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A culture of sexual harassment

Richard M. Steinberg | September 13, 2016

The headlines shout out: “Harassment crisis builds at Fox News,” “Kisses, innuendo, propositions, and fears of reprisals,” and “Secrecy of settlements hid bad behavior.” The media is filled with reports of former Fox anchor Gretchen Carlson’s lawsuit charging Chairman/CEO Roger Ailes with sexual harassment, along with the expanding aftermath.

Just as with multibillion-dollar losses attributed to one “rogue” trader at major banks, executives at 21st Century Fox’s headquarters reportedly said “the problems they have confronted at Fox News are because of one man only, Roger Ailes.” The implication is there never was a widespread problem at Fox, and no other executives aided and abetted the abominable behavior, despite someone having to approve and record settlement payments in the millions of dollars. And with Ailes now gone there’s no remaining issue whatsoever. Hmmm.

Following Carlson’s suit, the company engaged a law firm to investigate, surfacing many other female employees saying they were sexually harassed by Ailes or other executives. We don’t need to review the many salacious assertions, which have been well documented in the media, but it’s worth noting an apparent pattern of harassment, where women not submitting to pressures resulted in their being demoted or fired. One former daytime host reportedly said Fox News managers dismissed her complaints about Ailes and she then was demoted, adding “The real issue that makes women so fearful and so afraid is what comes next … At Fox, you have a company that not only sexually harasses, but is willing to empower its executives and use company resources to carry out ongoing harassment in the form of retaliation.”

Why don’t more women report improper behavior? Certainly the fear of retaliation is at or near the top of the list, and such fear contributes greatly to a harmful corporate culture that not only excuses past transgressions, but encourages future ones, as well.

Effect on corporate culture. What is culture? We know it’s amorphous, but very real, with direct impact on what happens within an organization. One definition says culture is the professional atmosphere of a company, along with its values, customs, and traditions. The COSO enterprise risk management framework adds, “Official policies specify what the board and management want to happen [whereas] corporate culture determines what actually happens, and which rules are obeyed, bent, or ignored.”

Board members are not auditors and are not positioned to, nor should they, take inordinate amounts of time to look deeply into the bowels of the company. But experienced and insightful former executives sitting on a board can learn much by asking a few relevant questions.

How is a culture formed? There are many lengthy descriptions—suffice it to say here that culture is based on the beliefs and actions of its people, with the chief executive officer being the driving force. One can easily surmise that where a CEO believes it’s perfectly appropriate to use his (or conceivably her) position to gain sexual advantage over subordinates, other executives will believe it’s acceptable for them to do so as well.

There are numerous reported cases where senior male executives have had liaisons with female employees. Immediately coming to mind are Best Buy’s CEO Brian Dunn; Lockheed’s Vice Chairman, President, and COO Christopher Kubasik; and Boeing’s CEO Harry Stonecipher. These men were ousted from their positions for violating the company’s code of conduct and/or showing poor judgment.

There appears to be a difference between these and similar instances of business-related sexual relationships on the one hand, and those at Fox News on the other, as the issue of harassment comes forth loud and clear at Fox. But we don’t know to what extent the liaising senior executives at other companies used their lofty positions to sway subordinates to enter into an intimate relationship. And while there may be a difference between an entirely consensual relationship and one where a powerful executive coerces a subordinate to act in a way they otherwise would not, a company’s culture will suffer regardless.

Culture will suffer for many reasons, including the notion that one can move up in an organization not by demonstrating superior business ability, but by having a sexual relationship with a superior and associated favoritism adversely affecting others’ opportunities. Another factor is the concept of cheating. In one company I worked with, it was not uncommon for senior executives to have extramarital relations with employees, with some even bragging to their colleagues about their trysts. When an executive’s angry wife provided information to the company about her husband’s affair, a resulting investigation showed that not only was the affair occurring, but the executive was paying for hotel and other expenses with company funds—raising a fundamental question: If an executive is cheating on his or her spouse, isn't there a greater likelihood that the individual will also cheat the company, which could go well beyond improper expense reporting? In addition to issues surrounding creation of a hostile work environment, the broader ethics of executives came into question. The executive was fired, with a message heard throughout the organization driving meaningful change in the company's culture.

Gauging culture. An experienced executive, consultant, or auditor can go into a company and get a sense of its culture. Touring production or other facilities, talking with managers and workers and observing and probing to gain in-depth knowledge can provide pretty good insight into the values and beliefs of an organization. That being said, there are circumstances where even top executives setting the “tone at the top” don’t have a good line of sight into the “melody in the middle”—with regard to harassment or other issues.

How does management learn what’s really going on in an organization? Tomes are written on this, focusing on such matters as open two-way communication between direct reports, robust compliance processes, effective whistleblower channels—where employees truly believe anonymity is honored and investigation and action taken where appropriate without any form of retaliation, regardless of a violator’s position in the organization—and well-constructed surveys. But of course there are circumstances where the problem starts at the top of an organization—senior managers know full well that inappropriate relationships are occurring between their leader or peers and subordinates. They also may be a party to facilitating such liaisons and retaliating against those rejecting pressures to submit.

The board’s role. It’s been said that a board is responsible for setting corporate culture, but that is misleading. Yes, the board is ultimately responsible for all that occurs in a company, but it engages a CEO and senior management team to run the business. The reality is that it is the CEO, along with direct reports, who set the tone of an organization and establish the culture. But the board is indeed responsible for oversight and taking action where necessary. And make no mistake, where the integrity and ethical values at the top are sorely lacking, the board needs to know and take whatever action necessary to make them right.

How does a board of directors know what’s going on so action can be taken before a hostile workplace environment permeates the corporate culture, with all the associated damage to the company? An effective board will have good knowledge of the company’s culture through a variety of ways: It will receive reports from not only the CEO but also key executives, both in the boardroom and other meetings. There will be one-on-ones at dinner or otherwise for informal yet meaningful discussions. Private board meetings take place with the chief compliance officer, chief risk officer, legal counsel, internal audit, external audit, and others positioned to know what is truly going on in the organization—including such matters as multimillion-dollar settlement payments. Certainly the CEO needs to know of these meetings and, unless fingers point directly at him or her, the CEO needs to be apprised of important information communicated. Information also is obtained via whistleblower or helplines or similar reporting channels, with a sharp focus on whether those vehicles are trusted to ensure anonymity and action.

Directors at many companies increasingly are getting out into the field, talking directly with production, supply chain, sales, HR, and other personnel—not only with managers, but also with those doing the hands-on day-to-day work. These discussions can provide critically important information about what really goes on in the organization. Certainly board members are not auditors and are not positioned to, nor should they, take inordinate amounts of time to look deeply into the bowels of the company. But experienced and insightful former executives sitting on a board can learn much by asking a few relevant questions.

Another effective way for a board to learn what’s going on is through what’s sometimes called a risk-culture survey. Done well, a carefully constructed questionnaire is distributed periodically by management to company personnel—to all employees at once or on a rotating basis. The feedback must be carefully analyzed and corrective action initiated. Importantly, it’s not necessarily the information garnered from one set of responses, but rather trend lines over time, along with clear feedback to personnel that management is taking the results seriously and formulating and carrying out plans to deal directly with problems as needed. To obtain honest feedback, it is absolutely critical that assurances of anonymity are believed. To help gain trust, it can be useful to utilize an outside firm and make clear the information is provided to one executive, such as the company’s chief compliance officer. The board must be provided the results, and the CEO as well, though if there are issues related to the CEO’s actions the report may need to be redacted.

Experience shows it’s not common for a CEO to be the source of such cultural problems. But it can happen, and the board needs to learn about and deal with it.

But what to do when the CEO is also chairman, as appears to be the case at Fox News? That’s why board independence is so important. Survey results and other information garnered need to be understood by an independent committee, such as audit, with further discussions in private meetings of the independent directors, so that any indications of improper behavior and related cultural problems are dealt with swiftly and appropriately. Unless such problems are fully addressed, including dealing with all of the executives involved with misdeeds, the damage can be severe and long-lasting.

Back at Fox News, it’s now been reported that Gretchen Carlson has settled for a payment of $20 million, along with an apology from Fox News, and the company is in settlement negotiations with other women. Roger Ailes resigned on July 21st, a mere 15 days after Carlson filed her lawsuit. Ailes received $40 million as part of his exit agreement and will continue to consult interim CEO Rupert Murdoch through 2018. What will happen at Fox News going forward remains to be seen. We’ll be watching with interest.