Workplace sexual harassment may be committed by individuals, but if and when harassers feel able to freely engage in misconduct without fear of being caught or punished, that’s a problem for the whole organization. Specifically, it speaks to a culture challenge; the organization may have policies in place designed to prevent and stamp out sexual harassment, but victims don’t feel secure in reporting because the culture discourages it. Because of that, senior leaders may not find out about a harassment problem as early as they could.
But if culture is part of the problem of sexual harassment, it is also a part of the solution—and a growing concern among directors and shareholders. In a recent blog post at the MIT Sloan Management Review, Patricia H. Lenkov, founder and president of Agility Executive Search LLC, and Denise Kuprionis, founder and president of The Governance Solutions Group, discussed some of the steps boards can take to actively manage culture so as to mitigate the extensive legal, financial, and reputational risks associated with sexual harassment. They offer up some questions directors should be asking in their dialogue with management about the organization’s policies and practices:
How do our current policies measure up to best practices?
Too often, the board does not read company policies or require human resources leadership to review policies and procedures annually to gauge the effectiveness of the reporting process. Directors may think this level of review is “stepping on management’s toes.” However, the board must determine whether the company’s current policies and procedures related to preventing workplace sexual harassment and discrimination are adequate. Asking HR how these policies are communicated and to define “best practices” is not crossing the management/board line. Directors should weigh in on whether the CEO and the management team are communicating the right message.
Do employees trust and use our procedures for reporting harassment?
While there are many methods and procedures organizations use for employees to report harassment or complaints, hotline calls to a company’s dedicated ethics line are a good example. Board directors sometimes utter a sigh of relief when they hear there have not been any hotline calls at their organization, but it’s a common misconception that few calls to the ethics line equates to a “good” company culture. In an open and trusting culture there are many calls — calls for how to handle a matter, calls for clarification, and, yes, some calls that report a potential problem. Informed directors ask how many calls are received in a given time period and require that calls be categorized. …
Bob Iger, the CEO of the Walt Disney Company, received a total compensation of $36.3 million in fiscal year 2017, if all goes well, could earn more than twice that figure this year. The company’s investors, however, have balked at the board’s plan to reward Iger so generously, voting 52–44 percent against a non-binding advisory resolution approving Disney’s executive compensation pan at its annual shareholder meeting, Bloomberg reports.
Three proxy advisors had urged investors to reject the plan, which they said was misaligned with performance, but the board insists that Iger’s compensation package is worth making sure he remains on board through the completion of Disney’s ongoing $52.4 billion deal to purchase 21st Century Fox:
“The board decided it was imperative that Bob Iger remain as chairman and CEO through 2021 to provide the vision and proven leadership required to successfully complete and integrate the largest, most complex acquisition in the company’s history,” Aylwin Lewis, head of the Disney board’s compensation committee, said Thursday.
Bloomberg notes that this is the first time Disney shareholders have pushed back on an executive compensation package since federal regulators began encouraging these “say on pay” votes in the 2010 Dodd-Frank Act. Indeed, such rejections are still a rare occurrence in corporate America generally. Just 1.2 percent of S&P 500 companies had their advisory pay resolutions opposed by a majority of investors in 2017, Reuters reports, citing data from ISS Analytics.
For the most part, America’s largest companies agree that they need more gender diversity on their boards of directors. Even those who question the bottom-line value of diversity can recognize that having more women in leadership improves a company’s public image and offers a perspective that can help them better serve their female stakeholders and customers. While corporate America has made some progress toward bringing more women into the C-suite, gender parity in corporate leadership is still a distant vision. On boards of directors, women’s representation also remains low, with some major companies having not one woman on their board.
Furthermore, getting a seat at the boardroom table is only half the battle for women’s inclusion, as Kimberly A. Whitler and Deborah A. Henrietta discuss at the MIT Sloan Management Review. According to their research, more is needed for women directors to have a real impact on corporate governance.
There are three levels to progress for women on boards, Former Xerox Corp. CEO Anne Mulcahy tells the authors: breaking in, critical mass, and gaining influence. The true power in boards lies with a handful of select committees: audit, nominating/governance, executive, and compensation. Across the Fortune 500, 58 percent of companies have at least one woman chairing a board committee, but the numbers of women leading these key groups is far lower: Only 21 percent of nominating or governance committees have a female chairperson, Whitler and Henrietta find, and just 5 percent of executive committees. Meanwhile, women hold just 6 percent of board chair positions, and in half of those cases, it’s because that woman is the CEO of the company.
Facebook announced last week that Kenneth I. Chenault, the retiring CEO of American Express, would join the social media giant’s board of directors on February 5. A 37-year employee of American Express, Chenault was appointed to the chief executive post in 2001, joining the very small club of people of color in the upper echelons of corporate America. Next month, he will become the first person of color on Facebook’s board, Hanna Kozlowska notes at Quartz, fulfilling a promise Chief Operating Officer Sheryl Sandberg had made to the Congressional Black Caucus last year that the company would soon appoint an African-American director.
With Facebook, like all of its peers in big tech, has been criticized for a lack of diversity in its workforce, particularly in technical and managerial positions. Its latest diversity report, released last August, showed modest progress, with black Americans making up 3 percent of its US workforce and Hispanic Americans 5 percent. Women now make up 35 percent of Facebook’s global workforce, 28 percent of its leadership, and 19 percent of its technical staff. Minority presence in senior leadership, however, has stagnated since 2014.
TIME magazine revealed its Person of the Year this week, granting the distinction not to an individual but rather to a group of women it calls “the silence breakers,” who have spoken up against sexual harassment in their workplaces in recent months. This includes the women in entertainment, media, and technology who exposed prominent men in their industries as serial sexual abusers; as well as the vast numbers of women who came out around the world with personal stories of sexual harassment on social media through the #MeToo hashtag campaign.
The revelation of these women’s stories, along with the growing number of famous men who have been fired from their jobs and publicly disgraced due to sexual misconduct allegations, has engendered a palpable shift in the way we as a society talk about sexual harassment and assault in the workplace. The shocking revelations of decades of sexual misconduct by Hollywood producer Harvey Weinstein in October may have been the event that triggered the avalanche of allegations and public admissions of guilt:
The response to the Weinstein allegations has shaped the way people view women who come forward. In a TIME/SurveyMonkey online poll of American adults conducted Nov. 28–30, 82% of respondents said women are more likely to speak out about harassment since the Weinstein allegations. Meanwhile, 85% say they believe the women making allegations of sexual harassment.
TIME also touches on the impact this conversation is having on gender relations in the workplace, noting that it is making men think harder (and feel some anxiety) about whether the interactions they have with their female colleagues are appropriate, and worry about crossing lines where they hadn’t before:
A suite of corporate governance reforms proposed by the UK government will not require companies to have employee representatives on their boards after all. A slimmed-down version of the proposed revisions to the UK Corporate Governance Code, just issued by the Financial Reporting Council, instead proposes to require “the adoption, on a ‘comply or explain’ basis, of one of three employee engagement mechanisms”: a director appointed from the workforce, a formal workforce advisory council, or a designated non-executive director.
The revisions will not mandate direct employee representation on boards, as Prime Minister Theresa May had briefly suggested last year, but will start putting pressure on organizations to devise their own ways of making employees’ voices heard in the boardroom. This will give businesses the flexibility to design the right solution for their organization, Rob Moss reports at Personnel Today:
Peter Cheese, chief executive of the CIPD, said: “This is a significant step forward in recognising the value of the workforce and the need for its voice to be heard at board level. The FRC rightly recognises that in order to drive sustainable culture change and build trust in business, boards must focus more on values, behaviours and a wider stakeholder voice beyond that of shareholders, with particular attention to the voice of the workforce.”
The National Association of Corporate Directors’ 2017-2018 Public Company Governance Survey, which came out this week, identifies several issues that directors say are matters of concern for them, as well as what they are not getting enough information about from management and want to spend more time discussing in board meetings. Among these issues are cybersecurity threats, which only 37 percent of respondents said they felt confident that their company was prepared to defend against; and business strategy, with 71 percent saying their boards needed to improve their understanding of and contribution to management’s strategic decisions.
The third item on the list is corporate culture, which directors say they are hearing plenty about from upper management, but are not getting enough insight into what culture actually looks like further down the org chart, as Vincent Ryan notes at CFO:
Eighty-seven percent of directors said they had a good understanding of their companies’ tone at the top, but only 35% of directors said they had a good understanding of “the mood in the middle,” and just 18% of them indicated they had a good grasp of the health of the culture at lower levels of the organization.
While directors generally were confident that management could “sustain a healthy corporate culture during a period of performance challenges,” 92% of directors said they relied totally on reporting from the CEO about the health of organizational culture. According to the survey, it was rare for a director to get a direct take on corporate culture from functions such as internal audit (39%), compliance and ethics (30% ), and enterprise risk management (20%)[.]
These takeaways are largely consistent with our own latest research at CEB, now Gartner. One reason why boards are talking more about culture because shareholders are: our Investor Talent Monitor (which CEB Corporate Leadership Council members can check out here) shows that questions about talent topics, including company culture, are coming up more often on CEO calls with investors. Another reason why culture is on boards’ radar is that so many recent scandals have revolved around allegations of toxic company cultures: Boards today need a better view of culture because its impact on the bottom line has never been more apparent.