Dollars, sense and sexual harassment: when share price is all that matters

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.