An assembly of California-based public pensions representing $635 billion in assets under management have banded together to form Trustees United, a group asserting a hard stance towards sexual harassment and other workplace misconduct. The group’s main endeavor is to encourage other organizations to take significant steps to promote the same message.
The group contends that these violations not only have a compelling adverse effect on corporate culture and human capital management practices, but also create material risks to investment portfolios and financial performance as a result.
“As fiduciaries, we recognize that the recent wave of sexual harassment and misconduct incidents leave companies open to significant operational, financial, and reputational risks,” a statement from the group reads.
Trustees United was founded by members from the California Public Employees’ Retirement System (CalPERS), California State Teachers’ Retirement System (CalSTRS), the Los Angeles County Employees’ Retirement System (LACERS), and the Los Angeles County Employees’ Retirement Association (LACERA).
The group maintains four foundational principles it believes will guide investors’ actions to manage risk on the issue:
- Company directors should publicly share due diligence processes used to respond to sexual harassment and violence complaints by all employees
- Transparency in reporting sexual harassment and misconduct settlement costs to investors can help change corporate culture and limit the potential for future financial and reputational risk
- Companies must prioritize diversity at all levels
- Policies and agreements such as collective bargaining agreements can mitigate risk by addressing power imbalances
“Less visible—but no less real—are the missed opportunities to create long-term value due to the adverse impact sexual harassment and misconduct have on corporate culture. The trustee principles were conceived as a catalyst for expanded engagement on an issue that remains largely invisible to investors,” CalSTRS Vice Chairwoman Sharon Hendricks said in a statement.
The group referenced the Weinstein Company’s declaration of bankruptcy and Wynn Resorts’ sudden loss of $2 billion in value in the wake of sexual harassment claims against their respective executives as “only the most high-profile illustrations of this looming threat.”