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How Boards Can Protect Themselves from #MeToo Surprises

How Boards Can Protect Themselves from #MeToo Surprises
January 3, 2019 Rita Risser Chai

Boards of Directors are often surprised to hear of sexual harassment complaints against their companies. The decisions to settle, or not, are not ones they typically get involved in. Yet when the news hits the fan, they are blamed as ultimately responsible for what goes on in the company. Not only are they blamed in the media, they also can be held liable in suits brought on behalf of shareholders, and even under the harassment laws of the states that prohibit aiding and abetting harassers. For example, the Weinstein Company’s board renewed Harvey Weinstein’s employment contract even though they were aware of multiple allegations against him.

One way BODs can protect themselves and the companies they govern is to demand to be kept informed.

In response to the November 2018 employee walkout, Google promised, “We will create a new section in our Investigations Report focused on sexual harassment to show the number of substantiated or partially substantiated concerns over time, by function. It will also discuss trends, disciplinary actions taken, and substantiation percentages. We’ll also summarize, in this annual report, the types of behavior we do and do not terminate employees for.”

That’s a good start, though it’s not clear who sees this report. But Google’s board should demand to see it, and other boards should demand the same information as well. In addition, every board should also be informed of the number of harassment complaints litigated and settled each year, the amounts spent for litigation and settlements, and the number of cumulative complaints and settlement amounts against individuals, without naming names. This would alert the board if they saw multiple complaints or huge settlements against one individual. The board also should be informed of the amounts paid in severance to employees terminated for harassment.

When BODs are kept informed of the depth and breadth of the problem, they can assess whether their CEOs are addressing it effectively. If not, boards can take appropriate action to protect their companies.