AIB Featured Business Leader – Dara Khosrowshahi
Dara Khosrowshahi is an Iranian-American businessman with a solid and well-respected career. He hit the spotlight recently when he was appointed the new CEO of Uber, taking the place of CEO and co-founder Travis Kalanick. It’s a daunting task for Khosrowshahi, given the turbulent fortunes of the ride-sharing app, but one that’s well suited to his background.
Khosrowshahi was born in Iran on May 28, 1969. His family founded the Alborz Investment Company, a diversified conglomerate that afforded them social and financial prominence in their community. The family moved to America in 1978, just in time to escape the Iranian Revolution. However, during the revolution, their company was seized by the new government and nationalised.
Newly arrived in America, they lived with an uncle in Tarrytown, a small but upscale town around 40km out of New York. There he attended the Hackley School, an Ivy League prep school. He was a popular student, captaining the soccer and lacrosse teams as well as winning the award for all-round best student.
Khosrowshahi went on to obtain a BA in Electrical Engineering from Brown University. On graduating, he began working for the investment bank Allen & Co. He worked there for seven years, leaving in 1998 to work for an Allen & Co client, Barry Diller. Diller owned USA Networks, and Khosrowshahi took on an executive role charged with launching their content streaming offerings. “I was a complete failure,” he says of the experience, ruefully. “The cost of streaming content was higher than any advertising dollars you could earn. The better you did, the more you lost.”
Diller didn’t consider him a failure, though. In 2001, Diller’s other company IAC purchased online travel company Expedia. Khosrowshahi helped with the negotiations and spent a few years as the Chief Financial Officer at IAC until 2005 when Diller made Khosrowshahi the CEO of Expedia.
Until late August 2017, he remained in that position. By all accounts, his tenure was a success. Expedia’s stock rose 47% in 2015, against a flat market in which the wider S&P500 fell by 0.69%. Revenue rose by 16% in the same fiscal year. Over his career at Expedia, stock rose from $22.90 to $153.94. In the years that Khosrowshahi has been CEO, he has responded to the changes in the travel business by acquiring competitors. Expedia has taken over Orbitz and Travelocity and responded to the rise of Airbnb by buying vacation-rental service HomeAway.
In February 2015, Khosrowshahi was appointed to the board of the New York Times in light of his digital and international expertise. Since joining Uber, he has resigned from New York Times board but remains on the board of Fanatics, a sports retailer.
In 2015, he received a pay rise of 881%, going from $9.6 million in 2014 to a whopping $94 million in 2015. That amount included $90.8 million in stock option awards and was the incentive for entering into a contract of employment declaring that he would stay at the company until September 2020. While details are scarce, it appears certain that Khosrowshahi will lose a large chunk of this fortune due to the move to Uber. In doing so, he also leaves behind a profitable company for one whose fortunes are increasingly unsure.
Uber, a ride-sharing company, was founded in 2009 by Travis Kalanick and Garrett Camp. The company has become a worldwide phenomenon; its name often invoked as embodying the quintessential marketplace disruptor. It has also, especially in 2017, been on the receiving end of a series of scandals. It kicked off in February when a former engineer publicly alleged that she had been sexually harassed and then threatened with dismissal for reporting it. The New York Times published a report suggesting that her experiences were not unusual within the company. A week later, a dash cam video caught Kalanick on camera abusing an Uber driver over lowered prices. Another report suggested that Uber was using technology called Greyball to avoid officials in cities where the service was not authorised to operate. Separately, a number of senior executives resigned.
At the end of March, it was revealed that an Uber team meeting had taken place in a Seoul escort bar. The company also suspended its self-driving cars after one ran a red light and another was involved in a crash. Former Attorney-General of the United States Eric Holder indicated that he was investigating the company’s workplace harassment claims and expected the investigation to be thorough – that report was released in June. By May, a criminal investigation was opened into Uber’s use of ‘Greyball’.
Against this background, Kalanick stepped down as CEO in June 2017, after a shareholder revolt made it untenable for him to do otherwise. However, Kalanick still maintains control of a majority of Uber’s shares and has shown no sign of wanting to fade from the record. He pushed hard for Jeff Immelt, General Electric’s CEO, to be appointed to the position. Others favoured Meg Whitman of Hewlett-Packard.
Khosrowshahi is widely considered to be a compromise candidate: a relative outsider in the world of Silicon Valley, without significant transportation experience. His calm, drama-free approach to business and his reputation for excellent employee relations may have tipped the scale. Whatever the reasoning, it appears clear that he’ll have a steep road ahead of him. Uber’s C-suite and talent pipeline have been decimated by rafts of resignations, with several pending and active lawsuits running against the company.
Khosrowshahi may not have worked in transportation before, but he does know about running a platform designed for end users, and about steering growth through turbulent waters. His financial background may also assist in helping Uber prepare for an IPO. If Uber seeks a leader that will help keep them out of the papers, Khosrowshahi may well be their guy.
This article was written by Tanya Ashworth-Keppel on behalf of the Australian Institute of Business. All opinions are that of the writer and do not necessarily reflect the opinion of AIB. The following sources were used to compile this article: Bloomberg, Business Insider, New York Times, Fortune and ReCode.
Image credit: Market Watch