Governance Lessons from the Weinstein Case

theBoardlist
Oct 15, 2019 · 4 min read

I had the great pleasure last week of meeting Jodi Kantor and Megan Twohey, the two New York Times reporters that broke the Harvey Weinstein story in 2017. theBoardlist’s founder and Stub Hub President, Sukhinder Singh Cassidy and the Stub Hub Women’s Initiative Network hosted a lunch and event to celebrate the launch of their new Pulitzer prize winning book, “She Said”.

The story Jodi and Megan tell is not only of a sexual predator and the courageous women who spoke out. It is an incredible example of investigative journalism that blows open the doors on the enablers of sexual harassment in our culture. Cash settlements and their accompanying NDAs that force women to keep their secrets are just the beginning. We’ve all been shocked to learn that two lawyers, Lisa Bloom and Gloria Allred, turned a career’s worth of experience representing victims of sexual harassment against them to protect predators like Weinstein.

As I sat in the audience amongst many invitees from theBoardlist community, I was struck by another enabler in the story — The Weinstein Company and its board of directors. For decades, Weinstein used company funds and resources to enable his behavior. His brother and Chairman of the Board at TWC, Bob Weinstein, knew about Harvey’s abuse of actresses and female employees and pleaded with him to get help for his “sex addiction” rather than holding him accountable for his actions. Eventually, The Weinstein Company board put a wrist-slapping measure in place of personal penalties for Weinstein for any future settlements. The implication is staggering: not only did the board know about Weinstein’s behavior, they acknowledged there would likely be future victims and did nothing to protect them.

You can imagine the rationale. The board’s responsibility, its raison d’être, is to maximize shareholder value. For years, Harvey Weinstein was a shareholder value-making machine with countless successes and an unparalleled reputation in the industry. Faced with a scandal that would attract negative media attention, tarnish the CEO and the company’s reputation, the board made the decision to keep the secret and gently encouraged Harvey to curb his behavior. As Jodi Kantor said, “Interestingly, the board’s choice to keep the secret to protect the company ended up being the thing that destroyed it.”

The event at Stub Hub was on the same day news broke about Daryl Morey’s now famous 7 word tweet followed by NBA Commissioner Adam Silver’s statement in support of freedom of speech, potentially alienating the massive Chinese market. I was also reminded of my former employer, Walmart’s recent choice to stop selling handgun ammunition in its stores despite the decline in revenue and potential impact to its stock price.

It made me think: how does a CEO or board handle a situation where maximizing shareholder value is in direct conflict with doing the right thing? Let’s put aside for a moment the fact that I suspect in the long term, Silver’s decision will in fact bolster the NBA’s brand, yielding better financial results. Similarly, Walmart’s decision did not negatively impact it’s stock price. Assuming that in the moment, those two leaders weren’t sure how their decisions would pan out, what was their incentive to do the right thing? There is no governing body in place, no legal framework, no stop gap to ensure that boards make the right call when moral decisions are at stake.

It’s tempting to say that one of the lessons learned from the Weinstein case is that some of these structures should be established. But, can they? I am not convinced that it’s possible to govern morality. The recent Business Roundtable pledge to consider the social and environmental factors in decision-making is an interesting example. Making public statements like these are certainly a step in the right direction but they are not binding. The fact remains that both the CEO and the board are officially accountable to one thing: shareholder value within the constraints of the law. Without other structures in place, it occurs to me just how dependent we are on the integrity of our leaders.

theBoardlist candidates often ask me: How do I know when I am ready to serve on a board? My answer is usually about specific expertise, strategic thinking, influence within an industry, thought leadership. But, listening to the reporters last week made me realize the most important aspect of “board-readiness” is the moral integrity and fortitude to do the right thing when the only structure in place may pressure you to do just the opposite.

theBoardlist connects exceptional women with global board opportunities. Find us at theboardlist.com and theBoardlist.

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