Duty Calls:
Directors’ Oversight for Healthy Work Cultures is No Passing Phase
by Donna Hamlin, Ph.D.
Consider the latest news about Pinterest, Inc., which faces a new suit by the Key W. Police Officers’ & Firefighters’ Retirement Plan pension fund in Delaware, citing it for allowing for a “toxic and broken” culture of “discrimination and retaliation” against female executives, alleging it tarnished the company’s reputation with its large base of female users.
“The very notion of tolerating gender and racial bias by senior management” at a company that calls itself “the nicest place on the internet” should be “self-evidently anathema, illogical, and unacceptable,” according to the complaint made Tuesday in Delaware Chancery Court.
The suit claims board members with long-standing ties to founder and CEO Ben Silbermann “opened the floodgates to a veritable tsunami of public outrage about Pinterest’s hypocrisy” by catering to his “rockstar” persona “rather than cross him and risk being excluded.”
The company’s senior leaders “personally engaged in, facilitated, or knowingly ignored the discrimination and retaliation against those who spoke up,” according to the 53-page complaint, which accuses the directors of abdicating their oversight duties out of loyalty to Silbermann. The pension fund previously sued Pinterest seeking internal files to bolster its claims. Company records show “the board had been tracking these and other complaints” since 2019, “but nobody challenged Silbermann and his cohorts in senior management,” the complaint says.
This case is not “exceptional.” It is an example of the growing focus on ensuring work cultures actually work – for all. Diversity, inclusion and equity are factors boards must assess as dimension of corporate reputation, performance and risk management.
This is not a phase.
Jeffrey Balash, founder of Achieve True Value, studies the trends which impact on the true value of organizations (https://achievetruevalue.com/). He notes the demographic shifts in the composition of the US workforce.
“According to the Bureau of Labor Statistics, in 2018:
By race, Whites made up the majority of the labor force (78 percent). Blacks and Asians constituted an additional 13 percent and 6 percent, respectively. American Indians and Alaska Natives made up 1 percent of the labor force, while Native Hawaiians and Other Pacific Islanders accounted for less than 1 percent. People of Two or More Races made up 2 percent of the labor force.
Yet....
People of color will become a majority of the American working class in 2032. This estimate, based on long-term labor force projections from the Bureau of Labor Statistics and trends in college completion by race and ethnicity, is 11 years sooner than the Census Bureau projection for the overall U.S. population, which becomes “majority-minority” in 2043. . ..
For the working-age population (those between the ages of 18 and 64) the transition takes place in 2039.
This constitutes a huge change in the demographics of the workforce in only ten years.
By 2043, Latinos will be 26.6 percent of the working-age population while African Americans will be 13.4 percent. This is significant for the demographic transition of the working class because members of these groups are also the least likely to have a four-year college degree. In 2013, 13 percent of Latinos and 21.2 percent of African Americans in the labor force had a bachelor’s degree, compared with 36.7 percent of non-Hispanic whites. Though the Asian American population is projected to grow the fastest over the next 30 years, on average, Asian Americans have the highest rates of college completion in the labor force (59.4 percent in 2013), making them a very small share of the working
class.
Moreover, diversity has many vectors to consider: race, national origin, gender, generation, physical abilities and differences in thought/orientation to problem-solving.
To successfully define, understand and manage diversity in inclusive ways, the critical theme is to be people centric.”
What Can Your Board Do?
Is your board assessing how well the company institutes and maintains policies and practices that ensure a healthy work culture. Is it a culture where people appreciate, listen and understand each other and take full value of differences that make a difference? Does it provide equity in opportunities? Is it a safe place where employees can feel free to express ideas that may be unusual, or a departure from accepted knowledge or contradictory?
If your board needs guidance on assessment of its culture, contact us about our assessment the Inclusion Index, which provides data on the current state of your organization as a focus for what needs attention and improvement.
In today’s workplace, diversity is a fact. Inclusion is the competency we must develop to take full advantage of its value. The return for companies who master this are significant. Directors have the duty to ensure and monitor these benefits: access to a broader pool of potential employees, ability to attract a more skilled workforce talented individuals prefer a diverse workplace, richer and more creative solutions, improved effective communication among diverse groups of customers, higher innovation and increased retention of the best workers.
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Legal Case Details
Cause of Action: Breach of fiduciary duty
Relief: Damages, costs, fees and interest
Attorneys: The pension fund is represented by Bernstein Litowitz Berger and Grossmann, LLP. Attorney for the board have not made appearance in the case. Pinterest and its directors are represented in a separate securities cas by Freshfiels Bruckhaus Deringer US, LLP.
The case is Key W. Police Officers’ & Firefighters’ Ret. Plan v. Silbermann, Del. Ch., No. 2021-0257, complaint unsealed 3/30/21.
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