Silicon Valley Is Using Trade Secrets to Hide Its Race Problem
(Bloomberg) -- Diversity and inclusion. Words repeated so often they’re virtually mantra in corporate America. Hardly a day goes by without some CEO extolling the virtues of a more diverse and inclusive workplace.
But when it comes to showing their progress for the world to see, some of the biggest names in Silicon Valley are turning to a novel legal defense: asserting they’re trade secrets.
More and more, firms including Oracle and Palantir Technologies argue that detailed, government-mandated figures on the number of women and people of color they employ must remain confidential. Making them public, they say, would be tantamount to giving away proprietary technology and hand competitors a “road map” to poach talent.
So while tech companies often voluntarily give the public a glimpse of their diversity strategies, the tactic all too often lets them have it both ways, according to Georgetown University’s Jamillah Bowman Williams, who explores the trend in the tech industry for a forthcoming paper. And as criticism grows over Silicon Valley’s bro culture and its lack of minority representation, claiming the figures are too valuable an asset to share could allow companies to pay lip service to diversity with little or no accountability.
“This is almost like the extreme case of the business case for diversity,” Williams, an associate professor at Georgetown University Law Center, said in an interview. By blocking the release of these figures, she writes that “companies can use this tactic to hide gender and race disparities and interfere with the advancement of civil rights law and workplace equity.”
Changing the status quo has never been easy. A growing body of research shows diverse perspectives bring tangible benefits to firms that support them, yet black and female CEOs lead just 5 percent of S&P 500 companies, a number that’s tumbled in recent years. That’s compounded by the fact that almost three-quarters of corporate leaders pick protégés of the same race or gender. Just last month, the Labor Department alleged Oracle shorted women and minority workers $400 million in wages by paying them less and steering them into lower-level positions. (Oracle declined to comment.)
Tech’s race and gender problem has become a focal point as the industry has risen to dominate large swaths of the U.S. economy. Everyone from Apple to Google and Facebook has publicly embraced the importance of diversity and made repeated commitments to become less homogeneous. Yet thus far, the industrywide efforts have yielded scant progress.
The latest U.S. government data, released in 2016, reinforces the point. While the proportion of women has crept up, racial disparities persist. Black employees made up less than 3 percent of the Silicon Valley workforce and Hispanic workers accounted for less than 7 percent -- little improvement from prior years. (Another study showed that Asians work in disproportionately high numbers in tech, but are the least likely to get leadership roles. Those, as you might expect, are occupied mostly by white men.)
At issue is the EEO-1 employment data report, which firms must submit to the Equal Employment Opportunity Commission each year. In her research, Williams looks at how tech firms responded when asked for them to be released. Her paper cites media inquiries covering more than 200 tech companies.
She writes that the vast majority, both large and small, refused to release their data and subsequent requests were often rebuffed with the trade-secrets argument. Because diversity has become such a buzzword in tech and firms routinely vie for the same, and often limited, pool of talent, they say releasing workforce numbers that are too specific can put them at a disadvantage.
Palantir, the data mining startup co-founded by Peter Thiel, for example, aired those concerns in a 2017 letter to the Labor Department, adding it risked losing its investment in recruiting a diverse workforce. Rivals could see where it was making progress and which hiring initiatives it had undertaken, giving them a key to “raid” its growing ranks of women and minorities. Palantir didn’t respond to requests for comment.
Granted, trade-secret protection is a fairly common practice with a long history in corporate America. Applying it to diversity, though, is not only unusual, but fairly specific to tech, according to Gerardo Con Diaz, an assistant professor of science and technology studies at University of California at Davis.
Tech’s use of the trade-secret defense goes back to at least 2011. That year, CNN asked 20 tech companies for their diversity stats. Only three -- Dell, Intel and Ingram Micro -- complied. When CNN submitted Freedom of Information Act requests to the government, Apple, Google, Hewlett-Packard, IBM and Microsoft invoked an exemption covering trade secrets, saying disclosure would cause “competitive harm,” Williams says. (Apple, Google, HP and Microsoft have since begun publicly releasing their EEO-1s and some also produce annual diversity reports. IBM, which hasn’t made its report public, declined to comment.)
The practice has only gotten more popular. Last year, when nonprofit Reveal from the Center for Investigative Reporting requested the EEO-1s from 211 tech companies, an overwhelming majority declined. Just 26 complied or had already released the reports. While the organization successfully sued for release of the data from federal contractors like Oracle and Palantir over their objections, most are still free to use the trade-secret argument.
Federal regulations have made it easier. After President Barack Obama signed a law in 2016 that let companies file trade secrets on a federal level, filings jumped 30 percent the next year, Williams found. Under the Trump administration, Labor Department officials provide firms with detailed instructions on how to invoke the exemption, she said. IBM went as far as to sue its former chief diversity officer last year to block her move to Microsoft, claiming she would take confidential data on its diversity initiatives and strategies with her. (The case was settled out of court.)
When it comes to diversity, Williams argues the legal rationale is flimsy. To be a trade secret, a company needs to show there’s value in keeping information confidential and that it might face economic harm if it becomes public. Yet firms routinely share parts of their demographic data and diversity strategies, on websites or at conferences, often for marketing and recruiting talent.
“This is not like McDonald’s and their sauce that goes on the Big Mac or the Google algorithm that’s the core of its business strategy,” Williams said. “For workforce demographics, it’s unclear what’s so economically valuable to where it would be a detriment, other than reputational harm.”
In other words, the defense is often a convenient way for companies to shield themselves from public scrutiny and embarrassment.
Palantir’s diversity numbers, which the Labor Department made public in January, do little to quell that perception. Its report, compiled by the Center for Investigative Reporting, showed over three-quarters of its 1,328 professionals were men and just 1.4 percent were black. Palantir employed no female executives or senior officials and managers that year, either.
Tech companies, for their part, often point to the “pipeline” problem. That is, firms would love to hire more women and people of color, if only there were enough qualified candidates. The numbers though, don’t quite add up. In 2014 to 2015, black students earning a bachelor’s degree in science, technology, engineering and mathematics accounted for 7.1 percent of graduates in those fields, according to the Department of Education. Yet in Silicon Valley, black employees made up less than half that.
That makes transparency crucial, Williams says. Without it, it’s hard to know what the problems are -- whether hiring and retention or pay and promotion -- making it harder to fight workplace discrimination and change the culture. If anything, making workforce demographics public lets everyone see what works and what doesn’t. It can be a measuring stick to see whether the tens of millions of dollars Silicon Valley invests to recruit and retain more women and non-white workers is money well spent.
“If they’re really concerned about equity and diversity in the long term, not only in their company but in the industry and society as a whole,” she says, “then you would hope that they would have a broader dialogue around it.”
--With assistance from Nico Grant.
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