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Company culture

Peer, public pressure compels firms to get serious about after-hours misconduct

Helen Chan  Regulatory Intelligence and eLearning Expert

Helen Chan  Regulatory Intelligence and eLearning Expert

In today's digitized world, news of alleged misconduct reaches audiences far and wide. Public reaction, often in the form of written feedback on news websites and even social media channels of the organizations or individuals named, is instantaneous and out there for everyone to see.

Reports of misconduct that involve sexual harassment and abuse of power have proven to be irrevocably damaging to the reputations of employees and businesses. Last year, the Presidents Club Charitable Trust, a British charity that had been in existence since 1985, closed after an investigative report by The Financial Times found female wait staff were allegedly subjected to sexual harassment by attendees of the male-only gala.

Public condemnation of the organization, as well as some of the individuals involved, was swift. The fundraising organization disbanded 24 hours after the news report was published. One of the organization’s joint chairman, David Meller, was asked to leave his non-executive directorship at the U.K.’s Department for Education.

A political hopeful, Meller was previously known as a generous Conservative party donor and successful businessman who founded an academy trust to sponsor state schools in England. He has since taken a leave of absence from the trust he founded.

In another example, Richard Liu, chairman and chief executive of JD.com, one of China’s leading e-commerce companies, was implicated in a sexual assault case in Australia. The case, which resulted in the conviction of another individual, was linked to a party Liu had hosted in his home in Sydney. While the judge did not assign fault to Liu, his name and that of JD.com came to be closely associated with the case, even though the individual who was convicted was not an employee of the company. Later, Liu himself was arrested in Minneapolis on suspicion of rape. U.S. prosecutors ultimately dropped the charges against Liu due to a lack of evidence; however, he has faced considerable reputational damage and public backlash in China. The share price of JD.com also dropped considerably following news of his arrest, a development that has no doubt been felt by the company’s employees and shareholders.

As these examples show, in addition to amplifying the speed in which the public reacts to news of misconduct, the Internet and social media have also vastly broadened the reach and scope of reputational damage, especially for named individuals.

Risks are too great to ignore for businesses

From Asia to North America, conduct risks arising from bullying and harassment have become too great for businesses to ignore.

After-hours misconduct presents significant reputational risk to corporations and individuals in Asia-Pacific (APAC) jurisdictions such as China, Hong Kong, Japan, and South Korea, to name a few, where a lion’s share of business transactions and employee interactions, including social activities between junior or middle-management employees and their line managers occur after-hours, usually at venues where copious amounts of alcohol are served.

As discussed in the examples above, being publicly linked to instances of bullying, harassment, and more seriously, sexual assault, have severe and lasting reputational, financial, and professional consequences. Businesses are exposed to risk and in some cases, vicarious liability through the actions of their employees; events hosted, organized or attended by employees; and even acts carried out by affiliates of employees.

While many APAC jurisdictions lack mandatory requirements for anti-harassment training or harassment policies, most have workplace harassment laws and regulatory requirements in place that expose businesses who fail to address workplace bullying and harassment to varying degrees of legal liability.

In Hong Kong, for example, corporations are legally required to provide a safe working environment for all employees. Employers may be vicariously liable whether or not they knew about acts of sexual harassment during an employee’s course of employment, meaning that misconduct that occurs after-hours is fair game. Courts in Hong Kong have broad powers to award remedies and punitive damages in civil harassment cases.

Businesses in some APAC jurisdictions are beginning to take measures to mitigate their exposure to risk as well as to fulfill their legal obligations. (An informative summary of applicable workplace harassment obligations and liability considerations in the APAC region can be found here.)

There’s a cultural aspect to awareness training

In Singapore, demand has been on the rise for awareness training from consultancies that specialize in workplace harassment. While awareness training for staff at all levels is an important part of an effective compliance program, businesses concerned about their exposure to after-hours misconduct risk need to be thinking about policies and practices that take the regional culture of APAC jurisdictions, as well as the nature of their business, into consideration. For example, in countries such as China or South Korea, it is considered offensive for a junior to refuse an alcoholic drink from a senior. Declining a drink, even to an advanced state of inebriation, is seen as a faux pas. This attitude, which is steeped in the Confucian roots of both countries, extends to interactions between managers and subordinates.

This contributes to an atmosphere where employees may feel immensely pressured to comply with anything that is asked of them by a supervisor, a senior executive of the firm, or a client.

In this instance, policies, procedures, and awareness training that encourage employees to speak up and report misconduct, such as whistleblower channels, are unlikely to be very effective, simply because of cultural influences. However, corporate cultural change that places the onus on senior staff to set a “tone from the top” and to actively embody a zero-tolerance policy towards bullying and harassment may prove to be more effective. As a foundation to set the right tone, businesses need to provide culturally sensitive awareness training to all employees.

Further, training for employees in positions of power should be catered towards illustrating that they are expected to demonstrate and facilitate good conduct, from themselves as well as their peers, as part of their core job responsibilities. Senior executives should publicly and vocally endorse all of the anti-harassment policies at their company; and non-compliance should result in dismissal regardless of rank. One emerging practice that has garnered controversy is the decision by some businesses to impose an obligation on managers and senior executives to report misconduct when they become aware of it or face disciplinary action.

Some businesses have adopted this approach and even elevated standards among their peers, suggesting the misconduct risks are becoming ever more pressing. It also suggests that businesses can tackle such problems effectively through thoughtful and practical compliance initiatives.

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