Shareholders turn the screws on IBM and its gag orders

IBM shareholders at the IT giant’s annual meeting last month endorsed a proposal to have the company produce a public report on the potential risks arising from its use of concealment clauses that constrain disclosure of workplace misconduct.

Almost two-thirds (64.7 percent) of participating shareholders voted for the proposal, which was submitted by Clean Yield Asset Management, a US-based investment firm focused on corporate social responsibility.

“The proposal is non-binding so IBM has no obligation to implement the proposal,” explained Molly Betournay, director of social research and shareholder advocacy at Clean Yield Asset Management, in an email to The Register. “However, companies tend to address (in one way or another) proposals that garner majority support from shareholders. I expect there will be additional dialogue between IBM and Clean Yield about this issue.”

The Register asked IBM, which opposed the proposal, whether the biz intends to respond to its shareholders or reduce its use of concealment clauses, and an IBM spokesperson declined to comment.

The proposal represents an attempt to force Big Blue to be more forthcoming about how contractual language limiting discussion of unlawful workplace behavior, such as harassment and discrimination, affects its operations.

“It’s no secret that IBM has faced serious allegations of discrimination,” Clean Yield said in a statement on Thursday. “According to the [US Equal Employment Opportunity Commission], IBM has engaged in a pattern of age discrimination. There have been other recent findings of discrimination based on race, gender pay, and pregnancy at IBM.”

Contrary to the EEOC’s 2020 finding that “top-down messaging from IBM’s highest ranks” encouraged managers to reduce the number of older workers at the company, IBM’s chief human resources officer Nickle LaMoreaux in February insisted, “there was (and is) no systemic age discrimination at our company.”

“Concealment clauses,” the proposal explains, “are defined as any employment or post-employment agreement, such as arbitration, nondisclosure or nondisparagement agreements, that IBM asks employees or contractors to sign which would limit their ability to discuss unlawful acts in the workplace, including harassment and discrimination.”

Non-disclosure agreements may contain concealment clauses but may also serve a legitimate function, like protecting trade secrets, without limiting discussion of unlawful workplace behavior.

Don’t mention about the NDAs

According to a recent paper distributed via SSRN from the Federation of American Scientists’ Day One Project, overuse of NDAs is commonplace in the US. The paper cites research findings that “between 33 percent and 57 percent of US workers are constrained by an NDA or similar mechanism.”

“It is difficult to precisely determine how many employees are silenced by NDAs because NDAs are designed to conceal information,” the paper explains.

“In fact, NDAs often provide that the mere existence of the agreement is itself a secret. Lawyers regularly encourage firms to use broad NDAs as a condition of employment – not only to protect trade secrets, but also to discourage employees from revealing bad employment experiences.”

• IBM not cooperating with discovery, say attorneys in age-discrimination case
• IBM deliberately misclassified mainframe sales to enrich execs, lawsuit claims
• Sealed, confidential IBM files in age-discrimination case now public to all
• Axed data scientist sues IBM claiming he was discriminated against as a man

The shareholder proposal argues that IBM should publish a report on its use of concealment clauses because “there are concerning findings of age discrimination at the highest levels at IBM, according to the EEOC.”

The proposal also asserts that: concealment clauses pose a risk to the company and investors; IBM’s practices lag behind peers like Adobe, Airbnb, Google, Intel, Microsoft, Salesforce, and Uber that have agreed not to impose such terms; investors benefit from corporate accountability systems; and concealment clauses undermine beneficial diversity and inclusion programs. And it points out that employees at companies like Activision, Airbnb, Google, eBay, Meta, Pinterest, and Riot Games have protested the use of arbitration or other concealment clauses.

To justify the demand for a public report, the proposal points to now infamous IBM corporate communications unearthed as a result of the age discrimination claims, such as an email that refers to IBM’s “dated maternal workforce” and a description of older workers as “dinobabies” that need to be made extinct.

It also cites recent IBM pay, race, and pregnancy discrimination settlements, and notes that IBM’s own enumeration of risks to shareholders lists laws in states like California that disallow concealment clauses in employment agreements.

IBM in its opposition to the proposal argued that the company doesn’t prevent employees from discussing the terms and condition of employment and doesn’t require employees to agree to arbitration as a condition of employment. The company acknowledges however it may use confidentiality agreements as part of lawsuit settlements or voluntary exit agreements.

The proposal put forth by Clean Yield says IBM’s use of these agreements to resolve arbitration claims is particularly concerning.

“Notably, while IBM states in the opposition statement that it does not require arbitration as a condition of employment, it fails to acknowledge the use of arbitration clauses in post-employment agreements,” the proposal says.

Steven Cahn, founding partner in New Jersey-based law firm Cahn & Parra LLC, who has been pursuing an age discrimination claim on behalf of former IBM research scientist Eugen Schenfeld, told The Register in an email that argued these sorts of secrecy agreements shouldn’t be allowed to obscure wrongdoing.

“We have a statute in New Jersey that prohibits non-disclosure agreements in employment settlements,” said Cahn. “Passed in 2019. Essentially a company can keep private the amount of money paid, but the facts of the case cannot be kept secret.”

“It is bad public policy to have these non-disclosure clauses. In these IBM age discrimination cases, they have been used to divide and conquer. If we knew the details of all of the other cases around the country all of the plaintiffs would be on equal footing.” ®