Alphabet Shareholders Vote Down Proposal to Tie Executive Pay to Diversity

Alphabet Shareholders Vote Down Proposal to Tie Executive Pay to Diversity

Investors in Alphabet Inc., the parent company of Google, voted down all proposed resolutions at on Wednesday’s shareholder meeting, including one that would have made the compensation of senior executives partly dependent on the company making progress toward specific diversity and inclusion goals. The proposal was opposed by Alphabet management, Reuters reported on Wednesday, which sank the resolution as insiders have effective voting control of the company. Google co-founders Larry Page and Sergey Brin hold supervoting shares in Alphabet that enable them to defeat any shareholder resolution they don’t approve of. Google insists that its existing commitments to diversity are sufficient:

Eileen Naughton, who leads Google’s HR operations, said the company remains committed to an internal goal to reach “market supply” representation of women and minorities by 2020, which could help bring hiring in line with the diversity of the candidate pool.

Another resolution aimed at getting Google to provide investors more information about its efforts to moderate user-generated content on the platforms it owns, including YouTube, was also voted down on Wednesday.

The proposal related to diversity was put forward by the activist investment fund Zevin Asset Management and supported by a group of Google employees who have expressed concern about how committed the company really is to being an inclusive environment for everyone who works there. One of those employees, engineer Irene Knapp, addressed Wednesday’s shareholder meeting with a statement that stressed the urgency of addressing ongoing problems in Google’s culture:

Diversity and inclusion are key components of business sustainability and success. … Yet, at Alphabet, diversity and inclusion activities by individual contributors and managers alike — including mentorship, outreach, and community building — have been met with a disorganized array of responses, including formal reprimand. The lack of clear, communicated policies and actions to advance diversity and inclusion, with concrete accountability and leadership from senior executives, has left many of us feeling unsafe and unable to do our work.

The chilling effect of harassment and doxxing has impaired productivity and company culture. Responses from HR have been inadequate, leaving minority communities unprotected. Now we are forced to weigh the risks to ourselves before giving each other support. This backwards response is tied to immediate retention issues, as entire support networks shut down in fear.

The proposed metrics will incentivize long-term progress on diversity and inclusion. However, Alphabet must also immediately address human capital risk by improving its code of conduct, by cracking down on malicious leaks that have intimidated individuals, by publishing to employees a manual formalizing the procedures for HR investigations, and by finding a solution for bad-faith HR complaints. We are hopeful that executives are finding ways to implement these solutions, as concerned employees requested two months ago.

Google has faced scrutiny in the past year over its slow progress toward diversity goals and allegations of discriminating against women in pay and promotions. A pay equity audit demanded by another activist investor, Arjuna Capital, failed to satisfy Arjuna’s questions and compel it to withdraw a resolution demanding that the company report on the risks it faces from emerging public policies on gender pay equity.

Although Alphabet’s unique share structure protects it against the possibility of shareholders passing resolutions opposed by management, such proposals call public, media, and investor attention to issues its leaders might prefer not to talk about. For a high-profile company like Google, activist investors like Zevin and Arjuna may be counting on the court of public opinion, more than investor pressure, to guide the company toward addressing their concerns.