As the #MeToo movement emboldens victims of sexual harassment and assault to speak out — and as investors increasingly prefer companies that align with their values — a due diligence group is warning institutional investors to keep a closer eye on the investment managers whom they trust their beneficiaries’ assets.
Institutional fund allocators are doing a better job of identifying sexual harassment issues at investment management firms, but need to do more to respond when they uncover such problems, according to the Investment Management Due Diligence Association.
IMDDA’s second annual sexual harassment survey, released Friday, found that only 26% of allocators said they inquired about sexual harassment in the workplace — still an improvement over the 11% in the 2018 survey that said they did so.
At the same time, 9% of allocators said they would still invest with a manager even after they had found workplace sexual harassment issues, up from 4% in last year’s study.
Fifty-five percent of due diligence professionals said they would not press for answers if a manager declined to answer questions about sexual harassment. But 45% said they would dig deeper, way up from 18% in 2018 that said they would insist on answers.
Three-quarters of investors said they checked social media and lawsuit history for red-flag indicators of sexual misconduct as part of their due diligence, up from two-thirds in the previous survey.
“IMDDA’s second annual survey of sexual harassment demonstrates that the global institutional investor community is continuing its efforts to uncover and react to instances of sexual harassment uncovered during the due diligence process,” said IMDDA’s executive director Andrew Borowiec said in a statement.
“The full impact of sexual harassment is, first and foremost, on the victim or victims and that must be addressed. Investors need to maintain their moral and ethical responsibilities while making sure not to ignore fiscal responsibilities.”
IMDDA said that in response to the rise of the #MeToo movement in 2017, it commissioned anonymous surveys of due diligence professionals at institutional allocator firms.
Seventy-eight allocators representing endowments, pensions, insurance companies, private banks and funds of funds participated in the 2019 survey, of which 55% were from North America, 24% from Europe, 9% from Asia/Australia and the balance from Africa/Middle East/South America.
Release of the report comes in the wake of the controversy surrounding Fisher Investments Chairman Ken Fisher’s lewd comments about women made in October during an industry conference.
Fisher has not been accused of sexual harassment, but the incident led to an outcry over entrenched sexist behavior in financial services. Investors have pulled more than $4 billion from the firm since Fisher made the comments, for which he has apologized.
The issue is much broader than the comments of one “creepy man,” according to Ellevest chief executive Sallie Krawcheck. It is “bigger than that: It’s about women feeling — and being — welcome not just at financial services conferences, but in the financial services industry itself.”
On Thursday, BlackRock said it had fired a top executive for having a consensual relationship with another employee, in violation of company policy.
IMDDA said its survey seeks to define the risks of complacency regarding sexual harassment and recommend ways that professional allocators can improve operational due diligence to discover, respond to and seek to prevent workplace harassment in its various forms whenever and wherever it occurs.
The risks of ignoring sexual harassment at investment management firms can be devastating for allocators, IMDDA said.
These risks include negative media coverage, reputational damage, tough questions and actions from investment committees, protests from beneficiaries and charges that due diligence professionals simply did not do their job.
IMDDA recommended the following actions for operational due diligence professionals:
- Examine human resources processes
- Ask about percentages of recent departures of women vs. men, and reasons why they left
- Ensure that the background checker asks tough questions about sexual harassment claims
- Investigate the firm’s nondisclosure agreement history
- Interview past employees about the firm’s corporate culture and work environment