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Microsoft Sets Bar on Investigating Harassment.
Who Will Follow?

Feb. 23, 2022, 4:59 PM

You’d think that the brilliant brains running America’s shiniest institutions would get it right by now. They’re hardly virgins in the arena of sexual harassment, discrimination, bullying, and other unlawful conduct in the workplace.

Just a few weeks ago, Microsoft did something simple and logical in laying out a road map on how to handle investigations into those thorny issues: It hired a firm (Arent Fox) that’s not its regular counsel to review its prior investigation into harassment allegations against Bill Gates, and benchmark its “current practices against ‘best practices’ adopted by other companies.”

Independent review. Benchmarking. How radical. Microsoft might be leading the way, but are other institutions following this course?

I hope I’m wrong, but I bet that Microsoft’s approach is an outlier.

For instance, in the CNN imbroglio involving former anchor Chris Cuomo and its now ex-president Jeff Zucker, the network turned to longtime counsel Cravath Swaine & Moore to investigate the sexual harassment claims against Cuomo. And speaking of the Brothers Cuomo, the New York Assembly picked Davis Polk & Wardwell last spring to investigate charges of sexual harassment against then Gov. Andrew Cuomo, who had various personal ties to the firm.

Though there’s no indication that either Cravath or Davis Polk failed to do their job fairly, questions inevitably arise whether there’s a conflict of interest. So why don’t companies and institutions pick a fresh firm?

“I’d like to believe it is common practice now for companies with high-profile investigations to retain a firm that is truly independent, but I’m not so sure that companies are doing that proactively or when not in the hot seat,” says Brande Stellings, who advises companies on harassment and equity policies. If the alleged behavior is egregious or if the accused is a senior official, she adds, “there should be a public commitment to using a firm that does not have ties to the organization.”

Appearance matters.

“The optics are certainly better if a company hires a firm with which it has no prior professional relationship,” says NYU law professor Stephen Gillers. Whether that practice will become the standard, though, is another matter: “I think the great majority of shareholders focus on the stock price and dividends,” adds Gillers. “If the use of regular counsel is more likely to protect these, they’ll favor it. If the ensuing negative publicity risks harming profits and share price, they’ll press for an outside review.”

But using a regular counsel for investigations should not be verboten, argues Bridgit Blinn-Spears, a partner at Nexsen Pruet in Raleigh, N.C. “The optics might be better if there’s no existing relationship but the disadvantage is that the firm won’t know the company as well,” says Blinn-Spears. The key, she explains, is to have one set of regular counsel for investigations and another for litigation that might spring from the investigation. “The solution is to have a clean division.”

Some institutions aren’t even debating this issue because they’re handling investigations internally—and they’re making a mess. That seems to be the situation with Tesla Inc., which got slapped with a $137 million verdict in October in a racial discrimination suit and is now facing a suit by the California Department of Fair Employment and Housing for discrimination and harassment against Black factory workers.

(The DFEH noted, “Tesla had no written procedures for coordinating investigations into racial harassment involving workers from staffing agencies and did not provide standardized training to supervisors on how to conduct investigations into racial harassment.”)

Harvard University also seems to have made quite a fiasco with its own investigation of allegations by three female students of sexual harassment by a popular anthropology professor. It came out that the university gave records of therapy sessions of one of the women to the professor. (Represented by Sanford Heisler, the students are now suing Harvard.)

Again, why didn’t it occur to this august institution to bring in an outside counsel to conduct a thorough investigation? (Neither Harvard nor Tesla has responded to my request for comment.)

Which raises this question: What does it take to get an institution to take allegations of harassment or discrimination seriously enough to conduct an investigation that seems above reproach? Workforce revolt? Shareholder pressure? Public shaming?

I’ll tell you what won’t prompt action: Simple desire to do the right thing.

As laudable as Microsoft’s actions are, it didn’t get there by its lonesome. It was pushed into it by a shareholder proposal submitted by Arjuna Capital that garnered 78% of shareholders’ vote—a fact that the company acknowledges. And it was spearheaded by Arjuna managing partner, Natasha Lamb, an activist investor—and a woman, I might add.

A cynic might add that Microsoft is suddenly behaving like a model citizen because it wants to acquire video game giant Activision Blizzard Inc. in a deal that’s valued at nearly $70 billion. But Activision has its own problems with sexual harassment—ones that arguably make Microsoft’s issues look like child’s play.

(Microsoft’s spokesperson told me that the company committed to issue the report on harassment prior to discussion about acquiring Activision.)

And how is this all playing to those who’ve fought in the trenches for gender equality at Microsoft? Former Microsoft security strategist Katie Moussouris, who filed a lawsuit in 2015 against the tech giant for discriminating against women in pay, promotion, and performance evaluations, is ambivalent.

“It’s an important step in transparency and accountability, but I don’t think it changes an organization,” Moussouris told me. Though she dropped her suit after a federal appeals court upheld a lower court’s decision to deny her case class certification, Moussouris blazed a glaring spotlight on gender inequities at Microsoft.

“It’s been seven years since I filed the lawsuit, so they’ve been under pressure about gender issues for a while,” she added.

So what can Microsoft or any company in the headlights do to convince people that it’s really serious about being accountable?

“The most forthcoming action would be to use an independent firm and waive privilege in advance and then release the report, perhaps with redactions for privacy or competitive reasons,” says Gillers. “But it will be the rare client that takes that chance.”

In other words, don’t hold your breath.

To contact the reporter on this story: Vivia Chen in New York at vchen@bloombergindustry.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergindustry.com; Kibkabe Araya at karaya@bloombergindustry.com