Social media company Pinterest was hit with a shareholder derivative suit Monday alleging the company's executives and directors ignored a culture of race and sex discrimination, harming the company as it fights other suits and reputational harm.
The partially redacted complaint alleges Pinterest has had a "systematic culture, policy and practice of illegal discrimination on the basis of race and sex" since at least February 2018.
"Pinterest's top executives and members of its board of directors 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 suit says. "As a result of 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 shareholder derivative suit, filed by The Employees' Retirement System of Rhode Island, comes after months of allegations from former and current female employees that they were marginalized, left out of company meetings and paid less than their male counterparts.
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The women went public with their stories after Pinterest, in response to George Floyd's May 25 police-involved death in Minneapolis, issued a public statement saying: "With everything we do, we will make it clear that our Black employees matter, Black Pinners and creators matter, and Black Lives matter."
In solidarity with the three women, some Pinterest employees staged a virtual walkout Aug. 14 to demand transparency in compensation and increased diversity among Pinterest's senior leadership, the complaint says.
Other employees came forth to detail their discrimination, according to the complaint.
"The individual defendants, all top executives and board members at Pinterest, breached their fiduciary duties to the company by perpetrating or knowingly ignoring the long-standing and systemic culture of discrimination and retaliation at Pinterest," the complaint alleges.
The executives and directors didn't investigate "widespread allegations of discrimination and retaliation," didn't prevent management from discriminating and retaliating against women and people of color and didn't improve Pinterest's policies and procedures to ensure complaints are investigated and handled by independent, nonconflicted individuals, the lawsuit alleges.
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According to the suit, the discrimination has resulted in increased public scrutiny of Pinterest, a user boycott, reputational harm, has deterred advertisers and harmed the company's ability to hire and retain talent.
The complaint alleges breaches of fiduciary duty, waste of corporate assets, abuse of control, and violation of Section 14(a) of the Exchange Act.
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Rhode Island General Treasurer Seth Magaziner, who brought the suit on behalf of The Employees' Retirement System of Rhode Island, said in a statement, "Pinterest's mistreatment of female employees and employees of color is unacceptable, and the Pinterest Board's deference to a culture of sexism and systemic discrimination has impaired Pinterest's value and the value of the system's investment in Pinterest. We are bringing this action to meaningfully reform corporate governance at Pinterest and ensure this misconduct is addressed."
The plaintiffs are represented by Louise H. Renne, Ruth M. Bond and Anastasia Bondarchuk of Renne Public Law Group; Julie Goldsmith Reiser, Molly Bowen, Lyzette Wallace and Laura Posner of Cohen Milstein Sellers & Toll PLLC.
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