New Uber CEO hints at 2019 IPO as he rakes over troubled startup

One of Dara Khosrowshahi’s first tasks at Uber Technologies Inc. will be coming up with a new set of core principles. Uber’s board ripped up parts of the original list of 14 corporate values, authored years ago by co-founder Travis Kalanick, after they were used by employees to justify malicious behavior around the office.

Rewriting the company’s ethical code will be a symbolic way for the newly appointed chief executive officer to put his stamp on a company scarred by months of management turmoil, allegations of widespread sexual discrimination and mounting legal threats.

Uber is turning to the 48-year-old Expedia Inc. CEO to articulate what the transportation Goliath should stand for and inspire a workforce of more than 15,000. His reputation as a man of principle with little ego is a stark contrast to his predecessor, a brawler who became enmeshed in a wide array of scandals, according to people who have associated with both men.

Kalanick introduced the new CEO to employees at a staff meeting Wednesday morning. Khosrowshahi, who starts Sept. 5, cracked jokes and fielded inquiries. In response to a question about going public, he said it would probably happen in 18 to 36 months, according to two people who listened to the meeting. “It’s my opinion that the company should go public,” he said.

In addition to taking the CEO chair, Khosrowshahi will likely get a seat on the board opposite Kalanick. Meanwhile, the former chief has expressed interest in returning to a more active role at the company since he was ousted in June, creating a potentially awkward dynamic that Khosrowshahi will need to manage. Past colleagues, friends and family describe Khosrowshahi as an understated, measured negotiator, who will challenge anyone who stands in the way of what he believes in, including the U.S. president — someone he’s antagonized on multiple occasions.

“I saw him work with strong personalities and complex situations, and simplify to focus on what actually matters,” said Jeremy Liew, a venture capitalist who reported to Khosrowshahi at IAC/InterActiveCorp. “He has a strong moral compass.”

Khosrowshahi was shaped by his escape from Iran as a boy, just before the chaos of the 1979 revolution. He came with his family to the U.S. as a 9-year-old refugee. He grew up in Tarrytown, New York, with his mother and brothers. For most of his teenage years, his father was detained in Iran after returning to care for Khosrowshahi’s grandfather.

Even in re-telling the story in a letter to employees following Donald Trump’s ban on immigration from certain Muslim-majority countries, he deflected sympathy. Though a refugee, Khosrowshahi said, he didn’t feel like one as a child. “For the grown-ups, it was a difficult transition,” he told Bloomberg Businessweek this year. “The kids were able to party together, so it was fun.”

The family prospered and ascended America’s business ranks. After studying engineering at Brown University, Khosrowshahi took a job at investment bank Allen & Co., where his brother is a top dealmaker today. Their cousins are prominent venture capitalists and senior technology executives at Intel Corp. and Alphabet Inc.

Barry Diller, the billionaire media mogul, recruited Khosrowshahi into his inner circle during the dot-com frenzy in the late 1990s. Diller asked Khosrowshahi to scout acquisition targets and put together the sprawling internet empire known as IAC. He worked on the company’s purchase of Expedia in 2003 and then took over the online travel business.

Peers in the corporate world admire Khosrowshahi for his trustworthiness and strong values, traits that can be hard to find in the world of deal-making. “I just found him to be one of these solid, hopeful, humble leaders,” said Omid Kordestani, Twitter Inc.’s chairman and a fellow Iranian immigrant who makes a point of seeking out Khosrowshahi at the annual Allen & Co. conference in Sun Valley, Idaho.

Khosrowshahi has been a central figure in the travel industry for more than a decade. He oversaw the spinout of Expedia from IAC in 2005 and then led a corporate shopping spree with shareholders’ blessing. He spent the last few years orchestrating mega deals. He dropped nearly $5 billion in a single year on just two companies, Orbitz and HomeAway. While Expedia’s market value is dwarfed by Priceline Group Inc., Khosrowshahi’s company has outperformed its larger rival’s stock since the acquisition binge in 2015.

But Khosrowshahi’s track record isn’t spotless. He took a pass on buying Booking.com in the mid-2000s. Priceline purchased the site soon after for $135 million, turning it into one of the most successful acquisitions of its time. It now contributes about 80 percent of Priceline’s $12 billion annual revenue. This year, Expedia needlessly invited Uber-like controversy. It was one of the last remaining advertisers with Fox News’ “The O’Reilly Factor” after dozens of brands dropped the show amid sexual harassment allegations about its host.

In contrast to the unscripted persona of Kalanick, a 41-year-old paper billionaire who coined the phrase “Boob-er” to describe his company’s ability to attract women, Khosrowshahi carefully curates his image. He has four children from two marriages. He fills his Twitter feed with pictures of family, thanks to his mother and wife for their support, and grainy concert photos of dad-rock bands like the Shins and U2.

Colleagues said he doesn’t take himself too seriously. He goes all out for company Halloween parties, showing up dressed as the Flash or Darth Maul from Star Wars. A few years ago, Khosrowshahi and Expedia’s finance chief sported matching ketchup and mustard costumes with the tagline “Chief Condiment Officers.” (Mark Okerstrom, Khosrowshahi’s ketchup companion, is a likely candidate to replace him in the top job at Expedia.)

Khosrowshahi engenders admiration from his subordinates. At trade conferences, he’s known to post up by the bar and chat with any colleague or entrepreneur passing by. “He has the highest character possible,” said Sean Shannon, who ran Expedia’s Canadian and Latin American business until 2015. “He is sincere, respectful, highly respected and a straight talker.”

One area where Khosrowshahi and Kalanick overlap is in their stance against President Trump. For Kalanick, it took a boycott of some 500,000 customers to delete their Uber apps, prompting him to step down from a Trump business council and denounce the president’s immigration policies. Khosrowshahi was vocal in his opposition to the travel bans, and Expedia joined a court case to fight the policy. After Trump’s perplexing response to violence in Charlottesville, Virginia, Khosrowshahi criticized the president on Twitter this month, saying he failed to “rise to the expectations of his office.”

Immigration is a key issue for Uber. The company has said 15 percent of U.S. employees are on work visas, and the service is a common way for immigrant drivers to make a living. While Khosrowshahi probably won’t win over Trump anytime soon, he has fans in Washington. “Dara gets business and tech; he gets people; and he gets government,” said Julius Genachowski, chair of the Federal Communications Commission under President Barack Obama and a former colleague of Khosrowshahi at IAC. “He has the strength and perspective to lead Uber through its complex opportunities and challenges, both in the U.S. and around the world.”

But the situation at Uber is unlike any Khosrowshahi faced at Expedia. The ride-hailing company has been a favorite target for regulators practically since its inception and more recently has battled lawsuits threatening to upend the future of autonomous driving research, the way it negotiates with drivers and the composition of the company’s board.

There’s also a still-simmering cultural crisis, which boiled over this year after a former employee published allegations of sexual harassment and widespread gender discrimination. Uber commissioned a pair of human-resources probes, including one led by former U.S. Attorney General Eric Holder. As a result, the board decided to scrap some of Kalanick’s cultural values for the company, including ones that encouraged “toe-stepping” and asked workers to “always be hustling.” Uber also fired more than 20 employees and released a diversity report, which laid bare a disproportionately male workforce.

Expedia is one of the most diverse places to work, at least by tech industry standards. Women account for half of global staff and a quarter of technical workers. At Uber, 15 percent of tech staff are women, one of the lowest proportions among industry peers.

Uber’s board selected Khosrowshahi on Sunday over two other finalists. Jeffrey Immelt, the 61-year-old chairman of General Electric Co., failed to win over the board, which scrutinized his performance at GE among other concerns. Meg Whitman, chief of Hewlett Packard Enterprise Co. who’s also 61, publicly turned the job down multiple times while continuing to interview privately. She and Kalanick didn’t see eye to eye, people familiar with their interactions said. That conflict still doesn’t obscure the fact that Uber went with Khosrowshahi over a qualified female candidate.

In an interview Tuesday, Khosrowshahi suggested he would prioritize diversity issues at Uber. He was optimistic about Uber’s prospects despite the many challenges. “Uber is a company that is redefining the transportation industry on a global basis,” he said. “To be part of that story is something that is interesting and would be a real privilege.”

Kalanick welcomed his successor in an emailed statement Tuesday night. The ex-CEO complimented Khosrowshahi’s “deep passion for team building.” Kalanick concluded: “I couldn’t be happier to pass the torch to such an inspiring leader.”

But the wounds left after Kalanick’s reign are causing some investors to question Uber’s ability to recover. Benchmark, the largest venture capital backer, is suing Kalanick for fraud — allegations the co-founder denies. Several mutual funds marked down the value of their Uber holdings. And a group of investors are looking to snap up a large chunk of stock from shareholders at a discount, while offering the company a smaller sum at the same $69 billion valuation from last year.

The circumstances are probably too daunting for any CEO to fix on his own. Khosrowshahi will have plenty of spots to fill in his leadership team for help getting the job done. After this year’s turbulence, at least 10 senior executives ran for the exits or were pushed out.

Courtesy Bloomberg