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The Financial Cost of Sexual Harassment in the Workplace

The Financial Cost of Sexual Harassment in the Workplace

By Norman Ford and John Arendes

Harvey Weinstein’s company Miramax has produced a long list of award-winning movies, he himself won an Oscar as a producer of Shakespeare in Love in 1999. Despite these accolades, what he will most likely be remembered for now is the subject of harassment and how his dramatic downfall opened the floodgates as a slew of other public figures followed him into infamy.

Their abhorrent behavior and treatment of others is easy to condemn, and irrespective of whether any of these men pay for their actions, the fact is everyone involved, both victim and perpetrators, will pay heavily. While the cost to those who were abused, to those whose lives and careers were irrevocably damaged, is incalculable, the cost to the organizations and businesses behind these men, and others like them, is calculable.

Moreover, it is a hefty price tag companies have appeared either willing to pay or happy to ignore.

21st Century Fox paid $45 million in the first quarter of 2017 to settle allegations of sexual harassment, while Weinstein reportedly reached eight settlements with a group of women to avoid “lengthy and costly” litigation, which were in the six-figure range. Fox News paid $13 million to five women who worked at or appeared on Bill O’Reilly’s show.

In 2012, in what is believed to be the highest compensation awarded to a single victim of workplace harassment, Ani Chopourian was awarded $168 million.  Yes, the amount was later reduced to $82,230,484, but that is still a considerable sum.

A sports fan?

When Browne Sanders, a former executive for the NBA’s New York Knicks, took her case a number of key players were named and during the trial testimony was aired that included the Knicks and team owner James Dolan. Sanders was awarded $11.5 million.

American Apparel’s CEO Dov Charney is almost in a league of his own given the number of lawsuits taken against him, while the company itself went from roughly $633 million in sales to filing for bankruptcy and being reportedly $177 million in debt.

Then there also all the many occasions where there is no public record of a payout because the case was settled privately.  Jennifer Drobac, a professor of law at Indiana University’s Robert H. McKinney School of Law, says that often the accused is someone powerful and profitable for the company, so management decides it’s worth paying “a few hundred thousand dollars in settlements to make a problem go away.”

However, although these numbers are significant regarding their size, they do not reveal the full cost of harassment in an organization.

When Susan Fowler took her Uber story public, the response was swift and universal, with #DeleteUber quickly going viral. In one recent survey, 56% of those respondents who had left Uber in recent months have done so explicitly because of the bad stories.

The explosion of high profile cases is also garnering attention from investors. While in the past such occurrences/ situations may have been easy to overlook now, according to Stu Dalheim, director of engagement at Calvert Research and Management, “The case is getting stronger for investors to understand that there is risk in many companies. Corporate boards must be much more aggressive in enacting stronger compliance regimes for human resources. Investors should be asking companies and corporate boards to do more.”

Already the consequences are being felt. Habib Subjally, a senior portfolio manager at RBC Global Asset Management, has said he intends to start asking companies directly how they are managing the risk of sexual misconduct. “If they throw a legal answer at me, I’m disappointed,” he says. “‘We have zero tolerance’ isn’t how to answer the question. This is about showing respect and being able to explain how management provides a caring, nurturing environment for their team.”

There are other costs too. The NY Times is drawing attention to the fact that as a knee-jerk reaction to the harassment scandals, many men are now refusing or avoiding solo meetings with females.  “Before you might have said, ‘Of course I would do that, and I will especially do it for minorities, including women in Silicon Valley. Now you cancel it because you have huge reputational risk all of a sudden.”

And this is not just his view. In a poll for the New York Times, most men and women said people should take extra caution around members of the opposite sex at work and about a quarter believe private meetings with colleagues of the opposite sex are inappropriate. However, will this have long-term consequences for mentoring and coaching opportunities? And without this vital and career-boosting service, will women and organizations not benefiting from female leadership, only suffer even further?

We are sure in time we will have even more data, more proof that harassment in the workplace comes at a huge cost to everyone. For now, we do know that independent film production Good Universe has just won the film rights to Susan’s story, so we can expect Disruptors in a theatre near us soon.

While there were many other bidders, we do not believe Miramax was one of them.

Norman Ford is the VP of Operations for Compliance Solutions at Skillsoft and John Arendes is the VP and GM of Compliance Solutions at Skillsoft.

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