Closing The Gap

Fearing future #MeToo allegations, a growing number of companies are turning to reputation management firms

@Lesia.Valentain via Twenty20

The business of protecting companies from sexual harassment scandals is booming.

Calls to reputation management firm Temin and Company quadrupled in 2018, according to president and CEO Davia Temin.

"Sexual harassment has not been one of our biggest areas of inquiry, up until now," Temin tells CNBC Make It. But with the rise of the #MeToo movement, companies are finding themselves unprepared and facing huge legal liabilities. Temin's business helps companies — including more than 15 in the Fortune 500 — find and address internal problems, before they become public.

When a company hires Temin and Company, the firm first conducts an in-depth study into the company's leadership and corporate culture. Temin zeroes in on how persistent a culture of sexual harassment is at an organization and what the company is doing wrong, then makes recommendations at the governance level, including, in some cases, firing senior people. Many of Temin's clients are in highly-regulated industries, like pharmaceuticals and finance.

Workplace sexual harassment claims jumped more than 12 percent in fiscal year 2018, according to the U.S. Equal Employment Opportunity Commission (EEOC). The EEOC recovered $70 million from companies for victims of sexual harassment in 2018, up from $47.5 million the year before.

"From the beginning of the #MeToo movement to now, I have definitely seen corporate employers and non-profit organizations taking this issue so much more seriously," Victoria Lipnic, acting chair of the EEOC tells CNBC Make It.

The EEOC offers harassment prevention training, and its trainers are booked up six or seven months out, according to Lipnic. Its staff outline best practices for preventing harassment and tailor recommendations to suit different workplace cultures. Though the organization used to receive case-by-case requests for help, often from employers looking to "check the box" following an expensive settlement, this type of training aimed at really changing corporate culture is new, says Lipnic, who now gets more than 100 emails every day from companies asking for help.

"It is undeniable that people woke up," said Lipnic. "I certainly hope, as the head of the EEOC, that people stay awake."

Still, she says, the real impact of the actions firms are taking won't be clear for five to 10 years. "If this is all a 'one -and-done' thing, then I am not sure how much improvement we will have made."

Davia Temin
Photo courtesy of Temin and Company

Boards and executives are taking a much closer look at their exposure to #MeToo claims this year, having witnessed an increasing number of shareholder and class action lawsuits.

Legal experts highlight the shareholder lawsuits filed against Wynn Resorts and Twenty-First Century Fox as examples of shareholder litigation in the wake of #MeToo. Around 30 percent of the annual company reports required by the United States Securities and Exchange Commission (SEC) included "reputational risk" in their risk factors in 2018, a CNBC search revealed.

Also driving action: women at the board and C-suite level. While 494 of the the 3,000 biggest publicly traded companies in the U.S. had no female board members as of November 30 2018, according to research firm Equilar, the vast majority of Temin's clients have female board members. Lipnic also emphasizes that an engaged leadership is the most important factor when it comes to addressing sexual harassment in the workplace.

To address problems internally, many experts recommend "bystander training" — encouraging employees who witness bad behavior to report it — over sexual harassment training, which multiple studies have shown to be ineffective. (In October, New York State began requiring companies to implement workplace sexual harassment training.) Lipnic agrees that bystander training has shown some promise where it's been used on university campuses, but says more research is needed.

Companies are increasingly factoring exposure to sexual misconduct claims into hiring decisions, mergers and acquisitions deals and asset management. Beginning in the summer of 2017, the so-called "Weinstein Clause" started showing up in more deals, according to Temin. The clause allows companies to nix a deal if due diligence investigations turned up negative reports about executives at target companies.

There's also been a decrease in willingness to tolerate "superstar harassers," top performers known to bring in business and abuse their power, like Harvey Weinstein. Lipnic says plaintiffs lawyers have also told her that companies are also more likely to settle on good terms with harassment complaints.

"They made a different cost-benefit analysis before than they are making now," she says . "People are recognizing the impact — and this is the #MeToo movement — of harassment on people, and how it can impact their careers for years."

Investigators are also being employed to look further into people's pasts, following sexual misconduct scandals involving high profile figures such as former chief executive officer and chairman of CBS Les Moonves, which surfaced after decades.

People are recognizing the impact — and this is the #MeToo movement — of harassment on people, and how it can impact their careers for years.
Victoria Lipnic
acting chair, U.S. Equal Employment Opportunity Commission

"In the year since the Weinstein scandal, we've seen around a 35 percent uptick in client calls on the matter," says Dan Nardello, a former federal prosecutor at the Manhattan U.S. Attorney's Office, who now runs his own firm.

While some companies and boards previously viewed background investigations as a "check the box" requirement going back 10 years, many more now recognize the value of an in-depth, rigorous investigation going back decades, said Nardello.

"As we've seen in a number of high profile situations, 10 years is usually not long enough to fully vet someone's background," he said. "Our clients are increasingly requesting that searches be both as historical and as comprehensive in scope as possible."

Social media means #MeToo claims can spread fast and wide, and these firms are also increasingly being hired by men who say they have been wrongly accused. Temin estimates that between five and 10 percent of accusations are false. She works with those who say they've been wrongly accused to develop an authentic counter-narrative, figure out how to involve human resources and manage their reputation within an industry.

"Whatever you do, you want to do it very quickly," said Temin, who says in the past she's been concerned clients might hurt themselves.

Still, Temin calculates that 1,110 high-profile figures have been accused of sexual harassment since the allegations against Weinstein first emerged. "We probably have not heard the worst of the stories," says Temin. "Those who are truly damaged are often too damaged to come forward."

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