Thanks to Tarana Burke’s Me Too movement, TIME’S UP and others, it’s no longer possible to ignore the devastating impacts of discrimination, harassment and sexual assault in the workplace. In the business world, we’ve seen many alleged harassers removed from positions of power. But while Les Moonves and his ilk may be gone, it’s not always clear whether companies are taking steps to eliminate not just the alleged harassers, but the policies and practices that helped shield them from accountability in the first place.
Take for example mandatory arbitration and non-disclosure (read: secrecy) agreements. Both practices can enable harassment and discrimination based on race, gender, ethnicity and other federally protected classes, to continue unseen by keeping complaints and any settlements confidential. This is so problematic that in 2018 attorneys general from all 50 states called for the end of mandatory arbitration and secrecy in sexual harassment cases, noting that, “Ending mandatory arbitration of sexual harassment claims would help to put a stop to the culture of silence that protects perpetrators at the cost of their victims.”
Recognizing the risks these types of policies can present for companies and their employees, a number of investors are asking companies to eliminate their use. The New York City Pension Funds recently submitted several shareholder proposals calling for an end to “Inequitable Employment Practices,” including mandatory arbitration and involuntary non-disclosure agreements. Other investors, including the Nathan Cummings Foundation, are asking companies to explicitly prohibit the use of non-disclosure agreements and mandatory arbitration in the context of employee harassment and discrimination claims.
There’s good reason to do so. At companies like 21st Century Fox, Intel and Nike, we’ve seen cultures that allowed those accused of harassment and discrimination to rise to the top, resulting in the unexpected and destabilizing loss of leadership. Of course, it’s not just leadership that’s impacted. A corporate culture that tolerates harassment risks physical and mental harm to employees, impacting productivity, absenteeism and employee turnover. Meanwhile, consumer facing companies put their brands at risk if it becomes known that their workplace policies protect those who harass and discriminate.
There are also legal risks attendant in relying on arbitration and non-disclosure agreements, which exist under a patchwork of state laws. Recognizing the damage that these policies can cause, at least seven states have limits on non-disclosure agreements in harassment settlements. California, for instance, bans confidentiality agreements in sexual harassment and discrimination cases.
For long-term investors, these “keep it secret” policies present real risks. They aren’t just bad for business, they are, more importantly, bad for employees. When nearly half of African-Americans have faced race-based discrimination in the workplace and more than half of senior-level women have been sexually harassed during their careers, it is clear that these policies and practices are contributing to harmful work environments. We’re hopeful that the companies we’ve engaged on these issues will follow the lead of Microsoft and others and discontinue arbitration and secrecy requirements when it comes to sexual harassment and discrimination claims, because to continue to ignore this pervasive problem is indefensible.