Company policies and more women on boards could stem financial fallout.
By April Hall
The issue of sexual harassment has been kept quiet in the boardroom.
The thorny topic is often treated under the larger umbrella of healthy company culture, says Eric McCarthey, a director for Spar Group, Salsbury Industries and Interra International LLC.
At its core, he says, sexual harassment is a question of culture and tone at the top that can no longer be a “silent” issue or kept in a committee. If you’re a director, he adds, sexual harassment policies are “very material to one of your responsibilities. It is a duty of care and a duty of loyalty” to employees and shareholders.
And with the rise of the #MeToo movement, it’s a responsibility that’s becoming harder and harder to ignore. There are not just potential bottom-line implications (20th Century Fox settled $90 million over sexual harassment claims), but a growing effort to end forced arbitration may mean more accusations will be pushed into court and the public spotlight, increasing risks of damage to the high-powered accused and the brand for which they work.
In recent months, harassment claims have grown to epidemic numbers, an avalanche partly triggered by revelations of movie executive Harvey Weinstein’s pattern of sexual predation. When facts came to light, he was ousted from his own company and stripped of industry accolades and memberships. Since then, more high-profile men in many fields have fallen, including actor Kevin Spacey, U.S. Senator Al Franken, Fox News Channel’s news chief Roger Ailes and anchor Bill O‘Reilly. It seems there are more claims every day and the issue is forcing its way to the fore for not only executives, but directors as well.
While company executives have addressed firings, there has been little talk from board directors.
Most boards of directors haven’t even talked about sexual harassment as a business issue, according to a recent survey.
Some 77% of directors surveyed said their boards had not discussed, and 83% had not reassessed, company risk as a result of media reports of sexual harassment.
The survey, from theBoardlist and Qualtrics, was taken in July, in the wake of summertime scandals that led to the ousting of Uber founder and CEO Travis Kalanick.
“To be fair, the Harvey Weinstein story hadn’t happened yet,” points out Sukhinder Singh Cassidy, CEO and founder of theBoardlist. “It wasn’t a conversation then, but I’d be shocked in six months if we see it isn’t becoming one. My hope is when sexual harassment is not just in tech, but politics, the media, entertainment, boards will start addressing company culture proactively.”
That’s beginning to happen.
The conversations about the need to discuss sexual harassment and policies surrounding it are starting across industries with a focus on corporate culture, says Paula Loop, leader of the Governance Insights Center at PwC.
“[Directors] are thinking about it from a risk perspective as a culture issue and the impact [a sexual harassment claim] could have on the brand or the reputation of the company,” Loop says.
Part of the discussion, she continues, must also include asking the company’s management, “What have you done recently to make sure everyone knows the policy and reinforce it in the company.”
Checking in with every level of employee at a company is “the new normative” of board engagement, McCarthey adds.
“The new normal is you have to get out and talk to people in the company periodically, to go touch and feel the company’s operations at a bunch of different levels.”
It’s only through this type of interaction a director can get a sense of the culture, he says.
Tone at the top and good leadership modeling is the responsibility of the board, which should include reviewing workplace principles. He suggested bringing in outside resources to evaluate aspects including the role of zero-tolerance policies.
But it’s not just tone and awareness. McCarthey advises that ancillary policies need to be re-evaluated, including things like travel and entertainment guidelines that may contribute to the opportunity for sexual harassment claims.
When a claim of sexual harassment is reported, the first step is to investigate the claim for its validity, McCarthey says. But after that investigation, it’s time to turn to any patterns surrounding the behavior. And there are times when the board needs to step into that investigation.
McCarthey has firsthand experience. At a company where he sat on the board, the CFO was accused of sexual harassment of a subordinate.
“We were brought into the loop fairly early on by the CEO of the company,” he explains. The first step, particularly because of the involvement at the C-suite level, was “to get as many facts as we could.”
In the end, the claim was credible and the CFO was fired. The process was “swift,” and the board worked closely with the human resources executive. During the investigation they found the incident to be isolated and he credits the CEO for staying poised and modeling “great leadership” during the process.
A key way to stem the sexual harassment tide, is by bolstering gender diversity.
Having more women — who are the majority of the victims of sexual harassment — on boards could help men understand the pervasiveness and dynamics of the problem, McCarthey maintains.
“The thing that happens with having more women in the boardroom, and this is so positive,” he stresses, “is it gives the board a higher emotional quotient in understanding the subtle things about diversity and gender relationships that are blind spots for men.”