Google Is Pushed to Tie Executive Pay to Progress on Diversity

Employees of Google’s Alphabet Inc. are teaming with investors in a push to tie executive pay to progress on workplace diversity.

A staffer for the web-search giant will present a proposal at the June 6 annual shareholder meeting in Mountain View, California, according to Zevin Asset Management, which submitted the measure. They’re requesting Alphabet consider related metrics in incentive plans, with a focus on diversity and inclusion in the workforce.

Photographer: David Paul Morris/Bloomberg
Criticism has grown internally that executives aren’t doing enough to address workplace harassment, said Liz Fong-Jones, an engineer who’s backed a petition to create better policies and procedures. Those concerns came to the fore after another engineer, James Damore, wrote a 3,000-word memo assailing the firm’s affirmative action policies and suggesting women are biologically less-qualified than men for tech jobs. He was fired and sued Alphabet for wrongful termination. In a separate lawsuit last year, the company was accused of paying women less than their male peers.

“Executives can be motivated by money,” Fong-Jones said. “There needs to be a clear signal from the shareholders that they value inclusion.”

Employee Grievances

Typically, Alphabet investors attending shareholder meetings bring proposals on a range of issues, from pay to environmentalism to the firm’s political positions. Executives hear them out, then vote down the proposals, showing the company is still controlled tightly by its founders.

But this year, executives are more attuned to grievances — particularly those from employees. Last week, the staff announced it was retreating from a Pentagon cloud deal after sustained internal protests. Google Chief Executive Officer Sundar Pichai is prepping an ethical charter for his AI units this week, in part to appease concerns of his staff.

Still, Zevin’s proposal has little chance of passing, given that Google’s billionaire co-founders Larry Page and Sergey Brin have more than half the voting power. In opposing the plan, the company said in a filing that it won’t “enhance Alphabet’s existing commitment to corporate sustainability,” noting that Page collects a salary of just $1. A spokeswoman didn’t immediately respond to a request for comment.

Proxy advisers Institutional Shareholder Services Inc. and Glass Lewis & Co. are split. ISS supports the proposal while opposing the nominations of compensation committee members L. John Doerr and K. Ram Shriram “due to poor stewardship” and “a lack of performance-conditioned compensation.” Glass Lewis said it believes the company already considers such initiatives in its business decisions.

Alphabet’s other top executives get salaries, perks and participate in the company’s incentive plans. In the past three years Pichai and Chief Financial Officer Ruth Porat have received reported pay of $302 million and $70.8 million, respectively, most of it from stock grants, according to data compiled by Bloomberg. Those awards don’t include performance metrics.

While tech companies are hardly leaders in this area, some are more committed than others. Microsoft Corp. has about 17 percent of annual bonuses linked to culture and organization leadership goals, which include promoting diversity. Intel Corp.’s annual cash bonuses are tied in part to diversity-based hiring and retention goals. And Qualcomm Inc. and International Business Machines Corp. mention inclusion considerations in their qualitative assessments of their executives’ pay.

Investors care about environmental, social and governance issues, said Andy Jack, a partner at Covington & Burling LLP in Washington, where he co-chairs the law firm’s Clean Energy and Climate industry group.

“Boards and compensation committees would be well advised to review their company’s published ESG targets, understand how the targets relate to the company’s overall business strategy and reflect on whether compensation programs should incorporate any specific incentives to promote achievement of the ESG goals,” Jack said.

©2018 Bloomberg L.P. All rights reserved. Used with permission

–With assistance from Mark Bergen and Alistair Barr.

To contact the reporter on this story: Alicia Ritcey in New York at aritcey@bloomberg.net

To contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net Peter Eichenbaum