Directors of Google Parent Accused of Fostering Workplace Harassment
The shareholder complaint claims company directors acted disloyally by approving "millions of dollars in unwarranted severance payments" following sexual misconduct claims against executives and managers.
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, accused the web giant's board of fostering a culture of “rampant sexual harassment” and covering up misconduct by senior male executives.
In a newly unsealed Delaware Chancery Court shareholder derivative complaint, four New York-based pension funds say corporate directors 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 were credibly accused.
The lawsuit cited massive public scrutiny of Alphabet in the wake of reports in The New York Times saying Andrew E. Rubin, Google's vice president for mobile and digital content, resigned with a $90 million severance package and a delayed repayment of a $14 million loan.
He left after allegations surfaced that he 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 lawsuit said Alphabet disclosed another 48 instances of sexual harassment reported in the previous two years, including 13 complaints against senior managers or executives.
According to the complaint, the U.S. Department of Labor has 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 workplace misconduct allegations.
“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 media office did not respond to a request for comment by deadline.
The filing 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 the three had histories of dating younger female subordinates and used their clout to secure large severance packages for colleagues 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 sexual misconduct by defendants Rubin and Singhal and by paying Rubin and Singhal millions of dollars in unwarranted severance payments,” the filing said, adding the board members “did not act in good faith” and “acted disloyally toward the company.”
The complaint filed April 11 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 in February sued the company for corporate records that relate in part to Alphabet's directors knowledge of misconduct in their ranks.
The four plaintiffs in the latest action said they made a similar demand for documents.
The plaintiffs 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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