Recent headlines regarding Bill Gates’ romantic overtures to women employed by the Bill and Melinda Gates Foundation are an important reminder that nonprofit boards are not immune to the risks posed by employee fraternization. In fact, stakeholders may hold nonprofits to even higher standards than for-profits.
Fraternization is the interaction between co-workers that extends beyond business relationships—the most problematic being romantic relationships. While an employer might prefer that its employees not date each other, blanket bans on dating colleagues may be difficult to enforce and only discourage employees from reporting relationships. A 2019 survey produced by job site Vault.com found that 58% of employees have engaged in romantic relationships with colleagues.
Workplace dating does not violate any law, but it can give rise to legal, reputational, and employee morale issues. The main legal risks are sexual harassment, conflicts of interest, and workplace violence. Beyond legal risks, management issues such as favoritism, lack of objectivity and unprofessional behavior can arise.
Many donors and other organizations emphasize nonprofit governance. Watchdog groups such as the Better Business Bureau’s Wise Giving Alliance and Charity Navigator rate nonprofits based on their governance structures. IRS Form 990, which most U.S. nonprofits must file annually, asks for detailed information about governance practices and policies.
Let’s also not forget that directors of nonprofits have a duty of regular oversight or care. In the wake of #MeToo, questions have been raised about whether board actions or inactions concerning workplace harassment constituted breaches of such fiduciary duties, either by tolerating or being willfully blind to obvious misconduct.
Here are a few steps that a proactive nonprofit board can take to manage the risks posed by employee fraternization:
1. Refresh Policies Annually. Review policies annually that may be implicated by employee fraternization (e.g., sexual harassment, conflicts of interest, close personal relationship policies) and brief directors on issues that have arisen in the past year. This includes looking at material reporting romantic relationships. Key questions to consider include:
- What do the nonprofit’s reporting metrics look like? Are there repeat offenders, problematic departments, or concerns that come up more frequently?
- When was the last time the nonprofit updated its policies, conducted training, and performed crisis management exercises?
- What steps have been taken to promote an inclusive, diverse, and safe culture? What is the current state of the nonprofit’s culture?
2. Have a Reporting-Up Checklist. Institute a checklist for management that requires disclosures of consensual romantic relationships or allegations of sexual harassment involving key executives to be reported promptly to the board. The board should also require a report on investigations and disciplinary actions for workplace harassment be delivered annually.
Since management is responsible for day-to-day operations, while boards only exercise an oversight function, it is critical that management keep directors informed. While nonprofit boards cannot and should not micromanage close personal relationships of employees or, depending on the size of the organization, each allegation of harassment, there may be some relationships or allegations that rise to the level of board involvement.
3. Form an Oversight Committee. Form a committee that is tasked with overseeing personnel issues involving key executives, managing a whistleblower channel, and reviewing compliance issues more generally. Handling these issues at a committee level, rather than full board, may be desirable for a few reasons. The committee can be composed of subject matter experts, and it can typically respond with greater agility than a larger, more-unwieldy donor-appointed board.
4. Create a Crisis Response Plan. Develop a crisis response plan for high- stakes accusations. Should an allegation of misconduct arise, a nonprofit will need to act quickly. A crisis response plan can be important in ensuring a timely and thoughtful response. The plan should address public relations considerations as well as:
- Identify supplemental human resources consultants who can be engaged on short notice.
- Address succession planning to ensure that there are adequate resources should an employee become conflicted or need to be dismissed; and
- Outline how to provide “notice of a potential claim” to the nonprofit’s directors’ and officers’ liability insurance carrier, to assure that the carrier does not have grounds to refuse to cover any resulting liability.
5. Recruit a Director With HR and Employment Law Expertise. Prioritize the recruitment of one or more directors who are knowledgeable about human resources practices and employment law. Nonprofits tend to prioritize fundraising in board recruitment processes. Focusing on operational expertise can help enhance board oversight, supplementing areas where internal resources may be weak.
New directors should receive a list of close personal relationships involving any key management members. This safeguards against certain members being informed while others are not aware.
6. Touch the Culture. Consider taking the pulse of the nonprofit’s work environment beyond the C-suite through a survey of employees to identify and understand trends and patterns around fraternization and sexual harassment. Refreshing periodic trainings that address fraternization issues, including trainings at the board level, can help establish organizational culture through a “tone from the top.” It may also be legally required in some jurisdictions, such as New York.
Nonprofit boards should be informed of critical personnel issues. When issues arise, they should ask questions and may need to retain independent advisers that report directly to them. Nonprofit boards should never accept a “report out” from management that a personnel matter has been investigated and resolved, particularly when a matter involves allegations of serious misconduct by key employees.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Michelle R. Heisner is a partner in Baker McKenzie’s Global Corporate and Securities Practice group in New York.