On February 4, 2014, Microsoft announced that Satya Nadella would become the new Chief Executive Officer of Microsoft. Nadella had worked in Silicon Valley since 1992, and had been with Microsoft for 22 years when he was elevated to the position of CEO. His first year compensation amounts to about $84 million. Until October, Nadella’s tenure as Microsoft’s CEO was unremarkable. But then came his remarks at the annual Grace Hopper Celebration of Women in Computing, the World’s largest gathering of women technologists. The head of Microsoft chose this gathering of more than 8000 attendees, mostly women, to suggest that women were better off trusting “karma” than pushing for raises. The incident raised the hackles of women inside and outside the technology world and immediately raised Nadella’s profile as well … but not in a good way.
The CEO had been invited to speak at a plenary session, which was open to all conference attendees. In response to a question the best ways for women to advance in corporate America, Nadella said that “[i]t’s not really about asking for the raise, but knowing and having faith that the system will actually give you the right raises as you go along.” Nadella went on to say that not asking for a raise was “good karma.”
Not too surprisingly, Nadella’s remarks immediately drew the ire of women, particularly as studies routinely show that women are paid less than men. Indeed, some research shows that Nadella’s advice is exactly the opposite of what women need. According to Linda Babcock, an economics professor at Carnegie Mellon University and leading researcher on women and pay negotiations, one of the reasons that women make less money is because they are less likely than their male counterparts to negotiate their compensation.
There is at least one silver lining in the story of this CEO blunder — it appears that Mr. Nadella may have learned something from the experience. The first sign of the lesson learned came in the form of a tweet. Unlike many CEOs, he did not try to explain away the ignorant remarks. Instead, within hours of leaving the stage, Mr. Nadella tweeted: “Was inarticulate re how women should ask for raise. Our industry must close gender pay gap so a raise is not needed because of bias.”
Next came Nadella’s brief email to all Microsoft employees, in which he stated that his response to the question was “completely wrong.” Yes, you read that right. Within hours of making a foolish and clearly erroneous suggestion about how women should try to get ahead in the world of technology, Nadella sent an email saying he “answered the question completely wrong.” He also went on to say “I believe that men and women should get equal pay for equal work. And when it comes to career advice on getting a raise when you think it’s deserved . . . you should just ask.”
Then, a week after the incident, Nadella issued a companywide memo committing to expanding diversity within the company. Significantly, the memo points repeatedly to the danger of “conscious and unconscious” bias in the workplace. The concept of “unconscious” bias, also known as implicit or cognitive bias, refers to the way that people make decisions based on stereotypes and assumptions without intending to discriminate. In Nadella’s own words —
“My advice [to not ask for a raise] underestimated exclusion and bias — conscious and unconscious — that can hold people back. Any advice that advocates passivity in the face of bias is wrong. Leaders need to act and shape the culture to root out biases and create an environment where everyone can effectively advocate for themselves.”
Psychologists, academics and employment rights lawyers have been talking about this phenomenon for years. The Nadella memo is a clear sign that their message is finally reaching the top echelons of corporations. And that is good news.
Cynics will assume, probably correctly, that the quick apology was a public relations tactic. And there is no question that the seemingly radical act of Nadella admitting that he had made a mistake virtually ended the criticism. But there is reason to hope that the CEO for one of the world’s largest companies may have learned a deeper lesson than how to engage in damage control. As we begin a new year, CEO’s across the country should take a page from Nadella’s playbook, accept that they may not yet fully understand the forces that have caused the gender pay gap, and resolve to “act and shape the culture to root out biases.” Admitting error, saying that you were “completely wrong,” and taking action to change corporate culture is not only the right thing to do, it is also good business.