Businesses can no longer turn a blind eye to gender discrimination and toxic culture. And if ethics don’t motivate, maybe shareholder displeasure and brand damage will
When two former employees filed a lawsuit against Nike alleging gender discrimination and hostile workplace environments this year, it showed the lasting impact of the #MeToo movement, and its wide-reaching implications across business, entertainment, politics and religion.
A survey published by leading UK gender equality and women’s rights charity Fawcett Society revealed a significant change in attitudes over the past 12 months, with people of all ages more likely to call out inappropriate behaviour.
But more needs to be done, argues the charity. It recommends the government reintroduces third-party harassment laws and introduces a new duty on large employers to prevent discrimination and harassment in the workplace. “Employers have to take responsibility for their own workplace culture,” says Sam Smethers,Fawcett Society chief executive. “Older men have to be part of the change because they often hold positions of power. But their attitudes are lagging behind.”
#MeToo is the global movement against sexual harassment and sexual assault was sparked by allegations of predatory behaviour by movie mogul Harvey Weinstein.
The hashtag #MeToo quickly spread across social media. “The good thing about the #MeToo era is that people feel empowered to talk about things that have happened to them in the past,” says Nick Henderson, director of course development at compliance training firm VinciWorks. “No one should go unpunished for behaviours that are illegal, unprofessional or unethical.
ABUSES OF POWER
In the case of Nike, the issues raised by the federal lawsuit, which includes sexual harassment, look more broadly at a hostile culture that had deliberately ignored gender discrimination and inequality. The former employees allege Nike habitually hired women at lower salaries, discriminated against them in performance reviews and failed to promote female talent as frequently as their male counterparts.
The company hierarchy was described as an “unclimbable pyramid”. It is understood the lawsuit could eventually become a collective action involving over 500 women, both current and former staff.
“If you have a business culture where women are paid less, where they are promoted less, where they’re seen as being ‘less than’,” Henderson says, “then it’s going to logically follow that other people in the workplace will feel they can harass, discriminate and even abuse and assault women in the workplace, because they don’t feel they are equal to them and so they don’t have to treat them the same.”
“No workplace can be free of inappropriate behaviour and there’s not going to be a situation where you have a harassment-free workplace,” he continues.
“But you have to have strong policies in place to prevent a toxic workplace culture where harassment can happen, and to be able to properly investigate claims of inappropriate behaviour. And it has to be part of a wider strategy whereby you are promoting more women to make sure there is a diverse group of people at every level of the organisation.”
He thinks training is essential as a way of raising awareness and talking about boundaries. “Businesses should really be thinking about the training they’ve got and whether it is just a tick-the-box exercise to protect them from liability. Training needs to make people feel that they can report something that’s happened and identify behaviours that aren’t okay.”
“Banter is something that happens between friends and mates – it’s not something that happens with people who are unequal in a workplace,” says Henderson. “Bantering cannot happen between subordinates and the people who are managing them.”
DON’T CROSS THE SHAREHOLDERS
The initial lawsuit against Nike was followed by a second suit brought by shareholders, which targets the company’s board of directors, and names former brand president Trevor Edwards as a defendant along with chief executive Mark Parker. The investors claim Nike’s directors breached their fiduciary duty by “knowingly” ignoring a “hostile work environment that has now harmed, and threatens to further tarnish and impair (Nike’s) financial position, as well as its reputation and goodwill”.
“With investor actions, what they’re basically saying is that the board turned a blind eye to the longstanding culture of harassment and discrimination, and as a result of that, the board breached their fiduciary duty and wasted corporate assets,” says Eleni Petros, employment practices liability insurance practice leader at broker Marsh.
“So in this instance, the process of holding the company and its executives accountable for permitting this culture is not only about the lawsuit of the people who are affected, but also the shareholders who allege the directors failed in their duties to the company and harmed the company as a result.”
The ramifications of the Nike case could be significant, with the potential for more shareholder class actions expected to arise in the US as a result of similar litigation. Julia Graham, technical director of Airmic, thinks risk managers need to approach issues such as gender discrimination as an enterprise-wide issue. Just as cyber risk is no longer the sole domain of a company’s IT department, so employment risk is no longer an HR issue alone.
“It’s about collaborating across all those different silos to understand what your culture is, how that translates into the business and what you would like it to be,” she says. “And then you need to be very sure that you’re upholding that and if necessary, even at a senior level, coaching your leaders to make sure you deliver that mission and those values. You should be coaching those senior people so they know how to respond properly if something goes wrong.”
A BRAND KILLER
Crisis management and communications also have an important role to play in mitigating the reputational fallout from allegations of sexual assault and sexual harassment.
Commentators argue that Nike’s internal culture of marginalising women was at odds with how it portrays the brand as valuing women in sports and that this has damaged the trust in the brand.
“If you’re not convinced by doing the right thing, think about the commercial aspect, because it can be damaging,” says Graham. “Are talented women going to want to go and work for a company that doesn’t treat them with respect? Probably not.”
As the examples of Philip Green, president Donald Trump and Cristiano Ronaldo demonstrate, it is not always possible to prevent the accused from behaving in ways that cause further damage. “One problem is when you have people who are almost as big as the business,” says Graham. “When you have big egos and big personalities, it’s not an easy thing to deal with and it’s not always within your control.”
“In organisations the size of Nike, where there are big corporate cultures, I don’t think there is any excuse, because they’re not dealing with the Elon Musks and the Philip Greens,” she continues. “For these people having good advice can save a lot of heartache. And Nike does have good crisis and business continuity plans – I know some of the people who have written them – but they clearly didn’t follow them.”
WHERE DOES THE BUCK FALL?
Concern that employment practice claims will increase in the aftermath of #MeToo is fuelling demand for EPLI cover.
Marsh EPLI practice leader Eleni Petros notes that #MeToo, along with other trends such as the rise of the gig economy, has increased many organisation’s exposures to employment risk.
“Employment risk is increasingly a risk management issue,” Petros says. “As a business you need to make sure you have the correct practices and procedures in place and that you have the right tone in the organisation. If that fails and you get claims, you need to make sure you can protect yourself. There are more claims in the US, so a lot of companies have EPLI policies – because they are the ones that will respond to a claim against the organisation, and typically these claims are made against the organisation rather than an individual. But we’re certainly seeing an up-tick in enquiries from clients about EPLI insurance as a result of these issues.”
There are also implications for directors and officers. “If we are talking about claims against the board of directors for not fostering the right corporate culture, that’s not an employment practices discrimination, it’s about corporate culture. And that will hit the D&O policy because that is a claim against directors for not fostering the right corporate culture and thereby breaching their fiduciary duty.”