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.
Using the Tools in Your Arsenal
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:
- a
well-publicized hotline; - a
“tone from the top” that communicates real commitment to addressing
allegations; - a
robust investigation protocol; and - engaged
board oversight.
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 Newsfaced
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.
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