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Uber’s sins are the sharing economy’s cross to bear

LiveMint logoLiveMint 20-06-2017 Sundeep Khanna

Last week after months of speculation, the serial misdemeanours at Uber Technologies Inc. finally came to a head with Travis Kalanick, the company’s CEO, proceeding on an indefinite leave of absence. It isn’t every day that the founding CEO of a large company is meted out this kind of treatment.

In fact, the last such exit probably goes back to the infamous sacking of Steve Jobs in 1985 from Apple, the company he had set up just nine years before that with Steve Wozniak and Ronald Wayne.

Start-ups by their very nature are guided by the personality of their founders so Kalanick has to take the rap for how Uber has shaped up. But, with his departure, along with that of several of his senior colleagues at Uber, the knives are also out for the sharing economy of which the cab-sharing company has been such an integral part.

This new economy, comprising tech-based start-ups like Uber, Airbnb, TaskRabbit, Tomio and BlaBlaCar, has over the last few years redefined the markets while testing the structure of established organizations. But in the process, it has run afoul of regulators, incumbents and in many cases customers as well, thanks largely to a way of doing business that has all the signs of a high school frat.

The Uber culture marked by sexual harassment, bullying and discrimination, that Kalanick has been censured for, is at the centre of what the New York Times in a sharply worded comment called “bro-culture”, a kind of perverse corporate machoism in which men, yes mostly men, create “a culture built on reckless spending and excessive partying”. You need just a cursory look at a dozen high-profile start-ups in India for a flavour of that.

But a toxic culture isn’t the only problem that Uber and other new-economy companies face. Later this year, the European Court of Justice in Luxembourg will take a decision on whether Uber should be treated as a technical platform, one that merely links independent drivers and random passengers, or a full-blown transportation service, like any other taxi fleet.

At the same time, Airbnb, which has constantly clashed with city officials, is facing fresh taxes as well as bans on short-term home rentals in many cities across Europe and the US.

Fundamental to the problems of the sharing economy is the concept of taking responsibility: as a technology platform, these companies are not responsible for the actions and activities they spawn. As a service they are.

To understand how that pans out, think of a chemist, one of whose drugs leads to a serious illness or even death of a customer.

Would the store escape censure by claiming it was merely a stockist for drugs from various companies and therefore not responsible for what happens to people who buy them? In turn, would the company that manufactured those drugs be able to get away by saying it bought the rights to market that drug from another company and so was absolved of any crime?

We know the answer to those—in all cases the chemist and the company would have to face an investigation and penalties.

That’s because of the principle of responsibility. The general legal theory that is used in cases involving employer liability is “respondeat superior”, which effectively means “let the master answer”. It holds employers liable for the actions of their employees if they impact customers.

It is the reason why pharma companies have to spend millions in conducting trials on the drugs they seek to market. It is also why a chemist won’t stock drugs from the unknown, neighbourhood company which claims to cure cancer in a week.

Today every company is expected to take complete and comprehensive responsibility for its products and services through its entire life cycle, and even beyond. So Coke can’t shrug its shoulders about what consumers do with the empty cans.

A Cisco Systems has to face lawsuits by NGOs alleging that the networking hardware seller supplied a security system to the Chinese government despite being aware that it would be used to track and persecute religious minorities.

It is how the world of companies and institutions has evolved, thanks in part to shareholder activism and in many cases responsible governance.

The cooperative model that new-era digital start-ups are using can not preclude these rules of business.

Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.

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