February 25, 2019
February 25, 2019
Companies can no longer view sexual harassment flippantly—as just another human resources headache. Mishandling of sexual harassment complaints goes to the heart of the public’s perception of the company, directly impacting the bottom line. For instance, the Alphabet board of directors was sued last month for their handling of sexual harassment complaints at Google. State and federal legislators have since introduced voluminous legislation targeting sexual harassment. This is a real enterprise risk that requires board oversight.
As the #MeToo movement continues, boards should exercise their oversight authority to assure an unequivocal response to sexual harassment matters by leveraging the powerful tools developed during the post-Enron era.
Boards should address this critical risk area urgently, by reviewing existing corporate controls to ensure that systems in place effectively detect, investigate, and remedy sexual harassment complaints. As a first step, boards should consider whether their whistleblower hotlines—already required for accounting matters under the Sarbanes-Oxley Act (SOX)—are equally as effectively deployed to identify sexual harassment. Underutilized hotlines and mismanaged complaints have been identified as critical failures in some of the most prominent and public sexual harassment scandals. Through basic enhancements to the existing compliance infrastructure, boards can efficiently and proactively address this critical oversight gap and create a culture that does not tolerate sexual harassment.
In the 17 years since SOX was enacted, a robust compliance framework has developed to address matters raising serious litigation and public relations risks such as accounting fraud and corruption. Whistleblower hotlines are a critical control within that framework. A well-implemented hotline ensures that misconduct is addressed early, minimizing the harm that can be done by a bad actor and the fallout for the company more broadly. Mature reporting programs include:
Nearly two decades of experience with SOX-mandated hotlines should put companies in a good position. However, in the context of sexual harassment, hotlines are often underutilized or deluged with complaints that are not addressed thoughtfully. Companies should take a fresh look at their hotlines, considering the following issues to ensure that the company’s hotline is set up to detect, assess, and remediate sexual harassment complaints.
Make sure that all employees know about the hotline. A hotline that is not well publicized is not protecting anyone. In the wake of a scandal, it is unfortunately all too common for a company to review its hotline files for related allegations, only to find that personnel were not even aware that a hotline existed. When Fox News faced allegations that it failed to address sexual harassment by one of its star personalities, Fox was quick to point out that it had not received a single complaint on its hotline. Employees swiftly rebuffed this claim, reporting that they had not been made aware of the hotline, even in sexual harassment training.
At a minimum, boards should press their management team to confirm that their hotline is included in any trainings and materials relating to sexual harassment. Companies should think critically about the best ways to publicize their hotlines in the context of their operations, industry, and geographic profile. Boards then should routinely review hotline statistics and take steps to probe whether the hotline should be better publicized or re-publicized and whether there are other impediments that may impact reporting—and, therefore, their oversight of this matter.
Encourage Reporting. In the context of headline grabbing allegations, companies should re-double their efforts to ensure that reporting internally is an attractive first step when they have a complaint. Employees often turn to external reporting when they fear their anonymity will not be protected through internal reporting mechanisms and harbor concerns about retaliation. Tone from the top is critical in this respect. It is also important to ensure that reliable anonymous reporting is made readily accessible and that the company’s anti-retaliation policy is emphasized at every opportunity. Particularly in the context of sexual harassment, fear of retaliation appears to be one of the major concerns driving whistleblowers to report externally or not at all.
Adopt Effective Escalation Procedures. Hotline procedures typically break allegations into categories such as “Workplace” and “Business Integrity,” for instance. Allegations falling into Integrity-related categories are subject to robust investigation protocols and credible reports are often subject to mandatory board reporting. “Workplace” complaints, which may include sexual harassment, may be subject to less rigorous procedures with no clear requirement as to when the board is made aware of allegations. Boards should ensure that the procedures implicated by sexual harassment allegations are commensurate to the significant risks posed for the company. Boards should also consider mandatory reporting procedures and ensure that the board has real oversight over the company’s handling of sexual harassment matters.
The #MeToo movement has shone a light onto corporate scandals involving sexual harassment, and the related litigation and legislation is just picking up steam. Boards would be well served to take steps now to ensure that their companies and employees are protected. Enhancing whistleblower hotlines already required by SOX would be a practical and powerful first step in that direction.
Audrey Ingram is a partner and Michael Mann is a partner and founder of the Washington, D.C. office of Richards Kibbe & Orbe. Jamie Schafer is an associate in Richards Kibbe & Orbe’s Washington, D.C. office.