Sexual Harassment Is Becoming a Serious Investment Risk

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As more women speak out, shareholders are starting to pay attention.

Harvey Weinstein. Bill O’Reilly. Roy Price. Kevin Spacey. The list of prominent men recently accused of sexual harassment goes on, and on, and on. So, too, do the costs of such behavior, in ruined reputations, aborted careers, and shattered companies, not to mention dollars and cents. Investors also have a lot at stake.

The greatest cost, of course, is borne by the targets of predatory behavior, mostly women, many of whom have been newly empowered to share their storiespublicly in recent weeks. The numbers suggest that their experiences are just the tip of an ugly iceberg. According to the Equal Employment Opportunity Commission, one in four women in the U.S. experiences sexual harassment at work. Based on a recent Wall Street Journal/NBC news poll, that figure could be closer to 50%.

If you have a gender-diverse culture, this kind of behavior would be less tolerated and probably less prevalent

Charlotte Laurent-Ottomane, executive director of the Thirty Percent Coalition

Whether or not snowballing accusations of sexual misconduct, and the backlash they have sparked in the U.S. and abroad, are a watershed moment for the culture, as many hope, they are a piercing wake-up call for corporations and investors. Companies that tolerate or cover up sexual harassment, perpetuate a culture that fosters it, or fail to provide proper avenues for employees to report concerns and offenses, could pay in multiple ways, from difficulties in attracting, retaining, and motivating talented workers to customer defections, ruined business deals, and lost revenue and profit.
The Weinstein Co. film studio, for instance, reportedly has been seeking a cash infusion since dozens of women accused its former head, Harvey Weinstein, of sexual harassment or assault, some recent, some in episodes dating back decades. Fox News faced an advertiser backlash before parting ways with O’Reilly, a network star who left the company in the spring amid allegations of sexual harassment, only nine months after Fox ousted its chairman, Roger Ailes, on similar charges. (Fox is owned by 21st Century Fox [ticker: FOXA], which shares common ownership with News Corp. [NWSA], the parent of Barron’s.) Weinstein has apologized for his behavior. The Weinstein Co. didn’t respond to Barron’s request for comment. Following the allegations about O’Reilly and others, Fox has overhauled the management and reporting structure at Fox News, and made other changes. O’Reilly has denied the accusations against him.

GIVEN THE SOCIAL cost of workplace scandals, and the toll on corporate and stock-market performance, investors also have a growing role to play. Increasingly, they could find themselves pressuring companies to root out bias and harassment of any sort, and implement better risk-management policies. While sexual harassment has many causes, it tends to flourish when workplace culture is poor and corporate governance, weak.

A dearth of women in the workplace, particularly in board and executive positions, and a lack of gender parity in opportunity and pay, are also contributing factors that have begun to attract investors’ attention.
“For a while, investors were able to say that they couldn’t address what they didn’t know about,” says Stu Dalheim, director of engagement at Calvert Research and Management, a unit of Eaton Vance that engages in “responsible” investing, with a focus on environmental, social, and governance factors in stock selection. “The case is getting stronger for investors to understand that there is risk in many companies. Corporate boards must be much more aggressive in enacting stronger compliance regimes for human resources. Investors should be asking companies and corporate boards to do more.” Calvert is doing so, and deliberately steering clear of companies dogged by gender-related controversy. barronsboard

 That includes Dollar General (DG), says Dalheim, which has paid to settle a variety of discrimination and harassment suits in the past decade or so. The investment firm also passed on buying Uber Technologies’
loans and other securities, he adds. Uber co-founder Travis Kalanick was forced out in June as CEO of the privately held ride-sharing company, after failing to
tame a corporate culture rife with sexual-harassment issues.
“Dollar General is committed to providing its employees with a work environment free from unlawful discrimination, including individual harassment,” a company spokesperson said. The retailer doesn’t comment on pending litigation. Uber didn’t respond to Barron’s request for comment.

Eve Ellis, a portfolio manager with Morgan Stanley’s Matterhorn Group, says she generally avoids investing in ompanies facing class action or individual lawsuits dealing with gender. “They might cost a company money, and lead to reputational risk,” she says.
In the aftermath of the Weinstein revelations, which prompted the current public reckoning, Habib Subjally, a senior portfolio manager at RBC Global Asset Management, said he intends to talk to corporate management teams about workplace policy and culture issues, including managing the risk arising from sexual misconduct. “If they throw a legal answer at me, I’m disappointed,” he says. “‘We have zero tolerance’ isn’t how to answer the question. This is about showing respect and being able to explain how management provides a caring, nurturing environment for their team.”

By CRYSTAL KIM, LESLIE P. NORTON, AND LAUREN R. RUBLIN

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There should be an expectation in business that the selection process is based entirely on merit...Given the disproportionate number of men to women in senior roles, business should question the soundness of their meritocracies.

Sir Philip Hampton, Chairman GlaxoSmithKline

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