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He says bias forced him from Microsoft

Peter Browne says that as an older black man he was denied promotions and big stock options. Now he's suing the software giant.

By KYLE PARKS

© St. Petersburg Times, published October 29, 2000


PALMETTO -- After Peter Browne answered a Wall Street Journal ad for a job at Microsoft Corp., management sent him fruit baskets and lobbied him with late-night phone calls. "They pitched a career, not just a job," he says.

So Browne joined the company in July 1995, a landmark hire for the software giant: Browne became Microsoft's highest-ranking black executive, managing 300 people and a $25-million budget, in a predominantly white company and industry.

But the status didn't last long.

Promotions and hefty stock options didn't come his way, despite glowing performance reviews for his work directing computer systems at the company. The execs with the real power at the Redmond, Wash., headquarters were known as "FOBs" -- friends of Bill -- as in Bill Gates, chairman and founder of the world's dominant software company.

"They were usually younger white guys, and they were people who had never worked anywhere else," says Browne, 58. "It's almost like a cult."

Now, Browne has joined the ranks of the U.S. government and 19 states. He is suing Microsoft. While the feds have portrayed Microsoft as a monopolistic bully, Browne accuses the company of racial and age discrimination.

His lawsuit, which seeks more than $10-million, could become one of the highest profile discrimination battles to hit the overwhelmingly white high-tech industry. Browne is an unlikely rebel: He's a soft-spoken, professorial millionaire in a waterfront Palmetto home, and Microsoft's meteoric growth is what made him a wealthy man.

But Browne feels he is standing up for minority employees at Microsoft, and he's not alone. More lawsuits are coming. A second discrimination suit, filed by a black woman who worked at Microsoft, could snowball into a class-action case against a company where just 2 percent of its U.S. work force is black.

It's another blow to Microsoft, already marred by bad publicity stemming from the battle with the feds. And it's another indication of the culture and personality of the company, which stems from its founder.

"Gates sets the tenor and the tone," Browne says. "The attitude is cutthroat. Take no prisoners. And that carries over into everything else. If you are not in the right group, you are open game to be killed."

Browne says he didn't speak out until now because he feared losing millions until he became eligible to cash in his stock options. And once in litigation, plaintiffs are generally gagged by lawyers who fear they'll wreck the case.

But as Browne finishes giving depositions for a March trial in Seattle's U.S. District Court, he has agreed to talk with the St. Petersburg Times. A cancer survivor, Browne is clearly on a mission.

"I am fighting a company that will do anything to protect itself," he says. "Who is more powerful than Microsoft? I may get nothing out of this, but that's okay. I want to do this for other people who are still at the company."

Restructuring himself out of a job

Browne's Palmetto home is a technogeek's dream, with three sets of coaxial cable and four phone lines running into every room. Out in the garage, he has plenty of room to indulge his hobby: putting together remote-control model airplanes.

Browne built the $1-million house earlier this year -- he spent $600,000 building it and $400,000 or so on the fancy upgrades -- planning for it to be a vacation home. But now, having left Microsoft, he will live there full time.

He has been in the computer industry from its beginning. In his first job in the late '60s, he was running stacks of computer cards through a primitive machine.

After gaining experience as a programmer at John Hancock Mutual Life Insurance, Browne moved on to a succession of technology companies: Digital, Compugraphics, Wang Laboratories and Brooktree, taking on more responsibilities through the years.

He also moved beyond programming, using his master's degree in business administration from the University of New Hampshire. Browne developed a knack for figuring out how to organize complex information technology operations.

Browne didn't get a big pay raise to go to Microsoft, though. He actually took a pay cut, from $117,000 a year to $100,000. But the potential payoff was huge. He got options for 15,000 Microsoft shares right away; tens of thousands more were promised if he did well.

"I applied for the job on a lark, but I was convinced when they told me they wanted people who had experience at other companies," he says.

After he arrived, Browne quickly realized that his department was a mess. Two groups were doing much the same thing, but reporting to different bosses. One of them, Microsoft executive Steve Ballmer (now the company's chief executive), was building his own internal empire as he moved up the ranks, Browne says.

Within three months, Browne devised a restructuring that simplified the organizational structure but eliminated his job. "That didn't worry me," he says. "I had been in other situations where I restructured myself out of a job, but I was always assured there would be an equivalent position for me. This was different."

He spent months looking around the company for a job at a similar level -- Level 14 in Microsoft terminology, two steps below vice president -- with no luck. Browne says the company didn't seriously try to help him find an equivalent position. Finally, he became director of planning for MSN, the company's online Microsoft Network.

Immediately, he ran into trouble.

"I was told other employees were upset with me because I wanted to make changes," says Browne, who still got good reviews while at MSN. "But that's why I came to Microsoft in the first place."

After another lateral move, he eventually ended up as information technology director of Microsoft Licensing Corp., a relatively tiny Reno, Nev., spinoff where he was a Level 13 supervisor in charge of just 12 people.

After two years in Reno, Browne took a medical leave to be treated for prostate cancer. During that time, he filed the lawsuit. Then, earlier this year, he got the doctors' permission to return to work.

But Microsoft wouldn't offer him a real job, he says, talking only of a position with vague duties and no real responsibility. So he took an $11,000 severance package.

With his glowing reviews, Browne says he doesn't understand why a legitimate position couldn't have been found for him. He thinks the lack of a job was racially motivated.

Browne feels fortunate that he lasted five years -- long enough for his total of 50,000 shares of Microsoft stock to vest. Vesting is the right an employee gradually acquires over time to get benefits from a company; in this case, Browne needed to stay at Microsoft a certain length of time to be able to cash in his shares.

What rankles him is that during his Microsoft career, he consistently got good performance reviews. Browne has the paperwork to prove it, and the company doesn't dispute that fact. So he's mystified about why he moved down the corporate ladder, not up.

Browne had two strikes against him, he says. He was a newcomer to Microsoft: "(Other employees) would say, "If you're so smart, why weren't you here at the beginning?' " he says. And he's black.

As he thinks back, Browne is still amazed by Microsoft's kill-or-be-killed corporate culture. Every group project became a cutthroat competition with evaluations and stock options on the line.

"I'd see it in meeting after meeting," Browne says. "If you get your idea put forward and I don't, you get an A rating with jumbo stock options and I don't.

"There were huge amounts of compensation involved. But there were only so many A grades given out. Your goal became to make yourself look good and make everyone else look bad."

But Browne says there's also another problem: Blacks don't move up in Microsoft's management ranks, partly because the white supervisors aren't giving out superlative performance reviews to black employees.

Of the 21,000 employees at Microsoft's headquarters, there is only one black man in a management position as high as Browne's initial level, he says.

The company responds that of its 91 vice presidents, 20 percent are women or minorities. But while eight are women, four are Hispanics and six are Asian-Americans, none is black.

And of 27,000 U.S. employees, Microsoft says, there are 737 blacks -- barely more than 2 percent of the work force. But the company says it's working to improve. Three years ago, there were 402 blacks in its U.S. work force.

Though Microsoft officials won't discuss Browne's case in detail, they say this isn't an issue of discrimination.

"We assume that if he had stayed, Peter Browne would have continued to be a valuable member of the Microsoft staff," company spokesman Dean Katz says. Also, he says, it is hardly the only high-tech company with few minorities in positions of power.

Few faces of color in the technology industry

Indeed, diversity is an issue for the entire high-tech industry, and though Microsoft officials say minorities make up 22 percent of the company's domestic work force, they admit they can do better.

"There is more that we could be doing, and more that the industry is doing," says Microsoft's Katz. "Still, we do believe we have done a good job on this."

Microsoft has spent about $100-million to support technology programs at colleges with large minority populations, Katz says, including $86-million to 39 historically black institutions.

"We are trying to encourage the schools to develop curriculums and technology," Katz says. The goal: Expand the number of techno-savvy minority graduates that companies such as Microsoft can hire.

Around the technology industry, high-level minorities are rare, reflecting their low overall numbers in that work force.

While blacks comprise 12 percent of the U.S. work force, they account for just 6 percent of the high-tech industry's workers, says the Information Technology Association of America. Hispanics account for another 12 percent of U.S. workers, but the high-tech work force is just 4 percent Hispanic.

There are also gender issues: While women comprise almost half the nation's work force, they account for 30 percent of the high-tech industry's workers. (At Microsoft, women make up 26 percent of the work force.)

"I don't think the issue is discrimination as much as it is a lack of people with the appropriate science and math skills," says Harris Miller, president of the Information Technology Association of America, an Arlington, Va., trade group that represents Microsoft and other high-tech companies.

"The industry is working to improve training," he says, with money going to computer equipment, teachers and scholarships.

One challenge, Miller says, is that many historically black colleges have such glaring infrastructure problems that it's hard to convince them that grant money should go to high-tech needs.

Another challenge is to convince math and science stars to go into information technology jobs. "These are people who could go into the law, investment banking, whatever," Miller says. One way to do that: Companies are aiming to create more internships for promising minority students.

The high-tech industry is still run by a club of overwhelmingly white men based in Silicon Valley, though Asians have gained entry.

"People in high-tech tend to hire someone who's been referred to them by someone else, and African-American names don't come up," says Barry Cooper, general manager of the Blackvoices.com Internet site, which specializes in helping blacks find jobs.

"There needs to be more of an atmosphere of inclusion," says Cooper, who formerly covered technology for the Orlando Sentinel. "A lot of the networking goes on at after-work functions where most of the faces are white."

Do nothing to endanger the stock options

Inside Microsoft, it's all about the options.

Who's getting them? When's the stock going to split? How long until you can cash in your shares? Who's going to get the top evaluations, with options to match?

Options are rights to buy company stock in the future at a set price. They are designed to reward executives when the stock price rises.

But those options -- and the company's record of generous community contributions to employees' causes -- have helped Microsoft bully its employees into silence, Browne says.

"People don't speak up because they don't feel they have any recourse," he says. The options vest in eight periods over 41/2 years, he says, so employees have a huge incentive to keep quiet and stay at the company.

Then, after they leave, the pressure takes a different form, he says. Thanks to the options, many Microsoft execs in their 30s and 40s have been able to take early retirement as millionaires, and many get involved in their communities.

"The company will make big donations to causes close to its former employees' hearts -- if you haven't made any trouble for them," Browne says.

Browne has a high-powered Seattle law firm, McNaul, Ebel, Nawrot, Helgren & Vance, handling his case. So far, the two sides in the case seem far apart.

Browne is seeking damages of more than $10-million. He says that if he had been given the types of jobs he deserved, he would have received at least 250,000 more shares of Microsoft stock.

Based on the stock's present trading level of about $65, those shares would be worth at least $16-million today. The stock closed at $67.87 Friday.

Unless the two sides can reach a settlement, the case is expected to go to trial in March.

Meanwhile, a second racial discrimination lawsuit has the potential to become a class-action case. Lawyers for former Microsoft employee Monique Donaldson, the plaintiff, think a Browne victory could only help them.

"Both these cases could help reassure employees that they can come forward and challenge these practices," says Joe Sellers, a partner at the Washington firm of Cohen, Milstein, Hausfeld & Toll.

The Donaldson case was filed earlier this month. Donaldson, who is black, alleges that she was bypassed in favor of less qualified candidates for jobs within Microsoft. Donaldson worked at the company from 1992 until this year, most recently as a program manager in the MSN division.

Microsoft officials take pains to talk about how the company has a director of diversity and a council of employees representing everyone from gays to various ethnic groups.

But Browne says the company fails to deliver on its diversity promises. And even though he made about $6-million from the stock options he got at Microsoft, the issue goes beyond the cash.

"America is a democracy, but in a corporation that all falls away," he says. "A company can say it's an equal opportunity employer, but at this company, that just isn't the case."

- Researchers John Martin and Cathy Wos contributed to this report.

Peter Browne

AGE: 58.

JOB: Recently finished a five-year tenure at Microsoft Corp., where he says he went from a senior director's job -- he was the highest-ranking black executive at Microsoft at the time -- to a lower position in terms of responsibility and commensurate stock option grants.

EXPERIENCE: Worked for John Hancock Life Insurance, Digital, Compugraphics, Wang Laboratories and Brooktree as a computer programmer and information technology manager.

EDUCATION: BS, business administration, Franklin Pierce College, Rindge, N.H.; MBA, University of New Hampshire.

WEALTH: He's a millionaire, thanks to $6-million worth of options for 50,000 shares of Microsoft stock he earned while at the company.

PERSONAL: Grew up in Nantucket, Mass. . . . Wife, Jill, is a former product manager at Digital. . . . Has two grown children, a daughter who's a nurse in Boston and a son who's a computer science student at the University of New Mexico.

RESIDENCE: A 3,600-square-foot waterfront home in Palmetto. He estimates he spent $600,000 to build it, then put in at least another $400,000 in upgrades, including state-of-the-art computer wiring in each room.

COMPLAINT: Microsoft passed him over for a series of high-level management positions because of his race and age. He's seeking more than $10-million in damages.

QUOTE: "Microsoft's strategy is to discredit its critics. I simply want compensation for the jobs I deserved to have."

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