Governance Watch - Issue 10

By Dina Medland in London

‘Reputational Deficits’

What on earth, you might well ask, is a ‘reputational deficit’? You would have to ask Uber board member Bill Gurley, who used the term to describe the state of “what is still Silicon Valley’s most successful start-up” as described by the Financial Times. He told the paper: “It is going to take us a while to get out of this” when referring to the mess the company finds itself in after revelations of endemic sexism and a fair amount of hubris within its managerial ranks.

The notion of a ‘deficit’ or a credit in reputation is an interesting one to ponder. ‘Reputational deficit’ or a deep core essence of business (and therefore its corporate governance) fail while it simultaneously talks up its future loud? More quietly, in corners, its workforce must be whispering about who is in charge, exactly. CEO Travis Kalanick is on an indefinite ‘leave of absence’ and it is not yet apparent who is to set that ‘tone from the top’ going forward.

If Uber’s redemption is in any way seen as a marketing exercise, there is danger ahead. The board of directors did vote unanimously to adopt the recommendations of a workplace review, but the discrepancy between what it calls for and the reality of current corporate culture at Uber appears vast. The resignation of Uber’s board member David Bonderman after he made a sexist joke at a company meeting earlier this week underscores that.

Which only serves to show that it is messy when the message on the company cart is suddenly in doubt, and the cart is put in front of the horse. Did anyone in the Uber boardroom ever talk about corporate governance and ethics? Was there a view on how this new world taxi start-up was going to function and thrive beyond mere disruption and gaining that toe-hold in the competitive odds?

It is a truism that reputations are slowly built and quickly destroyed. As the report’s main recommendation is that its leave-of-absence CEO Travis Kalanick’s responsibilities should be reduced and a COO appointed, all eyes will be on the man – or woman – who fills that role.

But if any Uber board members are still thinking ‘reputation deficit’ the implication is that this could be a very long turn around, with no real clue where to begin except by changing who sits around the boardroom table talking about corporate culture and making sure it includes HR.

Ethics and Security

Yesterday’s BBC News headline reads: ‘How BAE sold cyber-surveillance tools to Arab states’.  Its story covers a year-long investigation by BBC Arabic and a Danish newspaper that has uncovered evidence that FTSE 100 BAE Systems has made large-scale sales across the Middle East of sophisticated surveillance technology, including decryption software which could be used against the UK and its allies.

The sales are legal, and BAE Systems in the UK declined a BBC request for an interview on the issue, saying it was against company policy to comment on specific contracts. 

But in a written statement it said: "BAE systems works for a number of organisations around the world within the regulatory framework of all relevant countries and within our responsible trading principles." No-one from the UK government was willing to speak to the BBC about the implications of Evident sales, but the Department for International Trade also issued a statement.

The news comes at a time when cybersecurity is very much at the top of the boardroom agenda. But the ghost of ethics also looms large when it comes to lucrative contracts. BAE used its Danish subsidiary to sell the mass surveillance Evident systems to many Middle Eastern countries with “questionable human rights records”, according to the BBC.

BAE Systems first bought ETI, the Danish company that developed Evident, in 2011. Four years later - in 2015 – there was an email exchange (seen by the BBC) between the British and Danish export authorities in which the British side clearly expresses concern about this capability with reference to an Evident sale to the United Arab Emirates. "We would refuse a license to export this cryptanalysis software from the UK because of Criteria 5 concerns” it says. Criteria 5 refers to the national security of the UK and its allies, says the BBC.
Despite British objections, it says, the Danish authorities approved the Evident export. 

The clue to the thinking behind the sales must go back to the original purchase of ETI in 2011 and to conversations in boardrooms – but the world looks a bit different today.

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