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Investor presses Microsoft to release results of Bill Gates investigation after rare shareholder win

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Bill Gates speaks in Seattle in 2020. (GeekWire Photo / Todd Bishop)

After winning support from Microsoft shareholders for more transparency and independence in the company’s handling and disclosure of sexual harassment cases, an investor is calling on Microsoft to publicly release the results of an independent investigation into past allegations against co-founder Bill Gates.

Microsoft shareholders sent a signal “that these issues need to be addressed head-on, in a transparent, independent way,” said Natasha Lamb, managing partner of Arjuna Capital, whose proposal won nearly 78% of the shareholder vote.

Natasha Lamb, managing partner of Arjuna Capital.

The outcome at Microsoft’s annual meeting Tuesday was a rare victory for a shareholder proposal. Corporate boards typically oppose such proposals, as Microsoft’s board did in this case. Shareholders vote them down more often than not.

However, the vote was advisory, not binding.

Microsoft executives described it as an important issue for the company. They pledged to release new data on sexual harassment complaints and investigations, and commission an outside review of the company’s processes for handling and investigating complaints. But they stopped short of commiting to fully implement the proposal.

The proposal called on Microsoft to issue an annual report “assessing the effectiveness of the company’s workplace sexual harassment policies, including the results of any comprehensive, independent audit/investigations, analysis of policies and practices, and commitments to create a safe, inclusive work environment.”

The proposal urged the company “to independently investigate and confront these issues transparently.” It said the annual report should include the results of any independent investigation into executive level allegations.”

The proposal specifically mentioned past allegations against Gates, which came to light earlier this year. They included questions about a relationship between Gates and a Microsoft employee in 2000, when he was still an executive.

A Microsoft spokesperson said previously that a board committee in 2019 “reviewed the concern, aided by an outside law firm, to conduct a thorough investigation.” Lamb said that doesn’t qualify as an independent investigation under Arjuna Capital’s definition of the term.

Gates resigned from the Microsoft board before the investigation was complete, the Wall Street Journal reported. A spokesperson for Gates said at the time that his decision was unrelated to the investigation.

Arjuna Capital’s proposal said that sexual harassment and gender discrimination “can harm shareholder value – resulting in higher turnover, lower productivity, increased absenteeism, and higher sick leave costs.”

The vote by a clear majority in favor of the proposal was “an absolutely remarkable signal from the market, and from institutional investors, that ESG [Environmental, Social, and Governance] issues like sexual harassment are material to the company and to investors,” Lamb said.

Discussing the shareholder proposals in a livestream after the vote, Microsoft CEO Satya Nadella said it was important for the company to listen to the feedback as part of its commitment to a growth mindset, always learning and adapting.

Microsoft President Brad Smith called addressing sexual harassment an issue of “enormous importance” to the company and its employees.

Microsoft CEO Satya Nadella, left, and President Brad Smith address questions from shareholders during a livestream in conjunction with the company’s annual meeting Tuesday morning. (Screenshot via livestream.)

In the company’s proxy statement, Microsoft’s board had recommended that shareholders vote against the proposal, explaining that the company had already planned to start releasing an annual report that would “substantially address the key topics identified in the shareholder proposal.”

The board also outlined Microsoft’s efforts to address sexual harassment inside the company, including a significant expansion of its internal investigative capabilities; and training on harassment and discrimination issues.

“There are new steps that we are going to take that we were thinking about, and I think that the resolution and the dialogue we’ve had has helped us advance our decision making,” he said.

After the vote, Smith gave a preview of the types of data that the company plans to release. For example, he said, Microsoft received 51 complaints from employees in its recently completed fiscal year; 47% were substantiated.

That compared with 142 complaints the prior year, 49% of them substantiated. The decline in the total probably resulted from the shift to remote work, Smith said.

In addition, Smith said Microsoft “will bring in a third party do an independent assessment of all of the work that we do to investigate these cases.”

He added, “We’ll share what that independent report says, and we will listen. And if there’s recommendations for change, we will think hard about making them.”

Smith did not address the Gates allegations specifically. Microsoft declined to provide further information beyond its public statements. A Gates representative declined to comment on the vote.

“I think it would be unfortunate if that were the extent of Microsoft’s response, and they did not fulfill the main thrust of the proposal through some kind of a technicality, or interpretation,” Lamb said via phone Tuesday afternoon.

Four other shareholder proposals at the meeting were turned down. However, one of them, calling for the company to report its median pay gap by race and gender, received 40% of the vote. It was also submitted by Arjuna Capital.

“This proposal was, frankly, a good nudge,” Smith said of the median pay proposal. “You know, it’s been a good conversation. And so you will see us next year take more steps to publish globally our median pay gap data.”

Speaking on the livestream, Smith described an overall shift in how shareholders interact with companies. He said there has been “almost a sea change” in the relationship between shareholders and large companies.

“We recognize that, in some ways, the nature of the conversation is even changing, not just at Microsoft, but more broadly,” he said. “We’re seeing more shareholder groups come forward; they have a broader range of proposals.”

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