Corporate Chronicles

Sometimes the greatest act of rebellion is to simply speak the truth. Alexei Navalny. Thank you sir.

Episode 5 of a 13-part weekly series on good governance and ethical conduct.

In this series I will be examining issues of corporate governance and matters of public interest. If readers have specific business integrity and governance topics they’d like me to explore, please message me here on LinkedIn, Facebook or email.

How to Dodge Accountability: Gag Orders and NDAs

Shhhhh ….?? ?? ?? ??

“Until?…?toxic NDAs are abolished, victims of sexual harassment, bullying, and other wrongdoing will continue to be silenced. Employers need to take responsibility for their workplaces and what goes on in them. … you cannot have an agreement that covers up harmful behaviour or behaviour that could harm a third party in the future.” Former assistant to disgraced film producer Harvey Weinstein, Zelda Perkins, who broke her NDA in the Financial Times in 2017 and is the co-founder of You Can’t Buy My Silence.

Non-disclosure agreements (NDAs) or confidentiality clauses, are provisions which seek to prohibit the disclosure of information and are used, in most cases, legitimately, by companies - often as part of an employment contract, to protect corporate secrets from, or sensitive information being shared with, competitors.

Sometimes though, what the company wants hidden is not the "secret sauce" or the “strategy” but in fact far darker matters. In this scenario, the confidentiality clause, the NDA, is really a “gag order” used by companies and powerful individuals to prevent employees or contractors from speaking out about matters the company would far rather never see the light of day.

Those in power and authority, employers and organisations, at times use these confidentiality clauses not for good but rather to safeguard nasty corporate secrets and to avoid consequences of wrongdoing. In some cases, NDAs are intended to silence and intimidate victims and witnesses from speaking out on abuse at work, to protect perpetrators, and to obstruct justice.

You Can’t Buy My Silence!

These types of clauses, sometimes called “hush agreements” came to light with the #MeToo movement when powerful and wealthy men tried to silence victims of sexual harassment.??

Globally, there is a move to stop NDAs in the workplace from being used to cover up criminal acts and immoral or grossly unfair behaviour in companies, including sexual harassment, assault and racial discrimination. The aim is to tackle toxic workplace cultures, protect victims, and to create a more level playing field between workers and employers. What has also been made clear is that it is not enough to prevent the misuse and abuse of confidentiality clauses but that employers must be held accountable to protect their employees from things like harassment, bullying and abuse before it happens.?

Unethical confidentiality clauses and abuse of power

At different stages of an employment relationship, NDAs are useful and appropriate: (i) as part of an employment contract, for example to protect commercially sensitive information; and (ii) within a settlement agreement, to allow both sides of an employment dispute to move on with a clean break. BUT, when these confidentiality clauses are used to cover up cases of harassment and discrimination, this empowers repeat offenders and perpetuates an unacceptable workplace culture. This is unethical.

Shattering the Silence of Corporate Misconduct

The California Act Silenced No More outlawed settlement deals and bans confidentiality provisions that prevent employees from speaking about harassment, discrimination, and retaliation: “We want every employee to feel safe, championed and empowered to raise any concerns about their work experience. No worker should ever be silenced from speaking out about their own experience of harassment or discrimination in the workplace. For far too long, these secret settlements and agreements have reinforced a culture of secrecy that prevents accountability, respect and justice.” So said California State Senator Connie Levya, who wrote the bill.

The intersection of employees rights and corporate interests is a matter of public concern!

Employees are forced into agreements that protect perpetrators and leave these offenders and wrongdoers free to continue to harm others in the workplace. Some real-world examples:

The Theranos Fairytale ??????

Once upon a time there was a promising biotech startup called Theranos led by Elizabeth Holmes who claimed to have revolutionised the medical world in the area of blood testing. We know where that ended up; the company no longer exists and Elizabeth Holmes is in prison till 2032. But what preceded that? And what did NDAs have to do with it?

There were employees who had questions about Theranos’ practices and its technology. They were silenced through NDAs. During the trial, former employees testified that they had long suspected something was not quite right but said nothing because they felt they could not ask questions and that they would be sued if they spoke out. These agreements and employees’ fears prevented them from speaking out about the company's fraudulent claims.

This widespread use of NDAs by Theranos contributed to a culture of secrecy that allowed the company to ‘operate’ without accountability for years. When the truth eventually emerged, the company collapsed. This is a prime example of significant governance failures where NDAs are used to perpetuate fraud and suppress whistleblowing.

In such cases, NDAs are really shields for employer misconduct and act as handcuffs for employees. Workers grapple with a stark choice: stay silent and complicit or break silence and face consequences. This is not about personal ethics; it's a battle for workplace accountability, transparency and justice. It is about TRUTH.

Wiley Weinstein walks the plank ?? ????

Harvey Weinstein, a giant in the film industry, is now serving time until at least 2039. His company used NDAs to silence victims, hiding his actions and blocking information that could have prevented further abuses. These agreements didn't just quiet voices; they shielded a predator and kept others in the dark.

This culture exists across industries, sectors and in organisations and institutions both public and private: ‘I am the boss, the big man, the GM/CEO/Director, I can do as I please. Because I am the boss, only my opinion matters, only my decision is right and best’. Corporate wrongdoers go one step further by lying and refusing to accept accountability in order to save face. Or, as we say here, they ‘make as if’ the person speaking up is deluded, unwell, stressed, or …. a woman, what can you expect??

Weinstein's exploitation of NDAs shielded his predatory acts for years, impacting victims and shaking the film industry to its core. The explosive revelation of his deeds ignited the #MeToo movement, putting the spotlight on NDAs as tools for concealing wrongdoing and showcasing their potential for abuse by perpetrators.

Fox’s Open Secrets????? ??

Similarly, Roger Ailes, the former chairman and CEO of Fox News, faced allegations of sexual harassment from multiple women and Fox News reportedly used NDAs to settle with them; preventing the accusers from speaking publicly about their experiences. The culture at Fox was one where everyone knew what was going on but no one said anything. Because they were bound by confidentiality clauses. This allowed the sexual harasser, the wrongdoer to remain in power, till the allegations became public. Until that point there was a lovely but fake veneer of respectability and a charade of ‘governance’ and ‘ethics’.?

Wells Fargo and the Cost of Silence ??????

NDAs were not the central issue in this scandal but the culture of secrecy and retaliation meant whistleblowers were often fired or faced backlash for exposing the truth involving the creation of millions of fraudulent savings and checking accounts on behalf of clients without consent. It highlights the broader issue of using legal and corporate tactics to stifle dissent and opposition and evade responsibility and accountability.

The scandal led to significant financial penalties for Wells Fargo and serves as an example of how a culture that discourages transparency can lead to widespread unethical practices.

Cover-up Culture and Secret Deals ??????

Tearfund’s Trustees used an NDA in a financial settlement with an employee who was in the middle of bringing a grievance against the charity over alleged bullying. The secret deal banned the member of staff from making “any adverse or derogatory comment” about Tearfund after leaving the organisation. They were also required to destroy all communications relating to their role at the charity and could not contradict the charity’s official account of why they left. In return, they received a five-figure pay-off, and the charity paid for additional “arrangements” for the ex-employee including a therapeutic retreat.

From Suicide to Jail Time ??????

The most recent which is also the longest standing one is the most alarming, disgusting and egregious. I am talking of course about The Post Office scandal.

Gina, the widow of Martin Griffiths, who killed himself because of being falsely accused and having to spend more than ￡100,000 of his own money to meet accounting shortfalls, was offered a settlement agreement in exchange for her silence. She was given 24 hours to decide whether to sign an NDA that would prevent her from speaking about the circumstances leading up to her husband’s death. This was one of many, many efforts to suppress knowledge of the problems with Horizon, the faulty IT system.?

Zelda Perkins says: “The Post Office scandal again shows the degree to which NDAs make miscarriages of justice possible, how they keep witnesses away from court proceedings, silence whistleblowers and compound the trauma for victims of abuse. She refers to Professor Richard Moorhead , who is part of the team investigating the legal outcomes of the Post Office’s actions, who told her: "NDAs have been a key cover-up weapon … silencing experts, victims and preventing information getting to courts and so helped mislead them.”

Rishi Sunak admitted that “the ability to speak out about things is key to unlocking justice”.

Fixing Board accountability - shape up or ship out

Organisations and Boards must be held accountable for ensuring there are clear policies to precisely define what must stay confidential, and that transparency isn't compromised. Leaders should act with unwavering ethics, setting a standard for truth, openness and accountability. There is a need to balance privacy rights and the public’s right to know. My call to action is that we must shift towards more open and accountable practices not by stifling the truth, but by telling the truth and dealing with it.

The time is now for open and accountable actions. Let's move towards approaches that balance privacy protections with the imperative for transparency. This is the call for a future where trust is rebuilt, and integrity leads the way. Advocates and campaigners around the world hope that these legal reforms will serve as models for other countries, and that we can establish global legislative benchmarks. I do too.?

Across every industry, workers expect to be and should be heard, to have influence. We talk about servant leadership as a way of moving away from command and control but command and control is alive and well; if you agree with me, the boss, it’s all good, but if not … shut up and out the door you go baby. The costs to companies who do not listen are: damage to brand and reputation, legal fees, fines, talent turnover, employee disengagement, and waste of executive time.

Why should it matter to shareholders?

People break silence, break agreements, and go public when they believe that they have exhausted all avenues to get employers to stop the cover-ups and deal with the problems.?

How do directors tune into employees’ voices? How and when should they recognise and make room for those dissenting voices that are willing to speak truth to power? Well, it is NOT by signing NDAs or confidentiality clauses. We have to change what has become part of our legal and corporate DNA that treats abuse as a “trade secret” or "proprietary information".

Shareholders often remain unaware that their investments are being used to conceal personal misconduct, and while boards might not grasp the full scope of what's happening, they are accountable and ought to know as they have a responsibility to be informed. Settlement agreements have their place in resolving workplace disputes, but financial compensation should be for addressing harm or job loss, not to purchase silence. The routine use of these agreements can create a culture of secrecy and mistrust, highlighting a critical oversight duty for boards to ensure transparency and accountability.

Shareholders must demand accountability

No more hiding misconduct behind confidentiality clauses and NDAs. Boards must be transparent and act ethically and accept accountability. In the words of Alice Walker: "The most common way people give up their power is by thinking they don't have any." The time for change is now. Those who have suffered injustice should never be gagged again.

#AlexeiNavalny #integrity #accountability #truth #AlexeiNavalny

Next week: Order in the Boardroom

References and additional reading

1. Change urged to stop ‘gagging clauses’ from silencing harassment victims in UK Financial Times, 13 September 2021
2. Crack down on misuse of Non-Disclosure Agreements in the workplace
3. CONFIDENTIALITY CLAUSES: Response to the Government consultation on proposals to prevent misuse in situations of workplace harassment or discrimination.
4. Legislators aim to quash workplace gagging clauses Financial Times, 1 August 2021
5. Harvey Weinstein sentenced to 16 additional years for LA rape conviction, UK Guardian 24 February 2023
6. The Post Office scandal shines an unforgiving light on NDA abuse UK government must act to prevent the victims of injustice being gagged: Financial Times 24 January 2024
7. ‘People wanted to believe the fairytale’: the downfall of Elizabeth Holmes UK Guardian 30 May 2023
8. Congress Passes Law restoring sexual harassment Victims’ Voices, Banning NDAs
9. Tearfund has spent hundreds of thousands on pay offs to ex-staff
10. Post Office scandal: from suicides to jail time with child killers — the heartbreaking stories of the postmasters The Standard 9 January 2024
11. Britain is falling behind when it comes to the misuse of NDAs: Financial Times 23 June 2023
12. Judge Engoron in New York v Trump with thanks to Graeme J. and Richard Moorhead for their insight.