Our CEO Is an Accused Harasser. Now What?
An accused CEO should stand in the same shoes as any other employee in this regard—the difference is the involvement of the board, perhaps a heightened degree of confidentiality, and the organization's choice of investigator to represent the organization or conduct the investigation, or both.
August 21, 2018 at 03:37 PM
6 minute read
Corporate counsel must shudder in the #MeToo era when they hear that their organization's CEO (and typically their boss) is accused of sexual harassment. The dual but conflicting loyalty owed to the CEO, as well as to the organizational client presents unique ethical challenges. But despite this quandary, the lawyer's singular focus should be on the task at hand: addressing the complaint in a manner consistent with the law and the organization's internal procedures. Here are some guidelines for what corporate counsel should do and not do when a CEO is accused of sexual harassment.
Resist the urge to inform the CEO. There is a danger that, once informed, the CEO might hijack the investigation and substitute a frontier sort of justice or subtly pressure the investigators. Instead, the first telephone call (not an email or a text) after learning of the claim should be to the board chair or the lead board member responsible for risk management. Decisions regarding next steps with respect to an organization's leader should always be made in conjunction with a least one board representative because the board must commit to the investigation. While the board (or appropriate board committee member) may ultimately decide to inform the CEO of the investigation, that decision should not be undertaken without the advice of counsel. The board will also promptly need to consider whether to suspend the CEO during the investigative process and, if so, decide who will undertake their responsibilities.
Choose the outside investigator … but choose wisely. Most organizations have at least the passing semblance of a procedure (and hopefully more) to address and investigate harassment claims. An accused CEO should stand in the same shoes as any other employee in this regard—the difference is the involvement of the board, perhaps a heightened degree of confidentiality, and the organization's choice of investigator to represent the organization or conduct the investigation, or both. Depending on the size and nature of the organization, it is reasonable to assume that the CEO has an existing working relationship with the organization's regular outside counsel. Retaining that same firm (or lawyer) could lead to the conclusion that an impartial investigation will not or cannot be undertaken. As a result, in-house counsel should, immediately upon notifying the appropriate board member, obtain board consent to engage a firm unaffiliated with the organization. Assigning the investigation to internal corporate counsel and human resources representatives in this context would likewise be a mistake given the CEO's status and the reporting relationship with those employees.
Once outside counsel is engaged, triage the situation. In conjunction with outside counsel, in-house counsel should conduct an immediate triage. Does evidence need to be locked down and forensics undertaken? Spoliation can inhibit investigations and expose the organization to additional liability. Does the victim need to be separated from the CEO or do arrangements need to be made to physically ensure the victim's safety? A deft approach is necessary, especially if the accuser is the CEO's direct report or has frequent physical contact with them. Does the CEO have an employment agreement that outlines the process in the event of a complaint or that otherwise might trigger severance obligations if a decision is ultimately made to terminate? Is a board meeting required to be noticed regarding the investigation and how can that notice be effectuated? None of these basic governance and litigation management techniques should be overlooked simply because the CEO is the alleged perpetrator.
Gather and review your insurance policies. An employment practices or D&O policy may not be the only insurance policies a harassment charge implicates. In-house counsel should (to the extent possible given confidentiality concerns) consult those responsible for corporate risk management to determine if crisis consulting or reputation risk insurance are available to defray financial costs associated with the investigation. These policies frequently have rigorous and detailed notice provisions. Follow those notice requirements.
Who has the right to information and when, and how should that information be disseminated? Public companies are, of course, required to report material adverse events impacting their businesses, but it is not always clear when those reports must be generated and what contents the public securities laws mandate; outside counsel should be consulted in this regard. In addition, it is becoming an increasingly common practice to publish the investigator's report. Again, care must be taken, given that inherent in a fair investigative process is the lack of prejudgment as to its outcome. Finally, the impact to the organization of the investigation (and its consequences) should not be overlooked. At some point, there may be an obligation to inform the organization for morale purposes separate and apart from any required public reporting.
Manage the message. There is growing acceptance that engaging an outside corporate communications firm in conjunction with an investigation is an integral part of the advice offered to a corporation. At a minimum, a communications firm can assist the individuals responsible for internally managing the investigation—which should be an extremely limited management group—and perhaps at least initially exclude the employees who are responsible for public relations or investor relations. The control of information flow is critical, not just for morale and reputational concerns, but to avoid any insider trading or securities claims that might emanate from general but nonpublic knowledge.
Turning in, investigating or unseating one's supervisor is likely not experiential aspirations. While balancing the delicate conflict between investigating one's boss and ensuring the corporation's legal interests are appropriately managed is difficult, treating a report of harassment against a CEO ultimately should not materially differ from ensuring a fair investigative process for any other of the organization's employees—except perhaps applying a bit more of a deft touch.
Jen Rubin is a partner with Mintz, Levin, Cohn, Ferris, Glovsky and Popeo practicing employment law in New York and California.
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