Following bias accusations, lawsuit seeks corporate policy changes at Pinterest
A shareholder plaintiff alleged that CEO and other board members kept company leadership an all-white "boy's club."
After multiple employees said they were underpaid and ousted because of their race or gender, a shareholder says Pinterest needs to be held liable for its discrimination and reform its corporate practices.
In a 105-page complaint filed in the District of Delaware Tuesday against Pinterest Inc., shareholder Joel Mosquera accused CEO and President Benjamin Silbermann, CFO Todd Morgenfeld and seven other board members of keeping company leadership an all-white “boy’s club.” The lawsuit demanded extensive changes to company bylaws.
Related: 5 actions companies can take now to cure the corporate racism pandemic
In the complaint, Mosquera, represented by Michael Farnan and Brian Farnan, who did not respond for comment on the case Thursday, asks Pinterest to change its corporate governance policies to require its directors and executives to train yearly on diversity. sexual harassment, antidiscrimination and affirmative action.
Other changes requested include giving shareholders a say in appointing board members from underrepresented groups, creating a fund to hire, promote and mentor Black employees, revising Pinterest executives’ compensation plans to tie 30% of their pay to reaching diversity goals and publishing an annual diversity report.
The complaint also says the San Francisco-headquartered social media company should stop using Ernst & Young as its independent auditor, having paid millions to the firm while it was “neither independent nor effective at ensuring the adequacy of the Company’s internal controls.”
From its start, the complaint states, Pinterest has billed itself as being a more inclusive, diverse and friendly platform than other social networks, among both its users and its employees. By contrast, other tech companies have implemented social justice initiatives in 2020 in addition to publicly condemning racism.
According to Pinterest’s 2018 report to the Equal Employment Opportunity Commission, 4% of Pinterest’s employees are Black, and 64% of its leadership is white. That leadership is also 75% male, although nearly half of all Pinterest employees (and a majority of its users) are female.
“While other companies have been dedicated to achieving a significant increase in diversity within their highest ranks, the Individual Defendants have caused Pinterest to violate federal and state laws regarding diversity and discrimination by outwardly touting its diverse staff, while internally discriminating against them based on their sex and race. In this way, Pinterest has been able to fool the investing public that it was not among the list of companies that perpetuated the White-male dominated tech environment.”
Additionally, the complaint argues Pinterest’s leadership has cost millions of dollars in settlements with former employees, a class-action lawsuit and the costs associated with investigations.
The bulk of the complaint’s allegations involving racial and gender harassment at Pinterest cite the experiences of Pinterest’s former COO and two members of its public policy team, all of whom are female, though many more Pinterest employees alleged discrimination in the latter half of 2020, staging protests or going public with their own experiences.
The discrimination reported, Farnan wrote in the complaint, violated board members’ obligations, leading the company to expend millions defending itself. The District of Delaware case claims a waste of corporate assets, gross mismanagement, abuse of control, contribution, unjust enrichment, and breach of fiduciary duties.
Francoise Brougher, Pinterest’s first COO, won $22.5 million in a California court for gender-based discrimination and retaliation by Pinterest. According to the complaint, Brougher found she was also being underpaid when compared to male employees at the same level, with Morganfeld receiving 63% more shares of Pinterest stock than Brougher in their first year of employment at the company. Additionally, Morganfeld was eligible to receive those shares outright, while Brougher’s were vested over a five-year period. Brougher’s compensation was eventually adjusted, but not to an extent that resolved all of her concerns.
Although Brougher’s case was settled in December for what’s said to be the largest publicized individual settlement for gender discrimination in history, her accusations went beyond pay—she stated she was regularly excluded from meetings and decision-making, despite being the second highest-ranking officer at the company, and that Silbermann only listened to a small group of men.
“When Brougher raised issues with the Company, strategies, or other decisions, Defendant Silbermann accused Brougher of not being collaborative and not having consistently healthy cross-functional relationships. Rather than give her specific examples, Defendant Silbermann cautioned Brougher to ‘be mindful.’ Because she was a woman, she was not allowed to exercise the type of candor and assertiveness that commonly came from men in leadership positions.”
Silbermann fired Brougher in April 2020, and Brougher has maintained her termination was in response to her calling out the culture of misogyny within the company.
Ifeoma Ozoma, a Black woman who was the second person hired as part of Pinterest’s public policy team, learned she was being paid significantly less than the only other member of the team—a white man—at the time she was hired, though she had more relevant experience than him and they split their work evenly.
Ozoma left Pinterest in May 2020 but had first complained of pay discrimination more than a year earlier, she later said on Twitter, posting that Pinterest hadn’t addressed her complaints of online harassment, racism and disrespect.
Aerica Shimizu Banks, a woman who is half Black and half Japanese, was hired to Pinterest’s public policy team in 2019 at a higher pay grade than Ozoma, but still at a lower level than she should have been, the complaint said. Banks also later took to Twitter, where she said her manager had made inappropriate comments about her ethnicity but that an internal investigation found no issue.
Both Ozoma and Banks, according to the complaint, asked Pinterest management to protect them from harassment after pro-life group Live Action began publishing Slack conversations between Pinterest employees. Ozoma’s photo and contact information was leaked and published online, leading to threats of physical harm to herself and at least two other employees, after which Ozoma reportedly didn’t receive help from Pinterest’s legal team.
Banks and Ozoma were both heavily involved in policies that Pinterest praised publicly as making the platform more diverse and inclusive. After they aired their concerns on Twitter in June 2020, other employees supported their allegations that Pinterest was unresponsive to complaints of discrimination and served as a “revolving door” for Black employees.
Most of the complaint centers on claims of discrimination and Pinterest’s workplace culture, but it also brings one claim of breached fiduciary duty for directors allegedly misleading investors on its growth potential.
Pinterest’s ability to grow its business is based on how many more users are available to sign up for the platform and see advertisements that drive its revenue. After the company went public in 2019, board members spread the word that Pinterest had significant growth potential both in the United States and internationally, despite allegedly knowing the eligible audience in the United States was nearing its maximum.
The complaint cited a May 2019 letter to shareholders which said Pinterest expected revenue to grow by more than 40% over the 2018 fiscal year based on an increase in the average ad revenue generated from each Pinterest user, “particularly in the U.S.,” with the expectation that ad revenue would increase both domestically and internationally.
That expectation was echoed in earnings calls and SEC filings throughout the majority of 2019. In the fall of that year, various documents showed Pinterest had fallen short of growth expectations, with advertising revenue from U.S. users falling short of projections by $14 million. With that news released, Pinterest’s stock price fell 17% in a day.
Representatives with Pinterest’s media relations team did not respond for comment on the case.
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