"Boards must be held accountable for sexual harassment scandals," 1 Jan 2020 [Subscription required]

When banks harm customers and preventable wildfires rage, corporate boards are remade and top executives are fired. Since 2016, when US regulators revealed that Wells Fargo had opened millions of unauthorised accounts, nine of 14 members of the bank’s board of directors have stepped down, and the chief executive has changed twice. Pacific Gas & Electric, blamed for sparking wildfires in California, has brought in a new CEO and 10 new directors, or 77 per cent of its board.

One might expect companies reeling from sexual harassment scandals, brought to light by the #MeToo movement, to hold their corporate directors similarly accountable.

As a lawyer who represents investors in lawsuits against corporate boards, I can tell you that the reality is very different when it comes to cases that involved allegations of pervasive sexual harassment, such as the ongoing litigation against Alphabet. Directors of companies embroiled in #MeToo-related crises have largely avoided accountability.

Take, for example, what used to be known as 21st Century Fox. In the first year following reports of rampant sexual harassment by news chief Roger Ailes and anchor Bill O’Reilly, not a single member of the company’s board of directors stepped down. Even today, Fox has just one woman on its board...

This is not just the right thing to do. It makes financial sense. A toxic corporate culture drags down workforce morale and can be a bombshell waiting to explode. A company hit by scandal suffers damage to both its reputation and stock price, and may struggle with a leadership transition.