Investors' voting pact opts to remove directors who tolerate sexual harassment

Dive Brief:

Kristina Bergman, CEO and co-founder of Integris Software, took a ground-breaking step to prevent sexual harassment in her startup by having investors sign an agreement to replace board directors if there's "reasonable probability" that misconduct occurred, reports The Washington Post. Bergman's investor agreement counters some companies' tendency to tolerate or ignore sexual harassment until allegations surface and go public.
Bergman told the Post that she decided to make the agreement part of the investor's legal documents because she knew as a female founder that sexual harassment was the tech industry's open secret and that removing a director for any reason other than embezzlement, fraud or neglecting fiduciary duties would be difficult. The agreement also requires that a special counsel be appointed to investigate misconduct and report all findings to the board.
Bergman compared the investor agreement to employment agreements that hold employees accountable for certain levels of behavior and that HR departments are charged with monitoring. She said the goal is to protect her, her co-founder and her employees. To protect investors, the agreement doesn't cause venture capital firms to lose board seats, but only to replace a partner in violation with another.

Dive Insight:

Curbing sexual harassment at the investor-director level is forward-thinking, even courageous by some standards. Those who set high standards for the organizations they lead may not always be aware that misconduct is happening at the lower levels. But responsible leaders create and maintain cultures in which conduct is expected to be ethical, respectful and compliant with the law at all times.

Bergman appropriately called out the tech industry for its inordinately high number of sexual harassment and sex discrimination allegations. A Harris poll released in May found that one in 10 women in the industry said they experienced sexual harassment. Figures like these and cultures considered biased against women and under-represented groups in the industry are unacceptable.

Uber, UploadVR and Tesla are some of the more highly visible tech companies that have faced sexual harassment claims in recent years. Other companies, like Facebook, have faced less intense but still serious claims of bias against women at their organizations.

Uber has since replaced its HR head with a diversity officer and has vowed to be more inclusive and celebrate diversity. Facebook just announced that 27% of its engineers are women — the largest percentage on record for the firm. In May, Tesla agreed to shake up its HR leadership. Other companies may need to take similar measures.

Those who don't could face more allegations, plus exorbitant penalties if found noncompliant. They also risk lowering their returns on investment (ROI); diverse work environments correlate with higher revenues. If investors want to protect their stakes in tech companies, they'll welcome agreements like Berman's.

HR has a stake, too; it must lead organizations toward becoming more ethical workplaces and follow up on all sexual harassment and discrimination allegations to make sure companies comply with the law.