The #MeToo movement, sparked by October 2017 articles in the New York Times and New Yorker detailing sexual harassment and assault claims against film mogul Harvey Weinstein, triggered an ongoing wave of allegations that has felled once-powerful figures in Hollywood, politics, the media, the hospitality industry and other fields.
For family business owners, l’affaire Weinstein proves how high the stakes are.
In a long-overdue move, the board of The Weinstein Co. fired Weinstein — co-founder of the studio with his brother Bob — after the Times and New Yorker reports were published. On March 1, 2018, after negotiations marked by several twists and turns, the near-bankrupt company reached a deal to sell most of its assets to an investor group led by Maria Contreras-Sweet, former administrator of the Small Business Administration. The Weinstein brothers will receive no cash from the sale. The deal includes a compensation fund for victims, and the buyers will pay off the company’s debt. A suit against the brothers filed by New York attorney general Eric Schneiderman, charging that they repeatedly violated state and city laws against gender discrimination, sexual harassment, sexual abuse and coercion, will continue.
Update: After the print edition went to press, there were new developments in the Weinstein case. Contreras-Sweet's investor group found undisclosed debt of $55 million to $65 million during the due diligence process, and the sale of The Weinstein Company collapsed. On March 19, 2018, The Weinstein Company filed for Chapter 11 bankruptcy protection. Investment firm Lantern Capital submitted a "stalking horse" bid to take over the company's assets. On April 30, 2018, sources reported that no other major bids were made, and Lantern would begin negotiations to take over the assets.
Clearly, it’s high time for workplaces to commit to fighting sexual harassment. Family businesses face challenges in proving that their efforts to do so are genuine. Along with recent press reports about harassment have come revelations about complainants pressured to sign onerous non-disclosure agreements. This has led to a widespread perception that human resources departments exist to protect the organization rather than employees. When the organization is owned by or strongly associated with a family, that perception can be tough to counteract.
“From what we’ve seen, family enterprises are in no way immune to the kinds of behaviors that afflict non-family enterprises,” says Richard Hart, who has investigated sexual harassment and sexual assault allegations in family businesses and other workplaces.
“We have seen that, just like non-family enterprises, family enterprises rationalize their way into not dealing with complaints,” adds Hart, a founding director of consulting firm ProActive ReSolutions. “Loyalty is often one of those ways that we rationalize our willingness to look the other way.”
Setting the tone
Virtually all organizations today have written policies stating that sexual and other forms of harassment will not be tolerated. But these policies do no good unless employees trust the organization will enforce them.
“It really starts at the top. It has to be a cultural issue flowing directly from the highest-ranking owner that is involved in the business,” says Scott Cooper, co-chair of the labor and employment practice group at the law firm Blank Rome LLP, which helps family business clients craft sexual-harassment policies and has represented family firms in harassment cases.
“People should never, ever feel like this is all about legal protection,” says Brooke Iley, who co-chairs Blank Rome’s labor and employment practice group with Cooper. “They should always feel like this is about resolving any potential issue and making a better workplace environment.”
In order for the human resources department to gain credibility as a place where employees can safely report harassment and express concerns, top management must proclaim support for HR, Cooper says.
“They must make that very public,” he says. “They must intentionally not undercut the efforts of HR.” For example, Cooper says, managers should refrain from making jokes about the HR function. Another no-no: telling employees that HR can be bypassed (e.g., “Just see me”).
Eve Hewitt, director of human resources at Port Blakely, a Seattle-based company in the fourth generation of family leadership, is charged with ensuring employee programs align with the company values. One of those core values is “respect,” says Hewitt, a non-family member.
“It’s very important to make sure that everyone understands what it means to have a respectful workplace, and what could be considered offensive to someone,” Hewitt says.
Port Blakely, which grows and markets renewable forest products, has approximately 116 employees and seven offices in the Pacific Northwest and New Zealand. The core values are publicized throughout the organization and reiterated often, says Hewitt. The company communicates to employees that they all have a responsibility to speak up if they witness offensive behavior, she says.
While Port Blakely has about 85 family shareholders, currently only two family members work for the company: René Ancinas, the CEO, and Mike Warjone, senior director of corporate strategy.
The foundational family governance documents state that any family members who work for Port Blakely will not be given special treatment. Indeed, according to the documents, “… family members not only will be expected to perform their employment duties according to the same high performance standard that is expected of non-family employees, but also will have additional responsibilities as representatives of the family. These additional responsibilities include demonstrated awareness of the individual’s influence on other employees and that his or her actions speak for the values of both the entire family and the company. In addition, the prospective family member employee will be required to separate the roles of professional employee and business owner.”
Responding to complaints
Hart says many organizations err in their response to harassment complaints by taking a reactive approach to the problem rather than a process approach.
“What we need is actual processes that are laid out in advance about how we will deal with this if it happens,” Hart says. “If you wait until it happens to start to act — ‘Gee, how should we deal with this?’ — you risk the process looking biased and partial. There’s much less risk of that if you’ve laid it all out beforehand, and if you follow the process.”
Preparing Your Business in the #MeToo Era
Scott Cooper and Brooke Iley, co-chairs of the labor and employment practice group at Blank Rome LLP, presented a webinar Dec. 14, 2017, suggesting practical advice employers can implement immediately to prevent or confront harassment. In today’s climate, they warned, no company can afford to ignore the issue.
Here is a sampling of the tips they offered:
• Communicate the culture change. Send a companywide memo, signed by the top leader in the organization, stating that a zero-tolerance policy will be strictly enforced and no one is above the law — not even family members or rainmakers. No complaint should be too small to be investigated thoroughly.
• Review your policies and complaint procedures. Do your policies apply to your current business model? For example, if you have expanded to new locations or closed some facilities, do the reporting channels still make sense? Are your complaint procedures up to date and accessible?
• Inform the board and the C-suite. Have a protocol in place. Set a threshold for what needs to be reported up (e.g., depending on the level of employee being accused). Strike a balance between taking complaints seriously and overreacting. Consider the potential impact on your bottom line if allegations are mentioned in the press or on social media. (There will be an adverse effect even if the allegations are unfounded.)
• Review your employment practice liability insurance coverage. Be aware that under “shrinking limits” provisions, insurer payment of defense costs reduces the limits available to settle the claim or pay the judgment. Know whether your employees are the only ones covered, or if your coverage extends to vendor or customer claims. Consider your time limits and the threshold for notification to carriers (when a lawsuit is filed, or when you receive the first demand letter from an employee?). Have a plan for reporting the information to your carrier.
• Prepare for an investigation. Create an investigatory protocol with help from your attorney or legal department. The type of investigation will vary depending on the level or form of complaint, so have these mapped out in advance, since an immediate response is essential. Investigations are complicated, and interviewers must be sophisticated. (The investigator could become a witness in court.) Your company’s defense revolves around conducting a thorough investigation.
• Be aware that there can be criminal implications under state or federal law. The statements you give in a civil case might become evidence in a criminal proceeding and vice versa. Consult attorneys who can advise you on what your rights are and what you should and shouldn’t say.
• Have a PR plan. Much of the damage done in these cases stems from how the initial accusation is discussed on social media and reported in the press. Have a response plan; don’t just shoot from the hip if you’re asked to comment. Consider whether you will talk to the media and, if so, who your designated spokesperson will be. What will you do if the accused employee wants to take a different position from what the company prefers?
• Rein in your holiday party and other social events. Immediately before the event, send a memo to all staff reminding them of your code of conduct. State in the memo that employees and their guests are expected to behave appropriately. (This will cover family members who don’t work for the company as well as employees’ guests.) Consider limiting or not offering alcohol. Work with your HR department to develop a strategic plan for dealing with those who might get out of hand. (This might include talking to these individuals before the party.) Observe the proceedings as if you were a high school chaperone, and deal with questionable conduct quietly, before it crosses any lines.
“Oftentimes in a family-owned business, there aren’t clear policies, or there are policies that haven’t been reviewed in a long time,” Iley says. “You really want to take a look now to make sure that if you’re sending something out to employees, it has the right message built in, and that you’re able to follow through on whatever you said. Now is the time to proactively look at that issue and to make sure that you have the system in place if a complaint comes in. Thinking through the issues ahead of time is important.”
All companies have a duty to investigate every claim of harassment. “You have to have a commitment to have an unbiased third-party review or, at least, an internal unbiased review,” Iley advises.
During investigation proceedings, Iley says, “Above everything else, the most important thing is to assure each person who participates that there will be no retaliation or action taken against them for their participation in the investigation.” Designate a contact person to take participants’ calls should they have questions or wish to report additional information, and ensure participants know how to reach that individual.
“The perception and the reality must align, or the [complainant] is not going to feel that they were listened to or had their concerns addressed,” Cooper says.
Jennifer Freyd, a professor of psychology at the University of Oregon, coined the term DARVO in 1997 to refer to a tactic used by many institutions and perpetrators. DARVO is an acronym that stands for Deny the behavior (e.g., “None of this ever took place”), Attack the complainant (“She has a drug problem”), and Reverse the roles of Victim and Offender, such that the alleged perpetrator assumes the victim role and turns the whistleblower or true victim into the offender (“She’s making up these allegations to get rid of her manager”). Along with #MeToo, #DARVO has become a Twitter hashtag.
A DARVO response hampers victims’ ability to recover from trauma, Freyd’s studies have found. “We found that when there is a DARVO experience, it tends to increase the self-blame of the person who gets ‘DARVOed,’” Freyd says.
Another area of Freyd’s research is “institutional betrayal,” or the harm done by an institution to the people who depend on it. She and Penn State clinical psychologist Carly Smith have found institutional betrayal can cause emotional and physical health problems.
Freyd has developed recommendations for how institutions can prevent this betrayal and support what she calls “institutional courage” (see sidebar).
“What is really important for companies to know, whether they’re small or big, is that how they treat people after they’ve been harmed can be either helpful or be a whole new set of harms,” Freyd says.
Freyd has also studied how people respond when others disclose a traumatic experience. While a blaming or dismissive response can exacerbate the injury, respectful and compassionate listening techniques can help a victim to heal. In one experiment, she found that listeners who received just 20 minutes’ worth of training responded to disclosure of a traumatic event in a way that those who told their stories found to be more helpful.
“When somebody hears a story about something really difficult, like sexual harassment, they might get really anxious and confused and not know how to respond, and so do certain [harmful] things not because they mean harm, but just because they don’t know what to do,” Freyd says.
She says that if people recognize how their response to trauma disclosure can affect those sharing the information, they will likely pause to think about whether their response will be helpful or harmful, and avoid institutional betrayal.
Apologizing when appropriate is one way to demonstrate institutional courage, Freyd says. But the apology must be genuine. “The details do matter,” she says. “It’s important to word the apology well, to be careful but sincere.”
Of course, companies can be expected to consult their attorneys before issuing an apology. “The worst thing you can do is have someone who has no credibility with the accuser sit there on the advice of a lawyer or HR and make a false apology,” Cooper says.
A skilled attorney can help craft an apology that doesn’t sound “overlawyered.” “I’ve seen apologies that are both effective and have passed through lawyers’ eyes,” Freyd says.
Confronting a family member
Who should be the one to confront a family member who has crossed the line? The answer depends on the family dynamics. Will the professional, objective approach of an HR director be the most effective, or is a respected family member best equipped for the task?
How to Demonstrate Institutional Courage
Jennifer Freyd, a professor of psychology at the University of Oregon, has studied ways in which institutions betray the people who depend on them. Here are some of her suggested principles that can be implemented to prevent institutional betrayal and foster its antidote, institutional courage.
• Respond sensitively to victim disclosures. Avoid cruel responses that blame and attack the victim. Even well-meaning responses can be harmful by, for instance, taking control away from the victim or minimizing the trauma. Compassionate listening techniques can help institutions respond with sensitivity.
• Bear witness, be accountable and apologize. Create ways for individuals to discuss what happened to them. Be accountable for institutional mistakes, and apologize when appropriate.
• Cherish the whistleblower. Those who raise uncomfortable truths are potentially the best friends of an institution. Once people in power have been notified about a problem, they can take steps to correct it. Consider incentives to encourage whistleblowing.
• Engage in a self-study. Institutions should make a regular practice of assessing whether they are promoting institutional betrayal. Conduct focus-group sessions and establish a committee to regularly monitor institutional practices.
• Conduct anonymous surveys. Use the best techniques to get meaningful data, provide a summary of the results and talk openly about the findings. This will inspire trust.
• Educate leaders about research on sexual violence and related trauma. Study concepts and research on sexual violence and institutional betrayal. Use the research to create policies that prevent further harm to victims of harassment and assault.
• Be transparent about policies. Policies and processes should be open to public input and scrutiny.
• Commit resources to these practices. Good intentions are a good starting place, but staff, money and time must be dedicated to make this happen.
When the harasser is the business leader, or if the business leader quashes managers’ efforts to address harassment committed by someone else in the organization, independent directors may be the only ones with the standing to raise the issue. Unfortunately, many family firms have not installed independent directors on their boards. Others have independent directors in place but fail to apprise them of “bad news” like this.
Older family members — particularly older men — are more likely to dismiss calls to confront the issue. Cooper suggests this counterargument, which can be made either directly or humorously, depending on the situation: “This may have been something you could have gotten away with in a prior era, but you definitely cannot get away with it now.”
Hart points out that conversations can devolve into an argument about what constitutes sexual harassment.
“I think that all organizations are hampered when the only way that they have of talking about behaviors is in terms of rules,” Hart says. “That automatically pushes us into an argument about whether a rule has been broken.
“I think the way forward for all organizations, and especially family organizations, is to move away from a focus on rules to focusing on being a high-performance organization,” Hart says.
That shift in emphasis, Hart says, helps center the discussion on behaviors that adversely affect organizational success: “Here’s what you said. Here’s what you did. Here’s the impact.”
If HR finds a complaint has merit and a corrective action is warranted, the company runs a major risk if it doesn’t follow the recommendation, Cooper warns. “It is fatal in most litigation” for a business owner to have to explain why the company disregarded the advice of its own HR department, he says.
Opening a dialogue
Iley has worked with client companies to conduct roundtable focus-group sessions where employees discuss scripted scenarios describing sensitive workplace issues.
“It opens up the dialogue,” Iley says. The small-group discussions should be led by people — often third-party professionals — who “understand the dynamics and know the questions to ask and things to say to make the people feel comfortable,” she advises. “Afterwards, you can set up a survey system or some type of follow-up hotline so that people feel they can ask some follow-up questions.”
These sessions can be revelatory, Iley says. In one family firm, she recalls, “The people at the top felt that they could give a very strong message.” But what emerged in the roundtables was that “people didn’t believe what they were hearing. They had a different perception of the head of the company and whether or not they really could come forward.”
Port Blakely engaged Denison Consulting to conduct a survey evaluating its organizational culture. To follow up on the findings, Port Blakely formed a culture action team to assess areas of strength and areas of development opportunity, and how both could be improved. “One part of that is facilitating conversations in small groups, talking about uncomfortable subjects,” Hewitt says.
Port Blakely offers training in respectful workplace behavior, which the company developed in conjunction with its employment attorney. In 2016, Port Blakely’s managers received the respectful-workplace training. In 2017, members of the company’s Diversity and Inclusion Committee and other frontline employees were trained. In 2018, the company plans to provide the training to all employees who haven’t already received it.
Port Blakely also presented a half-day gender bias training session to all employees. “That generated a lot of conversation and interest,” Hewitt says. Several employees delved further into the issue and took an online test of their hidden biases created by Project Implicit, a non-profit organization and international collaboration of researchers (www.projectimplicit.net).
Not every family company can afford to bring in a major consulting firm to help it address these issues. “In my travels among family businesses, usually the No. 1 problem is that they’ve downsized or not staffed up HR for many years because they operate on the assumption that ‘It’s a family business, we take care of our people, we don’t need these formalities,’” Cooper says. “And yet, that is not really the world we live in anymore.
“The world is catching up to all businesses of all sizes, and there is no family-owned business exemption anymore.”
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