David Beatty and Rick Powers weigh in on the #metoo movement, what it means for your board when dealing with sexual harassment and how it affects corporate governance in Canada.
David Beatty: Rick, there’s been a ton of information on all kinds of media about sexual harassment, whether you’re talking about that fellow from Alabama running for Senator, even the White House, Weinstein and the movie industry, and a whole movement called #MeToo around this. What should boards be doing about all of this? Just ignoring it?
Rick Powers: No. I think this is something boards have to be attuned to. Today in a world dominated by social media, these things are going to come out. We’ve got a 24-hour news cycle, as well, so depending on when it comes out, a board has to be ready to respond. This is just another type of risk that the board has to be aware of and plan for.
David Beatty: Okay. So do they set up a separate committee? How does a board actually physically handle this? Puts it on the agenda of the audit committee?
Rick Powers: Well …
David Beatty: Hello.
Rick Powers: We know that risk traditionally has been handled under the audit committee.
David Beatty: Right.
Rick Powers: More and more companies, though, are pulling risk out and having a separate committee. There’s all kinds of other types of risk other than audit, financial risk, and the skill sets you usually see on the audit committee may not be the skill set you need to deal with some of these other types of risks. So to have an adequate reporting mechanism, whether it’s to … I don’t think it’s through HR. Not for something like this. It may be someone in HR that’s involved.
David Beatty: What about hotlines coming back into the back door, as it were, to the board?
Rick Powers: Yeah, I think that’s what’s happening, where we set up initial whistleblower lines that were handled internally. Now, most companies are putting them outside to external third parties.
David Beatty: Oh, really? Oh, I didn’t know that.
Rick Powers: It gives some anonymity to the process, then. People aren’t as afraid to phone up.
David Beatty: So you’re protecting somebody who previously was reluctant to come forward with an issue.
Rick Powers: It should be anonymous.
David Beatty: That does seem to be a part of what’s happening in the media today, that women have been very reluctant to come forward. Now with this #MeToo movement, there’s kind of a surge of, “Well, it’s okay for me to tell my story.”
Rick Powers: That’s right.
David Beatty: By having an anonymous third party whistleblower line, we’ve accommodated that in a board of directors.
Rick Powers: Yeah. I think there’s still some fear of recriminations, but I think that is protected to a large extent by having it to an outside third party. But David, this is just part … I’m not trying to minimize this, but this is just part of overall behavior, unethical conduct, and as a board, you’re primarily concerned with the CEO. You know the case that we do in the class. Most of our students remember that.
David Beatty: Oh, that’s right. Des Hague.
Rick Powers: That’s right. The CEO of Centerplate and the dog kicking incident. He in his own time on a Sunday afternoon … He’s not at the office, but he’s taking a friend’s dog out for a walk, and video shows him in the elevator abusing the dog, kicking the dog, pulling it off the ground by its leash. It led to his ouster in the end, but their initial reaction was very, very poor. Remember, their first reaction was, “It’s not our … Have nothing to do with the board.”
David Beatty: That’s right. Yeah. So it’s social media and your interaction as a board or as a company with all of that stuff happening. In five weeks, it went from an isolated incidence in one closed elevator in Vancouver to sacking the CEO of a US publicly traded company.
Rick Powers: But I think there was an opportunity to perhaps save his career if the board had been ready and handled it properly.
David Beatty: They might have.
Rick Powers: You know what? There were some other circumstances going on at the time. The board wasn’t aware of those. They had no idea, and they just reacted poorly.
David Beatty: It reminds me, though. It’s Maple Leaf Foods with listeria.
Rick Powers: That’s right.
David Beatty: Wasn’t there a social media component to that, as well?
Rick Powers: Michael McCain probably handled that the best that anyone has ever done in terms of accepting some responsibility. They did use social media. They remember putting those videos. They were being inundated with requests for information. They said they took full responsibility and basically said, “Listen. We admit we didn’t do it right. We made a mistake.”
David Beatty: Isn’t the point for the board that they were prepared?
Rick Powers: That’s right.
David Beatty: If you’re unprepared, as Centerplate was, you’re going to get caught unawares, and that’s really going to be damaging to the company, right?
Rick Powers: We’ve worked with Jamie Watts, who was the Chairman of Navigator before. He uses the analogy when a crisis happens, consider a cartoon character with that bubble above their head where the words go in. When a crisis happens, you have to fill that bubble. You have to take control of that space from the company’s point of view or else you allow other stakeholders, someone like the media, to go in and take that space. Now you’re being reactive to what story they’re printing as opposed to being proactive and you pushing the story.
David Beatty: But they were prepared. That’s the point, isn’t it, for boards of directors in other places? You’ve got to be prepared for these eventualities.
Rick Powers: They knew listeria was a risk in their industry, and they were prepared.
David Beatty: I see. Great. Thank you, Rick.
Rick Powers: Great. Thank you.
David Beatty: Changing times.
Rick Powers: Exactly.
David Beatty: Wow.