Each case study will include issues/questions to address. The cases are intended for students to take a
comprehensive look at the current event topics as related to business and society. Students should
explore the issue using the text as well as personal, intellectual, academic references, and/or
experiences, thus applying their knowledge to these cases. Where sources are used, proper notation
must be included. Responses to each assigned question in all assigned case studies should be in
paragraph form, be double-spaced, and be between 250-300 words in length.
Discussion Case: Insuring Uber’s App-On Gap At around 8 p.m. on the evening on December 31, 2013, a mother and her two young children were walking home in San Francisco. At a busy intersection, the family waited for the “walk” signal and then started across the street. Just then, an SUV made a right turn, striking all three members of the family in the crosswalk. The mother and her 5-year-old son were seriously injured. Her 6-year-old daughter was killed. The man behind the wheel of the SUV identified himself as a driver for the ride-hailing service Uber. Uber immediately distanced itself from the tragedy, saying that the driver was “not providing services on the Uber system at the time of the accident.” The family’s attorney contested this, saying that the driver was logged onto the Uber application, appeared on the system as available to accept a rider, and was interacting with his device when he struck the mother and children. In other words, the tragic incident had apparently occurred during the app-on gap—the driver was on the road with his Uber application activated, but had not yet connected with or picked up a rider. So, who was responsible, the driver or the ride-hailing service? Uber was, in the words of a New York Times columnist, “the hottest, most valuable technology startup on the planet.” The company was founded in 2009 as “everyone’s private driver,” providing a premium town car service that could be summoned online. In 2012, it rolled out UberX, a service that enabled nonprofessional drivers to use their own vehicles to transport riders. Customers could use the Uber app to hail a car, connect with a willing driver, watch the vehicle approach on a map, pay their fare, and receive a receipt, all on their smartphone. Uber provided the technology and took a commission on each transaction. Uber’s disruptive business model caught on rapidly. By mid-2014, Uber’s ride-sharing service had spread to more than 120 cities in 36 countries. In the United States, the service could reach 137 million people with an average pickup time of less than 10 minutes. Demand was growing so fast that Uber was scrambling to recruit 20,000 new drivers,
Chapter 1 The Corporation and Its Stakeholders
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whom Uber called “transportation entrepreneurs,” every month. Private investors were enthusiastic about the company’s prospects: Uber had attracted $1.2 billion in funding and was valued at $18.2 billion. Drivers who partnered with Uber had the flexibility to drive when and as much as they wished. They could also make a decent living; the median annual income for its full-time drivers in San Francisco, for example, was about $74,000. But they also assumed risk. In the event of an accident, Uber instructed its drivers to submit a claim to their personal insurance carrier first. If it was denied, Uber’s backup commercial liability insurance would go into effect, but only after the driver had been summoned by a customer or had one in the vehicle. Traditional taxicab companies did not welcome competition from Uber. Cabdrivers in many cities across the world protested the entry of Uber into their markets, conducting strikes and “rolling rallies” charging Uber with unfair practices. Uber drivers did not have to comply with many of the rules that applied to taxicabs, such as those requiring commercial driver’s licenses, regular mechanical inspections, and commercial liability insurance. Governments at city, state, and national levels had become involved, with some imposing restrictions and others even banning Uber outright. In the wake of the 6-year-old’s death in San Francisco, California, legislator Susan Bonilla introduced a bill that would require Uber and other ride-hailing companies to provide commerical liability insurance from when the driver turned on the app to when the customer got out of the car, thus filling the app-on gap. The American Insurance Association, representing insurance companies, supported the legislation, saying that personal auto policies should not be expected to cover ride-hailing drivers once they signaled availability. “This is not someone commuting to work or going to the grocery store or stopping to pick their children up from school,” a spokesperson said. The family of the girl killed on New Year’s Eve also supported Bonilla’s bill, as did consumer attorneys and the California App-Based Drivers Association. But others lined up in opposition. Uber and other ride-hailing companies strenuously objected to the bill, as did trade associations representing high-technology and Internet-based firms, apparently concerned about increases in their costs of doing business. The bill, said an Uber spokesperson, was “an example of what happens when special interest groups distract lawmakers from the best interests of consumers and small businesses.” Sources: “Deadly Pedestrian Accident Driver Claimed He Drove for Uber,” January 1, 2014, www.abclocal.go.com; “Uber and a Child’s Death,” New York Times, January 27, 2014; “An Uber Impact: 20,000 Jobs Created on the Uber Platform Every Month,” Uber press release, May 27, 2014; “With Uber, Less Reason to Own a Car,” New York Times, June 11, 2014; “Uber and Airbnb’s Incredible Growth in 4 Charts,” VB News, June 19, 2014, online at www.venturebeat.com; “In Uber vs. Taxi Companies, Local Governments Play Referee,” Christian Science Monitor, July 7, 2014; “The Company Cities Love to Hate,” Bloomberg Businessweek, July 7, 2014; “Uber, Lyft, Sidecar Fight to Block New California Regulations,” San Jose Mercury News, August 13, 2014; “The Question of Coverage for Ride Service Drivers,” New York Times, September 5, 2014; and private correspondence with the office of Assemblywoman Susan Bonilla.
Discussion Questions
1. Who are Uber’s relevant market and nonmarket stakeholders in this situation?
2. What do you think Uber should do in response to the bill introduced by Susan Bonilla, and why?
Textbook:
Lawrence, A. T., & Weber, J. (2017). Business and Society: Stakeholders, Ethics, Public Policy (15th ed.).
New York: McGraw-Hill/Create Custom ISBN# 9781307214185 eBook: ISBN# 9781307214215
