How Should Boards Deal with Conduct Issues?

Following the #MeToo movement and the horrific circumstances which drove #BlackLivesMatter, there has been a shocking increase in the reporting of high-profile cases of sexual harassment, bullying and discrimination in the corporate sector. Regulators are regularly investigating “non-financial” conduct, and companies can face multi-million-dollar lawsuits stemming from bad behaviour by their executives, employees and – sometimes even – their clients.?

There is an expectation on Boards, especially from shareholders and regulators, that there is appropriate governance and procedures to actively root out and prevent bad behaviours. ?This is new territory for Boards.? It is also inherently difficult, given Directors’ distance from the day-today operations of the business.?

In my view, there are five key things that Boards should be doing to tackle these issues:

1.?????? Encourage people to speak-up.? Sexual misconduct and bullying are chronically under-reported.? Just because you have not heard about it, doesn’t mean it is not happening; and no news is not good news.? In 2017 the BBC interviewed 2000 people about sexual harassment incidents.? 63% of the women surveyed did not file a complaint and 79% of the men kept the issues to themselves. Boards should encourage open communication and reporting in relation to all kinds of behaviour – including micro-aggressions and informal complaints. ?They should also demand that business leaders cultivate and interrogate a wide range of formal and informal information, including employee surveys, retention rates, gender pay and performance statistics, performance reviews, exit interviews and insurance or risk notifications to ensure that potential problems are identified and dealt with early.? ?Finally, Board members should get out and speak to people if they aren’t doing so already.? In my experience, “everyone knows” where the problem spots in companies are – the real problem is that this information does not make it up to Board level.

2.?????? Be fearless.? Many Boards fear an unrestricted “speak up” culture or encouraging written complaints, because they do not want to open the company to potential lawsuits or investigations. However real these fears are, ignoring the problem or “closing down” issues quietly can backfire spectacularly.? In a fantastic book called “The Fearless Organisation,” Amy C. Edmonson of Harvard makes a compelling case that an open culture which encourages complaints enhances decision-making and improves customer outcomes.? While the thoughts of a “sea of red” metrics can be daunting, for many organisations this is a necessary and beneficial step to drive behavioural and cultural change.

3.?????? Check the process. Just because your company has a process, it does not mean that it is effective, trusted or even used.? The reality is that victims will not feel safe to speak up unless they believe that the organisation will treat their issues fairly and that something will happen as a result of their actions.? The statistics on whistleblowing are dire:? A recent study by the University of Greenwich involved 1,000 whistleblowers and their experiences with the Public Concern at Work charity hotline. ?It found that employers usually have just two opportunities to listen and respond to a concern before employees resort to external whistleblowing, and that 60% of those who blow the whistle believe that no action is subsequently taken by their employers in response to their concerns. The onus is on Boards to dig into the data.? Does your company have a complaints process?? How often is it used?? Are victims encouraged to come forward or are they shunted to “informal” ways of dealing with their concerns?? If the system is used, what is the nature of the complaints?? How many cases result in an outcome and what is the outcome?? Boards can play a crucial role in mandating transparency and providing support to victims and leaders precisely because they are outside the chain of command, and not involved in the day to day. ?They can also make sure that those who are accused are treated fairly.

4.?????? Protect your whistleblowers.? Retaliation is a real fear for those who complain.? In 2021, 56% of the charges filed with the US Equal Employment Opportunities Commission included retaliation.? Boards must ensure that those who speak up – formally or informally – are not penalised, by tracking or following their career progression.? For serious cases, more needs to be done.? When I was a CRO, I would often give whistleblowers a role in my area or that of a trusted colleague to protect them from potential retaliatory action.

5.?????? Maintain independent reporting lines. The most difficult issue is getting employees to speak up against more senior colleagues.? Independent directors play a key role here.? It is vital that key leaders – Heads of Risk and People, for instance, have reporting lines directly into the Board to ensure that everyone in the company is subject to the same standards of behaviour.? When I first became a CRO, the outside director to whom I reported gave me an incredible gift.? He said “I never want you to be afraid of losing your job because you are doing the right thing.? If you come to me, I will always support you, and – if necessary – I will quit so that you don’t have to.”? This kind of psychological safety is priceless.? Directors can provide it to senior leaders.? Those leaders, in turn, can pass it down the line to more junior colleagues.? And, when a case of misconduct involves a senior person, it is only the Board that has the authority and independence to take action.

Companies today are at a crossroads.? Society, regulators and employees are demanding that leaders face down bad behaviours and create a culture of trust and openness in their organisations.? Boards have a vital role to play in driving this change because of their independence and influence. It is the right thing to do as too many lives and careers have been blighted by misbehaviour.? It is also good for business.? A trust deficit between employees and leadership holds organisations back.? Fostering an open and dynamic culture will unleash the productivity, innovation and teamwork that makes companies great.?