The crisis of sexual misconduct

Mario Batali, the celebrity chef at the head of the $250 million restaurant empire Batali and Bastianich Hospitality Group, is the latest in a seemingly endless string of names associated with sexual misconduct, profoundly affecting business and the central institutions of our society. In just the past few months this list includes powerful Hollywood figures such as producer Harvey Weinstein and actor Kevin Spacey, media figures such as Matt Lauer and Charlie Rose, and political figures such as Senator Al Franken and Congressman John Conyers. This crisis has affected Silicon Valley, as Uber CEO Travis Kalanick has resigned, along with Mike Cagney, CEO of Social Finance, and a handful of others whose names are not as familiar.

The impact of sexual misconduct at the executive leadership level is not just in the lives of subordinates who have been so shockingly harmed, but that such allegations can profoundly affect the value of the brand, whether it is a university, a media company, a Silicon Valley giant, or a more mainline business. In 2016, a University of Missouri professor, Adam Yore, published a study that concluded that executive and CEO conduct such as sexual indiscretions, substance abuse, dishonesty, and violence may result in hundreds of millions of financial loss in market value. There is no insurance coverage that can provide for $200 million in lost value overnight for a large company or restore the trust and the good name of a company whose fortunes are invariably tied to the behaviors — especially the worst behaviors — of its leadership team.

While virtually every one of the organizations that have suffered from sexual misconduct scandals has had anti-discrimination and anti-harassment policies, and the law has long provided for a remedy for those either sexually assaulted or sexually harassed in the workplace, this is simply not enough. Training regarding these policies is simply not enough. It is not the policies or the training that is broken, but too often the culture itself. In a workplace where the culture has a set of values for most of the employees, but allows a different set of values for the owners or leaders, a crisis is nearly inevitable. Not only does cultural alignment with the best values of an organization generate more positive employee experiences, greater retention, and ultimately higher value, but misalignment, especially at the highest levels, will inevitably decrease value and put the organization at greater risk. Whether that misalignment relates to harassment, sexual misconduct, or dishonesty, the price tag is staggeringly high.

A new approach to harassment prevention — and more generally crisis prevention — begins with a true dedication to the values of transparent communication and fairness among all employees, regardless of status or gender, or other protected characteristics. This translates to not only boardroom policies, but also alignment of the values in recruitment, orientation, and evaluation of employees. Of course, you will never find an organization that suggests tolerance of abuse of power is a cultural value, but organizations that accept this as an unwritten code will find their way to a crisis sooner rather than later.

Even with a dedication to practice the values of fairness and transparency, a crisis may arise, but the likelihood will be reduced significantly. Moreover, in this season of employee talent shortage, the employment experience and the value of the organization will increase just as significantly when commitment to honesty and a pro-employee workplace is a central virtue.

Thomas Godar is a partner in Husch Blackwell LLP’s Madison office and belongs to the firm’s Healthcare, Life Sciences, and Education industry group.

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