Risky business: What IR professionals need to think about in the #MeToo era
It shouldn’t come as a surprise that just one claim of sexual harassment can significantly damage public perception of an organization’s gender equity, according to new research published in the Harvard Business Review. As we know too well, impressions and judgment in today’s stormy and consequential #MeToo and #TimesUp environment can have important and far-reaching implications.
These issues are important not just for the head of diversity, chief human resources officer or legal department, but also for the company as a whole and its most senior leaders, including those who communicate with investors on a daily basis.
Ignoring this issue, or the possibility of this problem, is a risk no longer worth taking. Like cyber-security concerns and competitive threats, the implications and consequences of sexual misbehavior are pervasive and unpredictable. All stakeholders including shareholders, customers and the public at large are in such a state of reactivity that this risk must be attended to by senior leaders as well as boards of directors right now.
In case you’re thinking this just won’t happen at your company, a quick Google search of CEOs and sexual harassment yields the following companies and organizations where either the CEO or another senior executive stepped down because of sexual harassment or misconduct claims: ABC News, Epic Records, Fox News, Intel, Nickelodeon, The Humane Society, Uber, University of Southern California, Weinstein Co, Wynn Resorts – the list goes on and on, so ignore this issue at your peril.
Nor is it just reputational risk that is at stake: there are financial and legal consequences as well. In the case of Wynn Resorts, the stock fell 20 percent immediately after allegations against Steve Wynn surfaced. Furthermore, three shareholder lawsuits have already been filed including one by New York’s public retirement system claiming that the company’s board of directors ‘did nothing to prevent Steve Wynn's ongoing pattern of sexual abuse and harassment’.
Additionally, in late 2017, 21st Century Fox settled a shareholder lawsuit for $90 mn that was tied to the scandal involving former Fox News CEO Roger Ailes and commentator Bill O’Reilly. And of course there are others.
As with most other company challenges, an ounce of prevention is worth a pound of cure. So what does that prevention look like for investor relations professionals?
Sending a strong message
Pertaining to matters of sexual misconduct, for preparation and planning purposes IR needs to align itself with human resources and the legal department. But before this can even happen and for the purposes of direction, the tone needs to come from the top of the organization.
The board of directors and CEO must establish the climate within the organization. They must be on board with the policies and procedures suggested by legal and HR to not only prevent sexual harassment and misconduct but also to handle it if it should happen. The culture of the organization impacts the behavior within and its consequences. As such, it is the starting point for tackling the issue of sexual harassment and misconduct.
Beyond this, IR must be prepared to answer investor questions about sexual misconduct policies and incidences within the company. This goes beyond the simple description of training that takes place for compliance reasons. IR must be clear on the company’s philosophy about this issue and empowered to discuss it appropriately. If an event should occur, IR needs to swing into action to contain the crisis that can ensue.
It is interesting to note the swiftness with which Intel handled the situation after learning its CEO, Brian Krzanich, had a relationship with his direct report. It was one week from discovery to resignation, even though the relationship was over and had taken place before he even became CEO. This sends a strong message about zero tolerance at Intel and will likely go a long way to allay investor concerns about potential lawsuits.
The scrutiny on companies has at no time been more intense. The never-ending revelations of sexual misconduct, coupled with the transparency of social media, the 24-hour news cycle and the proliferation of activist investors, makes the job of IR more challenging than ever. It should always be best practice to get out ahead and plan for what sometimes feels like the inevitable.
Patricia Lenkov is founder and president of Agility Executive Search