What are the costs of sexual harassment?
Companies have long known that sexual harassment can lead to costly lawsuits that are now valued at up to $7.6 million per case. But since the explosion of #MeToo and the fall of Harvey Weinstein, the costs of misconduct have grown even further. Today, harassment is no longer just a cultural or legal issue, but a financial and brand issue that reaches every corner of the company. That means that no matter how good your training and reporting may be, they’re no longer enough.
Story after story has shown that when a brand loses authenticity over sexual harassment, they also risk losing their hard-won earnings. Uber has lost nearly 15% of its market share over the two years of its harassment scandals. After it was announced that Steve Wynn had received multiple allegations of sexual harassment and assault, Wynn Resorts lost $3.5B in company value.
Now, the sheer force of the #MeToo movement and the cost of sexual harassment allegations are changing how company boards make decisions, where more and more protections are being put in place to lessen the shock of the next big scandal. In particular, we’re seeing two unprecedented changes:
1) Boards are firing faster and speaking louder
Board members have become deeply concerned about the costs of sexual harassment, and are finally moving more swiftly and openly to lower the stakes. According to new studies in crisis management, boards are firing executives accused of misconduct at record speed, and less euphemistic about executive departures than ever. CEOs are now being removed 3x faster than during the Weinstein accusations, and in 2018, at least 8x the number of CEOs will be explicitly fired for misconduct compared to the previous year. This indicates that for boards, #MeToo is now a genuine business risk.
2) Boards are taking back money from toxic workplaces
Sexual harassment can inflict so much damage that lawyers have added ‘Weinstein clauses’ to merger agreements, stipulating that buyers have the right to take back their money if revelations of wrongdoing arise. Lawyers in the world of billion-dollar corporate mergers have said that due to its reputational and financial costs, sexual misconduct is now in the same category of risk as foreign government bribes and IP fraud. The material consequences of sexual harassment have risen, and companies that aren’t doing everything in the power to protect their culture will have a disproportionately high risk of financial loss.
The costs are clear, and companies who wait will pay
The fact that boards are firing faster, speaking louder, and enforcing harder shows that the costs of sexual harassment aren’t just noteworthy—they’re seismic. As the public perception of a company and its financial outcomes are tied closer than ever, the way you prevent and deal with toxic employees is now inseparable from that perception and from your bottom line.
Your company should be armed and prepared to deal with toxic behavior as well as the brand damage that results when people hear about it. Companies are owning up to faults and taking action faster than ever when CEOs misuse their power. If you turn a blind eye to identifying and preventing toxic behavior, you’re risking more than legal fees and turnover—you risk irreparable damage to your market share, merger outcomes, and your name.
How’s your harassment tolerance? If you’ve given tacit permission for your employees to face workplace harassment and discrimination, know that consumers, businesses, and even boards are speaking with their wallets, and what they're saying is loud and clear: the longer you wait to deal with sexual harassment, the more it’s going to cost.