Will Google tie executive pay to workplace diversity?

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

Irene Knapp, a software engineer for the web-search giant, will present a proposal at Wednesday’s annual shareholder meeting in Mountain View, California, on behalf of 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.

Related: Google diversity data pressures Silicon Valley to change

Criticism has grown internally that executives aren’t doing enough to address workplace harassment, said Liz Fong-Jones, a long-time employee who’s backed a petition to create better policies and procedures, including cracking down on “malicious leaks that have intimidated individuals.” 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.”

Culture of discourse

Google promotes lively internal communication, letting staff complain about anything from the quality of the snacks in the micro-kitchens to workplace sexual harassment, sexism, bigotry or racism. However, it has been rare for employees to speak out publicly against the company.

This is changing as Google has grown and become entwined in increasingly controversial matters. More than 4,000 employees recently demanded that the company’s artificial intelligence technology not be used for military purposes. Several staff resigned, Google said it would let a Pentagon AI contract expire next year, and Chief Executive Officer Sundar Pichai is preparing an ethical charter for Google’s AI this week, in part, to appease staff concerns.

Speaking out during Alphabet’s annual shareholder meeting is also highly unusual for Googlers. Both episodes highlight the growing power of the company’s employees. Google relies on talented engineers and spends a lot of time and money keeping them. That gives workers more leverage.

Alphabet investors don’t necessarily have that much clout with the company. At shareholder meetings, they typically bring proposals on a range of issues, from pay to environmentalism to the firm’s political positions. Executives hear them out, then reject the proposals, showing the company is still firmly controlled by its founders.

Veto power

While executives this year are more attuned to grievances, particularly those from employees, 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 said the firm had no comment beyond the statement in the filing.

Proxy advisers Institutional Shareholder Services Inc. and Glass Lewis & Co. are split on the proposal. ISS supports it 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 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.

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