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