Can suing a company's board lead to more accountability for workplace misconduct?
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When leaders behave badly, their conduct is often hidden in plain sight and insulated by enablers. So, it’s only fair to ask: When a corporate executive misbehaves, what did the board of directors know and when did they know it?
Even in the face of hundreds of #MeToo headlines revealing negative behaviors in the workplace, there has been little focus on those who have a fiduciary duty to the organizations that they oversee—the members of their board of directors.
It is possible that a lawsuit filed by a Lululemon shareholder may usher in a new era of corporate accountability for workplace misconduct. Last year, the athletic apparel company entered into a separation agreement with its CEO, paying him $5 million for a departure that was seemingly due to allegations of an inappropriate relationship and a toxic workplace culture.
Several months later, a shareholder sued Lululemon’s board and company executives, alleging that they breached their fiduciary duties and wasted corporate assets.
The shareholder’s lawsuit is at the early stages of its journey through the court system. The suit should, however, cause boards to examine their knowledge of workplace misconduct and their payouts of “separation bonuses” to alleged perpetrators after information about their behavior has come to light.
The Lululemon lawsuit should motivate boards to develop direct ways to learn about workplace misconduct, separate from information that they receive through the filtered lens of corporate executives.
Ask no questions, see no evil
Organizations will invariably seek to downplay negative events to the public. Recently, a national nonprofit’s board chair issued a statement following the termination of its charismatic co-founder. The chair did not provide a reason for the dismissal, pointing to the board’s duty to protect the confidentiality of personnel issues. Rather, he emphasized that the board responded to staff concerns about workplace culture and that it had immediately hired an independent investigator to review its policies and processes.
The chair’s remarks were typical of the mild contrition expressed by boards forced to confront accusations against high-profile employees. He praised the hard work of the board while dutifully acknowledging that its members weren’t looking closely at the day-to-day experiences of some of the staff, and they didn’t always ask the right questions of the CEO and president.
Yet such carefully couched language belied the founder’s reputation within and outside the organization. Years ago, I was part of a volunteer leadership team tasked with identifying speakers who would draw an audience to an event. When this now-terminated leader’s name was suggested, one of our colleagues immediately rejected the idea based on stories that had long persisted about his behaviors. The board chair’s admission that they failed to ask the right questions seemed to be a euphemism for never inquiring about critical workplace culture issues.
The last to know
How is it possible that boards of directors can be the last to know that they had a sexual predator, or serial harasser, or someone guilty of offensive workplace misconduct within the organization? Assuming that a board is not acting out of willful blindness or indifference, the logical answer is that the organization’s policies and procedures provide no path for disclosure to those who arguably have the most important role in preventing such behaviors. Fixing that gap is a critical element of changing workplace culture.
Yet, it is seen as axiomatic that the role of a board is limited to serving as an adviser to management with respect to the company’s strategy and operations and having an oversight function with respect to monitoring performance. But those structures have one critical barrier: meeting materials are prepared by management—the very individuals who may be clueless about or complicit in behaviors impacting workplace culture.
And even where a CEO has knowledge of a problem and shares information with the board, there will be a strong inclination to put the incident in as positive a light as possible to those who oversee his or her compensation and employment future. As one commentator from Wired noted: “The tone of reports compiled for the agenda is usually meant to reinforce the idea that … we’ve mitigated the damage; we’re on track to improve/achieve results.”
The practical effect of keeping workplace misconduct issues within the purview of management is that boards have insulated themselves from accountability. But as with everything else in the #MeToo era, that bifurcation of responsibility has to change.
Evolving roles for changing times
The fix is not difficult. It will, however, challenge those who view the division of responsibilities between a board and management through a strictly traditional lens.
Boards should establish a direct route for employees to report allegations of workplace misconduct in a way that neither originates with nor passes through senior management.
Equally important, the board should not limit the scope of this process to a legal definition of sexual harassment, as few actions rise to that level. Negative behaviors commonly extend beyond the realm of unwanted sexual attention, with damaging consequences that can affect the physical and psychological health of employees and impact workplace culture and employee engagement.
If we have learned anything from the barrage of #MeToo revelations, it is that when powerful leaders are implicated as perpetrators or defenders of negative behaviors, silence is the likely result of those victims and bystanders who fear retaliation for speaking up, even when an internal reporting process exists.
I know from my own many experiences serving on boards that it is critical to respect the role of management. I also know, however, that there are times that boards have to hear concerns about workplace conduct in situations where employees think it is too much of a risk to pursue internal avenues of reporting. The sensitivity of the underlying facts should not be a reason to preclude a solution that helps address possible workplace misconduct.
Decades of silence tell us that a far more aggressive response is needed to end workplace misconduct and ensure a culture of respect that is free of fear, intimidation and other behaviors that diminish or disparage individuals or groups.
Boards of directors have the ultimate fiduciary responsibility for the organizations that they oversee. It should not take a shareholder lawsuit to ensure that obligation extends to workplace misconduct.
This is not asking boards to tread into territory where they do not belong. It is simply recommending that they claim a role that they should never have ignored.
Lauren Stiller Rikleen, president of the Rikleen Institute for Strategic Leadership, is the author of The Shield of Silence: How Power Perpetuates a Culture of Harassment and Bullying in the Workplace, a newly released book published by the ABA. Her prior ABA-published book is You Raised Us, Now Work With Us: Millennials, Career Success, and Building Strong Workplace Teams. She’s also a member of the ABA Journal’s Board of Editors.
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