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That calculation won't work with harassment, though. By the time your lawyers are in settlement negotiations with the next harassment victim, a chain of bad decisions has allowed a dysfunctional culture to persist, and potentially to pollute every product you sell to the public.
What you need is a culture where everybody knows what the rules are and what the consequences are for breaking them. How can you get there?
- First of all, you have to fund the company culture. Without adequate resources, your ethics and compliance operation can’t establish the systems necessary to build a compliance ecosystem where issues are dealt with when they’re small, instead of catastrophic.
- Give authority to the right people. If your compliance and human resources departments can’t remove a toxic manager because business interests outweigh concerns about workplace culture, you have a problem. The skeletons are probably building up in your closet and you don’t even know it.
- Listen. To build a speak-up culture, you need to listen. You want to hear what’s sick and toxic in your organization, painful as it may be. That may mean checking reports on Glassdoor, or even asking questions first. Your employees must feel safe to speak up without threat of retaliation and with confidence they’ll be believed.
- It’s not all about the money. Harassment claims can be expensive and of course the latest rash of incidents demonstrates the dire balance-sheet risk they present to some companies. But to properly reassess the risks managers must assign a greater value to human dignity and civil treatment in the equation. This isn’t the kind of risk you can model on a spreadsheet.
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Sexual harassment wasn’t invented this year, and it isn’t going away. It’s a psychological problem, usually rooted in workplace power imbalances, and predators aren’t going to change their activity voluntarily.
What is changing is how companies and investors are assessing the risks associated with harassment.
SEXUAL HARASSMENT WASN’T INVENTED THIS YEAR, AND IT ISN’T GOING AWAY.
A recent cover story in Barron’s quoted investment managers who are increasingly concerned about the enterprise-value impact of sexual harassment and other symptoms of a corporate culture gone awry. The Equal Opportunity Employment Commission believes one in four women in the U.S. experience harassment at work, yet a study of Securities and Exchange Commission filings that Barron’s requested from Sentieo found only 166 mentions of “gender” in the risk factors section of annual 10-k filings since 2009.
“Corporate boards must be much more aggressive in enacting stronger compliance regimes for human resources,” Stu Dalheim, director of engagement at Calvert Research and Management, the responsible investing unit of Eaton Vance, told Barron’s.
In a world where a single tweet can force change across the entire organization, it’s downright reckless to pretend harassment won’t happen in yours. Time to make sure the values you say your company embraces are reflected in every product you sell.