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Microsoft shareholders back protest vote over sexual harassment claims

Microsoft’s shareholders have overwhelmingly backed a protest vote calling on the technology company to reveal more about its handling of sexual harassment claims, in the shadow of recent cases and the revelation that co-founder Bill Gates had a relationship with an employee.

The call amounted to a rare rebellion at Microsoft’s annual shareholder meeting, with 78 per cent of those voting against management. It brought an immediate promise from the company of more transparency, though Microsoft stopped short of saying it would reveal details about individual allegations or reopen its handling of cases from previous years.

The shareholder revolt followed years of complaints from some workers that Microsoft had brushed pervasive claims of harassment under the carpet.

Arjuna Capital, which submitted the shareholder proposal challenging management, said that Microsoft’s human resources department had upheld only one claim against the group out of a total of 238 included in a class-action lawsuit alleging discrimination and harassment in 2012.

“Reports of Bill Gates’ inappropriate relationships and sexual advances towards Microsoft employees have only exacerbated concerns, putting in question the culture set by top leadership, and the board’s role holding those culpable accountable,” the shareholder proposal added.

Microsoft revealed this year that its board had hired an external group to look into a decades-old “intimate relationship” that Gates had with an employee. Gates stepped down from Microsoft’s board before an investigation was completed. The outcome of any inquiry has not been revealed.

The shareholder vote dealt a blow to Microsoft’s lofty reputation with investors focused on environmental, social and governance issues. It is the most widely held company in US ESG funds as of July, according to Bank of America. The vote also marked the first time since at least 2000 that shareholders have taken a stand against the company’s management, according to ISS, a shareholder advisory firm.

In another sign of shareholder frustration, the previous near-unanimous support for Satya Nadella, chief executive, and John Thompson, lead director, showed signs of cracking. The 99.9 per cent backing for Nadella’s re-election as a director a year ago slipped to 94.7 per cent this year, while Thompson’s 99.1 per cent support fell to 91.4 per cent.

The decrease in support came months after Nadella took on the additional role of chair. Norway’s oil fund, which owns about 1 per cent of Microsoft, had indicated it was opposed to the roles being combined.

ISS and rival Glass Lewis had recommended that investors back the Arjuna resolution, arguing that a failure to deal effectively with sexual harassment claims would hurt Microsoft’s reputation and ability to hire, affecting its shareholders.

“There are new steps we are going to take that we were thinking about,” Brad Smith, Microsoft’s president, said after the vote. “I think the resolution, and the dialogue we’ve had, has helped us advance our decision-making.”

He said the company had been compiling more information internally on harassment claims and recognised that “shareholder interest” made it important to disclose more publicly as well.

As an example of the kind of disclosure it might make in future, Smith said that in Microsoft’s past financial year, it had investigated 51 complaints and that 47 per cent were substantiated, compared with 49 per cent of the 142 cases investigated the year before. The decline in claims probably reflected the fact that more people were working from home, he added.

Smith also said Microsoft would commission an independent review of how it handles harassment claims and publish the results. However, he stopped short of promising the company would adopt any recommendations, saying only that it would “think hard” about making changes.

Smith said Microsoft would also publish more details on its gender pay gap, despite shareholder rejection of a separate proposal on the issue. It is already required to publish the data in the UK and would extend this globally, he added.


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