Company Predators Are a Boardroom Issue

The board’s role in addressing bullying and sexual harassment

By Stan Silverman

Recent news has been dominated by allegations of sexual harassment against high-profile individuals and against companies that tolerate a culture of sexual harassment within the entertainment and high-tech industries.

At Fox News, CEO Roger Ailes and popular “The O’Reilly Factor” host Bill O’Reilly were finally forced to step down by the board of parent company 21st Century Fox after persistent allegations of sexual harassment and financial settlements with their accusers. In the case of O’Reilly, the decision came after the loss of dozens of sponsors of “The O’Reilly Factor."

Travis Kalanick was forced to step down as CEO of Uber by major Uber investors, not the company's board, after allegations became public that a culture of sexual harassment was the norm within Uber, as well as other allegations of unethical and illegal conduct by the company.

(Related Article: Uber Report Calls for Board Oversight Overhaul.)

Experts on corporate governance have to ask some important questions:

  • Why did the board of 21st Century Fox tolerate sexual harassment of women by Ailes and O’Reilly for so long?
  • Why did the board of Uber not hold Kalanick accountable for allowing a culture of sexual harassment to exist within the company?
  • Were the 21st Century Fox and the Uber boards tolerant of Ailes, O’Reilly and Kalanick due to the wealth they were creating for their companies, and only took action when these individuals became financial or reputational liabilities?
  • Did these boards not care about the harm caused to women subjected to sexual harassment by individuals within the company, or the harm caused by an organizational culture that tolerated sexual harassment?

Most companies do not have a sufficient number of women serving on their boards. More women board members will certainly help in reducing the atmosphere were sexual harassment is tolerated within their companies.

Public companies are mandated to have employee hotlines -- all companies should have them. Best practice is for hotline reports to be monitored by the audit committee of the board, since their purpose is for employees to report financial misconduct. Hotlines can also be used to report sexual harassment or bullying of employees by tyrants in the workplace.

(Related Article: Many Directors Are Culture Clueless.)

It is the audit committee’s job to ensure allegations of sexual harassment and bullying are investigated and proper action taken. Boards should not tolerate either. I once worked for a tyrant whose behavior adversely impacted the employees as well as the financial performance of his division. In retrospect, I wish that such a hotline existed with my company.

Hotlines, however, only work if employees take them seriously and are confident they will not be retaliated against.

In Sept. 2016, Wells Fargo revealed that in excess of 3.5 million bogus customer accounts were established over five years for the purpose of meeting very aggressive growth goals.

A number of Wells Fargo employees who reported these unethical and illegal practices to the Wells Fargo ethics line claim they were subsequently fired. In a January 2017 CNN Money report, columnist Matt Eagan wrote, “Wells Fargo says it has found evidence that at least some of these whistleblower retaliation claims … may have merit.” It is the job to ensure retaliation does not take place and fire those managers that retaliate.

Wells Fargo CEO John Stumpf was fired by the board. The company was heavily fined, lost significant business and suffered significant reputational loss. Sen. Elisabeth Warren (D-Mass.) has called for the entire Wells Fargo board to resign.

(Related Article: Auto Industry’s “Bro Culture” Was Able to Change.)

A board’s primary job is to hire the CEO, hold him or her accountable for tone at the top and organizational culture, as well as strategic and operational results. The board also has the responsibility of replacing a CEO who does not measure up.

I have served on many boards –- public, private equity, trade association and nonprofits. I judge my personal performance the way a new director would judge incumbent directors. This is how I judge incumbent directors of the boards I have joined.

The last thing I would want is for a new director to think, “The incumbents have not performed," or "Board culture is poor."

"Did I make a mistake joining this board?”

Stan Silverman is Vice Chairman of Drexel University and founder & CEO of Silverman Leadership.

 

 

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