects Expedia Chief Dara Khosrowshahi As Its Next CEO

Just nine hours after Jeff Immelt tweeted that he was no longer in the race to be Uber"s next CEO, moments ago Uber"s board selected Expedia CEO Dara Khosrowshahi, 48, various news outlets report. According to Recode, the board selected the "third candidate", one who was not only an unknown until now, but one who as the photo below shows, is also not a woman despite his beguiling first name and the board"s rumored prerogative to pick a female next leader.

Dara Khosrowshahi, current CEO of Expedia

In a statement, a spokesperson said: “The Board has voted and will announce the decision to the employees first.”  If he accepts, he would be replacing founder Travis Kalanick and interim CEO Ariana Huffington.

The decision appears to have stumped everyone, including Recode"s Kara Swisher who writes that "what that means is anyone’s guess, and sources close to one of the remaining possible CEO picks — Hewlett Packard Enterprise CEO Meg Whitman — said she has not been informed of any choice nor had the board agreed to some the the things she was asking for to take the job. Whitman was asking for a number of things, including less involvement of ousted CEO Travis Kalanick."

As the NYT adds, Jeff Immelt, a finalst until this morning, withdrew when it became clear that he did not enough have support. Recode adds that "Immelt dropped out of the running this morning, with sources close to his thinking calling the process totally “dysfunctional” (and worse)."

And while the board was leaning toward Meg Whitman, the chief of Hewlett Packard Enterprise, "matters changed over the course of Sunday afternoon and the board decided on Mr. Khosrowshahi" according to the NYT.

While not much is known about Dara Khosrowshahi, and why the board thinks the Expedia chief can successfully replace Travis Kalanick as head of the world"s most valuable private company, what is known is that under Khosrowshahi, Expedia was one of the first tech companies to file a legal challenge against Trump"s travel ban, citing the potential harm it could do its employees and customers. As such, the Iranian-American appears to be high on the #resistance totem. His anti-Trump bias was further exposed in his year end note to employees, in which he said he wants to send "just a big thank you to our global employee base for an improved 2016 and certainly an improved end to the year. And hopefully we will all be alive to see the end of next year."

Some further background:

Dara Khosrowshahi has served as CEO of Expedia, Inc., since August 2005. Since that time, Expedia has extended its global presence to more than 60 countries worldwide through Expedia, Hotels.com, and Hotwire online booking brands, and the travel community sites of TripAdvisor Media Network. Ten years later, in 2015, Expedia awarded him $90 million worth of stock options as part of a long-term employment agreement, stating he would stay until 2020. 

Before joining Expedia, Khosrowshahi served as the CEO of IAC Travel. Khosrowshahi worked at Allen & Company from 1991 to 1998, and as its vice president from 1995 to 1998. He is also a board director for BET.com, Hotels.com and several other companies.

In February 2015, the New York Times Company announced Khosrowshahi as one of two new nominees for its board of directors. He will formally stand for election at the annual meeting of stockholders on May 6, 2015. Arthur Sulzberger, Jr., the publisher of the New York Times and chairman of The New York Times Company praised Khosrowshahi"s "comprehensive digital and international experience, as well as significant financial expertise".

The search for Uber"s new CEO had been riven by scandal and discord, especially between former CEO Kalanick and Benchmark, the VC firm that is a major Uber shareholder and that also has a seat on Uber’s board. Both Kalanick and Benchmark had their own preferred candidates for a new chief. Benchmark recently sued Kalanick to try and force him off the board.

Trump Slams "Grandstanding" CEOs Who Have Quit His Council

Well, on the bright side, it took him around 12 hours to respond to last night"s resignations...

For every CEO that drops out of the Manufacturing Council, I have many to take their place. Grandstanders should not have gone on. JOBS!

— Donald J. Trump (@realDonaldTrump) August 15, 2017

The remaining CEOs on Trump"s council had the following to say (via Business Insider)

• Andrew Liveris, Dow Chemical Company, will remain on the council. "I condemn the violence this weekend in Charlottesville, Virginia, and my thoughts and prayers are with those who lost loved ones and with the people of Virginia," Liveris said in an emailed statement. "In Dow, there is no room for hatred, racism, or bigotry. Dow will continue to work to strengthen the social and economic fabric of the communities where it operates — including supporting policies that help create employment opportunities in manufacturing and rebuild the American workforce."


• Bill Brown, Harris Corporation, did not respond to a request for comment.


• Michael Dell, Dell Technologies, will remain on the council. "While we wouldn"t comment on any member"s personal decision, there"s no change in Dell engaging with the Trump administration and governments around the world to share our perspective on policy issues that affect our company, customers, and employees," a spokeswoman said.


• John Ferriola, Nucor Corporation, did not respond to a request for comment.


• Jeff Fettig, Whirlpool Corporation, will remain on the council. "Whirlpool Corp. believes strongly in an open and inclusive culture that respects people of all races and backgrounds," the company said in a statement. "Our company has long fostered an environment of acceptance and tolerance in the workplace. The company will continue on the Manufacturing Jobs Initiative to represent our industry, our 15,000 US manufacturing workers, and to provide input and advice on ways to create jobs and strengthen US manufacturing competitiveness."


• Alex Gorsky, Johnson & Johnson, did not respond to a request for comment.


• Greg Hayes, United Technologies Corp., did not respond to a request for comment.


• Marillyn Hewson, Lockheed Martin, declined to comment.


• Jeff Immelt, General Electric, will remain on the council. "GE has no tolerance for hate, bigotry or racism, and we strongly condemn the violent extremism in Charlottesville over the weekend," a GE representative said in a statement. "GE is a proudly inclusive company with employees who represent all religions, nationalities, sexual orientations, and races. With more than 100,000 employees in the United States, it is important for GE to participate in the discussion on how to drive growth and productivity in the US, therefore, Jeff Immelt will remain on the Presidential Committee on American Manufacturing while he is the chairman of GE."


• Jim Kamsickas, Dana Inc., did not respond to a request for comment.


• Rich Kyle, The Timken Company, did not respond to a request for comment.


• Richard Trumka, AFL-CIO, said the group was aware of Frazier"s decision and assessing its role. "The AFL-CIO has unequivocally denounced the actions of bigoted domestic terrorists in Charlottesville and called on the president to do the same," Trumka said in a statement. "We are aware of the decisions by other members of the President"s Manufacturing Council, which has yet to hold any real meeting*, and are assessing our role. While the AFL-CIO will remain a powerful voice for the freedoms of working people, there are real questions into the effectiveness of this council to deliver real policy that lifts working families."


• Thea Lee, formerly AFL-CIO, departed as the group"s deputy chief of staff, and it is unclear whether she will remain a member of the council.


• Denise Morrison, Campbell Soup Company, will remain on the council. "The reprehensible scenes of bigotry and hatred on display in Charlottesville over the weekend have no place in our society," a company representative said. "Not simply because of the violence, but because the racist ideology at the center of the protests is wrong and must be condemned in no uncertain terms. Campbell has long held the belief that diversity and inclusion are critical to the success of our business and our culture. Our commitment to diversity and inclusion is unwavering, and we will remain active champions for these efforts. We believe it continues to be important for Campbell to have a voice and provide input on matters that will affect our industry, our company and our employees in support of growth. Therefore, Ms. Morrison will remain on the President"s Manufacturing Jobs Initiative."


• Dennis Muilenburg, Boeing, will remain on the council.


• Doug Oberhelman, formerly Caterpillar, did not respond to a request for comment.


• Scott Paul, Alliance for American Manufacturing, was unavailable for comment.


• Michael Polk, Newell Brands, did not respond to a request for comment.


• Mark Sutton, International Paper, will remain on the council. "International Paper strongly condemns the violence that took place in Charlottesville over the weekend — there is no place for hatred, bigotry, and racism in our society," an International Paper representative said. "We are a company that fosters an inclusive workforce where all employees are valued and treated with dignity and respect. Through our participation on the Manufacturing Jobs Council, we will work to strengthen the social and economic fabric of communities across the country by creating employment opportunities in manufacturing."


• Inge Thulin, 3M, did not respond to a request for comment.


• Wendell Weeks, Corning, did not respond to a request for comment.

Who will be "the last CEO standing"?

Trump-Appointed Manufacturing Tzar Backfires - Supports NAFTA, Backs Mexico

In an apparent snub to the administration"s trade policy plans, GE CEO Jeff Immelt - who sits on the Trump-appointed manufacturing council - said he "very supportive" of NAFTA adding that he was "optimistic about Mexico."

Just a day after we showed Mexico"s Manufacturing industrial production surge 8.5% year-over-year - the greatest surge since August 2010...

And expectations for employment in US manufacturers are tumbling...

Reuters reports that GE Chief Executive Officer Jeff Immelt said on a visit that Mexico had great potential and was not properly understood. He touted the conglomerate"s Mexican operations and the trade deal binding Mexico, Canada and the United States.

"GE as a company, we"re very supportive of NAFTA," Immelt told employees at an event to mark the expansion of operations in the northern city of Monterrey. He said the trade accord could be modernized, as Mexico has argued.

The GE boss said trade meant "win-win" opportunities across North America.

"We will continue to work constructively in the context of wanting to see a close relationship between the U.S. and Mexico," he said, noting that GE"s exports to the rest of the world from Mexico were worth $3 billion.

"We"re optimistic about Mexico, we"re optimistic about what we can do here," Immelt added, saying Latin America"s no. 2 economy would be a "big part" of GE"s future.

As a reminder, Immelt sits on a Trump-appointed manufacturing council (that Mexico has targeted for lobbying as Mexico and Canada push U.S. business leaders to defend NAFTA).

While Trump touts a "Buy American" policy and has railed against U.S. companies moving operations to Mexico (threatening to ditch NAFTA, a lynchpin of the Mexican economy, if he cannot rework it to secure better terms for the United States), unlike some U.S. companies, GE has not backed off plans in Mexico, risking broadsides from Trump on Twitter.

How long before Mr. Immelt gets a tap on the shoulder?

CEO Pay Soars In 2016 As Employee Wages Continue To Stagnate

CEO pay increases took a brief pause in 2015 dropping to a paltry median of just $10.8 million with most getting a pay cut or a raise of less than 1.5%.  But, as the Wall Street Journal points out this morning, the CEO"s of America can once again rest assured that their families will not starve to death as 2016 pay soared nearly 7% setting a post-recession record.

Median pay for the chief executives of 104 of the biggest American companies rose 6.8% for fiscal 2016 to $11.5 million, on track to set a postrecession record, according to a Wall Street Journal analysis.

Twice as many companies increased their chiefs’ pay as reduced it, though a few high-profile bosses took substantial pay cuts, including Apple Inc.’s Tim Cook and General Electric Co.’s Jeff Immelt.

The higher pay was doled out as the stock market notched strong gains and corporate profits rebounded over the course of 2016. “If ever there was going to be a good year for CEO pay, it was going to be 2016,” said David Yermack, a finance professor at New York University’s Stern School of Business who studies executive pay.

As usual, operating results had limited impact on CEO earnings potential and some of the largest payouts went to CEO"s who were fired in 2016.

Some of the biggest paydays went to companies in transition—or even turmoil. Philippe Dauman, who was forced out as chief of media giant Viacom Inc. in August, made $93 million during the year. The total includes $58 million of exit payments, promised under his 2015 employment agreement. A Viacom spokesman declined to comment.

At Johnson Controls International PLC, Alex Molinaroli made $46.4 million in the year ended Sept. 30, more than double the $21.7 million he made the prior year. Last fall, he split off an auto-parts business that accounted for a significant part of Johnson Controls’ revenue and closed a $14 billion merger with Tyco International PLC. A Johnson Controls spokesman declined to comment.

Meg Whitman made $35.6 million in the year ended Oct. 31 as chief executive of Hewlett Packard Enterprise Co., which was created when she split Hewlett-Packard Co. into two companies in late 2015. That is more than double the $17.1 million she made a year earlier at the combined company.

Her latest package included a special equity grant tied to the launch of HP Enterprise. Aside from such one-time items, “Meg’s target compensation has remained unchanged over the past three years,’’ an HP Enterprise spokeswoman said, referring to a portion of the CEO’s pay package.

Thomas Falk of Kimberly-Clark Corp. received a 29% raise, compared with a 21% pay cut in 2015 and bringing his total compensation to $15.7 million in 2016 from $15.4 million two years earlier.

Mr. Falk’s raise came even as the maker of Huggies diapers and Kleenex tissues posted a shareholder return of -7.7% last year compared with 14% a year earlier.

A Kimberly-Clark spokesman said the company considers its three-year shareholder return of 25% and five-year return of 90% better measures of Mr. Falk’s performance.

And here"s how the top 20 highest paid CEO"s in America made out in 2016:

Much of the higher pay was awarded in various forms of restricted stock or stock options. The compensation increases have come about because rising equity awards have more than made up for declines in cash incentive pay, according to a separate analysis by Institutional Shareholder Services, the large proxy advisory firm.

While cash bonuses have fallen about 1.4% among the companies that have filed pay disclosures, stock awards have risen 7.4% and option awards have risen 3%, noted John Roe, head of analytics at ISS.

Of course, that"s hardly any consolation for the average American worker who just saw his real earnings collapse over the past two years and actually turn negative in 2017.