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MICROSOFT CORPORATION

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Labor Department Questions Microsoft and Well Fargo Over Pledges to Hire More Black Employees -- 3rd Update

10/06/2020 | 09:54pm EST

By Khadeeja Safdar and Ben Eisen

Microsoft Corp. and Wells Fargo & Co. were contacted last week by the U.S. Labor Department questioning their plans to hire more Black employees as they seek to diversify their management ranks.

Microsoft said the agency overseeing federal contractors is questioning whether its June pledge to double the number of Black managers and leaders in its U.S. workforce by 2025 violates federal laws prohibiting discrimination based on race.

"We have every confidence that Microsoft's diversity initiative complies fully with all U.S. employment laws," Microsoft general counsel Dev Stahlkopf said in a blog post.

Wells Fargo in June pledged to double Black leaders at the bank over the next five years. It recently received a letter from the same agency reminding the bank that it may not discriminate on the basis of race to provide additional opportunities and that quotas are prohibited.

A Wells Fargo spokesman said the bank "is committed to and taking action to become a more diverse and inclusive company. Numerous efforts are under way to implement changes at all levels of the company, and we are confident that they comply with U.S. employment laws."

Black employees represent about 4.5% of Microsoft's U.S. workforce and less than 3% of senior roles, according to the company's 2019 diversity report. At Wells Fargo, Black employees are currently 6% of senior management. That compares with about 13% of the U.S. population.

After the killing of George Floyd in May and calls for racial equality, Microsoft and Wells Fargo were among several companies, from Germany's Adidas AG to Silicon Valley's Facebook Inc., to make pledges to hire more Black employees.

In a Sept. 29 letter to Microsoft, Craig Leen, director of the Office of Federal Contract Compliance Programs, said this initiative "appears to imply that employment action may be taken on the basis of race." The letter asked Microsoft to prove the actions it is taking aren't illegal race-based decisions. The letter to Wells Fargo is also dated Sept. 29.

The OFCCP is an agency within the Labor Department tasked with protecting workers and promoting diversity at companies like Microsoft and Wells Fargo that are federal contractors. Companies have to report their diversity and demographic data to the OFCCP and they have to have an affirmative-action plan for each location.

"Although contractors must establish affirmative-action programs to set workforce utilization goals for minorities and women based on availability, contractors must not engage in discriminatory practices in meeting these goals," wrote Mr. Leen, who was appointed to run the agency in 2018.

Camille Olson, an employment lawyer with Seyfarth Shaw LLP, said it is common for companies to set diversity goals and that they are consistent with the OFCCP's affirmative-action obligations for contractors. "Setting goals is encouraged," she said. "This is something companies have done for years and years."

Federal contractors are required to address any areas of potential discrimination in their ranks, said Cyrus Mehri, a civil-rights lawyer with Mehri & Skalet PLLC. "These companies are on sound legal footing if they take steps to address a documented shortfall," he said.

A Labor Department spokeswoman said the agency "appreciates Microsoft's assurance on its website that it is not engaging in racial preferences or quotas in seeking to reach its affirmative-action and outreach goals. OFCCP looks forward to working with Microsoft to complete its inquiry."

A Labor Department spokesman didn't respond to questions about the Wells Fargo letter or how many companies received similar notices.

In September, Microsoft agreed to pay $3 million to settle OFCCP allegations of discrimination in hiring at four facilities. OFCCP said audits found hiring disparities against Asian, Black and Hispanic job applicants. In August, Wells Fargo agreed to pay $7.8 million to settle OFCCP allegations of hiring discrimination against Black job applicants. Neither company admitted wrongdoing in the agreements.

A Microsoft spokesman said the agreement largely involved hiring concerns from 2012 to 2014. "The agency recognized that Microsoft had already addressed their concerns and did not require any changes to our hiring practices," he said.

A Wells Fargo spokesman said the agreement related to a review of hiring data from six to 10 years ago. "There were no findings that Wells Fargo hiring managers intentionally discriminated against job candidates," he said.

Last month, the Trump administration issued an executive order that prohibits companies with federal contracts from participating in training that "promotes race- or sex-stereotyping or scapegoating." The OFCCP has created a hotline for workers to report their companies for potentially violating the order.

In June, Microsoft also said it would step up efforts to fight racial disparities outside the company, including setting up a $50 million investment fund focused on supporting Black-owned small businesses. The company pledged to use data and technology to identify racial disparities in the criminal-justice system and improve policing.

"We believe it is a core part of our mission to make our company, our community and our country a place where people of diverse views and backgrounds are welcomed and can thrive," Microsoft said in its blog post.

Wells Fargo has added two senior Black leaders to its operating committee, is requiring a diverse slate of candidates for roles paying more than $100,000 and is changing its compensation system to hold senior managers accountable for hitting diverse hiring and promotion goals

--Lauren Weber and Eric Morath contributed to this article.

Write to Khadeeja Safdar at khadeeja.safdar@wsj.com and Ben Eisen at ben.eisen@wsj.com

(END) Dow Jones Newswires

10-06-20 2153ET

Stocks mentioned in the article
ChangeLast1st jan.
ADIDAS AG -0.88% 270.5 Delayed Quote.-5.87%
FACEBOOK INC 3.46% 286.55 Delayed Quote.39.61%
MICROSOFT CORPORATION 1.00% 216.21 Delayed Quote.35.75%
WELLS FARGO & COMPANY 2.60% 28.06 Delayed Quote.-47.84%
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Financials (USD)
Sales 2021 158 B - -
Net income 2021 51 344 M - -
Net cash 2021 76 102 M - -
P/E ratio 2021 32,0x
Yield 2021 1,01%
Capitalization 1 635 B 1 635 B -
EV / Sales 2021 9,86x
EV / Sales 2022 8,81x
Nbr of Employees 163 000
Free-Float 99,9%
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Mean consensus BUY
Number of Analysts 39
Average target price 242,47 $
Last Close Price 216,21 $
Spread / Highest target 28,6%
Spread / Average Target 12,1%
Spread / Lowest Target -16,7%
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NameTitle
Satya Nadella Chief Executive Officer & Non-Independent Director
Bradford L. Smith President & Chief Legal Officer
John Wendell Thompson Independent Chairman
Kirk Koenigsbauer COO & VP-Experiences & Devices Group
Amy E. Hood Chief Financial Officer & Executive Vice President
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