Council of Institutional Investors Calls for Corporate Board Governance to Mitigate Sexual Harassment

In a Thursday report, a massive group of pension funds called for corporate boards to adopt harsher guidelines for those violating sexual harassment codes.

According to the report, the Council of Institutional Investors (CII), which covers 130 pension funds managing more than $3.5 trillion in assets, unleashed a bevy of guidelines and recommendations to corporate boards of directors across five key areas: personnel, board composition, policies and procedures, training, and diversity.

Such guidelines recommend the boards understand and review every settlement of a sexual harassment case, discuss company culture, revise policy, and allow for staff to be able to come to boards with their cases.

“Overseeing how top executives manage risk is one of the most important duties of a board,” CII Executive Director Ken Bertsch said in a statement. “But in general, many boards have not taken a close look at how their companies are addressing sexual harassment risk, and are struggling with how to exercise effective oversight. CII’s report offers practical ideas on how to tackle this threat.”

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CII also recommended strengthening and diversifying boards by adding female and minority directors, creating committees of the nominating and governance committee devoted to ethics and culture, and setting a high number of independent directors with independent board leadership.

It also called for recouping executive pay and ensuring that “violation of these policies constitute a ‘for cause’ termination of executives.” In addition, CII also urged that sexual harassment case payouts be reported to the board and reviewed with the legal team when these incidents should be reported to shareowners. The report also said boards should review how much should be shared.

“It is up to the board to ensure that management upholds an appropriate tone at the top, with executives setting positive examples, and with a sense of ownership and accountability for an ethical corporate culture that promotes treating all employees with dignity and respect,” the report read. “Given recent revelations of sexual harassment across many industries, all boards should discuss sexual harassment, including an examination of their companies’ policies. To ensure accountability, reports of sexual harassment, especially those against senior officials, must be brought to the board’s attention early, treated seriously, and investigated thoroughly.”

“We hope the questions help shareholders in engaging board members on this issue, and in holding directors accountable for oversight of management efforts to deal effectively with sexual harassment and corporate culture” Bertsch said.

Tags: Corporate Boards, Council of Institutional Investors, Governance, Sexual Harassment

Kentucky Senate Republicans announced before a rowdy group of concerned citizens that there will be an updated version of the pension reform bill they introduced last week with several major changes.

One of the top changes includes relaxing the 50% reduction of retired teachers cost-of-living adjustments (COLA) for 12 years. The new version will instead reduce teachers’ COLAs from 1.5% to 1% until the Teachers Retirement System is 90% funded, which an actuarial analysis of an earlier pension bill estimated would take 20 years.

Senate President Robert Stivers said the new version of Senate Bill 1 would also not reduce benefits lawmakers acquired from taking a post-retirement gig at another state job. However, it would stop future pension “supersizing.”

Another change in the substitute bill sees a 1% salary contribution going towards retirement health benefits for certain state workers hired between mid-2003 and mid-2008. The initial bill required a 3% contribution.

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According to the Courier-Journal, the bill’s sponsor, Joe Bowen, told the disgruntled teachers and state government retirees that there will be no votes on the bill until the updated version is revealed along with an actuarial analysis.

“We were elected to solve big problems, and this plan unravels the biggest fiscal crisis Kentucky has ever faced,” Bowen said, reported by the Journal. “And there’s going to be some sacrifice involved at some level. Some sacrifice for all of us.”

However, two hours before the Wednesday meeting, Kentucky Attorney General Andy Beshear released a six-page letter to the legislature explaining that the current version of SB 1 “breaches the inviolable contract” for current and future Kentucky retirees.

“The Commonwealth’s public employees have upheld their end of the contract, working for decades on behalf of our Kentucky families. The General Assembly, on the other hand, will violate the contract if it passes the current version of SB 1 into law, as it would materially reduce, alter, or impair the contract’s guaranteed benefits,” the letter read.

Beshear, who suggested lawmakers look to expand gambling in the Bluegrass State for its pension funds rather than pass a reform bill, cited 21 legal violations regarding SB 1 in his letter.

“For teachers, SB 1 unlawfully reduces cost of living adjustments, caps the use of sick time, extends years of service to qualify for some benefits, and forces teachers to contribute significantly more of their salaries to their retirement,” read Beshear’s letter, which also mentioned that his office did not receive an advanced copy of the reform bill. “For state police officers, state employees, and country employees, the bill unlawfully changes how public employees’ retirement is calculated, reduces or caps sick leave benefits, and imposes new deductions on already strapped salaries.”

Currently, Kentucky’s pension system is facing a shortfall of more than $40 billion. Bowen, who was not happy with the timing of the letter, warned of a “terrible ending” if the bill does not pass.

Tags: Andy Beshear, Joe Bowen, Kentucky, Pension