Harassment Fallout Follows Familiar Pattern

Hey, it’s Mark. Sometimes the wrong people accumulate power, and they invariably abuse it. Not every system has safeguards in place. The Vatican, for example, doesn’t have an oversight committee, unless you count God. But companies do. And as we’ve learned from allegation after allegation of sexual harassment or assault by powerful executives, corporate boards have utterly failed to do their jobs.

The latest example, of course, is laid out in a series of explosive reports from the New York Times, the New Yorker and other publications about Harvey Weinstein. Many women accused the Hollywood mogul of assault or of pressuring them for sex during what they thought were business meetings over the course of decades. He’s a powerful figure whose money and influence could make or break careers.

Weinstein’s role in filmmaking has a lot in common with venture capitalists. There are several VCs who exploited a similar imbalance of power with female entrepreneurs. Those women hoped to make business connections and uncover financial opportunities that could allow their businesses to survive. With many of the offenders, their venture partners and investors had the authority to kick them out but turned a blind eye to allegations.

A detailed list of claims against Weinstein were seen by his company’s board in 2015, according to the Times. Weinstein said the matter was settled quickly, and the claims were withdrawn. But the board had an inclination that the letter wasn’t a fluke, and not just because Weinstein’s alleged problem was apparently an open secret in Hollywood. Weinstein’s brother, Bob, acknowledged this week in a email published by the Times that Harvey had “a problem that really exists,” and the board finally sent him packing.

While boards can’t be expected to babysit executives, ignoring a thorough set of allegations that lands in their laps, especially when there’s a pattern, means directors aren’t fulfilling their responsibilities. What’s more, waiting for journalists to investigate is simply bad business. The public and investors lose more trust in a company that lets a troubled executive run amok than one that deals with the issue before it spins out of control.

Boards have settled into a troubling routine that Weinstein Co. adopted. After getting caught, the alleged offender is first placed on a leave of absence while the company waits to see if it’ll all blow over. It rarely does. Then come the statements of contrition, sometimes donations to women-friendly causes. Dave McClure started by forfeiting “day-to-day operations” at the VC firm he co-founded before stepping down days later. Bill O’Reilly said he was taking a vacation. And although Travis Kalanick wasn’t accused of harassment, he oversaw an organization in Uber where the problem was allegedly rampant. Kalanick’s leave, like McClure’s, O’Reilly’s and Weinstein’s, didn’t last long.

A popular alternative, and just as ineffective, is a prolonged exchange of power. As the Times was preparing to publish claims that SoFi Chief Executive Officer Mike Cagney had inappropriate relationships with subordinates and that the board repeatedly took no action, the company started with an exit plan that would keep him in power for another three months. A few days later, he was out. BetterWorks, a lesser-known startup, also went the interim CEO route after Bloomberg reported on a sexual harassment suit. That one has so far stuck, but a book he was planning to publish with John Doerr of Kleiner Perkins Caufield & Byers is on ice.

Boards have the power to take swift action, and doing so can reassure employees, investors and the public. Without that, businesses become dictatorships, where it takes an insurrection to remove mad kings from power. That’s not a very good system. —Mark Milian

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