“How is Microsoft responsible for my stress disorder? Simple, 12 years of subjecting me to unequal and contradictory treatment, debasement, sexual harassment and outright illegal practices in its hiring, management, and disabilities protocols.”

- A former female Microsoft employee, in December 1997.

“There are glass ceilings and glass walls in place for African Americans at Microsoft. We are stunned and disappointed in their treatment of Black employees.”

- Willie Gary, lawyer of an ex-Microsoft African American employee, in January 2001.

In January 2001, seven of Microsoft's former and current African-Americans employees filed a discrimination suit against the company. One of the largest discrimination suits ever filed in the US, it alleged racism and plantation mentality at their workspace and sought $ 5 billion in damages. Microsoft was accused of discriminating against its employees through performance evaluations, pay packages, promotions, wrongful terminations and retaliation. This suit consolidated all the discriminatory suits filed separately by the seven employees.

The suit was subsequently given the status of a class action, extending its reach to Microsoft's vast base of former and current African-American employees. Thus, all the former and current African-American salaried employees employed by Microsoft (in the US) on or after October 4, 1997 and all the former and present female salaried employees employed by Microsoft on or after February 23, 1999 were included in the suit. The filing was primarily based on the existing case of Rahn Jackson, one of the first Microsoft employees to take legal action against Microsoft for racial discrimination. The plaintiff claimed that Microsoft's employment policies and practices permit its managers to exercise discretion when deciding on evaluations, pay packages, promotions and job selections, resulting in decisions that reveal a race/gender bias.

During the early 1990s, many discrimination related suits had been filed against Microsoft. In the Donaldson Vs. Microsoft case, the plaintiff alleged that Microsoft discriminated against the Black and female workers by paying them smaller salaries, bonuses and stock options than it paid white males performing the same work. The suit also alleged that Microsoft had even retaliated against Black and female employees who protested against this discrimination.

Reacting to increasing media coverage of lawsuits filed against it, Microsoft claimed that the company did not tolerate employee discrimination and was focused on offering unbiased treatment to employees and promoting women and members of minority groups in its organization. However, few people bought their story. Willie Gray, one of the leading attorneys dealing in discrimination suits, argued that Microsoft showed plantation attitude when it came to dealing with African-American workers. Gray remarked that in 1999, only 2.6% of the Microsoft?s employees and only 1.6% of its managers were Black.

Throughout the 1980s and early 1990s, Microsoft remained in the news for discriminating against women and African-Americans. Many cases of both sexual harassment and discrimination against female employees were reported. Though the issue of racial discrimination arose in the late 1990s, it was only in 2000 that the employees initiated legal proceedings against Microsoft, demanding equality and justice.

William H. Gates (Bill Gates), along with his friend Paul Allen, established Microsoft Corporation in 1975. Bill Gates initially focused on software instead of hardware. Over the next two decades, Microsoft emerged as one of the richest and most influential companies in the world. In 1998, the company became the world's most highly valued company, reporting a market capitalization value of $466 billion.

Microsoft is engaged in developing, manufacturing, licensing and supporting an extensive range of software products and services for a multitude of computing devices. Microsoft sells software to over a 180 million people. Its products are available in over 30 languages and are used in more than 50 countries. The company is also involved in developing highly advanced, robust technologies for next generation software products.

Microsoft's success was attributed to (among other things) its effective recruitment and employee retention strategies. Microsoft had always attempted to attract the best talent. According to a press report, “Microsoft seeks a particular type of smart person, one who is pragmatically inclined, verbally agile and able to respond deftly when challenged.” Because of its efficient performance appraisal system and work culture Microsoft had a very low employee turnover rate. Microsoft gave incentives to employees on the basis of their performance appraisal. Employees underwent a performance review every year. Those who were making a significant contribution to the corporation were rewarded with pay raises, stock options or bonuses, which made many talented Microsoft employees millionaires. Microsoft promoted an informal work culture, where rules mattered little and senior executives normally kept the doors of their cabins open. Employees were dressed casually and appeared very relaxed. The company's open work environment encouraged employees to send e-mail messages to even top executives.

In keeping with the informal environment, Microsoft encouraged a decentralized management style. Employees worked as members of small highly empowered teams. Team members owned the rights to the products they were developing. Hierarchies were kept to the minimum. However, when there were differences of opinion within or across teams, which could not be satisfactorily resolved, Gates would step in as the final arbiter.

In late 1998, Microsoft had to face antitrust proceedings initiated against it by the US government. The government charged Microsoft of leveraging its power to gain an unfair advantage over its competitors. The government also accused Microsoft of bundling its Internet Explorer browser with Windows 95 and modifying Sun Microsystems' Java language to make it Windows compatible. In April 2000, the US government and 19 states involved in the antitrust suit sought the break up of the company.

However in November 2001, Microsoft negotiated a settlement with the US government. According to this settlement, Microsoft had to comply with the restrictions and regulations proposed by the federal judge supervising the settlement, for a period of five years, on issues such as software development and licensing, Microsoft's work-relationships with the software vendors and its communication with partners and competitors regarding the working of its software.

In early 1999, Microsoft announced a major restructuring exercise to rejuvenate itself. It planned to change its focus from products to customers. As a part of the restructuring, Microsoft was split into eight new, completely autonomous divisions. These divisions consisted of the Business and Enterprise division, Business Productivity division, Home and Retail division, Consumer Windows division, Sales and Support division, the Research division, the Developer group and the Consumer and Commerce group. In January 2000, Bill Gates climbed down as the CEO and took over as the Chief Software Architect of Microsoft. Steve Ballmer, President of Microsoft was
made the new CEO.

In early 2002, Microsoft remained ahead of its competitors on account of various factors such as efficient recruitment strategies for attracting and retaining the best talent, robust marketing strategies and the development of highly advanced software and technologies. Though the company had emerged unscathed from the antitrust case, it still had to face and deal with a lot of problems within the organization. The company's history was marred with complaints of sexual harassment and discrimination against women. However, complaints of discrimination and harassment did not attain serious dimensions until mid-2000, when the Donaldson discrimination
lawsuit was filed.

Racial and gender discrimination may be described as any verbal or physical act which is intended to cause or could reasonably be expected to cause individuals or groups to feel intimidated, demeaned, or abused because of their racial, ethnic, gender or national background. Sexual Harassment may be explained as an illegal form of gender discrimination, which is void under Title VII of the United States' Civil Rights Act of 1964.

The state and federal laws of the United States prohibit specific kinds of discrimination. Title VII of the Civil Rights Act of 1964 states that “managers can't hire, fire, pass over for promotion, deny a vacation request, do anything surrounding the terms and conditions of employment because of someone's protected characteristics. This means you can't make decisions or take employment actions because of an employee's race, color, gender, religion, or national origin.” According to the Act, it is unlawful to discriminate against any employee or applicant on the basis of his/her race or color in regard to hiring, termination, promotion, compensation, job training, or any other term, condition, or privilege of employment. Title VII also prohibits employment decisions that are based on stereotypes and assumptions regarding the abilities, traits, or the performance of individuals of certain racial groups.

Sexual harassment may be defined in many ways –

• An offensive sexual behavior by persons in authority towards those who can be benefited or offended in an official capacity. The definition lays more emphasis on the abuse of power than sexual harassment.
• A coercive behavior, whether implied or actual. It can be defined as an unwanted attention and intimacy in a nonreciprocal relationship.
• A breach of a trusting relationship that should essentially be a gender-neutral situation. The definition lays emphasis on unprofessional conduct and undermines the integrity of the employment relationship.
• Making unwanted sexual advances and unwelcome requests for sexual favors.

Instances of racial and gender discrimination in corporations have often been reported in the media for many years. The assumption underlying this discrimination was that women and people of color are incompetent until proven otherwise. In the absence of a definitive technique for measuring performance, the evaluation of the performance of women, and Black and ethnic groups was often subjective and biased. Numerous discriminatory suits had been filed against various companies including major companies like WalMart, Coca-Cola and Boeing Co. Law suits had also been filed against the federal government, alleging that 1,100 female applicants had been denied employment at the United States Information Agency (USIA) and the Voice America (both federal agencies) on the basis of their gender. The U.S. Supreme Court ruled in favour of the plaintiffs, and ordered the federal government to pay $ 508 million as damages.

Instances of gender/racial discrimination and sexual harassment were common in Microsoft since the 1980s. The company was even said to be the 'most disdainful place for women to work' during the 1980s. In its initial years, Microsoft had only a few hundred employees, most of them male. The only women employed in Microsoft were those who edited technical manuals. The work culture in the company was by and large undisciplined. According to analysts, all the manners, attributes and traits that were not acceptable in conventional society were highly prevalent in the company.

According to a report, “Microsoft was a geeks paradise, where issues such as interpersonal skills and personal hygiene had no importance and the presence of women was barely tolerated. It was the base of newly evolved computer nerds, who prided themselves on being masters of their fields where women had yet to take active part and were highly skeptical of the abilities of their female counterparts.'

Though the number of female employees in the company increased over the years, there was reportedly no improvement regarding the treatment extended to them by their male colleagues. (Refer Table I for instances of sexual harassment at Microsoft). There were numerous complaints about sexual harassment, blatant indifference to their opinions and proposed solutions to technical bottlenecks, and exposure to instances that could be regarded by many as biased, inappropriate and degrading.

Table I

A Few Instances of Sexual Harassment at Microsoft

Source: www.fastcompany.com

In 1990, in an attempt to safeguard their rights, a few female employees at Microsoft started 'Hoppers', an organization established to give women employees an opportunity to discuss the challenges faced by women at the workplace and to the enhance status of women at Microsoft. 'Hoppers' initially started as an e-mail community that operated through three e-mail addresses, 'Hoppers', 'Hopanon' and 'Hoppals.' 'Hoppers' conducted ongoing conversations on issues that interested other members. 'Hopanon' allowed women to submit anonymous postings and also offered advice on problems created by other members; and 'Hoppals' allowed sympathetic men to provide support to the cause of 'Hoppers.' Hoppers gained instant popularity among Microsoft's female employees.

Microsoft's management formally recognized 'Hoppers' as 'Diversity Advisory Council' in 1991. Hoppers, dedicated to protecting, retaining and advancing women throughout the organization, contributed significantly to the transformation of the company's culture. It ensured equal status to women in Microsoft during the early 1990s. Its efforts in this direction were aided by the company's need to shift gender differences to the backseat and put more emphasis on merit. In the early 1990s, when Microsoft realized the need to attract and retain female engineering talent in the organization, it worked hard to change the culture of the organization. The darkened offices of the software engineers, littered with empty cans and scattered computer parts, were replaced by clean, well-lit offices with fine interiors to ensure a healthy office culture. Women were recognized for their talent and given promotions on the basis of their performance in line with their male counterparts. (Refer Table II for Microsoft's efforts to safeguard the rights of women and minorities). As a part of its strategy for encouraging women, Microsoft supported Hoppers financially by allocating an annual budget and contributing to its scholarship fund for talented young women in the field of computer science.

Table II

Minority and Women Promotion at Microsoft

Source: www.ambedkar.org

In order to eradicate sexual harassment and inconvenience to women, Microsoft prohibited the use of server space for storing pornographic material. It also offered server space and other company resources to Hoppers to conduct its operations.

In early 1993, Microsoft also launched a 'diversity training' program, to educate employees about various issues such as sexual harassment, interpersonal skills and professionalism. Microsoft made it mandatory for every male employee to attend such a program once a year. Such programs discussed specific scenarios related to social and sexual issues at the workplace. Each session lasted for few hours and focused on enhancing interpersonal relationships and mutual respect between the employees (both male and female). Non-attendance at such programs was treated severely. Employees were threatened with termination of their jobs. Termination not only meant loss of job, salary and benefits to the employee, but also loss of valuable stock options in the company.

As a result of these initiatives, Microsoft seemed to have succeeded in becoming one of the best places for women to work by the late 1990s. The number of women employees also increased during the period, and in 2000, women employees accounted for an estimated 26% of Microsoft's total employee strength. Hoppers also extended its reach to 1,600 members across all Microsoft offices (in the US and abroad). Hoppers moved beyond safeguarding female rights to offering counseling to women who were being sexually harassed, holding study groups and discussions on various technical aspects, and examining new Microsoft technologies.

In spite of these efforts to portray itself as a progressive organization, reports of discrimination against women and racism at Microsoft began surfacing in 2000. In mid-2000, the first discriminatory suit against Microsoft was filed in the US federal court, followed by a number of different suits. By early 2001, all the plaintiffs combined to file a consolidated discrimination suit against the company, giving it the status of a class action suit. The plaintiffs charged Microsoft with discrimination in performance appraisal, compensation and promotion.

• Discrimination in Performance Appraisal: Microsoft conducted periodic appraisals of performance, based on which decisions regarding salary hike, bonuses and stock options were taken. The performance appraisal of employees was conducted by Microsoft's managers. The employees alleged that the performance appraisal system allowed for discrimination on the basis of race, color and gender. Microsoft used a rating system to evaluate the performance of its employees. The employees argued that the ratings technique allowed managers to exercise their discretion in the evaluating their subordinates. As a result, employee performance appraisals were generally biased. Microsoft had a written policy that required all managers to be trained to efficiently conduct performance evaluations and frame development plans for employees on the basis of their ratings. But, according to the plaintiffs, Microsoft failed to implement this policy. The plaintiffs also claimed that though Microsoft had a multi-level reviewing program, it was not effectively in practice.
• Disparities in Compensation: The plaintiffs alleged that Microsoft paid Black and African-American employees significantly less than white employees performing similar functions. According to the plaintiffs, Microsoft's compensation system had broad and overlapping pay ranges, thus allowing for vast pay differences among employees. To make matters worse, discrimination in evaluation led to discrimination in compensation.
• Discrimination in Promotions: Microsoft's written and unwritten policies enabled supervisors and managers to select candidates through word of mouth or other informal channels, for available positions. The plaintiffs claimed that such a selection system prevented qualified Black African-American employees from competing for those positions. The plaintiffs also claimed that Microsoft's managers prevented the Black African-American employees from moving to senior levels in the organization. According to the plaintiffs, the promotion practices at Microsoft perpetuated a 'glass ceiling' that prevented qualified and eligible Black African American employees from holding high positions in important divisions or departments of Microsoft.

The plaintiffs claimed that Microsoft failed to effectively deal with discrimination at the workplace (Refer Exhibit I). With more and more employees joining the discrimination lawsuits against Microsoft, analysts remarked that the time had come for Microsoft to take firm steps to eliminate discrimination in the organization.

While the number of plaintiffs complaining of discrimination at Microsoft kept mounting in 2001, Microsoft claimed that it was committed to diversity and did not tolerate discrimination of any type in its employment practices. The company announced that it had made considerable progress in increasing the number of minorities working at Microsoft and had demonstrated its commitment to diversity and equality by promoting women and minorities. According to company sources, as of October 2000, minorities accounted for 16.5% of total managerial positions in Microsoft and 22% of the domestic workforce of the organization as against only 17% in 1997.

A Microsoft spokesperson observed that since many minority groups lacked required qualifications, Microsoft had invested over $ 100 million in educational grants (which included $ 86 million granted to the United Negro College Fund during the late 1990s) to stimulate interest in technical training among women and minorities. The spokesperson further pointed out that though there was relatively lower percentage of Black employees at Microsoft compared to other companies, the number of Blacks at Microsoft increased by 83% during 1997-2000. To further highlight its commitment to proper treatment of minorities, Microsoft appointed Claudette Whiting, an expert in job-equality issues and a former director of job-equality initiatives at DuPont, as senior director of diversity in May 2001. Claudette's strong track record for creating a diverse, multicultural work environment that ensured equal opportunities for individuals of all backgrounds to grow and advance in the organization was expected to inspire confidence and trust in the employees.

In 2001, lawsuits against companies alleging discrimination at the workplace on the basis of race, class, gender, age and nationality had become rather common. According to analysts, when an economy is in recession and companies are not performance well, instances of discrimination increase. (Refer Exhibit II). Thus, companies like Microsoft, which seemed to be performing rather well despite the global slowdown, had an even tougher battle on their hands. Only the outcomes of the various pending lawsuits against Microsoft would reveal whether the company would be able to salvage its damaged reputation or not.

1. Examine the nature of sexual discrimination at Microsoft during its initial years. What factors led to this type of discrimination?

2. Discuss the impact of discrimination and harassment at the workplace on employees. What consequences did the company have to face by not taking action against discrimination?

3. Discuss and critically evaluate the steps taken by Microsoft to deal with discrimination at the workplace.

4. “The issue of gender and racial discrimination has existed since the inception of society – of which companies like Microsoft are an integral part.” Critically comment on the above statement, focusing on the organization's responsibility towards its employees. Recommend appropriate strategies for putting an end to such problems

Exhibit I
Microsoft’s Failure in Preventing/ Remedying Discrimination

Source: www.news.findlaw.com.

Exhibit II
Eliminating Discrimination in Organizations

Source: IBS Center for Management Research