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Partner, litigation and dispute-resolution practice and employment practice, Torys LLP.

The #MeToo movement has led to an explosion of sexual-harassment revelations in recent months. Strikingly, many allegations have involved individuals at the highest levels of their organizations, and companies are facing increasing public pressure to respond swiftly.

Organizations have a moral imperative to take steps to prevent workplace harassment – and address the situation appropriately if allegations do arise. No longer can sexual harassment be endured or tolerated.

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And as #MeToo continues to shine a much-needed light into the dark corners of workplace harassment, it’s important for executives and corporate boards to understand their legal obligations as well. Failing to take appropriate action can potentially result in litigation, as well as damage to morale, productivity, reputation, and the strategic direction and prospects of a company.

Directors are obliged to diligently oversee management and to act in the best interests of the company. In the wake of #MeToo, investors are looking to hold boards accountable for lost share value caused by failures to address workplace harassment. In November, 2017, the Delaware Court of Chancery approved a US$90-million settlement in an investor lawsuit against Rupert Murdoch and other key directors at 21st Century Fox for lost share value allegedly caused by the directors’ failure to address long-standing issues of sexual misconduct involving the company’s CEO and other senior individuals.

Executives and corporate boards can and should play an active role in eliminating conditions that could give rise to sexual harassment and ensuring that processes are in place to respond quickly if a situation does arise. Being prepared and pro-active is key. Here are some suggestions:

Set the tone from the top

Corporate leaders should be personally committed to promoting and creating a respectful and inclusive workplace that does not tolerate harassment and discrimination. Corporate leaders need to inform themselves about what the company’s culture is like on the ground. Boards must be prepared to take swift action if there are signs that management is failing to address issues, whether isolated or systemic. Consider tying executive compensation to metrics that promote inclusion and a harassment-free workplace. Ensure that violations of the company’s harassment and discrimination policy constitute “for cause” termination.

Have robust whistle-blower, harassment and discrimination policies

Ensure everyone is aware of the policies. The harassment and discrimination policy should be explicit as to what conduct is inappropriate and won’t be tolerated. The policies should be easily available to employees, and reviewed and updated annually. All employees should know how to make a complaint under the policies and to whom.

Ensure complaints are actually being addressed

To have teeth, a company’s harassment and discrimination policy must be enforced. Complaints need to be taken seriously and addressed promptly. Directors may be liable for failing to identify systemic enforcement issues or failing to address known ones. Ask management hard questions if a trend appears. Consider retaining an independent consultant to audit the company’s records and history of complaints to identify any issues.

Train employees and managers regularly

Training should be meaningful and robust. Anyone responsible for conducting investigations under the policy should receive directed training.

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Ensure procedures and resources are in place to handle complaints

In Ontario, the Occupational Health and Safety Act mandates investigations into allegations of workplace harassment and imposes certain procedural requirements, such as notifying both parties of the results of an investigation. Ensure that appropriate resources and personnel are in place to handle complaints. Consider using a third-party complaint-management service. Consider the circumstances under which the company will conduct an internal investigation and when it would be appropriate to retain an external investigator. Among other things, retaining an external investigator to conduct the probe can help assuage concerns about the independence and integrity of an investigation.

Have a crisis-management plan in place

Allegations of sexual harassment can develop quickly. Boards should satisfy themselves that they are prepared to handle these issues when they arise. The board should have a plan in place to quickly deal with allegations of misconduct aimed at senior leaders and the possibility of taking action to remove them. The plan should be flexible, rather than prescriptive.

Conduct appropriate due diligence on acquisition targets and strategic partners

A company’s reputation can be irreparably damaged when it combines or partners with an organization that does not share its values. When looking at material acquisition opportunities or other strategic partnerships, take time to seek out information regarding the organization’s policies, governance practices, history of complaints and, where possible, conduct interviews with senior and mid-level management.

Executives, educators and human resources experts contribute to the ongoing Leadership Lab series.

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