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When CEOs Get Booted from Their Own Companies

Just because you founded the company does not guarantee that you can continue to lead it once outside investors come in.

When a CEO gets pushed out of his own company, it is bound to raise some eyebrows.  One recent case involves Travis Kalanick, Uber’s former CEO and co-founder, who was forced to resign amid a slew of controversy and allegations against the company.

How did Uber’s successful streak go awry?

A large part of the blame appears to fall on Mr. Kalanick himself, whose style of management was described by many people as scrappy and unprofessional. While Uber expanded into a multi-billion-dollar organization, operating in over 600 cities around the world, Mr. Kalanick did not change his informal style of administration.

Over the last one and a half years, Uber has faced allegations ranging from sexism to even spying on customers who deleted the app. In a widely circulated email to employees in 2013 prior to a company party, Mr. Kalanick asked them to refrain from throwing beer kegs off rooftops and threatened a $200 “puke charge,” on those who might become overly inebriated.

Prior to Travis Kalanick’s departure, a number of the company’s top engineers resigned, pushing the company’s self-driving division into dire straits. Ironically, David Bonderman, a board member at Uber, resigned after making sexist comments in a board meeting that was supposed to address the culture of sexism within the company.

Arguably the biggest incident that added to the Uber controversy was when Mr. Kalanick was videotaped arguing with an Uber driver over the issue of falling fares for the company’s premium service, UberBlack.

Another similar founder resignation was that of Steve Jobs from Apple in 1985. But Steve Jobs had to leave for different reasons. Unlike Travis Kalanick, Steve Jobs wasn’t unprofessional. Rather, it was his ruthlessness and his tendency to make his employees work extremely hard.

Just two years prior to that, Steve Jobs had recruited former Pepsi executive John Sculley as Apple’s new CEO. Following that, Jobs and Sculley’s relationship deteriorated as Apple failed to profit from its new computer, the Macintosh. The Mac, which was conceived by Steve Jobs, did not sell as well as planned, and this placed a financial strain on the organization. Finally, the Jobs-Sculley power struggle concluded with the Apple board deciding to remove Steve Jobs from his role as Chief Visionary.

However, Steve Jobs returned to Apple after the tech giant bought a company he started following his departure from Apple, NeXT Inc. From 1996 to 2009, Steve Jobs became arguably one of the most respected CEOs in the world.

According to Alan Deutschman, author of Change or Die, The Second Coming of Steve Jobs: “The conventional wisdom was that Steve Jobs was a great visionary but not a good businessman. But in his second time at Apple, he wasn’t just a visionary. He made a point of learning how to be a great businessman.”

Another CEO resignation was Jerry Yang from Yahoo. Jerry Yang, one of the two co-founders of Yahoo, was CEO from 2007-09. He faced criticism for not accepting Microsoft’s $45 billion bid for Yahoo. He presided over Yahoo’s downfall as the company failed to compete with the likes of Google and Facebook, two companies that dominated the search engine and social media markets.

Mr.Yang’s relationship with Yahoo continued to deteriorate further, and he finally resigned from the board in 2012.

Despite the different reasons why these CEOs were removed from their own companies, there appears to be a common thread: pressure from investors and board members. Once external funding gets invested into a company, the founders answer to the investors. This is especially true if the investors possess a controlling stake in the company. If CEOs or founders fail to perform according to the expectations of investors, they may soon find themselves pushed out of their own companies.

Will Travis Kalanick return to Uber and revitalize the company like Steve Jobs did with Apple? Or will he completely dissociate himself from the organization like Jerry Yang? At the moment,­ it seems the latter scenario is more likely.

Arin Gerald studies mechanical engineering at Boston University. He writes about entrepreneurship, technology, and business.

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