Article originally published in the American City Business Journals on October 17, 2017
Leaders at three high-profile companies have been forced to resign their positions this year due to sexual harassment scandals within their business or personal lives.
The latest to this list is the Weinstein Co.’s co-founder and CEO Harvey Weinstein following allegations that he sexually harassed more than three dozen women over many years. Weinstein has apologized for his behavior but has denied accusations of assault.
Weinstein had the power to influence the careers of many women, as did Fox News Chairman Roger Ailes and Bill O’Reilly, host of Fox News’ “The O’Reilly Factor.” Both Ailes and O’Reilly also faced allegations of sexual harassment this year and were forced to step down by the Fox board after the allegations persisted in the mainstream media and, in the case of O’Reilly, was followed by the loss of major sponsors.
Uber CEO Travis Kalanick, meanwhile, was forced out by major investors, not by the company’s board, after a number of scandals including a well-established culture of sexual harassment of female employees within the company that went ignored by Uber’s HR department.
What do Uber, the Weinstein Co. and Fox News have in common? They are companies led by prominent, powerful men within the testosterone-driven high-tech and entertainment industries. Unfortunately, the cultural norm at many of these companies is to turn a blind eye to sexual harassment of women, doing so without regard to the adverse impact on these women or the reputational risk to the company.
When the allegations against Weinstein became public, four directors of the all-male Weinstein Co. board resigned. Weinstein was fired two days later, on Oct. 8. On Oct. 14, a fifth director resigned, leaving only three directors.
Over the years, Weinstein reportedly made private financial settlements with his accusers. On Oct. 10, the Weinstein Co. board issued the following statement: “These allegations come as an utter surprise to the board. Any suggestion that the board had knowledge of this conduct is false.”
This statement by the Weinstein Co. board was contradicted in an Oct. 11 article in The New York Times. Columnist Megan Twohey wrote, “Lance Maerov, the [Weinstein Co.] board member who handled the [employment] contract negotiations [for Harvey Weinstein], acknowledged in an interview that he had been told of settlements, but said that he had assumed they were used to cover up consensual affairs.
“Mr. Maerov said that his chief concern had been whether Mr. Weinstein’s behavior posed a legal liability for the business, and that after receiving assurances that no company money was used and that no complaints against Mr. Weinstein were pending, he had approved the contract.”
What happens in a CEO’s private life has a bearing on that person’s ability to effectively lead a company. A board needs to trust that its CEO’s actions will not tarnish the company’s reputation. Harvey Weinstein violated that trust.
When the culture within a company or the behavior of the CEO tarnishes the company reputation, stakeholders will wonder why the board tolerates it, regardless of how important the CEO is “viewed” to the success of the company. This is something all boards need to think about.
Public companies are mandated to have a hotline to the audit committee of the board for employees to report sexual harassment, financial improprieties or other wrongdoing. Private companies should also have them. It is the job of the audit committee to ensure that hotline reports are investigated and that if employees using the hotline suffer retaliation, swift action is taken against those who retaliate.
Fox News is a subsidiary of 20th Century Fox, a public company. Did victims of sexual harassment within Fox News use it? If they did, what was the action taken? Did Uber and the Weinstein Co. have hotlines? If they did, were they used and what were the actions taken?
The board’s job is to hold the CEO accountable for establishing the right tone at the top and an organizational culture, as well as for his or her own behavior, and to take appropriate action if warranted. Given Harvey Weinstein’s behavior, he is hardly establishing the right tone at the top.
So why do boards keep CEOs whose ethics and values damage the reputation of the company? Are they so important for the results they achieve? Does it take the loss of sponsors, as in the case of Fox News?
No employee should be “safe” from being sanctioned, up to and including termination, regardless of their position or “how valuable” he or she is viewed by the company — or, in the case of Kalanick and Weinstein, even if they are the personification of their company.
Speaking at a recent Women in the Workplace dinner hosted by the Wall Street Journal, Sheryl Sandberg, COO of Facebook, said, “We can’t tolerate Harvey Weinstein-like behavior. … It’s not just about him, it’s not just about the other men that do it. It’s about all the people around the men [that] know and don’t do anything.”
Will the prominence of the Weinstein Co., Uber and Fox sexual harassment scandals catalyze a change in the culture of not only the entertainment and high-tech industries that are frequently in the news, but also industries that are less visible and do not attract as much publicity? Time will tell.
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com.
