More investors responsible for allocating capital to investment management firms (nine per cent) would still consider investing, or invest, with a money manager discovered to have workplace sexual harassment issues compared to last year (four per cent), according to a survey by the Investment Management Due Diligence Association.
And, 71 per cent of investors don’t inquire about sexual harassment in the workplace at all, it found.
However, at the same time, more (26 per cent) allocators said they’re directly asking about sexual harassment in their due diligence processes than did so last year (11 per cent).
“Investors need to maintain their moral and ethical responsibilities while making sure not to ignore fiscal responsibilities. This survey shows we are moving in the right direction,” said Andrew Borowiec, executive director of the Investment Management Due Diligence Association in a press release.
The report highlighted that overall investment allocators are doing a better job at identifying sexual harassment issues at investment management firms, but still have plenty of work to do in order to tackle the problem more effectively.
Further findings included that 45 per cent of due diligence professionals said they’d dig deeper with their questions in situations where they found resistance to questions about sexual harassment, up from 18 per cent in 2018. And, 76 per cent of professionals are also using social media checks and looking in lawsuit history as red-flag indicators of sexual misconduct, up from 63 per cent last year.
Ignoring sexual harassment in the due diligence process has potentially limitless consequences, the report emphasized. These repercussions can include negative press, litigations, questions from endowment or foundation committees, as well as sudden removal of a fund’s top talent and swift exits by other investors.
The Investment Management Due Diligence Association made several recommendations for investors seeking to do better on this analysis. Due diligence should examine the money manager’s human resources processes, asking specifically whether there is an independent individual designated with whom employees can raise the issue, or a similar agent outside the organization, the report said.
Investors should also ask about recent departures from the organization, examining how many men vs. women leave and why. Further sexual harassment claims are often overlooked in background checks, so it’s important to ask the tough questions, it noted. As well, investors should seek to understand who has non-disclosure agreements at the firm and why. Finally, the due diligence process should involve interviews with past employees to get a better sense of culture and work environment.
“The IMDDA believes that leadership style and the closely related culture of the company being examined in a large part dictates whether or not that organization is compliant or flouts the rules. Asking these core questions is fundamental,” the report said.