Council of Institutional Investors Calls for Corporate Board Governance to Mitigate Sexual Harassment

Group recommends reporting case payouts, strengthening board diversity.

In a Thursday report, a massive group of pension funds called for corporate boards to adopt harsher guidelines for those violating sexual harassment codes.

According to the report, the Council of Institutional Investors (CII), which covers 130 pension funds managing more than $3.5 trillion in assets, unleashed a bevy of guidelines and recommendations to corporate boards of directors across five key areas: personnel, board composition, policies and procedures, training, and diversity.

Such guidelines recommend the boards understand and review every settlement of a sexual harassment case, discuss company culture, revise policy, and allow for staff to be able to come to boards with their cases.

“Overseeing how top executives manage risk is one of the most important duties of a board,” CII Executive Director Ken Bertsch said in a statement. “But in general, many boards have not taken a close look at how their companies are addressing sexual harassment risk, and are struggling with how to exercise effective oversight. CII’s report offers practical ideas on how to tackle this threat.”

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CII also recommended strengthening and diversifying boards by adding female and minority directors, creating committees of the nominating and governance committee devoted to ethics and culture, and setting a high number of independent directors with independent board leadership.

It also called for recouping executive pay and ensuring that “violation of these policies constitute a ‘for cause’ termination of executives.” In addition, CII also urged that sexual harassment case payouts be reported to the board and reviewed with the legal team when these incidents should be reported to shareowners. The report also said boards should review how much should be shared.

“It is up to the board to ensure that management upholds an appropriate tone at the top, with executives setting positive examples, and with a sense of ownership and accountability for an ethical corporate culture that promotes treating all employees with dignity and respect,” the report read. “Given recent revelations of sexual harassment across many industries, all boards should discuss sexual harassment, including an examination of their companies’ policies. To ensure accountability, reports of sexual harassment, especially those against senior officials, must be brought to the board’s attention early, treated seriously, and investigated thoroughly.”

“We hope the questions help shareholders in engaging board members on this issue, and in holding directors accountable for oversight of management efforts to deal effectively with sexual harassment and corporate culture” Bertsch said.

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