Introduction
Uber is one of the ride-sharing apps companies praised for its disruptive innovation in the transportation industry. The relatively young company from Silicon Valley that began as a startup is now valued at over $60 billion with a recent stake buyout by a Japanese investor valued at about $ 48 billion (Salinas & Balakrishnan, 2017; Reuters, 2016). Uber’s expansion into the market has been exceptional but the company has battled several legal and ethical challenges ranging from data breaches, sexual harassment, and driver exploitation among others that led to the eventual resignation of its CEO and co-founder, Travis Kalanick in 2017 (Newcomer, 2017). Imperatively, the paper discusses the legal and ethical issues surrounding Uber, the influence of Friedman’s philosophy and its influence on the firm’s executive, and an ethical framework that is applicable to the situation and its impact on the executives.
Uber’s Background
Formed in 2009 as a startup in Silicon Valley, Uber now operates in over 600 cities around the world. The ride-sharing app company is one of the recent disruptive innovations in the transport industry that emphasizes sharing of rides from one point to another (Uber, 2018). Hailed and criticized in equal measures, Uber is a demonstrating of the positive and negative aspects of the sharing or gig economy because it has been able to expand rapidly in less than a decade but its expansion has been marred with never-ending scandals ranging from internal and external sources. With net income of $ 2.8 billion and assets valued at $15 billion the organization’s market value is estimated to be about $ 60 billion. Uber has over 12,000 employees and is a leader in delivery commerce. Founded by Travis Kalanick and Garret Camp, the San Francisco-based makes over 5 billion trips a day and believes in helping people have safer and more accessible transportation (Uber, 2018). However, a history of scandals and allegation and lawsuits has tainted the organization’s reputation in the recent past that culminated in the resignation of top executives including its CEO and co-founder, Travis Kalanick (Taylor, 2017).
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Legal and Ethical Issues
Uber’s business model has disrupted innovation in the transportation industry but amidst the expansion and surging of the company’s value, many reports and investigations reveal a company and its executives that have over the years flouted regulations, ethical standards and legal responsibilities (Taylor, 2017). In fact, Uber’s business model goes against even economists’ perspectives like Friedman’s ethical responsibility of firms doing business. Friedman’s neo classical ethical responsibility framework posits that the only social responsibility of a business entity is to make profits for its stakeholders as long as it conducts its business operations within the legal compliance (Mertens, 2013). Consequently, over three laws and ethical perspectives are evident in Uber’s case study. Uber’s legal and ethical issues include cover-up of cyber attacks on customer data, non-compliance to American with Disabilities Act and labor laws where drivers are not considered the organization’s employees, intellectual property violations, flouting of local regulations and fraud, and sexual harassment, discrimination and retaliation Gallegos, 2014; Salinas & Balakrishnan, 2017).
Legal Issues and Specific Laws
According to Bloomberg News, Uber faces several legal issues that include bribery allegation abroad, use of illicit software, questionable pricing schemes and possible theft of competitor’s intellectual property (Newcomer, 2017). For instance, Uber has been battling violation of intellectual property where it is under investigation for alleged theft of schematics and other documents from Alphabet Inc that outlines its self-driving technology. Alphabet Inc accuses Uber of utilizing the stolen technology before it launches its autonomous car model. The firm claims that a team of former engineers at Google stole the laser sensor design that enables self-driving cars to map their environment. Google states that Uber bought a startup from one of its former engineers that were deeply involved in its self-driving initiative. Uber acquired the startup in late in 2016 (Salinas & Balakrishnan, 2017). The engineer was eventually fired by Uber but a former employee asserts in a letter that the ride-sharing app company encouraged and enabled its employees to steal trade secrets from competitors.
Uber’s recent admission of not its failure to disclose a data security breach in 2016 that affected over 57 million users and drivers is a huge violation of legal provisions. As such, the firm admitted to having paid hackers over $ 100,000 to remove the data and keep the breach a secret (Salinas & Balakrishnan, 2017). This raises consumer protection concerns about the security of their data. Imperatively, the city of Chicago and Washington’s state attorney general have filed several suits against the firm with allegations of misconduct by Uber. Washington lawsuit states that Uber violated its data breach notification legislation as the law requires a firm to notify the state within forty-five days in case of a breach that affects over 500 residents of the state. The hack affected over ten thousand Uber drivers in Washington. The Chicago suit states that the firm failed to rectify past vulnerabilities of data security in its system. Several other states are also investigating the security breach that puts the Silicon Valley firm in a potential future legal battle that could affect its long-term sustainability and operations, especially in the backdrop of the London ban where Uber has been banned from operating. Uber continues to face data breach allegations over its use of a tool called “Greyball” (Shen, 2017). Uber is accused of using the tool to evade authorities, especially in cities where regulators seek to block the use of the ride-sharing app (Taylor, 2017). Uber’s used the tool on its app to identify and evade regulatory authorities in cities like Paris, Las Vegas and Paris. The tool was used particularly in cities and markets that had banned Uber or restricted its movement.
Another legal issue affecting Uber is employees’ harassment, discrimination and exploitation of drivers. During the tenure of the former CEO, Uber faced different workplace culture investigations with one that ended in over 20 employees being dismissed (Shen, 2017). The company states that it investigated 215 claims during the tenure of its former HR vice president Linda Hornsey; where 54 cases were about discrimination, 47 on sexual harassment and over 45 cases on unprofessional conduct among others (Stark, 2017). The company also faces several lawsuits from former employees of color and women for alleged discrimination based on race and sexuality. Further, Uber’s drivers in different parts of the world, including the United States, have protested as they are never treated as employees and lack benefits and insurance when at work (Taylor, 2017). Such violations of legal issues demonstrate the inability of the organization to handle regulations and work ethically. The ride-sharing app company has been accused of not paying its drivers the minimum wage and other benefits like other employees (Coca, 2017).
Ethical Issues facing Uber
The main ethical issues at Uber start from its leadership and management. The leaders, right from its former CEO and co-founder, Travis Kalanick, and senior management have been accused of sexual harassment and discriminating employees from certain races (Stark, 2017). Further, Uber’s senior vice president in charge of engineering stepped down amid sexual harassment allegations. In March 2017, Travis was accused of visiting a Souls escort-karaoke bar (Taylor, 2017). The sexual allegations at the firm include drivers while a recent viral video that showed the former CEO arguing with a driver exacerbates the damage to the firm’s reputation.
Friedman Milton’s Philosophy & Influence to the Executives at Uber
Friedman supported the idea of a free market with little or reduced government intervention or influence. Friedman argues that state administration and influence should be reduced in the market and allows business entities to act freely and independently. Friedman proposed that this model would lead to economic prosperity (Cosans, 2009). Imperatively, firms can create fair market competition and self-regulate their industry. However, Milton’s argument has been criticized as favoring business entities to self-regulate yet they may abuse this freedom due to collusion (Mertens, 2013). Uber’s case is a perfect example of how self regulation can lead to catastrophic effects on a company’s or industry’s stakeholders. Uber and other ride sharing apps firms disrupted the transportation sector through their innovative technology. These apps have changed how regulators control taxi business in major cities around the world. Due to its innovative technology, Uber’s value has risen tremendously over its short history to become one of leading companies with increased venture capital (Friske, 2017). Its executives focused on making profits and increasing returns at the expense of drivers and passengers’ safety and flouted several regulations (Coca, 2017). Consequently, the management has gone against Friedman’s philosophy where it failed to operate within the “rules of the game” yet continues to make profits for its shareholders. The independent decisions by the company demonstrates the executives’ inability to adhere to regulations like having tools in the app that evades state officials and cheat on the number of cars in the firm’s network (Abboud & Wagstaff, 2015). Different states have subsequently filed suits against the firm after its revelations concerning the payment of over $ 100,000 to hackers to conceal the data breach incident that affected over 55 million people on its database (Reuters, 2016).
Conclusion
The case study on Uber shows that business entities have an obligation to respect, uphold and operate within the existing legal provisions and ethical codes expected by stakeholders. Uber has failed to illustrate that it is an ethical business that upholds legal provisions concerning various aspects of business operations, particularly compliance with the law. The firm’s executives have not indicated any commitment to adhering to these regulations as the case shows. Conclusively, to stay afloat and in business, Uber needs to address these legal and ethical problems to mitigate lawsuit, inquiries, and redeem its damaged market and industry reputation.
References
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