From Wynn Resorts to Lululemon, 2018 was the year of #MeToo mea culpa
- #MeToo scandals this year were faced by Wynn Resorts, Lululemon and Barnes & Noble.
- Companies developed different ways to handle their #MeToo mea culpas.
- Some were explicit and others were coy.
The #MeToo movement that started 2018 forced companies across the U.S. to deal publicly with the historically private issue of sexual harassment.
Harvey Weinstein's alleged transgressions struck a tone with the public and social media became a powerful microphone to amplify his and others alleged wrongdoings. As consumers and investors paid more attention, companies had to quickly learn the delicate art of admitting and apologizing on a public stage.
"Companies cared before about these issues, but now they really care because the reputational exposure can be so big and hard to quantify," said Lauren Casazza, a litigation partner at law firm Kirkland & Ellis, who advises companies on sensitive matters, including workplace misconduct. Casazza declined to discuss company specifics.
The founder problem
The biggest challenge for some companies last year arose when a founder was one of the accused.
Shares of luxury hotel operator Wynn Resorts fell more than 10 percent when the Wall Street Journal published a story in January detailing allegations of decades of sexual misconduct by gambling mogul, Steve Wynn. Wynn announced his resignation as CEO and chairman in February, which the company's non-executive board director said it accepted with "a collective heavy heart."
The company paid Wynn no severance and he eventually sold his remaining stake in "privately negotiated transactions." A spokesperson for the company told CNBC the company has also taken a number of steps since Wynn's departure, including creating new department of culture and community and launching enhanced workplace compliance and anti-sexual harassment training.
But Wynn's stock is down more than 42 percent since the news broke, as the hotel operator has grappled with slowing sales, particularly in Macau.
Papa John's, meantime, has yet to extricate itself from its founder, John Schnatter, who holds a roughly 30 percent stake in the company.
Racially charged comments made by Schnatter leaked to the public in July, sending shares of the pizza chain down nearly 6 percent. Soon after, a Forbes article emerged accusing the company of having a "frat-like culture" led by Schnatter that disparaged women.
Schnatter resigned as chairman a day after his comments leaked. A week later, the company decided to remove its marketing images of him, including his face on Papa John's pizza boxes. It later ran a campaign on Facebook and Twitter in which it addressed the comments head on.
"You expected better from Papa John's," says the video, which was posted on Facebook and Twitter. "So did we."
The marketing campaign, though, has yet to fully stem the losses. Its shares are down roughly 20 percent since news broke in July. The company also launched a sale process last year, one that has been made more complicated by Schnatter's stake.
Cleaning house
Cleaning house is easier when the founder isn't the party accused. Last year, many companies took pains to explicitly separate themselves from an implicated executive.
Lululemon Athletica announced in February its CEO Laurent Potdevin was resigning from the retailer after he "fell short of ... standards of conduct." One of the reasons behind Potdevin's departure was a multi-year relationship with a female designer, CNBC later reported.
Shares of Lululemon fell more than 3 percent after the market closed on the day Potdevin's exit was announced, but the stock has since risen roughly 60 percent. Lululemon announced Potdevin's replacement, Sephora executive Calvin McDonald, in July.
The exodus from Nike was a slower drip. Its widely presumed next CEO, Nike Brand President Trevor Edwards, resigned suddenly in March after complaints about workplace conduct. By May, 10 senior managers had left the company. Nike's shares, though, have risen 10 percent since Edwards' resignation.
Some companies were more indirect, acting simultaneously vocally and coyly about the reason for a CEO's departure.
"There are all sorts of things going on in the background that reporters don't see that make communications during a crisis challenging, for example when/what to disclose about a #MeToo investigation that may still be ongoing and not complete," Casazza said.
When Barnes & Noble fired Chief Executive Demos Parneros in July without severance, it was initially mum on the cause, only saying it was not "due to any disagreement with the company regarding its financial reporting, policies or practices or any potential fraud relating thereto."
When Parneros later sued Barnes & Noble for defamation, it issued a separate, more explicit statement: "The lawsuit filed by Demos Parneros is nothing but an attempt to extort money from the Company by a CEO who was terminated for sexual harassment, bullying behavior and other violations of company policies after being in the role for approximately one year."
Shares of the bookseller, which is facing its own challenges, were initially unchanged by Parneros' departure. Under his tenure, shares shed 32 percent.
Barnes & Noble and Nike didn't respond to an email seeking comment. Lululemon and Papa John's declined to comment.
Board oversight
It's unclear what corporate scandals will look like in 2019, but in 2018 companies put in procedures to try to stop, or at least mitigate, the financial pain.
For many, this means efforts to diversify the boardroom.
"I do believe part of the problem is that a lot of these organizations have been primarily men, so if there was sexual harassment, it was really difficult to report it," said Patricia Lenkov, founder of board recruiting firm, Agility Executive Search.
Boards are also creating more oversight at the highest levels, creating new reporting methods, should the questionable behavior be carried out by CEOs or in human resources departments. Some boards, meantime, are also asking to be informed more frequently about complaints.
The oversight is for more than public relations. #MeToo fallout has also led to litigation this year.
A CBS shareholder in August sued the media company, roughly a month after shares of the company fell a little more than 6 percent when news leaked of a pending article alleging sexual misconduct by then CEO Les Moonves. The company had touted its "harassment-free workplace environment" in filings with the Securities and Exchange Commission, but did not disclose Moonves' alleged misconduct, the suit stated.
Moonves, like Steve Wynn, was denied severance.
"Now the [#MeToo] risk can be on par, at least reputationally, with corruption risk and cyber-security risks," Casazza said.
Roughly 55 percent of professional women are less likely to apply for a job at a company facing public allegations of #MeToo improprieties, according to advisory firm advisory firm FTI Consulting. The firm also reports that nearly half of professional women are less likely to buy products or stock from such companies.
"It may take a few years, but [the survey] foreshadows significant impact for a company," said Elizabeth Alexander, senior managing director at FTI Consulting.