O’Reilly, Fox, Compliance, and Culture

Compliance officers should watch the unfolding mess at Fox News with a great deal of unease. The sexual harassment claims against its star talk show host, Bill O’Reilly, have nothing to do with regulatory compliance per se—but they have much to do with corporate values and culture, an important but blurry part of the compliance officer’s purview.

Unfortunately, it will only get more important but blurry in the future.

The allegations against O’Reilly aren’t really news; women have accused him of harassment before, and settlements over those claims have spilled into public view before. Last weekend, however, the New York Times published a comprehensive look at O’Reilly’s behavior, and it’s not pretty. He comes across as a flabby old relic chasing skirts, who gets mean and vengeful when these much younger women aren’t interested.

According to the article, five women have settled harassment claims against O’Reilly for a total of $13 million. Two of those settlements came after Fox sacked his boss, Roger Ailes, amid his own sexual harassment scandal last year. The parent company, 21st Century Fox, says it has spoken with O’Reilly about his conduct. O’Reilly denies the allegations but “has resolved those he regarded as his personal responsibility,” whatever that means. “Mr. O’Reilly is fully committed to supporting our efforts to improve the environment for all our employees at Fox News.”

This being the modern age, the New York Times article set off a firestorm of opprobrium on social media (#oreilly) and led to calls for companies advertising on the O’Reilly Factor to drop him. As of Thursday morning, more than two dozen have.

And lastly, President Trump poured gasoline on the fire yesterday, saying O’Reilly was “a good person… I don’t think Bill did anything wrong.”

That’s rich, since Trump is another flabby old relic accused of sexual harassment. Trump said he wished O’Reilly had not settled, and instead taken his accusers to court. Trump himself, of course, promised last fall to do exactly that against his own accusers. He never did.

The Ethics & Culture Conundrum

Corporate ethics & compliance officers should dread a situation like this: star employee accused of civil misconduct. At least in accusations of criminal misconduct, prosecutors step into the picture and can force the company to follow their lead. In a perverse way, that’s a relief. With civil misconduct along the lines of sexual harassment, the company decides for itself how to respond.

Let’s be frank. At many companies in that situation, the compliance officer’s ability to influence that decision is small, relative to the consequences for corporate culture that you will still need to manage.

That is, most companies will put a dollar figure on the allegations, make them go away, and let the star employee keep rolling along. Then the compliance officer gets stuck with a cynical corporate culture where employees believe management only cares about money. Good luck telling people that core values really matter after that.

We should appreciate the complex calculus that happens here. The executives who decide the employee’s fate—probably a mix of the general counsel, the HR director, the CEO, and ideally you—have to weigh the financial upside to keeping the employee, against the litigation risk of other employees taking the star to court.

But those are only the litigation and financial risks. The company must also consider culture risks (what message does a decision to settle and keep the star employee send to other employees?) and reputation risks (what message does it send to customers, business partners, and investors?).

The real math that gets done—the difficult intersection of money and ethics—is deciding which of those risks gets priority. For most businesses, which have a low public profile, the reputation risk is low. The challenge really is about how much priority the company assigns to litigation and culture risks.

That can leave ethics & compliance officers in a lonely position. Sure, you can counsel senior executives about the need to demonstrate the firm’s commitment to values, but for example, that didn’t carry the day at Fox. It calculated the value of paying whistleblowers to go away, the revenue O’Reilly would keep bringing to the business, and the possible damage to its corporate culture. Then Fox settled.

The question really is how much of a priority an organization places on strong ethical conduct, even at the expense of lucrative financial reward. That’s not news to compliance officers.

Welcome to Modern Times

What is news, and what can give compliance officers a stronger hand in these tricky situations, is the role that social media plays in pressuring corporate priorities. While we’ve used Fox as an example so far, to demonstrate the underlying dynamic here, let me use another example—Uber.

Remember that in February, Uber CEO Travis Kalanick was forced to resign from an advisory council to Donald Trump. Trump had just unveiled his ill-advised and ill-fated refugee ban. Kalanick’s participation on Trump’s advisory council caused a tremendous uproar among Uber customers and employees. That led to the #DeleteUber campaign, where more than 200,000 people canceled their Uber accounts.

Consider what really happened here: social media allowed two groups of Uber stakeholders (customers and employees) to form an alliance and force the CEO to change his priorities.

Were those groups right to demand that Kalanick quit Trump’s council? That’s irrelevant to our point. Social media allowed them to challenge the CEO with a unified voice. That gave them enough power to compel a change in management’s priorities.

I suspect we’ll see something similar with Fox. Social media is allowing critics of O’Reilly, Fox News, and sexually harassing corporate cultures to consolidate and amplify their voices with speed and force. When something like that happens, companies that previously placed financial priorities ahead of ethical and cultural priorities tend to revisit their decisions.

Astute ethics & compliance officers will note that whatever Fox might do today, that decision will be far more expensive than if the company had acted earlier. And when financial risks are smaller, emphasizing the priority of a strong ethical culture is easier.

It’s almost like saying that embracing a strong ethical culture from the start helps the company financially in the long run.

Huh. Imagine that.

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