Looking back on the year of #MeToo and forward to the road ahead, corporate boards need to think about and implement constructive change. Over the last year, high profile scandals consumed headlines, dragged down senior leaders and share values, and challenged preconceptions of corporate culture. It was a year of reckoning for some, a year of heightened awareness for others, and a learning experience for us all.

Like it or not, the scandals of 2018 proved that #MeToo has implications beyond sexual harassment. Scandals from Uber to CBS to Google highlight that organizational culture is a company asset to be protected and nurtured. They confirmed that toxic work environments and inadequate corporate governance can lead to costly financial, legal and reputational risks that threaten sustainability.  #MeToo scandals cast a broad spotlight on the positive or negative impact an organization's culture can have on its reputation, value and long-term sustainability. And they proved, in today's era of technology, social media, and employee and consumer activism, the enormous toll workplace misconduct and abuse of power can take on an organization.

For boards who failed to take action, the takeaway was clear—do so at your peril because when the headlines come, directors will be confronted with the inevitable question—“where was the Board?” While no one can predict where fiduciary legal liability ultimately will lie, boards are viewed as the ultimate guardians of an organization's financial, human and reputational capital, and addressing culture issues falls within the Board's responsibilities. Stakeholders expect governance to closely align with issues that drive sustainability and shareholder value. Culture matters.

Boards need to stay ahead of the curve in the year ahead. They should proactively apply the same strategic, risk-based, data-driven and innovative thinking to workplace misconduct issues as they do to business. Six key action items for boards:

• Prioritize culture as a strategic asset. Organizational culture aligns behaviors to promote shared purpose, value creation and innovation. Culture allows companies to adapt and take calculated risks for profitability and long-term growth. Boards should take concrete steps to understand and influence culture “at the top,” the “mood in the middle” and the “buzz at the bottom.” Challenge management. Use scorecards and metrics to measure and monitor culture. Management guru Peter Drucker stated: “culture eats strategy for breakfast.” If culture is poor, even great strategies fail. At its best, culture can create opportunity; at its worst, it destroys value.
• Exemplify the “Tone at the top.” “Walk the talk.” Boards cannot afford complacency or permit unaddressed misconduct or unchecked power. Healthy cultures start with clear, consistent organizationalwide standards, policies, procedures and messaging. Boards should insist on sophisticated investigation processes, visible reporting and strong remedial action. Codes of conduct and forced arbitration clauses should be updated and heightened attention paid to hot lines, whistle blowers and escalation procedures. Companywide training should be mandated and accountabilities assigned.
• Develop talent as a competitive differentiator. Foster diversity and inclusion.  Statistically significant numbers show that companies with ethnic and cultural diversity in the top quartile are 33 percent more likely to outperform peers. In an increasingly automated, data-driven, technologically disrupted and high skill-based environment, talent is a strategic differentiator for innovation and risk taking. There is a war for talent. To be competitive, boards will recognize that respectful, safe, diverse and fair work environments attract and retain talent.
• Set compensation expectations. Employment contracts matter. The agenda should include setting compensation, performance and behavioral expectations with management. Executive contracts should be more explicit about what counts as a “cause” for termination with clarity on the types of misconduct exemptions from severance arrangements. Payout terms of higher risk departures will be evaluated for reputational risks. Organizationwide equitable standards should apply.
• Focus on board composition. A board's quality, tenure, skills and diversity are under increasing scrutiny. Investors and other stakeholders are becoming less tolerant of boards that are not reflective of the customer, employee or supplier base.
• Expect more scrutiny. Recognize rising power of institutional investors. Public proxy fights by financial-centric activists are hitting the headlines, but boards must also deal with investors who are longer-term and ESG oriented. The result is a careful balancing act of interests, necessitating more meaningful engagement and disclosure around strategy, risks, compensation, performance and board composition. Boards should expect that culture is on the agenda in the upcoming proxy seasons.

#MeToo has been a catalyst for change across business and society. It has forced a spotlight on culture as a critical corporate asset. Forward-thinking boards should seize the moment to enhance corporate governance practices and reimagine a workplace that has a safe, inclusive, fair and healthy culture aimed at long-term value creation. And we will all be stronger for it.

Amy Conway-Hatcher, a partner at Baker Botts, focuses her practice on corporate internal investigations, corporate compliance matters and defending corporate and individual clients in criminal and civil enforcement matters before the Department of Justice, the Securities and Exchange Commission and other federal and state enforcement authorities.

Sheila Hooda is  an independent board director and strategic advisor.