Derivative Suit Accuses Alphabet Directors of Fostering Workplace Harassment
In a Chancery Court shareholder derivative complaint unsealed this week, four New York-based pension funds said corporate directors had failed to maintain internal controls at Alphabet.
April 18, 2019 at 05:11 PM
4 minute read
The original version of this story was published on Delaware Business Court Insider
Investors in Alphabet Inc.—the parent company of Google—have accused the Mountain View, California-based conglomerate's board of fostering a culture of “rampant sexual harassment” and covering up misconduct by its senior male executives.
In a Chancery Court shareholder derivative complaint unsealed this week, four New York-based pension funds said corporate directors had failed to maintain internal controls at Alphabet, leading the company to abandon its own policies governing sexual harassment and misconduct and causing it to pay “tens of millions of dollars” to corporate executives who had been credibly accused.
The lawsuit cited massive public scrutiny of Alphabet in wake of reports in The New York Times that said Andrew E. Rubin, then Google's vice president for mobile and digital content, had resigned from the company with a $90 million severance package and a delayed repayment of a $14 million loan, after allegations surfaced that he had coerced a female Google employee into performing oral sex on him. According to the Times article, Rubin and another senior Google executive, Amit Singhal, walked away with hefty severance packages after they were accused of inappropriate sexual behavior.
Following that report, the suit said, Alphabet disclosed that another 48 instances of sexual harassment had been reported over the prior two years, including 13 complaints against senior managers or executives.
According to the complaint, the U.S. Department of Labor has also been investigating Alphabet for allegedly failing to cooperate with an audit that revealed pay disparities for female employees. Last November, more than 20,000 Alphabet workers participated in a walkout to protest the company's handling of misconduct allegations in the workplace.
“Since the walkout, public scrutiny has intensified and the Company has initiated small changes to address these pervasive failures going forward,” the complaint said. “However, these belated, reactionary steps are insufficient to remedy the pervasive harm that has already been done to the company or to address the systemic, cultural problems that defendants have permitted at Alphabet for far too long.”
Alphabet's press office did not respond Thursday to an inquiry seeking comment on the case.
The filing specifically targeted Alphabet directors Lawrence R. Page, Sergey Brin and Eric E. Schmidt, who own a combined 56 percent of Alphabet's total voting power and exercise control of the board.
The complaint alleges that Page, Brin and Schmidt all had histories of dating younger female subordinates and used their clout to secure large severance packages for colleagues who had been accused of misconduct. The rest of the board, the complaint said, was beholden to the three directors and were unable to act independently of them.
“Defendants breached their fiduciary duties by using their control over Alphabet and the board to cause the company to cover up credible allegations of 100 sexual misconduct by defendants Rubin and Singhal and by paying Rubin and Singhal millions of dollars in unwarranted severance payments,” the filing said.
“In engaging in the foregoing conduct, defendants did not act in good faith, failed to exercise due care, and acted disloyally toward the company in breach of their fiduciary duties.”
The complaint, which was filed April 11 and unsealed Tuesday, was the latest to target Alphabet's board over its handling of sexual harassment allegations.
Earlier this year, investors filed two derivative suits in California state court over the same alleged activity, and another Alphabet shareholder investor in February sued the company for corporate records that relate, in part, to what Alphabet's directors knew misconduct within their ranks.
The four plaintiffs in the most recent action said they had made a similar demand for documents. However, they did not pursue further litigation over Alphabet's books and records, opting to go ahead with the derivative suit instead.
The plaintiffs in the case are represented by Michael J. Barry, Christine M. Mackintosh and Kimberly A. Evans of Grant & Eisenhofer.
The case, captioned New York City Employees' Retirement System v. Page, has been assigned to Vice Chancellor Kathaleen S. McCormick.
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