SUMMING UP
Would More Women in Leadership Help Mitigate #MeToo Concerns?
If a good case study is one that splits a class down the middle on an important issue while surfacing creative responses, this month's column on how best to encourage corporate compliance concerning sexual harassment and other on-the-job misdeeds served the purpose nicely.
Those supporting the idea of a corporate board's creating an independent officer of compliance, reporting directly to the board, cited the need for visible action in the face of growing challenges posed by everything from cyber crime to sexual harassment on the job.
As Sabrina put it, "I think the time to revisit whether an independent, non-partisan agency or individual (is appropriate) is now. Even the process of having that discussion, even if the decision is made to not go in that direction would be good for organizations to have." Sam agreed: "This should be standard business practice." He asked, "Why do these boards not have a member who truly understands Compliance/Governance?" John would go even further. "Yes to a compliance officer … This includes determining whether the company is executing and reporting on how it is allocating its residual cash flow among its stockholders and its other stakeholders."
Others were less enthusiastic about the notion. "A compliance officer will not be a panacea," said Nigel. "The real issue is about culture/leadership and supporting systems." Citing Robert Clarke, past Dean of Harvard Law School, Joe recalled Clarke noted that "Boards could be stewards of the corporation, looking after its long term health, or compliance officers using the Board's time to audit its performance against externally imposed standards… My own view is that the role of steward is critical to the success of a healthy economic system."
Nick C suggested that a response to the question has to take into account many things: "An appointment of such a role may well depend on more empirical evaluation of the underlying culture and climate of the entity and even then questions about who they report to, how they are appraised/evaluated, what powers and decision rights they have and how trust and functionality can be cultivated with such a reporting line … sounds challenging."
A wide range of alternatives to a corporate compliance officer were proposed. Paula G commented that "Boards need to become more involved to protect the interests of the owners … they must look outside to trusted advisors for compliance." Hughe said, "One way to get compliance is to frame harassment as a workplace health and safety issue. This is the case in the province of British Columbia in Canada."
Lydia asked, "Wouldn't a more positive answer be to attract, hire, & pay equitably & fairly, the many senior qualified women available for leadership roles?" Shirley put it more bluntly, when she commented, "Corporate boards should hire more women."
Would more women in leadership help mitigate #MeToo concerns? What do you think?
ORIGINAL COLUMN
One of the most important global management stories in 2017 was the #MeToo movement, a transparent, global hotline that brought specific charges of sexual harassment, especially in the workplace, to our attention.
High-profile accusations of gender bias and sexual harassment in Silicon Valley, in the worlds of entertainment, athletics, media, and government drew our attention to the issue. They also raised questions about why some of these practices had been covered up for so long. In some cases, the charges occasioned firings, resignations, and political losses.
Of course, the misbehavior was not confined to sexual harassment. It included activities occasioned, in some cases, by pressure to meet profit goals or suffer severe consequences. The behavior occurred in spite of efforts, such as the creation of reporting hotlines and ombudsmen, to expose and respond to it. It raised questions about how much was known in leadership ranks about what was going on. Inevitably, as it always does, it raised questions about why directors with ultimate responsibility didn’t know more and act sooner. As someone with experience on more than a dozen for-profit boards, I understand why directors find it so difficult to acquire enough knowledge and information to carry out their duties to various stakeholders.
There was a time, of course, when it was generally believed that directors had just two primary responsibilities: ensuring the organization was led by an effective CEO and generally representing shareholders’ interests. The CEO was a filter between the organization and the board. In many organizations, the CEO chaired the board and played a key role in selecting new board members. There was an implicit presumption of trust among the CEO and board members. At least a limited kind of camaraderie was thought to be essential among the leadership and the directors of a company.
Those fearing dysfunctional behaviors resulting from that kind of camaraderie have advocated the creation of the independent board chair, whether or not the CEO is a board member. But the dysfunctional behaviors apparently have continued without the knowledge of independent chairs, even with the existence of such things as confidential hotlines. (For example, Wells Fargo, the poster child for dysfunctional behaviors in recent months, has an independent board chair.)
Employees in need of their jobs have been afraid to report dysfunctional behaviors, even when they themselves are directly affected. Others who have reported issues have been disciplined or even fired after their complaints have been lodged “confidentially.” Trust has suffered among employees, customers, and suppliers alike.
This prompts the question of whether boards should hire compliance officers with independent status reporting directly to them. [The idea is not new. It has been employed among some financial organizations. The US government has an Office of Compliance, an “independent, non-partisan” agency.] The purpose would be to facilitate knowledge of what is going on in the organization.
It might be argued that this could damage the bond of trust among leaders, a situation where management might shield the compliance officer from information, or even a case where the CEO and compliance officer might develop a cozy relationship. On the other hand, an added window into the workings of the organization, similar to that often provided by the chief legal officer reporting the status of legal cases, would be available to the board. The existence of the compliance officer could provide assurance to potential whistleblowers and plaintiffs that their information would not be held against them, thus encouraging more reporting, for better or worse.
Should corporate boards hire compliance officers? What do you think?