• The Ellen Pao Trial: A Postmortem

    Ellen Pao.4jpgOn Friday, jurors concluded that Ellen Pao, a former junior partner at Kleiner Perkins Caufield & Byers, was neither discriminated nor retaliated against by the famed venture capital firm when she was passed over for promotions and ultimately fired.

    It was a dramatic conclusion to the five-week trial of Pao, who is today the interim CEO of the site Reddit. It’s also the beginning of more discrimination lawsuits in Silicon Valley, say employment attorneys who’ve seen the same patterns across the securities, legal, and medical industries over the years and who believe the smaller, more insular, male-dominated venture industry has just been set on the same path by Pao’s high-profile case.

    In fact, they say, both junior employees and their firms can learn a few things from what just happened.

    Most importantly, it will never be easy, winning a discrimination claim in court. According to longtime employment attorney Gary Phelan of the East Coast firm Mitchell & Sheahan, cases today tend to feature much more subtle types of discrimination than they did 10 or 20 years ago, meaning there are “no smoking guns” typically but rather “a series of pieces that, put together, may or may not equal discrimination.”

    In Pao’s case, the jury concluded that the pieces didn’t add up to a judgment against Kleiner, but that doesn’t mean discrimination based on gender didn’t play any role. “In many trials,” says Phelan, “part of it may be gender, age, race, disability, personality, performance – it’s never clearly one thing or another.” (If it were, it would likely settle before reaching a courtroom.)

    Saving up material for a court battle can prove a double-edged sword, too, says Phelan, referring to the 700,000 pages of documents that Kleiner’s defense team accused Pao of having amassed over the years.

    While junior partners might be inclined to record even more of their contributions in the wake of the Pao verdict, Phelan warns that clients with “lots of documentation” are “encouraging and scary at the same time. If you have a client who perceives every negative as discrimination and writes down everything, that’s not necessarily a good sign. It’s often someone who may be paranoid or someone who, by documenting everything, is perceived as trying to build a case that otherwise isn’t there.”

    That doesn’t mean firms should sit back and relax for now.

    Many have probably already taken a harder look at the way their partnership and employee agreements are written and whether, if they are sued, they can send a case to arbitration, where the proceedings are private and legally binding. (The arbitration agreements that Pao had signed related to Kleiner’s agreements with its limited partners, not an employment agreement with the firm. That’s why Pao was able to land the court case she wanted.)

    Firms need also think more about their HR practices. “You have people in this industry who say they’re changing the world, and in many ways they are,” says Phelan. But “thinking that you’re dealing with much bigger things than unconscious biases and HR practices — viewing them as a nuisance — tends to work to the disadvantage of females.” (Kleiner’s lack of well-defined HR policies didn’t hurt it in the end; the next firm might not be so lucky.)

    Not last, more firms will need to hire more women into their ranks, even if it takes longer than many women might like. “Kleiner won, but it hurt them, and venture firms shouldn’t conclude that they don’t have to worry about this,” says Phelan.

    “Change is always incremental” but lawsuits have slowly begun to transform numerous industries over the years, including Phelan’s own. (According to the research organization Catalyst, women accounted for 22 percent of law firm partners in 2013, up from roughly 13 percent in 1995.) He says “there will be more” lawsuits that target venture firms, as well. “Once something like this case gets so much attention, people start to wake up and pursue their rights.”

    Longtime employment attorney Cliff Palefsky of McGuinn, Hillsman & Palefsky in San Francisco agrees. The Pao lawsuit “has had unfortunate effect on a lot of people, including Ellen and Kleiner’s privacy and dignity,” he says. “But in terms of the debate it has created and its focus on the subtle forms of discriminations that absolutely go a long way in explaining the dearth of women in technology and venture capital, a social purpose has been served by it.”

    One public lawsuit “will do more to change the environment than 100 cases that land in arbitration,” Palefsky adds.

  • The “Fuzzy” Logic of Venture Partnerships

    JOHN DOERR AND ELLEN PAO AT COURTHOUSEThe gender discrimination and retaliation case of Ellen Pao versus Kleiner Perkins Caufield & Byers has enthralled Silicon Valley in recent weeks, with everyone now focusing on what a jury that’s set to begin deliberations will decide.

    But one of the many, bigger questions the trial has raised is whether it will impact how venture capitalists nurture talent and groom junior people to become partners.

    If it isn’t top of mind for many partnerships, it should be.

    On the stand last week, Kleiner Perkins general partner Matt Murphy described the promotional path at the storied firm as “fuzzy,” explaining to jurors that when he’d come aboard in 1999, you “just weren’t going to become a partner. You stayed two years, then you went to an operating company.”

    As Murphy and then-colleague Aileen Lee were promoted to more senior roles, a “fuzzy process” of promotion began to develop that led to less collegiality and more self-interested maneuvering at the firm, Murphy testified.

    That murky process also played a starring role in Pao’s lawsuit, which is why Joseph Sellers, the head of the civil rights and employment practice group at Cohen Milstein in Washington, D.C., suggests partnerships adopt a more structured promotional path than many feature today.

    Explains Sellers: “There are certain types of workplaces where the path to advancement isn’t as well defined as others, and in some people’s minds, that might look to provide some protection; with a poorly defined path, it’s harder to hold people accountable for decisions.” The reality, adds Sellers, is that “what might be legitimate grounds on which to deny somebody advancement could be perceived as being influenced by something impermissible.”

    Asking venture firms to be more transparent about how they choose general partners is easier said than done, of course. When it comes to the promotional paths of most firms, it’s “part fraternity, part sorority rush,” notes Cliff Palefsky, a top employment and civil rights lawyer in San Francisco. “It’s always a question of: Who do you want to hang out with?”

    Murphy told jurors last week that promotions at Kleiner depend on a “critical mass of partners within the firm who are saying, ‘We want this person to be promoted . . . There have to be enough people around the table who want this person to be a partner and to work with them for a long time.”

    Given that partnerships typically last at least 10 years and involve shared economics, it’s understandable to a point, too. “There’s very much an are-you-like-me orientation that comes into play in a small partnership,” says Palefsky. “Who do you trust? Who do you go to battle with? Those are the kinds of things that sunk Ellen. No one trusted her.”

    The irony is that Pao – as well as Trae Vassallo, another female partner who is no longer actively investing on behalf of the firm – have been revealed as big money makers for Kleiner, even if they didn’t quite fit in longer term.

    If Pao had gotten her way, Kleiner would have backed Twitter years earlier than it did and made a far richer return. She also lobbied to invest in RPX, a company that later enjoyed a successful offering, and Climate Corp., a company that was acquired seven years after its founding for roughly 10 times what investors poured into it. (Kleiner invested in RPX; it passed on Climate Corp.)

    Vassallo, meanwhile, played a key role in Kleiner’s investment in Nest Labs, which sold to Google for $3 billion last year. She also led the firm’s investment in Dropcam, the camera company that sold to Nest Labs for $550 million last year. (According to two sources, Dropcam liked Vassallo so much that Kleiner’s investment in the company was contingent on securing her as a board member.)

    Says Palefsky: “One thing this trial highlighted is how men and women can be held to a different standard without people realizing it, and how you can be a successful venture capitalist without being an identical twin to the person who came before you.”

    Helping startups with strategic decisions and recruiting is great, but “you can be great on the board of a company that’s failing,” he says. Ultimately, he says, “What matters is whether the fund goes up or down because of how well you can analyze a business. And there’s zero reason a man would be better than a woman in doing that.”

  • In Kleiner Case, Question of Retaliation Moves Front and Center

    Matt MurphyYesterday, Paul Gompers, a Harvard Business School professor, testified that Kleiner Perkins has one of the best records in venture capital when it comes to the number of female investors it employs. Gompers had taken the stand as an expert witness of behalf of Kleiner, which is currently fighting a suit brought against it by former junior partner Ellen Pao, who says she endured gender discrimination at the firm and was retaliated against when she complained about it.

    While Gompers’s testimony cast Kleiner in a flattering light, it’s likely that his statements – and those of numerous others – will prove far less important to the case than those of Matt Murphy, a general partner at Kleiner who finished his testimony yesterday shortly before Gompers was sworn in. The reason: retaliation claims are often easier to prove than discrimination claims, and several things surfaced in Murphy’s testimony that may give jurors pause. Among them, Murphy, who worked closely with Pao, said that he didn’t begin taking extensive notes about Pao’s performance until days after she filed her lawsuit against the firm in May 2012. Murphy also acknowledged that Pao was given 60 days to save her job in July 2012. (She was asked to leave at the end of that period.)

    In two days on the stand, Murphy denied any hint that Kleiner retaliated against Pao after she filed her very public suit. Murphy said he’d experienced “various episodes of friction” with Pao over the years and had long viewed her as “overly opinionated.” Asked by jurors what he meant, he said that Pao sometimes drew conclusions about investments too quickly and without enough information. He added that it can be “common with junior partners, because you’re associated with whether an investment gets done” rather than “whether it should have been made.”

    Murphy also suggested that Pao lasted as long as she did at Kleiner only because of general partner John Doerr, who Pao had served as chief of staff in her first years at the firm. “John was very protective of Ellen and she felt protected, and that was a dynamic that persisted for some time.”

    Still, jurors had plenty of pointed questions for Murphy, including whether the 60-day performance plan that Pao was put on in July 2012 was “fair.” At the time, Pao was asked to improve on several fronts, including to be sought out as a team member, be a good networker, and to demonstrate so-called thought leadership.

    “It’s not that we’d expect definitively that you’d see black and white [change] in 60 days [given that] she had all these issues for six years,” said Murphy. “But we wanted to give her very concrete feedback and see how she responded. Did she suddenly start sourcing more ventures, be collaborative, work more with [general partner] Mike Abbott, go down the list of things we talked about? Was there a real change and did you see — was it visible — that she was behaving differently, trying harder, being proactive – all those kinds of things? If we’d seen those things after 30, 45, 60 days, we obviously would have extended it, but we did not see meaningful change in her behavior.”

    Murphy’s testimony seemingly led Kleiner into tricky terrain. For example, though Murphy described the objectives set forth in Pao’s performance plan as “concrete,” jurors might see them as subjective. “How do you prove you had a better attitude?” says Gary Phelan, an employment attorney with the East Coast firm Mitchell & Sheahan and the chair of the Connecticut Bar Association’s labor employment section.

    In situations like Pao’s, says Phelan, “The employer is both the accused and the judge of whether you’re trying hard enough.”

    Murphy also argued that Pao was difficult and didn’t understand her role as a junior partner, but her reviews leading into 2012 contained both positive and negative feedback, as did other partners’ reviews. Her compensation remained stable, too. For example, in 2010, Pao earned $362,250, with an additional bonus of $150,624 (or roughly $513,000 altogether). In 2011, Pao was paid a base salary of $380,000 base salary, with a bonus of $136,800 (or roughly $517,000).

    Speaking generally, notes Phelan, “If you were rated an exemplary employee, then you complain, and the next thing you know, you’re getting a poor review, that’s evidence of retaliation.”

    The biggest problem for Kleiner could boil down to timing. Says Phelan: “When after somebody complains about something, and all of a sudden, there’s a paper trail where [the employer] is resurrecting things from the past, that in itself is enough to show retaliation — even if maybe the employer should have been [taking notes] before.”

    Sometimes, Phelan adds, employers “kind of tolerate things for a long time.”

  • Mary Meeker Goes to Bat for Kleiner — and Ellen Pao

    Mary MeekerIn a San Francisco courtroom yesterday, Mary Meeker, the star investment analyst turned general partner at Kleiner Perkins Caufield & Byers, took the stand, testifying that she has not experienced discrimination at Kleiner and calling the firm the “best place to be a woman in the business.”

    Kleiner is currently fighting charges of gender discrimination and retaliation by former junior partner Ellen Pao, and Meeker was called as a witness for its defense. In addition to testifying that she had never personally experienced discrimination at the firm, Meeker said she has not been excluded from Kleiner Perkins events because of her gender. She also said she hasn’t observed any gender discrimination at the firm.

    Meeker likely left an impression on jurors, particularly given her impressive career, from her early days at Morgan Stanley to her 19-year rise within the powerful investment bank, where she ultimately became the head of its global technology research practice.

    “I had a pretty good track record of finding things before others could see them,” said Meeker, pointing to companies she’d covered from almost their outset, including Microsoft, America Online, Google, Netscape, and Alibaba. In fact, Meeker said yesterday, Kleiner had “recruited me off and on for about a decade for a whole host of things.” (She finally joined the firm in December 2010.)

    Defense attorney Lynn Hermle had asked Meeker about her background to highlight the contrast between Meeker’s experience and that of Pao, who says she was denied the opportunity to advance at the firm because of her gender. Pao, who at 45 is roughly 10 years younger than Meeker, has enjoyed an impressive but far less celebrated career, including as a law firm associate, as a business development executive at numerous tech companies, and today, as the interim CEO of the site Reddit.

    Still, Meeker didn’t make as ideal a witness for Kleiner as she might have, volunteering information about Pao’s investing instincts and politely pushing against some of defense attorney Lynn Hermle’s attempts to show Pao in a poor light.

    Hermle, for example, asked Meeker to contrast her experience with Chi-Hua Chien — a former Kleiner investor who was promoted to a more senior role — with that of Pao, who was not promoted at the same time.

    Meeker called Chien “very bright, very intense” and someone who would “sort of get on the edge of his seat and jump up a bit and get really enthusiastic about the business.” Asked afterward to describe Pao in meetings, Meeker called Pao “certainly more passive, but I think thoughtful.”

    She also prefaced her comments by explaining that she had far less interaction with Pao, saying, “I was in a lot of meetings with Chi-Hua – I’d say every week. . . . With Ellen, we worked on a couple of things together.”

    One of those things was the news app Flipboard, which Kleiner’s early-stage fund had backed and whose later-stage, digital growth fund, which Meeker oversees, was also considering funding. (It passed at the time, said Meeker. “It was a little early. The company didn’t have revenue at that point.”)

    Pao also brought Climate Corp. to Meeker’s attention, Meeker said yesterday, occasionally facing Pao – who was seated 50 feet away — as if they were still colleagues. “It’s a company that has done quite well,” said Meeker. “It was acquired by Monsanto. Its founder is quite good, but the company focuses on offering insurance to farmers based on weather trends, which wasn’t an area where I thought any of us had particular expertise because we weren’t in the farming business.” (Climate Corp. went on to raise $107 million from investors; it sold for $930 million in October 2013, seven years after it was founded.)

    Hermle separately asked Meeker if Pao had ever come to Meeker and asked her to mentor her. “Not that I recall,” said Meeker.

    Meeker could have left it at that, but she added, “Bear in mind, I was the new kid on the block in 2011 and we were investing at a very rapid pace in a different area of investments than were core.”

    Hermle pushed the point. “So you were available?”

    “I think I’m around, though I can’t say I’m the most available person at all times,” answered Meeker.

  • At Ellen Pao Trial, Last-Ditch Efforts By Both Sides

    boxingWe wouldn’t want to be a juror at the trial of Ellen Pao, the interim Reddit CEO who is suing her former employer, Kleiner Perkins Caufield & Byers, for gender discrimination and retaliation.

    While both sides have enjoyed small victories at the trial, many of the “gotcha” moments raised by each have been neutralized when provided broader context.

    Remember those HR policies that Pao testified that she’d raised with executive members of Kleiner over the years, the ones she said she’d begged them to improve? We later learned that Pao never asked a single person to see an equal employment opportunity policy until she was preparing to sue Kleiner in 2012.

    It was a startling admission. But guess what? Yesterday, we learned that there was no EEO policy at Kleiner until 2012 or that, if there was, Kleiner’s then COO Eric Keller couldn’t find it, as he testified in the afternoon. Indeed, unable to locate one, Kleiner had one created the same year. (Recode has much more on the issue here.)

    How about the 700,000 pages of documents Pao was said to have amassed over the years to use in her case? It all sounded less nefarious once Pao was asked about them again yesterday, explaining that most was email coming from her work account, along with a Kleiner-issued hard drive and a box of documents that included “about 100 notebooks” for work that Pao said she’d filled up over the years.

    Here’s another thing: You might have read that Pao was difficult to work with. In a 2009 email exchange between Pao and her assistant, for example, the assistant told Pao she was running late because her landlord, who spoke poor English, had been in a car accident outside her house and she was acting as his translator. “It’s great that you want to be helpful to your landlord,” Pao wrote. “It would be better for me if you could come to work on time.”

    Yesterday, the incident sounded like much ado about nothing, with Pao testifying that the assistant’s tardiness was a fleeting problem and that they enjoyed a “good working relationship.” In fact, she said, when the assistant had to later choose which of her two managers to sit near — Pao, who was moving from one part of the office to another, or partner Wen Hsieh, who was not — she chose Pao.

    Keller’s day in court was just as cofounding. He testified yesterday that Pao asked for what seems like a very big payout to leave the firm before filing her lawsuit against it. “She said eight figures,” he recalled. Keller also testified to Pao’s intransigence when it came to her full cooperation with the investigator that Kleiner hired to look into complaints from both Pao and partner Trae Vassallo.

    We quickly learned, however, that the investigator, Stephen Hirschfeld, states on his own site that he works “on behalf of companies” — not employees. Asked if Keller read as much, he said he didn’t remember reading that detail when he researched Hirschfeld in late 2011. “I read the site. I looked at his qualifications. I didn’t memorize the website.”

    Court resumes at 10 a.m. again today. We’ll see what happens. But if there’s any crystal clear takeaway at this point in the trial, it’s that workplaces can be minefields. And that isn’t exactly a revelation, even if the case has been fascinating to watch.

  • Kleiner Attorney Lynn Hermle Shows This Trial is Far from Over

    Lynn Hermle.2Defense attorney Lynn Hermle set the stage yesterday for a bruising battle, delivering a series of jabs over the course of roughly four hours as she began her cross-examination of Ellen Pao, the former Kleiner Perkins Caufield & Byers partner who is suing the firm for gender discrimination and retaliation.

    Many of Hermle’s punches landed.

    Hermle, for example, asked Pao to confirm that she was hired within the same general time frame as several other former and current Kleiner employees in the spring and summer of 2005, including Randy Komisar, Beth Seidenberg, and Dana Mead. Hermle then asked Pao to confirm that “one man and one woman” were later promoted to general partner — Komisar and Seidenberg — while “one man and one woman,” meaning Mead and Pao, were not.

    The idea, of course, was to remind jurors that Kleiner promotes some but not all of its partners, no matter their gender.

    Hermle continued on, asking Pao to confirm the names of the women who Kleiner Perkins hired either in the same time frame or after Pao was hired, including: Mary Meeker. “Yes.” Megan Quinn. “Yes.” Jessica Owens. “Yes.” Tina Ju. “Yes.” Hermle continued on, citing Christina Lee; Lila Ibrahim; and Maritza Liaw; as well as mentioning, for good measure, Juliet de Baubigny and Kleiner’s CFO for the last 14 years, Susan Biglieri, who were already at the firm when Pao joined it.

    Hermle also established a discrepancy between Pao’s testimony on the stand and a videotaped deposition of Pao from April 2014 that Hermle played at various intervals yesterday. Specifically, while jurors looked on, Hermle asked Pao to look at her employment agreement with Kleiner, which mandated “compliance with [Kleiner] policies, including, but not limited to, policies prohibiting discrimination and unlawful harassment, securities trading, disclosure of confidential information, conflicts of interest and violation of applicable laws.”

    Hermle then said: “You made no attempt to obtain copies of these policies?” Pao answered that she did, in 2012, the year she filed her lawsuit against Kleiner. “But in the seven years between 2005 and 2012, you made no attempt to ask for any copies of these policies — is that correct?” asked Hermle. “Yes it is,” said Pao.

    On the heels of Pao’s testimony Monday that she engaged numerous Kleiner partners about the firm’s need for better HR policies, the admission didn’t look good.

    The veracity of Pao’s claims were further called into question when Hermle asked Pao about her interactions with Biglieri about those policies.

    Hermle: “You never asked Sue Biglieri if the firm maintained an [equal employment] policy?” Pao: “She told me it did not.” Cue the videotaped deposition from last year, in which Hermle asks Pao: “Did you ever ask [Sue] Biglieri about an EE policy?” and Pao answers, after a reflective beat, “No.” Hermle then asks in the deposition video: “Did you ever ask anyone at Kleiner for a policy that prohibited discrimination or harassment?” “No.”

    Surprisingly, Pao’s attorneys barely said a word while Hermle hammered at Pao, though presumably, they will have a chance to ask follow-up questions.

    Among the issues they might raise is Komisar’s advancement at the firm. Though Hermle yesterday compared his trajectory at Kleiner to Pao’s, Kleiner had worked with Komisar for years before 2005, including backing him in prior ventures and partnering with him on boards, which gave him a considerable advantage over Pao.

    They might also note that asking for copies of a company’s equal employment policy might have been seen as declaration of war. After all, employees don’t usually seek out such documentation unless they’re preparing to sue, and Pao has testified that she filed her suit after years of seeking a solution internally.

    No doubt Pao’s team will also walk through the names of those female employees who Hermle mentioned, some of whom were hired into support roles, and many who remain only loosely affiliated with the firm today.

    Still, Hermle made it clear from the start that this trial is far from over. Among other inconsistencies that Hermle worked to expose throughout her first day of questioning was whether Pao was “pressured” into a relationship with former colleague Ajit Nazre, as she has said, or Pao entered into it willingly, as dozens of very personal text messages and emails introduced into evidence yesterday suggest.

    To unsettle Pao, Hermle even plucked the word “humble” from the official description for the job that Pao had first taken at Kleiner.

    “[Y]ou understand what humble means, Ms. Pao? How would you define it?”

    “Modest, not arrogant. Someone who is not exaggerating their skills,” answered Pao.

    “And it would also include — would it not — someone who doesn’t think they’re better than their coworkers – without being dismissive of their coworkers’ accomplishments. That would fall within the definition wouldn’t it?” asked Hermle.

    “Yes,” sound Pao, who then waited, along with everyone else in the crowded courtroom, to see where Hermle would take her questioning next.

  • Ellen Pao Portrays Lawsuit as Very Last Resort

    Ellen Pao.2Yesterday, in Ellen Pao’s first appearance on the stand in her gender discrimination case Kleiner Perkins Caufield & Byers, where she once worked as a junior partner, she testified that filing suit against the firm was the culmination of many discussions with various of the firm’s senior executives over a five-year period during which she flagged issues of harassment and gender discrimination and beseeched them to change the “loosey-goosey way we dealt with issues.”

    Wearing a simple, caramel-colored dress and purple blazer, Pao spoke of attempts to encourage at least four senior Kleiner executives to institute HR policies around discrimination and harassment following her affair in 2006 with her then senior colleague Ajit Nazre, who she says was “relentless” in his pursuit of her and pressured her into what would become “rocky” six-month-long relationship.

    After Pao ended the affair, said Pao, Nazre began cutting her out of email chains and excluding her from meetings. For help, she turned to then general partner Ray Lane, who was Nazre’s mentor; Lane twice suggested the two have a conciliatory lunch. (Pao says she conceded, but left mid- meal after Nazre professed his love for her.) She also reached out to general partner Randy Komisar, who told her he “didn’t want to know.”

    Pao also later told general partner John Doerr about her brief relationship with Nazre. Doerr was prepared to fire Nazre over the incident, said Pao, who added that she and Lane successfully worked together to preserve Nazre’s job at the time. But subsequent conversations with Doerr, Lane, and general partner Ted Schlein about the need for Kleiner to institute better policies to deal with such situations and prevent future problems were repeatedly ignored, she testified.

    Pao, a Harvard-educated attorney who spent two years as an associate at Cravath, Swaine & Moore early in her career, also testified that she told Juliet de Baubigny, the firm’s head of human resources, that she felt Kleiner needed a related HR policy — particularly as Pao suspected Nazre of sexually harassing three administrative assistants. In response, de Baubigny told Pao she thought Nazre was a “sex addict,” recalled Pao of that exchange, who said yesterday that she was “surprised” by de Baubigny’s characterization. “I thought [de Baubigny] must have additional information about the administrative assistants.”

    On the stand, Pao came across as likable, including smiling on occasion as she addressed questions by her attorney, Theresa Lawless. It was an image very much at odds with the picture of Pao that Kleiner’s attorneys have sought to create as someone with “sharp elbows.”

    She also seemed highly competent. Indeed, at the direction of Lawless, Pao spoke at length about the many accolades bestowed on her by Doerr during their working relationship, as well about her investing instincts. She testified yesterday, for example, that she tried convincing Kleiner to invest much earlier on in Twitter, and that her case for the company went unheeded because, according to general partner Matt Murphy, who’d previously met with Twitter, its team wasn’t business-minded. (Kleiner eventually invested in Twitter in late 2010, at a $4 billion valuation.)

    Pao also testified that she convinced the partnership to back RPX, a patent technology startup that Kleiner would not have funded without her due diligence. (It would eventually go public in 2011, an otherwise terrible time for tech stocks.) She added that Doerr gave the company’s board seat to Komisar because Pao was pregnant with her daughter and as such, “I wasn’t being considered for a board seat or board observer role.”

    She also said that upon her return from maternity leave, she had “many” discussions with Komisar about RPX. Said Pao, “[H]e was not involved with the company, and the [RPX] team had started to complain about him. Every time I heard a complaint, I would raise it with Randy. I wanted to try to help solve the problem.”

    Unsurprisingly, Pao spent much of the day describing a very male-dominated culture at Kleiner. Pao was asked, for example, about that now infamous all-male dinner at former Vice President Al Gore’s apartment at the St. Regis hotel in San Francisco, where Pao also had an apartment at the time.

    “It was pretty humiliating,” said Pao of seeing entrepreneurs in the building who were on their way up to the dinner. One of them was Mike McCue, the CEO and cofounder of the news aggregation app Flipboard, on whose board Pao sat at the time. “I was coming down the elevator and ran into people in the lobby . . . When I went outside I saw Mike McCue [parking] . . . and he said ‘OK I’ll see you up there,’ and I said ‘No, no, I’m not going to be part of this dinner.’”

    Pao also described wanting to leave the firm in 2007 owing to the company’s culture. Following conversations with the firm’s senior partners about it, and asked by Doerr to elaborate, Pao wrote him — in email shown to the courtroom — the she’d like to see “less fear in making unpopular statements. Less risk around offending others.” She also pointed to “politics,” suggesting she’d like to see “consensus building in a way that shares information and contributes to an open process.”

    Not last, Pao told Doerr she thought the partnership needed to show greater respect to entrepreneurs, regardless of whether or not the firm was interested in funding their companies.

    Said Pao, “I’d seen some meetings where we were late and would make entrepreneurs late. There was [another] meeting in particular where we weren’t interested in talking about [the] specific venture and we started talking about taking some people from [the company that was in the pitch meeting] and [hiring them into another startup]. And when you’re talking about breaking up a [company in front of its founders], that just seemed very disrespectful to me.”

    Pao has yet to be cross-examined by Kleiner’s legal team. She returns to the courtroom today.

    Photo of Ellen Pao outside a San Francisco courthouse by Jeff Elder of the Wall Street Journal.

  • Ray Lane Under Oath

    Ray LaneRay Lane, an emeritus partner at Kleiner Perkins Caufield & Byers, came across as a good guy yesterday during his testimony in the trial of former partner Ellen Pao, who is suing Kleiner for gender discrimination. But he didn’t do Kleiner any favors, at times seeming to blame himself for mistakes and, at others, undermining Kleiner attorney Lynn Hermle as she tried painting a picture of Pao as too inexperienced for a promotion.

    Much of Lane’s testimony centered on his handling of the complaints of both Pao and Kleiner partner Trae Vassallo, both of whom turned to Lane before anyone else at the firm to discuss former partner Ajit Nazre.

    Pao had a short-lived but intimate relationship with Nazre, which she confided in Lane in 2007 after hearing Lane remark to Nazre in her presence that it was nice to see him with his wife and children at the Ritz Carlton in Half Moon Bay. (Nazre, Pao told Lane, led her to believe that he had split up with his wife.)

    Roughly four years after that exchange, Nazre showed up in Vassallo’s hotel doorway during a work trip wearing a bathrobe and slippers. Vassallo – married with children — also went to Lane before talking with anyone else at the firm.

    In Lane’s testimony about both situations — which he said he viewed as “two very different incidents” — Lane came across as a well-meaning mentor who wasn’t necessarily equipped to handle the information he was being given.

    In one 2007 exchange with Lane, for example, Pao wrote, “Thank you for your help in working through a difficult issue. It’s a really awkward situation. In the interest of moving forward and avoiding more unpleasantness, I’m willing to live with some disagreement over what happened if Ajit can be professional and collegial . . . I’m relieved to able able to put it behind me, glad that you were listening.”

    Lane wrote back that, “I really believe ‘stuff happens’ and both of you are terrific people. . . . this should not be offset by common human behavior. No bridges were burned, mistakes were made, apologies offered, and it’s up to us to move forward, and not shoot ourselves in both feet.” He also encouraged Pao and Nazre to “talk about working together [and moving] forward . . . you both have enormous mutual respect, despite any personal liabilities.”

    Lane’s initial advice to Vassallo similarly seemed to reflect the culture of a small firm unaccustomed to dealing with thorny personal issues. The day Vassallo told him about Nazre’s unwanted advances, said Lane, he suggested that she discuss the matter with the husband so that the couple could decide on a course of action together.

    Lane explained that he thought whatever followed should be up to Vassallo and not Kleiner. Still, said Lane, he worried at the time about Vassallo’s safety – noting that “things could have gone another way, [Nazre] could have pushed his way in” to her hotel room – and expressed regret yesterday at not starting an investigation straightaway.

    “It was my mistake,” he said of waiting until Vassallo wrote a formal complaint about Nazre to Lane and other Kleiner partners roughly one week after coming to Lane.

    It wasn’t the only mistake Lane appeared to acknowledge making.

    Asked by Pao’s attorney why Nazre was promoted to senior partner in 2008, despite Nazre’s relationship with Pao and, crucially, though Nazre lied to Lane when first confronted about it, Lane answered, “Good question.” He went on to explain that Nazre “quickly” confessed to his relationship with Pao, and that Nazre, in Lane’s view, was very knowledgeable about green tech and “an important part” of the firm’s team.

    Perhaps unsurprisingly, Kleiner’s attorney, Hermle, tried steering Lane to the larger point of whether or not Pao should have received the promotion that Pao is arguing she deserved. Toward that end, Hermle pulled up two emails relating to different CEOs who expressed displeasure in working with Pao.

    One CEO had apparently resorted to ignoring Pao, who recognized she’d have to find another way to win him over and wrote to Lane of the executive: “Frank is hierarchy focused and not as comfortable dealing with me directly so I need to be more ‘velvet-gloved’ (note the number of times it took to get him to copy me on emails).”

    Asked about the exchange, Lane described the CEO as a “difficult character” who is “more than 60 years of age” and “very set in his ways.”

    Hermle also produced an email exchange involving Workday cofounder and co-CEO Aneel Bhusri, who’d been talking with Kleiner about a late-stage investment before Workday went public in 2012.

    Wrote Bhusri to Lane, who forwarded his note to partner Ted Schlein: “Frankly, Ellen seems pretty clueless, can someone else take the lead?” Wrote Lane to Schlein, under Bhusri’s comment, “I kind of agree with him.” Schlein then responded: “She ran the names of folks by me, for diligence. I can’t say I paid too close attention so could be my fault.” Lane then responded to Schlein, “I will talk to [Bhusri] live tomorrow, but we have to put somebody else in or I will handle personally. I did the same as you, allowed Ellen to work it alone.”

    Was this a “major problem?” Hermle asked Lane on the stand. “No,” said Lane. “I don’t think it was a major problem.” Added Lane, “I thought [Pao] wasn’t being sensitive that this was a company that was already valued at more than a billion dollars.” But the bigger issue, Lane suggested, was that Bhusri didn’t like Kleiner’s technical review of Workday, which involved talking with “just a few customers.”

    Said Lane, “Mr. Bhusri disagreed with the approach. I thought the approach was fine.”

  • Kleiner, Ellen Pao and the Reddit Factor

    ellen paoIt’s looking like Kleiner Perkins will have to hash it out in court with former partner Ellen Pao, who filed an explosive gender-discrimination lawsuit against the venture firm in May of last year. 

    This Wednesday, Kleiner was denied its request to move the case to arbitration.

    In response, Kleiner told the Mercury News yesterday that it will “vigorously defend the matter” and is “confident we will prevail.”

    But Pao’s current job of building strategic partnerships at the social news site Reddit may throw an unexpected wrench into Kleiner’s defense.

    As industry watchers may recall, in October of last year, roughly five months after Pao filed her suit — in which she clams she was repeatedly denied opportunities to advance or pay raises — Pao was abruptly terminated by Kleiner, she said. Kleiner has always disputed the characterization, saying it asked Pao to leave “because of long-standing issues having no relationship or bearing on the litigation.”

    But now that the case is no longer under appeal, her attorney told the Mercury News yesterday that he’s planning to add a wrongful termination claim to the lawsuit.

    Legal experts have told me that Pao’s Reddit gig could work to her advantage in her case against her former employer. For one thing, anyone who claims retaliation in a discrimination case has a duty to look for a job. Joining Reddit could show that Pao tried limiting the financial damage to herself and secured a job under difficult circumstances (i.e., in the middle of a media circus).

    Landing the role could also boost Pao’s credibility and make her more believable to a jury, according to employment attorneys; they say that juries want to know, “Can this person work for someone else?”

    In cases like these, employment attorneys argue that the burden of proof is always on the employer, and retaliation claims are often more powerful and easier to prove than actual discrimination claims.

    And to make matters even worse, Kleiner could be on the hook for more damages than when Pao originally filed her lawsuit as an employee.

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