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Case Study # 3 – A Sexual Harassment Lawsuit

Abusive, coercive, bullying behavior needs to be dealt with conclusively, constructively, and very quickly. The more promptly the company acts with directness, compassion, and common sense, the more manageable this problem will become. Sexual harassment involves serial predator behavior. The perpetrator benefits because almost every victim remains silent and suffers alone – and there are always multiple victims. The higher these behaviors occur in an organization, the more witnesses there actually are — most if not all generally remaining silent — thus becoming complicit with the perpetrator.

The Company: 

Dependable Insurance is a 140,000-employee company with offices throughout the US and Canada and in many foreign countries, selling a full line of business and private insurance products. It has advertising and public relations budgets exceeding $10 million per year.

The Crisis: 

Dependable’s legal department was notified that Karen, a former employee, was to file a sexual harassment complaint against Mark, the current CEO, within the next 48 hours. Karen alleged that she had been forced to travel and cohabit with Mark in order to keep her job. While Mark’s interest in Karen and overt inappropriate behavior toward her in the presence of others was far from a secret, senior management banter was, “She must like it if she keeps going along with it.”

The Complexities: 

According to a draft complaint of the civil suit, Karen, was seeking restitution and damages. The graphic illustrations and allegations of her humiliation in the workplace promised adverse publicity in many company cities and in the trade press. Considering that the insurance industry already has dozens of watchdog organizations, critics, and ongoing commentators, this had the potential to develop into a very explosive situation.

The Approach: 

To respond, the company had essentially three options.

Option one: Do nothing other than prepare for the litigation. In response to outside inquiries, the communication approach would be to deny all charges with little comment.

“We believe these charges to be groundless and the emotions of a disgruntled former employee. We will prevail at trial.”

“We don’t know what she’s talking about; we cannot comment further because the matter is in litigation.”

Option two: Prepare for trial and its attendant publicity, work to discover the facts, avoid making any statements, and suppress information through pretrial motions. Prepare to discredit the plaintiff if need be, but especially for the trial.

Option three: Immediately split the legal team in two task groups: litigation and settlement. Have the settlement team approach the plaintiff, if possible, before filing occurs. Attempt to achieve a negotiated settlement at the earliest possible time. Courts generally support any serious efforts at settlement at any time during the litigation process.

The Culmination: 

The company sought my advice too late, already having chosen option two, an aggressive anti-victim strategy to discredit Karen. Once a lawyer was chosen as a spokesperson, the company said very little. Company litigators argued vigorously against any settlement, claiming it would make Mark look weak. When I disagreed, I was excluded from company litigation strategy meetings. I advised that Mark be terminated, but he was kept on as CEO, finally suspended at the last minute, just before the trial began.

The trial went badly for Dependable Insurance.  Karen was a credible, empathetic witness.  Badgering by defense attorneys only made things worse. Throughout, Mark maintained his innocence, supported by his peers and colleagues. He was ultimately separated from the company with a significant payout, eventually taking a job with a startup company in Silicon Valley.

As for Karen, she had been assaulted repeatedly by Mark, who abused his position of power to take advantage of an employee, while his buddies stood around and watched. I doubt that even a good day in court will help Karen heal, but it may be a start.

Lessons Learned

Dependable Insurance appears to have learned little from the experience, and the corporate culture of insensitivity to women has continued. Lawsuits and accusations of wrongdoing are treated as one of the costs of doing business.

The Conclusions

While the insurance company appears to have learned little, this scenario offers powerful lessons to learn for companies that choose to heed them:

Except in the rarest of circumstances, an effort to settle should be initiated immediately. My philosophy of settlement is the check you write today is the smallest check you’ll ever write.

Individuals accused of these behaviors, at whatever level, need to be suspended from their jobs, preferably terminated. Termination sends an extraordinarily powerful signal to the victim, other employees, and the public that you are serious about preventing such abuse. The argument against is that it will lead to wrongful termination litigation. However, it pays to remember that a litigation stemming from this termination will fully discuss and explore why the termination occurred, and most perpetrators will shy away from that.



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