Hubert Horan’s criticism of Uber

Hubert Horan’s criticism of Uber

Executive Summary

Businesses are becoming more concerned about their activities because consumers have developed an interest in the companies they buy their products from and would always want to deal with firms that are ethical in their dealings and take part in corporate social responsibility (CSR). Every business is currently striving to have their operations done in a way that takes care of all stakeholders’ interest while at the same time giving back to the society through different voluntary practices. Most of the disruptive technology-based startups in the recent past have been the centre of interest to find out whether their activities conform to ethical and CSR perspective. Areas of interest are on labour wages, marketing strategies, financial reporting, and their effect on the environment and the community as a whole. Uber is one of the many companies that have been blamed for a number of negative practices in the past which include deceiving media to portray itself as a successful and innovative business. Some of the practices that are regarded as unethical can be considered unethical include false financial reporting to please potential investors. This paper highlights some of the operations of Uber Company from Horan (2019) perspective to find out some of the activities that are most important from business ethics and CSR perspective.

Introduction

Business ethics and corporate social responsibility remain an area of great interest to many in the contemporary world. Consumers are more concerned about the practices of an organization, would always want to associate with those organizations that are seen to be operating ethical activities, and are involved in giving back to society. Leaders in organizations are aware of this fact, and that explains why nearly every organization around the world wants to be seen as being socially responsible by taking part in activities that benefit the society most of which are not directly related to the core business. It will not be surprising to find organizations that would act and behave as though their activities are ethical and meant to benefit society. Uber is one of the company’s that has attracted several criticisms from different quotas and praises of almost the same measure. The company has disrupted taxi industry with its highly innovative use of technology. However, it has attracted public criticisms concerning deceptive advertising, cultural problems, driver exploitation, and its disregard of laws and business norms.

Important Arguments from a Business Ethics and CSR Perspective

Horan (2019) in the article titled “Uber’s Path of Destruction” has discussed Uber’s operations since it started its operations way back in 2010. The author’s aim has been to demonstrate to viewers that Uber, contrary to what people think, does not have economic reality. Right from the beginning, Horan (2019) points out that Uber does not have hope of ever making a sustainable profit in the car service industry despite its remarkable growth to more than $45 billion gross passenger revenue (Par. 1). The author’s arguments concerning the operations of the business and the perception of its consumers bring out issues on ethics and corporate social responsibility (CSR). The article is divided into various sections, and in each case, the intention is to demonstrate that Uber does not have hope for sustainable profitability and that the company was meant to pursue “growth at all costs” when there were no plans on how to fund its growth through positive cash flows.

Uber Cannot Produce Sustainable Profits

In this section, Horan (2019) argues that Uber is not able to produce sustainable profits and that the financial reports that the company released in April IPO S-1 prospects were misstated to give potential investors a false impression on the financial performance of the company (par. 11). The financial report was meant to show that Uber registered an increase in its marketplace service by $5 billion and it managed to make a net profit of one billion in 2018 when in the real sense the company made zero profit in 2018. The author argues that the company lost $14 billion in the last four years (Horan, par. 11). This argument is important from business ethics and CSR perspective because it promotes false financial representation against the GAAP regulations. A false representation of the information about Uber’s financial position with a view to luring unsuspecting investors is ethically wrong. This goes against Norman Bowie’s principle that is against having one stakeholder’s interest given priority over others. The intention of concealing losses is meant to cheat naïve investors who are against Kant theory on the motive of actions which is expected to be for the sake of duty and not just in accord with duty.

Uber Has higher Cost than The Competitors It has Displaced

Under this subtopic, Horan (2019) argues that Uber would be operating at a significantly lower cost than traditional operators, which he says is not the case. The author points out that urban car services company has their costs are structured in four components, which include vehicle costs 18%, corporate costs 15%, fuel 9%, and driver compensation which is the highest at 58 per cent of the total (Horan, par. 18). However, Uber has a business model that shifts vehicle cost to the drivers and that the fare is paid by the passenger takes care of Uber and the driver costs. Majority of the people that use Uber are drivers with limited capital as well as business experience and therefore are unable to manage the high costs. Horan (2019), in this case, has assumed that Uber drivers are mostly inexperience and have no adequate capital. If such argument is true, then it draws attention to the business ethics and CSR issues where the intention of any business should be to take care of the stakeholder needs and work towards maximizing happiness and minimizing pain. Shifting the vehicle cost and having passenger fare to cover the cost of Uber and Driver who is less experienced and with limited capital then it is a model that is hurting the society and not improving it hence it goes against the utilitarianism and the spirit of giving back to the society. This goes against the stakeholder theory on rights and duties where according to Kant and Bowie, business is obligated to treat people as ends and not as means

Uber Margin and Driver Take-Home Pay

According to Horan (2019), the entry of Uber into the taxi industry resulted to a decrease in take-home pay from $12-17 to $9-11 per hour, which is below minimum wage in several cases (par. 22). While drivers initially needed 60-70 hours to earn a considerable income, the entry of Uber forces drivers to sleep in their cars to be able to make a meaningful income. Horan (2019) provides data from app-based companies in New York to back his claim up, and the data shows that 90% of drivers are recent immigrants and 20 per cent are those who need public income supplements like food. The author points out those incentives that the company used to attract its drivers in 2015 have been eliminated while at the same time passenger fares have been increased from 20% top 25-30% (Horan, par. 24). This argument shows that Uber is making the life of drivers worse by transferring wealth from labour to capital of about $3 billion. Corporate social responsibility requires employers to be concerned about the state of all stakeholders and avoid cases of cheap labour. The actions of Uber demonstrate a lack of commitment in CSR as their drivers are forced to sleep in their car to meet their daily sales.

The popularity of Uber is based on Manufactured Narratives

Honar (2019) demonstrates that the popularity that Uber is enjoying is not based on its greater availability and reliability than it was before entering into the industry, but all these are based on billions of dollars received from unsustainable subsidies. The company, according to “software” was meant to prevent drivers from being protected by labour laws that employees are supposed to get. This is against the ethical practice according to the theory of justice/fairness where the principle is to “give people their due.” If the author’s claim is true, then Uber is going against distributive justice by not giving their drivers what other drivers get, labour protection.

Antiregulatory strategy

Uber started with a political objective by eliminating governmental oversight over its taxi services. Regulations by the government are meant to create a conducive environment for the public and the taxi owners. It helps in promoting security and provision of revenue that is meant to maintain the economy. Consequently, it is unethical for Uber to work towards avoiding regulation, as the outcome will disadvantage many people to benefit shareholders.

Manipulation of media

According to Honor (2019), Uber effectively manipulated media by limiting crucial reporting. By repeating Uber’s easy to grab narratives, reporters failed to focus on the subsidies instead media treated breakthrough innovation and cheaper services as the truth. The company went ahead to hire Barack Obama’s campaign manager, David Plouffe, to run its public relation. Wealthy elites were hooked with the news of cheaper services, and little attention was given about the exploited drivers and disobedience to regulatory issues. The author states that Uber has been involved in the disobedience of the law and the media ignored sabotaging competitors for years but all these. While it is not possible to authenticate the truth of the claims, Horan (2019) put on Uber, if such claims are true, then they go against ethical practices and CSR practices expected of businesses. Companies are expected to conduct their activities in a transparent manner without sabotaging competitors. Additionally, it is immoral based on the outcome approach that requires individuals and businesses to do what is good because that processes the best consequences.  Hiring the best public relation person is not bad; however, the fact that it leads to media ignoring important things to the community such as abuse of the regulations and mistreatment of drivers makes the outcome of that action be negative hence immoral.

Conclusion

The article by Honor has highlighted several issues that are of interest to business ethics and CSR. The ethical and CSR concerns are based on the assumption that what Horan has presented is factual even though that cannot be substantiated. It is unethical to misstate financial statements deliberately to give a false impression to investors. Higher costs and reduced driver take-home are practices that are not meant to create greater good as required through utilitarianism because it makes drivers poorer while enriching shareholders. It is an unethical practice for a business to manufacture narratives to appear profitable as Horan claims about Uber. Coupled with the manipulation of media through popular narratives, Uber has caused more harm to the public than good which is unethical and is not in the spirit of giving back to society.

Works Cited

Horan, Hubert. “Uber’S Path of Destruction.” American Affairs 3(2):108-33.