Silicon Valley friends: What do you make of the lawsuit by Ellen Pao against Kleiner Perkins? (USA Today) The standard employment discrimination case, to my mind, starts with the principal-agent problem. It is another way for managers to cheat shareholder-owners, the same way that they might by moving the company headquarters to a different suburb in order to shorten their commute. The managers indulge their personal preference for hiring buddies, people that they think will be fun to work with, etc., regardless of the fact that more qualified workers are available at a lower price. But the Kleiner Perkins partners are compensated strictly according to their funds’ performance. (Perhaps still the standard “2 and 20” structure where they get 2 percent of the fund every year just for showing up and then 20 percent of any profits, even if the profits are driven by inflation and the fund underperforms the S&P 500.) So if Pao’s allegations are true, i.e., that she was doing a great job and producing profits, the greedy venture capitalists stand accused of intentionally making themselves poorer simply so that they would not have to look at an additional woman in the office (25 percent of Kleiner Perkins partners are female, according to Wikipedia, but it is unclear what the percentage would be for the entire office). Econ 101 would predict that those partners would have been happy to have a green Martian in the office if he/she were making money for them.
I haven’t set foot inside Kleiner Perkins for about a decade so I don’t feel qualified to comment on the likely merits of the case. What do Silicon Valley readers think?
Sidenote: Pao is married to Buddy Fletcher, a former hedge fund manager who was a successful plaintiff against Kidder Peabody, initially alleging race discrimination. Wikipedia says that prior to his marriage he was “in a same-sex relationship with Hobart V. ‘Bo’ Fowlkes Jr. for over 10 years” so presumably his lawyers had to choose between alleging that Kidder Peabody discriminated against him because of his skin color or his sexual orientation (at the time).