Rhode Island Employees' Retirement System, Providence, is suing Pinterest Inc. executives and board members, claiming they fostered a culture of discrimination and retaliation that also hurt its financial success.
The lawsuit filed Nov. 30 in U.S. District Court in San Francisco is supported by the $2 billion Ohio Laborers' District Council and Contractors' Pension Fund, Westerville.
The $8.5 billion Rhode Island pension fund charges that Pinterest's top executives and board members "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. 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 complaint said.
Rhode Island Treasurer Seth Magaziner said in an emailed statement that "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.
The lawsuit charges Pinterest officials, including board Chairman and CEO Ben Silbermann, co-founder and board member Evan Sharp, and Chief Financial Officer Todd Morgenfeld with breaching their fiduciary duty, wasting corporate assets, abusing control and violating proxy solicitation disclosure rules.
The case was filed after Rhode Island officials reviewed public filings, news releases, news reports, public statements, court records, confidentiality agreements produced by Pinterest, interviews of former employees, and its own investigation. The lawsuit also names Pinterest's audit committee for failing to take meaningful action.
The behavior alleged in the lawsuit involved goes back to at least February 2018, but events in 2020 brought things to a head as three female senior executives filed lawsuits for discriminatory pay practices, marginalization and retaliation. In August, Pinterest employees staged a virtual walkout to demand more diversity and transparency around compensation.
Rhode Island ERS is seeking corporate governance reforms and to have Pinterest executives and board members pay for the damages related to the alleged breaches of fiduciary duties. "We are bringing this action to meaningfully reform corporate governance at Pinterest and ensure this misconduct is addressed," Mr. Magaziner said.
The lawsuit also references Pinterest's dual-class share structure. After its initial public offering in April 2019, shares held by co-founders and pre-IPO stockholders were reclassified to give them most of the voting power, which the company noted in its 2019 10-K "limits or precludes other stockholders' ability to influence corporate matters."
A Pinterest spokesman said in an emailed statement: "Pinterest's leadership and board take their fiduciary duties seriously and are committed to continuing our efforts to help ensure that Pinterest is a place where all of our employees feel included and supported. We believe the actions we've initiated as well as the ongoing independent review regarding our culture, policies and practices will help us achieve our goal of building a diverse, equitable and inclusive environment for everyone."
Recent actions taken by the company include a new position, global head of inclusion and diversity, and two new board members, Andrea Wishom and Salaam Coleman Smith.