How much value has to be stripped from a company’s share price before it will publically act on allegations of sexual harassment?
For AMP Capital, it was 23%.
Sexual harassment is exponentially expensive: there’s high employee turnover, decreased productivity and workers chucking sickies. Harassment cases also mean higher insurance premiums, legal expenses and settlement payouts.
But as recent cases have shown, it takes investors pulling their cash and plummeting share prices before companies get the message.
Cash is key
The effect of an allegation is nothing to sneeze at. When model Kate Upton accused Guess co-founder Paul Marciano of harassment over Twitter in February 2018, more than $250 million was wiped off the company’s market value in less than a day.
QBE shares dropped by 9.2% between August 20 — when a complaint by a female colleague was lodged against boss Pat Regan — and his dismissal on September 1.
Between Boe Pahari’s first day as the boss at AMP Capital, allegations publicised on July 1, and his demotion on August 24, AMP’s share price had plummeted by 23%.
Pahari had been the subject of a sexual harassment investigation in 2017. The case was settled and Pahari penalised $500,000.
Importantly, these allegations have to first be made public. A national survey found 39% of women and 26% of men had been sexually harassed at work in the past five years. Just 17% of those had made a formal complaint.
Non-disclosure agreements between the complainant and the company mean few cases ever make it into the public domain.
AMP’s ignorance was costly
Pahari was due to start his new role on July 1 but an hour before his official start date, AFR reporter Michael Roddan dropped his investigation: “New AMP Capital boss accused of harassment.”
The effects of the article weren’t immediate, Roddan told Crikey.
“It was all sort of quiet for the first day or so,” he said. Slowly, information started trickling in. Roddan got access to a staff meeting addressing the allegations and Pahari’s promotion.
“That was unprecedented, to see the reaction from inside the company,” Roddan said. “All throughout the royal banking commission the company had been slaughtered on every front but it was never leaking — no one was relaying their concerns to journalists.”
It was a warning sign AMP ignored. While AMP chief Francesco De Ferrari welcomed the “candour” of staff outrage, he added Pahari had “apologised and expressed genuine remorse” and wouldn’t be replaced.
Shares began to slide, dropping by more than 6% in Pahari’s first week.
More people started taking notice. Former Fox News anchor Gretchen Carlson, who famously was the first to accuse chief executive Roger Ailes of sexual harassment, took to social media.
“So men go back to work in top positions even after publicly paying out women and women don’t work again. That sounds about right,” she tweeted.
More allegations emerged about the culture of bullying and intimidation by senior managers. The company started bleeding executives. Another executive, Alex Wade, quietly resigned among new misconduct complaints.
“Shareholder groups worry about how employees fare not from a moral or ethical standpoint, but because when people leave a business they take their knowledge, relationship with clients, and ability to run the company,” Roddan said.
Healthcare industry superannuation fund HESTA, whose members are 80% women, was the first to publically criticise Pahari’s promotion.
Investment consultant JANA cautioned superannuation funds from investing with AMP; Zenith Investment Partners placed AMP’s funds under review; Superannuation giant QSuper pulled $400 million in investments.
Only then, on August 24, did AMP take action: Pahari was demoted — though not fired. Chairman David Murray and Director John Fraser resigned from their roles.
A mismatch of values
AMP’s response is an interesting case study, labour lawyer and former executive director of the Australian Institute of Employment Rights Lisa Heap told Crikey, because it revealed the board’s narrow focus.
“They were managing the shareholder risk but not the rest of the risks … In their minds, it’s all in the dollars and cents,” she said.
“They’ll manage the current risk to the share price and might do some things to suggest they’re making a difference … but what will prompt them to make real change?”
Instead of relying on boards and executives to do the right thing, Executive Director of Women on Boards Claire Braund told Crikey the real push was coming from investors.
“Companies are starting to realise that shareholders and stockholders will not put up with poor behaviour,” she said.
Many major superannuation organisations have placed codes of practice on the Australian Securities Exchange and, as in the case of AMP, are taking a stand.
“There’s the role of big investors in showing members they must have social license to operate … they’re saying, ‘we will not invest in companies if they are seen to be inappropriate in any way’.”
Roddan said during his investigation, he was surprised at how reluctant people were to talk about the issue.
“Women are happy to talk about [the culture of harassment] but men … I really had to coax them to talk, which was shocking,” he said.
“There’s still a long way to go until people understand this is as pervasive or serious.”
Next: The impact harassment has on victims.
No it is not. Exponential refers to mathematical functions with an exponent. This is an absurd use of ‘exponentially’ where a plain ordinary old modifier like ‘very’ would be much better, although not exponentially better. Or just say it’s expensive, that would still make the point.
Events of this nature begin at zero so upon that basis alone the ametaphor (or analogy does not hold). From what has been reported plot (or graph) of the effects would be linear.
But relax, SSR; the article is just another example of ‘sensationalism’ at Crikey. So much for subjective reporting and nothing for objective reporting.
Abuse, any kind of abuse is about culture. The culture that permits it. The culture that enables it.
When you run management like a VIP members’ club, everyone suffers.
Given that, as you accurately state, “…abuse is about culture..” what does one do in a multicultural society which has at base the conceit that “All cultures are equal”?
Abuse is about individuals abusing other individuals. Every case (real, alleged, contrived) is different. Many are emotionally and circumstantially complex, profoundly subjective and fiercely disputed. Blithe reductionism to trite platitudes – the ‘problem’ is workplace culture/disrespect/gender inequality – helps no-one and nothing. Oh, except those with a functional vested interest in pat reductionism and simplification
This is what I find frustrating: the purely asserted and highly disputable ‘big picture’ zone into which this topic has been ushered over the last decade or so, as the entire field has been relentlessly colonised and commodified by a very specific cohort of – as Rundle likes to put it – Big Violence professionals. Generally pretty privileged, tertiary-educated middle-class aspirants to ‘doing moral good’, in the messy, complex, often contradictory and fraught areas of human (mis)behaviour and interpersonal behavioural transgression. It’s a noble ambition but the only meaningful way to deal with human beings who are being horrible to other human beings is to get down and dirty in the case-by-case, singular specifics, and resist the temptation of blanket diagnoses – and silver bullet fixes.
Thanks for clarifying the matter Jack. The initial remark that : “abuse is about culture” is tantamount to a tautology and, nowadays, extends to social media.
It has been a tad too easy to identify some CEOs who, it is alleged, have engaged in the practice but, for the sake of balance, others (e.g. notable AFL players) have not received scrutiny in this article (at least) or, indeed has the matter of domestic violence – for which there is no common thread of perpetrator – and could (recent murders) also be female.
As a side point, so called “working with children” or police clearances for particular occupations, if the press is any guide,
hasn’t eradicated the practice nor was it anticipated to do so. Legislating for penalties is one thing but attempting to legislate
for community behaviour is quite another.
Some of the subscribers, when next in (e.g.) London could do well with a chat with a social worker with regard to some cultural practices (that actually have NO basis in any religion) that are at clear variance with common and Statute law. The entire discussion concerning immigrants being permitted to live under their cultural and legal norms amounts to yet another post-modern contradiction.
The first of four articles. Let’s hope the remaining three get into the more serious and more prevalent instances – at the back of the fruit shops, in the supermarkets, on farms (see the ABC today) and in pubs and other SMEs. And while you are at it, let’s hope, too, that you examine the role unions and ethnic communities are playing in all this.
The “high profile” cases make a good story and perhaps they set the tone. But they are not 99.9% of the cases.
Hi Keith, I am from rural Victoria up near Gipsland so there is some serious interest in the abc story you cited.
It is my belief that the abc story is completely untrue. Anonymous sources, vague facts, an unrealistic description of events etc. Back Packers are usually very street smart and savy when it comes to farm working conditions and pay rates and all farmers want is the job done and to my knowledge always pay the expected rate. It’s just not worth it not too.
Farmer bashing is an art form these days and it’s possible someone at the ABC is having a lend of us.
An accusation seems to proxy as proof nowadays.
There you go again, pontificating from your usual aerie on top of Mount Stupid on the Dunning-Kruger curve.
Ok Let’s return to binding and throwing the accused into lakes and see if they float. The implication from ZH desires that Karen on FB is to be taken seriously.
We have administrative prodedures for the sake of those procedures. As for the DK inference provide the subscribers (if you are able to) with a brief history of the Inquisition.
As a “leg-up” the intention (although it drifted sideways) was to prevent injustices; similar to what occurred over the Salem Witch trials (and elsewhere).
Oh – perhaps I ought to mention Brett Kavanaugh.
“An accusation seems to proxy as proof nowadays”
You seemed to have missed the point of the article that it is the victim/whistleblower who is penalised by losing her livelihood rather then the perpetrator who, even if proven guilty, suffers little consequence career wise and financially.
Fez, the upper echelons to the Public Service, given the cronyism, can such that snake pits are more habitable – especially when one intends to change the game. Ditto for the corporate side.
I have witnessed no end of investigations into all manner of stuff where the person who acted from moral principles came to be screwed over wholesale. Nonsense tesomony was accepted and promises of personal interviews by the (Minister-appointed) investigators never occurred. I’m NOT defeding it; far from it.
As Jack points out, from this point (onward) the discussion needs to be case-by-case. I have seen employers (or managers) from hell and, equally, employees from hell. Happily, I have also seen a lot of good too.