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The Weinstein Effect Is Increasing Exposure For Board Members

By Jack McCalmon, The McCalmon Group, Inc.

Steve Wynn, the founder, chairman, and chief executive of Wynn Resorts Ltd. faces scrutiny from shareholders after claims of sexual misconduct surfaced. The claims originated from his divorce proceeding.

Wynn investor, Richard "Trip" Miller, managing partner of Gullane Capital Partners, recommended an outside investigation. "These are darn serious allegations," said Miller.

Wynn, who just resigned as chairman of the Republican National Committee, is reported to have paid $7.5 million to settle claims brought by a former manicurist at his resort. The accusation was that Wynn pressured her to have sex with him.

Wynn, who is 76, calls the allegations "preposterous" and claims that his former wife was running a smear campaign against him, which she denies. The Wynns are fighting over nine percent stake in the company.

Since the news broke, Wynn stock has dropped by more than 10 percent.

Outside women's advocacy groups have called for Steve Wynn to resign. Christopher Palmeri "Steve Wynn accused of pattern of sexual misconduct; Wynn Resorts stock drops 10%" latimes.com (Jan. 26, 2018).

Commentary by Jack McCalmon, Esq.

I am always amazed how personal issues can affect, often negatively, work and business issues. The Wynn matter is another example.

We have written about the “Weinstein Effect” and the impact it will have on employers. “The Weinstein Effect: Will Sexual Misconduct Claims Against Employers Jump In 2018?” (Jan. 22, 2018).

Another fallout from the “Weinstein Effect” is how sexual misconduct claims affect a company’s value. In the past, allegations against CEOs and other executives were viewed as personal/internal corporate matters that did not have a negative impact on the company’s value. That is no longer true, especially when accusations are made against executives.

Sexual misconduct within an organization is now a serious board risk. We have seen quickly how allegations alone can lead to shareholder litigation. Such allegations are especially damaging for “start up” companies that cannot afford the negative publicity of a sexual misconduct scandal by a chief executive. 

What should executives and boards do?

  • Make sure all sexual misconduct policies are re-acknowledged, including by executives.
  • Place an emphasis on safe environment training for sexual misconduct of any kind.
  • Have all allegations of sexual misconduct fully and independently investigated.
  • Conduct training of everyone in the workplace, including employees.
  • Screen every applicant to make sure he or she is safe for your workplace.
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