Now that tech giant Microsoft has published a public sexual harassment report as a condition of shareholder approval of a proposal asking for greater transparency on the effectiveness of the company’s sexual harassment policies, will other companies be pressured to follow suit?
Although rumors of sexual harassment allegations floated around Microsoft founder, chairman and CEO Bill Gates for years, it wasn’t until last year that a proposal for “a transparency report to shareholders assessing the effectiveness of the company’s workplace sexual harassment policies, including the results of any comprehensive independent audit/investigations, analysis of policies and practices, and commitments to create a safe, inclusive work environment” received enough shareholder support (78% majority vote) to move the Microsoft board to really address the issue. ESG investment management firm Arjuna Capital filed the shareholder proposal that was voted on at Microsoft’s annual meeting in 2021.
Arjuna Capital managing partner Natasha Lamb said in a press release, “The transparency report and implementation plan provide a leading example for companies to follow. We learned from the #Me Too movement that sexual harassment is no longer an issue that can be kept in the shadows. It is a material business risk that can and should be addressed with transparency and accountability.”
What should corporate board members make of the Microsoft report?
• Learn from it. Any time a shareholder proposal results in changes to corporate compliance for a company as large and influential as Microsoft, corporate boards should pay attention. All companies should consider examining the Microsoft sexual harassment transparency report—not because they believe their company has a problem dealing with sexual harassment, but because their board can glean insight about potentially effective policies to tackle sexual harassment in a corporate environment. Since Microsoft has been pushed to do a deep dive on trying to correct this issue, other companies can measure their harassment policies against what Microsoft has been asked to implement and see what some consider effective policies to improve corporate culture.
• Prepare for similar shareholder proposals. While it is unlikely that this type of transparency report will become a requirement for all companies, the potential impact this report may have on shareholders at other companies cannot be discounted. Shareholders at other companies dealing with sexual harassment allegation may receive proposals for similar transparency reports in coming years. Now that there is a precedent for this type of disclosure, it is reasonable to expect that requests for these types of disclosures may increase. All boards should consider how they would respond to a shareholder proposal asking for transparency on sexual harassment issues.
• Survey shareholders and employees to determine if sexual harassment is a major concern. As this report gets more publicity, it might be a good time for companies to review their current sexual harassment policies and ask key shareholders and employee groups whether what the company has in place is adequate. Making adjustments to internal policies like these without having a shareholder resolution on the matter being filed is preferable to having an embarrassing vote at the company annual meeting. Becoming aware of and addressing any dissatisfaction in this area can help mitigate the material business risk that comes with lawsuits and negative reputations associated with sexual harassment claims.
