Earlier this month, a Delaware court found that McDonald’s Corp. board members and the company’s chief human resources officer did not violate their duty to shareholders in handling sexual harassment and misconduct allegations, ruling that the directors’ response was legally sufficient.
Even though the shareholders’ lawsuit was thrown out, it has become a crunch point. It sets a new precedent under which HR leaders can be held liable for failing to aggressively monitor and stop behavior that violates the law and the company’s policies on sexual harassment.
According to The Wall Street Journal, “The claims center on what shareholders alleged was a boys’ club-type atmosphere at McDonald’s, complete with frequent gatherings at an open bar on the eighth floor of the company’s Chicago headquarters and alleged encouragement to hire young, attractive women to work in administrative roles there.” Whether at McDonald’s, Zenefits, or any other company, a boys’ club atmosphere (a toxic workplace atmosphere of rampant sexual misconduct) should not be tolerated.
In 2019, McDonald’s fired Chief Executive Stephen Easterbrook because of his consensual relationship with an employee, which violated company policy. Shareholders later sued McDonald’s board of directors, Mr. Easterbrook, and the company’s former chief human resources officer, David Fairhurst, for allegedly violating their fiduciary duties to the company.
Delaware law allows shareholders to sue directors over alleged oversight failures, including failing to ensure compliance processes are in place to address mission-critical risks. While some of the directors involved in the suit have since left the board, several remain in their roles.
Although the bad behavior in this case is extreme, it highlights the need for HR leaders to take action when the CEO or other executives violate sexual harassment policies and the law. They need to bring the issue to the CEO, or if the CEO is involved in the violation, to the board of directors or the company’s legal counsel.
Another complexity is the fact that about 33 percent of employees are involved in office romances during their careers. According to a 2022 survey from the Society for Human Resource Management, 33 percent of respondents report being in an office romance or having been involved in an office romance, six points higher than before Covid-19. Nearly two-thirds of these romances were with peers, while 12 percent of respondents dated their subordinates and 19 percent dated their superiors. Three-quarters of US workers say they are comfortable with people at their workplace being involved in an office romance. Another study showed that about half of office romances lead to marriages. However, office romances can be risky. Another survey showed that 60 percent of office relationships end in breakups within a year, and 17 percent of respondents eventually lost their job.
Office romances are too frequent to be banned. However, companies are on solid ground when they forbid dating between leaders and their direct and indirect reports (lower in the organization) and require that these relationships be reported. Policies often require that one of the employees be transferred to a department outside of the leader’s control or leave the company. In the McDonald’s case, the consensual office romance involving the CEO was not reported.
CHRO’s can be held liable for not stopping rampant sexual misconduct. HR should have written sexual harassment policies and mandate training on those policies when employees join the company and when required by law (such as every two years in California). Training and policies, however, are not enough. Consequences speak louder than policies and training, and it’s vital that HR does not turn a blind eye to violations—even if the employees in question are in the executive suite or among top sales workers.
Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and managing partner of InnovationOne, LLC. He works with organizations to transform HR and recruiting, implement remote work, and develop extraordinary leaders, teams, and innovation cultures. He is the author of the highly acclaimed book, Hack Recruiting: the Best of Empirical Research, Method and Process, and Digitization. He is quoted in business journals such as The Wall Street Journal, Workforce Management, and CEO Magazine. Subscribe to his weekly blogs at http://www.VictorHRConsultant.com.