December 01, 2020

The board of directors and several executives of Pinterest have been hit with a shareholder derivative lawsuit brought by an institutional investor alleging that the defendants breached their fiduciary duties by causing or permitting the company to engage in a pattern of race and gender discrimination and retaliation, harming the company’s reputation and workforce. As discussed below, the Pinterest lawsuit is the latest in a series of lawsuits alleging that companies’ boards have violated their duties to their companies or the companies’ shareholders with respect to their oversight of diversity, equity and inclusion issues.

The Lawsuit

On November 30, 2020, the Employees’ Retirement System of Rhode Island, a Pinterest shareholder, filed a shareholder derivative lawsuit in the Northern District of California against certain directors and officers of the company, as well as against the company itself as nominal defendant. A copy of the complaint can be found here. The individual defendants include Benjamin Silberman, the company’s co-founder, CEO, and Chairman; and Todd Morganfeld, the company’s CFO; and seven other individual directors.

The complaint alleges the lawsuit arises from the company’s “systematic culture, policy, and practice of illegal discrimination on the basis of race and sex.” The complaint alleges that the company’s top executives “personally engaged in, facilitated or knowingly ignored the discrimination and retaliation against those who spoke up and challenged the Company’s White, male leadership clique.” The complaint alleges that as a result of the defendants’ “illegal misconduct,” the company’s “financial position and its goodwill and reputation among its largely female user base (which Pinterest’s success depends upon) were harmed and continue to be harmed.”

The complaint’s allegations of discrimination and retaliation relate primarily to the company’s actions with respect to three female senior executives, two of whom are black. Two of the women, Ifeoma Ozoma and Aerica Shimizu Banks, filed lawsuits, later settled, in which they alleged that they had received discriminatory compensation, and were retaliated against and ultimately fired for seeking equitable compensation leveling and pay. Ozuma and Banks later shared their experiences on Twitter and in media interviews. A third woman, Francoise Brougher, who had been the company’s COO, filed her own lawsuit alleging discrimination and retaliation, claiming that she had been routinely excluded from job duties based on her sex and also that she  had been underpaid relative to similarly situated male executives.

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For those of you who might be wondering what the plaintiff might be hoping for from this lawsuit, I think one clue might be provided by the recent Alphabet settlement of the lawsuit involving underlying allegations of sexual misconduct and hostile workplace at Google. That case, readers will recall, settled for the company’s agreement to adopt certain corporate therapeutics, including most notably Alphabet’s agreement to provide funds of $310 million over ten years to address diversity, equity, and inclusion issues at Google. One reason I feel confident in conjecturing that this might be the kind of thing the plaintiff has in mind here is that the plaintiffs’ lawyers who filed the Pinterest complaint were co-counsel in the Alphabet/Google lawsuit.

The complete article can be viewed here