The High Price of Sexual Harassment
In the wake of the Roger Ailes and Bill O’Reilly scandals at Fox News, Rupert Murdoch reportedly lost $1.6 billion in net worth. One point six BILLION. Financial darlings, the likes of Uber, SOFI and Binary Capital likewise suffered valuation losses in the billions after sexual harassment scandals made headlines. Losses befalling the Weinstein Company have gone unreported, although legal fees alone have been estimated at more than $40 million, with allegations spanning continents, decades, and more than 80 accusers.
As the #MeToo movement continues to gain momentum, sexual harassment claims against powerful business leaders will surely continue to dominate the news. And yet Wall Street is not demanding the one thing that would bring transparency to the corresponding financial hit: public disclosure of sexual misconduct.
Allow me to break it down. Substantiated allegations of sexual misconduct are now all it takes to trigger the termination or resignation of an accused executive, even before legal action begins. Such actions alone have cost companies billions. Public companies are required to disclose material information — if said information would make other statements misleading if they were not disclosed. I know. This is some serious SEC mumbo jumbo, but stay with me. If substantiated allegations of executive sexual misconduct have the ability to cause precipitous decline in company value, I’d offer that corporations should be required to report them when they happen. And let’s face it, if they were required to report them, perhaps they would happen far less than they do right now.
Let’s revisit the Bill O’Reilly scandal for a moment as a prime example of why this is important. According to the New York Times, in January 2017, Bill O’Reilly settled a sexual harassment allegation for the whopping sum of $32 million. The article includes a “non-consensual sexual relationship” among the allegations. Is it me, or is that just a euphemism for rape? Regardless, how bad would it have to be to require $32 million? Worse, it was at least the SIXTH agreement, albeit the largest, made by O’Reilly or the company to settle harassment allegations against him. The SIXTH. In February, just a month later, Fox granted O’Reilly a four-year extension at $25 million a year. The story was revealed on April 1st and by early May, Twentieth Century Fox stock had dropped by 16 percent. Now imagine what would have transpired if Fox had been required to disclose O’Reilly’s misconduct after the 1st substantiated allegation? The 2nd. The 5th. Do we believe there would have been a fifth allegation?
It is often the case that these settlements are made in exchange for the accusers’ silence. As a result, most cases go unreported, and executives with a history of misconduct can move from company to company repeating the same behavior wherever they go. I liken it to the practice of moving pedophile priests from parish to parish. I tested this theory with a CEO that settled two harassment cases at the company where I worked early in my career. I typed his name and the words “sexual harassment” into Google to see if he was later accused at a different company, and immediately found reports of a $29M harassment lawsuit against him. I realize this story is purely anecdotal, but given the clandestine nature of settlements and non-disclosure agreements, it is the best I can do to support my theory.
What would have happened had he been required to disclose those settlements when they happened? Would he have gone on to harass more women at other companies? Would his company have been subject to a $29M lawsuit that resulted in an undisclosed settlement likewise valued in the millions? Probably not.
Bottom line, I am looking to the SEC and Wall St. to hold these leaders accountable, which in turn, may just improve their bottom line.