Alphabet Shareholders And Employees Want Executive Pay Linked To Diversity Goals

Alphabet Shareholders And Employees Want Executive Pay Linked To Diversity Goals

A group of shareholders and several Google employees are teaming up to back a proposal that would tie executive compensation to the company’s ability to meet certain diversity goals. But Google’s parent company, Alphabet, is opposing the proposal, saying that linking executive pay to diversity metrics isn’t in the best interest of the company or its shareholders.

Alphabet’s opposition to the plan sets the stage for a showdown at the company’s shareholder meeting on June 6, when a handful of employees will formally present the proposal.

“Our hope is that being there will show the magnitude of how much the problem is affecting us as workers,” one of the employees who plans to attend the meeting told Gizmodo.

Google is often viewed as an industry leader on diversity and inclusion, and it was one of the first major tech companies to begin publishing a transparency report with statistics about the number of women and underrepresented minorities in its workforce.

But employees have spoken out in recent months about toxic working conditions at the company. They say that their peers have been doxed and harassed for speaking up in support of diversity initiatives, that human resources has penalised and even fired diversity advocates for their work, and that executives have discouraged their employees from participating in diversity advocacy. Several employees are suing Google over diversity issues, and another group of shareholders has asked Google to assess the risks of its alleged wage discrimination against women. And although Google continues to publish its diversity report, the company hasn’t made significant progress in diversifying its staff – its workforce is currently 69 per cent male and 56 per cent white.

Google and Alphabet have maintained that they aren’t experiencing a diversity crisis but are rather dealing with complaints from a few disgruntled employees. A Google spokesperson declined to comment on the shareholder proposals, but the company also argued in its proxy statement that the proposal wouldn’t have any meaningful impact, even if it were approved, because Alphabet CEO Larry Page receives a base salary of only $US1 ($1) per year and is not compensated based on performance.

But Zevin Asset Management, the investment firm that drafted the proposal, says that it’s intended to apply to all of the company’s executives, not just Page. “Anyone whose compensation is reviewed in the proxy, people like Sundar [Pichai, Google’s CEO], we are thinking about them, too,” said Pat Miguel Tomaino, the director of socially responsible investing at Zevin. “If this proposal gets a high vote and the board moves to implement it, we expect they would implement it for the people for whom it’s relevant.”

In focusing its response solely on Page’s compensation, Alphabet is avoiding the bigger issues at stake, Tomaino added.

With Alphabet recommending a vote against the proposal, Tomaino doesn’t expect it to receive a majority vote. However, Institutional Shareholder Services, one of the largest proxy advisory firms in the world, advised shareholders this month to vote in favour of the proposal. Since many large pension funds and investment groups follow ISS’s guidance for voting, Zevin expects it could get as much as a quarter of the shareholder vote.

Zevin and the Google employees backing the proposal hope that will be enough support to convey to Alphabet leadership how serious the problem is.

“As employees, we don’t feel that we can build good products that help make the world fundamentally better without having a clear diversity stance that’s built into the company structure,” the Google employee said.

ISS also recommended a vote in favour of another shareholder proposal, put forward by Arjuna Capital, that asks Google to conduct a wage gap study. (Google maintains that it does not have a significant gender-based wage gap and spent just $US270,000 to close that gap in March.)

Taken together, the two proposals reflect investor concerns about talent retention at Alphabet. “Alphabet faces serious human capital risks if its inclusion strategy is not working. We are concerned about the company’s ability to attract and retain the most talented people, no matter where they are or what they look like,” Tomaino said. “These companies are really just containers for brains and they have to get the best brains inside them.”

The proposal represents a step up in employee activism at Google. Employees have met with leadership on the issue of diversity and inclusion, and have recently begun circulating an internal petition that asks for more transparency in HR policies and consistent enforcement of Google’s code of conduct, people familiar with the effort told Gizmodo. That petition has racked up more than 2,600 signatures.

But speaking publicly at the shareholder meeting is an escalation. “It’s a whole other level of magnitude – employees going on our own dime and going through the process of getting into the shareholder meeting and presenting this,” the Google employee explained. “It communicates strongly how bad it is on the ground and communicates that Alphabet executives need to do something about this.”