Firms Pledge to Stamp Out Sexual Harassment. Sounds Familiar
If you believe their tweets, venture capitalists have never been more invested in making their industry hospitable to women.
The flurry of good intentions did not come out of the blue. In the past few weeks, The Information and The New York Times have reported allegations of sexual harassment by well-connected tech VCs against female startup founders, many of them women of color. They described repeated propositions for sex from male investors, unwanted groping and kissing, sexually explicit texts in the middle of the night, and pressure to get a hotel room after a business meeting. Those charges were backed up with emails, screenshots, and texts from iMessage and WhatsApp. Before these media reports, the harassers suffered no consequences or disciplinary action.
The prevalence of sexual harassment has been an open secret in Silicon Valley for years, but in the past few weeks the critical mass of disclosures about people whose avatars routinely show up on your Twitter feed turned into a tipping point. The fight had moved from ineffectual HR departments and courtrooms to social media, where the verdicts are swift.
In other words, this time was different, in part because Silicon Valley was already in the midst of a PR nightmare stemming from allegations of sexual harassment and gender discrimination. The outpouring of stories began just one day after Travis Kalanick, once among the most envied CEOs in tech, was ousted from Uber amid charges of unchecked sexual harassment at his $70 billion company. Bolstered by support for Susan Fowler, the former Uber engineer who took her allegations of harassment public, many of the women who recently came forward risked their careers by naming names. In the wake of the disclosures, both Dave McClure, of 500 Startups, and Justin Caldbeck, of Binary Capital, resigned.
Venture capitalists reacted much more supportively in public to harassment allegations than they have in the past. In Medium posts, on their company blogs, and, of course, on Twitter, prominent investors praised the women for coming forward and voluntarily acknowledged the patterns of abuse. Reid Hoffman, a partner at Greylock Capital and a cofounder of LinkedIn, framed the industry’s inaction as a human rights issue, even before the allegations about McClure came out, and urged his fellow investors to be more outraged.”YES, MANY OF US DO CARE,” Hoffman wrote on Medium. “This is entirely immoral and outrageous behavior. And it falls to us to stand with you, to speak out, and to act.”
Andrew Weissman, a partner at Union Square Ventures, says that the lack of diversity in venture capital is what kept VCs blind to the transgressions against women CEOs. “People are feeling empowered to talk about instances of inappropriate behavior, and the rest of us are now seeing that for the first time,” Weissman says.
Investors also acted quickly; some even proposed industry-wide remedies. Hoffman suggested a decency pledge and proposed building “an industry-wide HR function.” To demonstrate support, he encouraged readers to post on social media using the hashtag #decencypledge. Y Combinator, a prominent launchpad for Silicon Valley startups, is developing a blacklist of investors accused of “inappropriate sexual or romantic behavior.” The firm recently emailed a form to 3,500 entrepreneurs that gives them the option to report cases anonymously. (Lawyers say that this approach could aggravate concerns about unfair allegations or backfire on the accusers.) YC would also consider funding an app that addresses sexual harassment, the firm told WIRED. Another group of about 30 investors recently disclosed their own efforts (two years in the making) to develop a code of conduct with genuine consequences and more effective mechanisms for reporting inappropriate behavior. One of the organizers told WIRED that female limited partners (who provide capital to VC funds) and female general partners (senior level investors at VC firms) have been involved in developing this code, which could potentially be enforced through the National Venture Capital Association, an industry trade group.
That’s the public front. A backlash to the spate of accusations is still happening in private. Isn’t sexual harassment worse on Wall Street? What about due process for the accused? This would never happen in my firm. Aileen Lee, the founder of Cowboy Ventures, told The New York Times that behind closed doors VCs have characterized the spate of stories as “a witch hunt” targeting individual investors.
Regardless of their motivation or sincerity, efforts like the decency pledge, a blacklist, and other public promises are still a sign that the power balance may be shifting between Silicon Valley’s gatekeepers and female entrepreneurs and employees. The same shifting power dynamic has led to serial sexual harassers being ejected from their posts in academia and TV news—after victims collectively broke their silence.
But it’s worth noting that the sexual harassment allegations against universities and media companies have, in some instances, hinged on lawsuits against the harassers. Such legal action is not, by and large, an option for women entrepreneurs who are harassed while seeking funding from VCs. They are not employees and therefore they don’t have the legal protections enshrined in employment laws like Title VII or California’s Fair Housing and Employment Act.
The recent outpouring of harassment disclosures may be an opportunity to remedy that problem, says Erica Baker, director of engineering at Kickstarter and an advocate for diversity and inclusion. “What we’re seeing right now is the canary in the coal mine moment,” she says. “We need to take immediate and swift action.” She has spoken to representatives at both the Department of Labor and the Equal Employment Opportunity Commission about amending laws so that they apply to the founder-investor relationship.
Regulatory changes are one potential suggestion in the ongoing debate about which strategies, if any, can make an impact. Advocates are dubious about the industry’s ability to police itself, and they have a case study to back up that skepticism: venture capital’s response to demands that it increase gender and racial diversity. It amounts to an empirical lesson in ineffectiveness.
Consider: In 2016, only 10.7 percent of senior investors at the most prominent venture capital firms were women, up from 8 percent in 2015, according to an annual report conducted by the VC firm Social Capital and The Information. Seventy-five percent of top investors were white men, down from 78 percent in 2015. Out of the 581 investors surveyed, seven were black and 11 were Hispanic.
Over the past decade, the numbers have actually been getting worse. Data from Columbia University shows that the number of female partners categorized as key decision makers in US VC firms has fallen from 10 percent to between 5 percent and 8 percent. These abysmal ratios came in the wake of industry calls for increased diversity. Forty-five top VC firms, including high profile players like Kleiner Perkins, Andreessen Horowitz, and Battery Ventures, signed a pledge to improve diversity just four months after the 2015 verdict in the Ellen Pao trial. But the pledge, which was orchestrated by the NVCA, did not allocate resources, set targets, or demand accountability from signatories, according to NVCA CEO Bobby Franklin.
The small amount of progress the VC firms are making on diversity can border on the absurd. For example, two of the top venture capital firms, which have raised billions of dollars, have each only hired one female general partner—who happens to be the same woman. Hoffman’s firm, Greylock Capital, hired Sarah Tavel as its first female general partner in 2015, 50 years after Greylock was founded. Tavel was poached by Benchmark Capital a few months ago, becoming the first female general partner in the firm’s 22 year history. Greylock currently has no female general partners, although partner Sarah Guo makes investment decisions, sits on boards, and takes a leadership role.
The industry is in a bind. Without women in positions of power, male investors don’t even see the problem. “Can you self-police without being self aware?” asks Union Square Ventures’ Weissman, who also has his doubts about the impact of internal pressure to increase diversity and prevent sexual harassment. “I can say to you that USV has only added three partners in 12 years, but I think that’s an excuse,” Weissman says. “If you want to make that change, you can make that change.”
Startup founder Sarah Kunst, one of the women allegedly harassed by McClure, says that any proposed harassment solution must address diversity because the issues are intertwined. “The reason I’m not a huge fan of a decency pledge without requiring or demanding more diverse investing teams is because it comes across like a protectorate. Let me make sure no women get harassed on my watch, instead of hiring a more diverse group of investors who will make it easier to identify bad actors,” she says. “There are so many instances where women will say, ‘That guy is so creepy,’ and the man [in the room] will say, ‘Really? I never noticed.’”
The VC Defense
The venture capital industry has historically leaned on a tidy set of factors to explain the lack of women in investing roles: Firms typically have few investing partners. Senior roles don’t open up very often. The high risk involved in investing means culture fit is important. There’s a lot at stake because the gig can last for decades. Few women meet the exacting criteria. Yadda yadda, they’re working on it.
“One of the open secrets in the Valley, and in New York too, is that every firm has hired a recruiter to bring on a woman partner, so there is that energy to do it,” Weissman says. Venky Ganesan, former chair of the National Venture Capital Association and a managing director for Menlo Ventures, says there has been “an unofficial adoption of the Rooney Rule”—the NFL policy that mandates interviewing minority candidates for top coaching jobs—in searching for candidates at venture capital firms.
Keeping it unofficial is part of the problem. “Venture capital has been a traditionally secretive and private industry, until the last decade when it started courting the press with PR on wins and partners,” Ellen Pao tells WIRED. “The closed nature of how they deal with these problems—and how they encourage their portfolio companies to deal with these problems—reflects their values around secrecy and opacity.”
It may appear like behind-the-scenes recruitment changes haven’t made a dent, but Ganesan says change just comes slowly. “The math does not make it possible to make an immediate impact.” Take the NVCA, he says. The organization has roughly 500 firms as members that on average have around five general partners. Out of those 2,500 or so people, “There are probably 30 to 40 [general partner] slots that get filled every year. Even if all 40 slots were filled by women, in five years, you’ll have 200 women. No one is going to say that that is success.”
Dramatically expanding the number of women who start their own firms would be the best way to speed up the process, he argues. But when it comes to diversifying existing VC firms, the constraints are unavoidable. “Nine women cannot have a baby in one month,” he says.
What Really Moves the Needle in Venture Capital
Math problems aside, the industry has undergone significant changes in recent years in response to market forces that impact investors’ ability to get access to the best deals. “When the next generation of founders wanted to work with VCs who are operators—not VCs who are lawyers—or VCs who worked at Google and Facebook, that happened pretty quickly over the last five to eight years,” says Hunter Walk, a partner at the seed stage investing firm Homebrew and veteran of YouTube and Google.
Indeed, demand from founders to work with progressive firms that share their values seems like the most promising catalyst for increasing diversity.
Limited partners willing to press the issue could also theoretically make a difference, but they have only recently piped up. “LPs were afraid of getting kicked out of the top 20 or 30 venture capital firms, so therefore I don’t think they felt comfortable raising any issue,” Weissman says. “It’s still pretty kid gloves. They say, ‘Hey are you thinking about adding someone to the partnership? What are you thinking about gender diversity? Do you know so-and-so?’”
The threat or actual pursuit of legal action can also force change, but it is inhibited by the prevalence of arbitration clauses in employment contracts, which require the complainant to submit to an arbitrator rather than seeking a remedy in civil court before a judge and jury. However, Ganesan argues that arbitration hasn’t put a damper on the number of lawsuits filed or the influence those lawsuits might have on other firms. “You may not be aware of them, but they happen and when they happen, changes are made,” he says.
For example, many firms, including Ganesan’s, have established strict limits on the number of hours worked by executive assistants after a spate of lawsuits were filed regarding overtime losses, even though the suits went to arbitration. (California employment law considers executive assistants non-exempt employees, which makes them eligible for overtime.) “In light of that our CFO felt like it was the right thing to do to lay out clear rules,” he says. In 2014, a judge refused to compel arbitration for a disturbing sexual and racial harassment lawsuit against CMEA Capital. The VC firm tried to argue that the complaint was only about overtime. The suit ended in a settlement with undisclosed terms. CMEA has since relaunched under a new name.
Larry Organ, a plaintiff’s employment lawyer whose client is suing Tesla for sexual harassment, scoffs at the notion that arbitration cases have the same impact as conventional lawsuits. “Name for me one case in arbitration that is a seven-figure settlement. No one knows! Even if there is, we don’t know about it,” he says. “The public shaming exists when you file a case in court.” (And, of course, on Medium and Twitter.)
Venture Capital Is Not as Unique As It Would Like to Think
“Research shows that harassment is more prevalent when women enter into traditionally male-dominated fields,” says Vicki Schultz, a law professor at Yale who has written extensively about sexual harassment in the workplace. “In that sense, it’s no different from the first women who went into the construction trade, surgery, policing, and firefighting. We think of it as different because the industry is populated by a highly educated, allegedly sophisticated people.” Boys clubs never willingly open their doors to outsiders. Progress on sexual harassment policy typically happens as a result of class action lawsuits, public and media scrutiny, or direct social activism, she says.
Meena Harris, a former policy manager for Slack who previously worked as a lawyer representing startups, says venture capital firms could use the same mechanisms for accountability that have worked in other industries, such as third-party auditors who conduct internal reviews. “When it comes to Silicon Valley’s ability to deal with sexual harassment in an actionable way, there’s no need to reinvent the wheel,” she says.
In the 1990s, both Wall Street and the legal profession were hit with a barrage of lawsuits following Anita Hill’s testimony that Clarence Thomas sexually harassed her in the workplace with lewd comments and unwanted sexual advances. At the time Freada Kapor, now an outspoken Uber investor and partner at Kapor Capital, ran a consultancy that advised companies on workplace bias. “Tech sees itself as so progressive and leading edge. It should make them cringe to think that they are 20-plus years behind law firms when it comes to dealing with harassment and discrimination,” she tells WIRED.
More recently, some law firms have been open to innovative approaches. Last month, 30 major law firms instituted the Mansfield Rule, which stipulates that firms must consider at least 30 percent women and minority candidates for any leadership position. The idea came out of a hackathon.
via Wired Top Stories https://www.wired.com
July 17, 2017 at 10:06AM