Pension Funds Push Boards to Get Tougher on Sexual Harassment

Investor group recommends changes such as pay clawbacks, disclosure of all settlementsWSJ Logo

A powerful group of pension funds wants corporate boards to do a better job of fighting sexual harassment, following a recent wave of alleged misconduct that toppled top executives in several industries.

 

In a report released on Thursday, the Council of Institutional Investors urges directors to consider recouping executive pay from alleged harassers, encouraging staffers to divulge sexual misconduct to the board, ensuring the board learns about every settlement of a harassment case and revising rules for office romances, among other recommendations. The CII represents 130 pension funds that manage more than $3.5 trillion in assets. It often takes strong stances on governance issues.

Businesses with executives accused of sexual harassment “may face legal charges, and the financial costs can be severe,’’ the council’s report said. Directors should be ”providing leadership on corporate culture, including combating sexual harassment,’’ the report added.

The report includes only broad recommendations and doesn’t lay out thresholds for taking action

Wynn Resorts Ltd. lost about $2.1 billion from its market capitalization on Jan. 26, the day a Wall Street Journal article described behavior that amounted to a decadeslong pattern of alleged sexual misconduct by CEO and founder Steve Wynn. He said it was “preposterous” that he would assault a woman.

Mr. Wynn resigned on Feb. 6 and subsequently lost hundreds of millions of dollars in severance pay. Regulators probing the alleged misbehavior have raised pointed questions with implications for the casino operator’s directors, long criticized for their close ties to Mr. Wynn.

Overall, “boards have not been taking a close look at how their companies are managing the risk of sexual misconduct,’’ said Amy Borrus, deputy director of CII, in an interview. ”Many boards are struggling to do the right thing.’’

As of last summer, 88% of boards hadn’t adopted a plan to deal with sexually inappropriate behavior in the workplace, according to a survey by Boardlist, a marketplace for female board talent in tech. Boardlist’s poll covered 414 individuals, nearly all of whom serve on public and private company boards. The rest are venture capitalists.

Businesses often try to claw back executive rewards following a corporate scandal or financial restatement, but clawbacks tied to sexual misconduct are rare. Instances of sexual harassment also should trigger recovery of pay, “particularly where senior executives are involved or problems of supervised employees are endemic,’’ the CII report recommended. Such a policy would draw greater attention to the issue, Ms. Borrus said.

The report’s suggestion that a designated board member field employee complaints about sexual harassment also is uncommon, she said.

In addition, CII recommended that management inform board members about monetary settlements of sexual-harassment cases, no matter how small. “We hear these payouts are not being reported up to the board in most cases,’’ Ms. Borrus said.

The council also urged that boards consider revamping company policies that affect corporate culture—such as office parties, consumption of alcohol and disclosure of workplace romantic relationships.

Closer scrutiny might also include directors’ obtaining past internal reports of sexual harassment to see whether human-resources managers identified repeat offenders, the report said.

Original article by  Joann S. Lublin here


pdfarrrow The Council of Institutional Investors Report

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