Uber pt. 2: Incentives

Today's post will continue down the list of diligence questions for Uber, focusing on Incentives.

How much of the company does management own? Within that ownership, what do their incentives look like?

I am no tax guy, but I did my best to look at Uber's 2023 10-K to answer this question. This is a large document, but from what I can gather, the section titled "Security Ownership of Certain Beneficial Owners and Management" in Uber's 2023 10-K filing specifies that Uber's executive officers, directors, and other management members collectively owned approximately 6.5% of Uber’s outstanding common stock by the end of 2023. This equates to roughly $8.57 billion, using Uber's latest share price of $63.52. Incentives within Uber's management are typical of that of a publically traded company, focusing on Stock Options, RSUs, and bonuses to align management goals with long-term shareholder values.

How hard is it for employees to get promoted? What about being fired?

The Uber corporate promotion timeframe is similar to that of a large tech company. This is supported mainly anecdotally through employee reviews on Glassdoor and other forums. What was also apparent was the lack of job-security employees feel. Typically, this is attributed to poor company culture, layoffs, and unsupportive management.

Has Uber had any recent significant changes in leadership?

The first thing that comes to mind for many of us, I'm sure, was co-founder Travis Kalanick resigning as CEO in 2019. He was replaced by Dara Khosrowshahi, former CEO of Expedia, who has since worked hard to transform Uber's image. Remember that Travis stepped down amid growing pressure as allegations of poor corporate culture circulated. Khosrowshahi therefore spearheaded a broader overhaul of the executive team. This includes new appointments to critical roles such as Chief Operating Officer, Chief Financial Officer, and Chief Legal Officer, as Uber ramped up to their IPO in 2019. This leadership change also came with several strategic decisions, such as pulling out of Southeast Asia. On a side note, this was particularly annoying for me, as then the sole rideshare service in Singapore (Grab) had no incentives to keep their prices low.

Are incentives aligned in terms of Capital Retention vs. Capital Returns?

Capital retention involves reinvesting profits into the business rather than distributing them to shareholders. This could be in the form of R&D, improvements in infrastructure, or acquisitions. Capital returns, on the other hand, refers to the distribution of profits back to shareholders, be it dividends or buybacks. Uber, historically, has focused heavily on capital retention to expand its dominance in the market. This can be seen in their Acquisition of delivery services such as Postmates and Drizly, or the heavy burn rate they maintained to grab new customers. Uber has also not paid dividends.

If the company succeeds, does everyone—employees, managers, founders, investors, suppliers, customers—get about what they deserve?

This could be a controversial one. When Uber succeeds, the distribution of benefits among stakeholders varies drastically. Investors and high-level executives have done extremely well, as the stock price is up 70% in the past year. On the other hand, drivers have not had the same fate. The solution for this is up for debate and has long been under public and regulatory scrutiny. I don't think I could come up with something better at 11 pm on a Tuesday.

That's it for incentives. Today was a short one, partly because I spent most of the allotted time looking at their 10-K, and partly because I just did not have the time today. Tomorrow will be fun though - we are looking at competitors in the market.