In the wake of the #MeToo movement, investors are quickly learning that the fallout extends far beyond just the perpetrators. Sexual harassment scandals have a trickle-down effect that impacts company stock value.
This is the result of living in an age of social justice consumerism. Today’s consumers not only expect the product or service that they purchase to provide real value, but they expect the companies that they support to uphold certain moral and ethical standards.
When a company violates these principles, the consumer will abandon said company. Often times, this is to the benefit of the company’s top competitor, who then scoops up the dissatisfied customers.
“The exposure of widespread sexual harassment–and worse–has ended careers and damaged numerous institutions across a wide swath of industries,” said Henry McVey, Member & Head of Global Macro & Asset Allocation at global investment firm KKR. “In this environment, there is no easy hedge; rather, investors must carefully assess company culture, risk management practices, and personnel risks.”
For a real-world example of how sexual harassment can severely hinder profits, look no further than Uber. When the ride-sharing company’s sexual misconduct scandal broke last year, Uber lost its market share to competitor Lyft. Even though the exposé was to Lyft’s benefit, the company made it clear that the scandal was not anything to rejoice about.
“This isn’t a time to gloat,” Lyft founders Logan Green and John Zimmer wrote in a staff email shortly after the news broke. “The faults of our competition don’t do anything to deliver a better experience for our customers.”
Lyft’s response was perfect considering the magnitude of the situation. People should always come before profits—a core value that every company should embody.
On a more positive note, when it comes to creating a workplace environment that is welcoming towards women, investors wield a lot of influence. Shareholders have the power to demand that a company adopt a zero-tolerance policy on sexual harassment. Not only is this good from an ethical standpoint, but it also protects business assets should a worker’s misconduct pose a risk to the company.
