Home – Headlines highlight the reputational and financial risks of sexual harassment

Headlines highlight the reputational and financial risks of sexual harassment

Posted on 10-18-2017 by Ulyana Androsova

 How quickly can a trickle of negative news accelerate into a flood of financial and reputational risk?  These days, the answer is fast—at least when it comes to sexual harassment allegations. As more women (and a few men) come forward to share their experiences of sexual harassment, it’s clear that companies can suffer significant reputational and financial harm when bad actions of top executives and board members come to light. In fact, the fallout from the latest sexual harassment scandal prompted a post on the FCPA blog—a site that is normally focused on the Foreign Corrupt Practices Act, and corporate compliance with it and other anti-bribery and corruption regulations. 

 Why companies are in crisis management mode over sexual misconduct

 For decades, sexual harassment lived in the shadows.  Rumours were plentiful. Innuendo was rampant. For the most part, however, companies kept a lid on sexual harassment allegations against key figures through a combination of non-disclosure agreements and behind-the-scenes settlements.  But as digital media strategist Heidi Moore wrote on LinkedIn, “Starting now, companies should start thinking about settlements as a bad investment. Non-disclosure agreements do not prevent scandals. It’s human nature: People talk.”   What’s more, in the digital age, this ‘talk’ spreads like wildfire across social media and the blogosphere, increasing the likelihood that any scandal will grow to epic proportions in hours or days, not months.  Moore cited a series of scandals as proof:

  • Roger Ailes was ousted by Fox News only 15 days after Gretchen Carlson spoke out about his sexual harassment in July 2016.
  • Bill O’Reilly was shown the door just weeks after the New York Times revealed that 21st Century Fox or O’Reilly had paid millions of dollars to settle a series of sexual harassment cases. The Guardian reported that “O’Reilly would assume a mentorship role in the women’s careers and then make sexual advances, causing them to fear professional consequences if they refused him.”
  • Harvey Weinstein was pushed out by his board of directors three days after an investigative report by the New York Times, and the company will likely change its name to further distance itself from the negative repercussions of his past behavior.
  • Justin Caldbeck, co-founder of Binary Capital, was forced out within days, and the company had to shut down a $175 million investment fund when investors jumped ship over sexual harassment allegations exposed in an industry publication, The Information.

 Noting that “… the potential fallout [of sexual harassment] is nearly infinite,” Moore continued, “Payouts on a grand scale are unsustainable. Harbouring a sexual harasser, however connected, powerful or brilliant, poses a far more significant business risk than simply firing the executive.”  While money spent on settlements may represent a ‘drop in the bucket’ compared to a company’s annual revenue, the reputational damage can lead to long-term financial consequences—a fall-off in advertising dollars and loss of investor and consumer confidence, to start. In addition, if investigations reveal that warning signs were ignored, the collateral damage for other corporate leaders and board members can disrupt business, lower employee morale and curtail progress toward growth goals while the company regroups.

3 tips for reducing reputational and financial risk

 Businesses need to take a proactive approach to mitigating reputational and financial risks of sexual harassment. Here are some steps to take:

  1. Create a clear, no-tolerance policy against sexual harassment and enforce it.  One fact that is clear from all of the recent allegations is that the stories only came to light after the woman—or in some cases, numerous women—reported the misconduct and saw a lack of action to remedy the situation.
  2. Do your due diligence before hiring key personnel.  Sexual harassment is wrong, no matter who does it, but the greatest liability comes when the harasser is in a leadership role. When vetting a potential executive hire, look for adverse media, past court cases or other red flags. Likewise, entering into a partnership with an individual or company demands rigorous due diligence to help you avoid a relationship that could taint your image with investors and the public.
  3.  Monitor the media for risk warning signs. Even the most robust due diligence process can miss a risk factor, but with ongoing risk media monitoring, you can stay alert to potential problems and respond proactively to minimize the damage.

 Risk media monitoring is particularly important given today’s 24/7 news cycle and the tendency for big stories—whether positive or negative—to go viral on social media. If you’ve been on social media in recent days, you’ve probably seen the #MeToo hashtags on Twitter or the MeToo posts on Facebook.  The trend was started by a tweet from actress Alyssa Milano who encouraged women to tweet #MeToo if they had experienced sexual harassment or assault.  Twenty-four hours later, reported The Atlantic, a Twitter spokesperson said the hashtag had been tweeted almost 500,000 times. The message is clear; women are prepared to step out of the shadows about sexual harassment. The question is: Are you ready to mitigate the reputational and financial risks associated with it? 

3 Ways to Apply This Information Now

  1. Visit us online to explore our solutions for monitoring for adverse news.
  2. Check out other posts here covering PR, risk media monitoring and more.
  3. Share this post to keep the dialogue going with your colleagues and contacts.

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