By April Hall
Sexual harassment woes at Fox News, leading to the recent firing of the network’s top host Bill O’Reilly, millions of dollars paid out in settlements and a government investigation, clearly impact the network and its parent 21st Century Fox.
But it’s unclear what role the board of directors played in the ongoing saga.
“As a publically traded company, [board directors] have a responsibility to the shareholders,” says Harry Kraemer, professor at the Kellogg School of Management, former CEO of Baxter International Inc. and author of From Values to Action. “The values of the company are something that the board needs to be absolutely involved with.”
Kraemer says he has no inside knowledge of the case, only what he’s read in media reports, but “when I read the company has settled several different cases I think the first time there’s a settlement I would say, ‘Wait. What’s going on?’
“The second time? There should be a five-bell fire alarm going off.” If management fired O’Reilly for fear of losing more advertisers, he notes, they are only reacting to economic drivers, not company values and that damages corporate culture.
Less than a year after the first sexual harassment suit was filed against Fox News, the company is facing a half dozen more accusations, which forced the network president Roger Ailes to resign. More recently, other Fox executives have been accused of encouraging racial tensions between employees.
Additionally, a federal investigation is underway and is reportedly looking into how settlements over previous sexual harassment claims were reported. According to sources cited by Financial Times, executives were not briefed on the payouts, nor were they reported in financial statements.
21st Century Fox is family-run by Rupert Murdoch and his sons James and Lachlan Murdoch. However, the company is public traded and has a board governance.
Although, the structure at the company may be part of the problem.
In an interview with the Financial Times, Charles Elson, director of the Center for Corporate Governance at University of Delaware, talked about a possible power struggle:
The ownership structure at Mr. Murdoch’s companies is partly to blame for oversight failures. 21st Century Fox and its sister company, News Corp, are effectively controlled by the Murdoch family through a dual class share structure that “breeds an environment where problematic governance can be fostered.”
It is unknown if the board of directors for 21st Century Fox is part of the investigation, but if the inquiry leads back to how well investors were informed, all roads lead back to corporate governance and culture, Kraemer says.
For example, many accusers and former employees of Fox News have cited a culture of control, bullying and harassment. Some have said it stemmed from Ailes who was reportedly notoriously controlling and not transparent with the company’s financials. However, the permission to bully and threaten employees is supposedly pervasive.
This week, seven African-American employees are expected to join two others suing Fox News for racial harassment and the charges point to Judy Slater and Tammy Efinger in the accounting department. Slater, a longtime comptroller for the company, was fired last month following the initial accusations, but Efinger, the accounting director, remains at Fox News.
Kraemer says if the board doesn’t work towards clearing the decks and making the company’s values clear, they are failing shareholders.
“Shareholders believe the board will act in a values-driven way,” he says.
Those values need to be demonstrated by the board and communicated in a clear way. And if those values are violated, employees, regardless of position, need to be removed immediately.
“It’s not a plaque you put on the wall and it’s cute,” Kraemer says. “If this behavior occurs, you’re not going to be here.”
A scandal rocked another Murdoch property six years ago when News of the World executives were charged with hacking the cellphones of celebrities and even a teen murder victim. With the settlements the newspaper paid out and the damage to its reputation, not only did the paper fold, but a bid Murdoch made to take over satellite TV provider Sky was rejected by U.K. regulators.
Ironically, Murdoch’s second play for Sky is currently with those same regulators. As the harassment scandals escalate, the deal is again in jeopardy as the broadcasting authority decides if the Murdochs are “fit and proper” to take over Sky’s license.