Beyond Legal Risk

Harassment is a costly business.  The actual cost of a harassment lawsuit could include wage loss, emotional distress, civil penalties, and attorneys’ fees.  The actual monetary hit a company can take is not small.  In theory, it could put a business under.  But there is a much, much larger risk that employers need to understand – the loss of reputation.  The loss of reputation falls into two distinct yet related categories:  loss of customers and loss of employees and candidates.

Loss of customers (or vendors, suppliers, etc.) is not insignificant. Signet Jewelers lost significant revenue when women turned away from its jewelry stores after harassment and discrimination issues came to light.    When Uber placed a surcharge on riders headed to airports to protest immigration issues and followed closely by Susan Fowler’s blog post outlining the rampant gender discrimination and harassment at the ride hailer, Uber suffered mightily.  It lost revenue, over a quarter of a million users, and become under close scrutiny around the world.

A loss of customers does not just affect large companies.  Small and medium-sized companies who are embroiled in scandal can get shuttered too.  For example, a Charlotte, North Carolina eye doctor surrendered his medical license and filed bankruptcy after sexual harassment allegations came to light.  A tech startup (in the HR-space no less) can’t raise funds or keep valuable customers after its CEO resigned in disgrace following harassment allegations.  This idea that harassment allegations can’t happen here is a myth unless you actively and obsessively build a respectful workplace.

Keeping and finding talent is also a challenge for a company with a reputation problem.  Uber employees were looking for the exits after Ms. Fowler’s blog post.   Employee turnover is high when a bully or harasser is able to stay with a company as inappropriate comments or conduct is a sign of a bad corporate culture.  Recruiters have to work harder, explain more, and actively try to “sell” your culture rather than let your culture speak for itself.

These days with review sites like Glassdoor and Indeed as well as social media, candidates can also get a good sense of a company culture well before an interview.  Take this Glassdoor review.  The review states that this employee is “sexually harassed on a daily basis.”  Or this review that states that the owner “encourages a hateful and discriminatory environment[.]”  Or even this review on Indeed that simply says, “Do NOT Apply if you are female.”  By a Glassdoor survey, 70% of candidates read reviews before interviewing with a company.  Will the reviews you get effect who wants to apply and/or interview with you?

Today, the Weinstein Company is likely to declare bankruptcy.  The Weinstein Company is not the first company to seek bankruptcy protection after an explosive sexual scandal.  American Apparel, Bikram yoga, Le Cirque, and neighborhood Mexican restaurants have all entered into bankruptcy following allegations of sexual harassment.  It can happen to any company who does not take the risks of sexual harassment seriously.  But these are just the financial risks.  The long-term effect of a bad reputation will linger on these companies and their products and services.  So, if you’re concerned about harassment in your workplace, do something about it now.  While not all small and medium-sized businesses will make the front page when harassment allegations surface, customers, suppliers, candidates, and employees will learn about it.  Don’t let it fester and get bigger and even more toxic and damaging.


Photo by Daniel von Appen on Unsplash


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