Free Enterprise - The FindLaw Small Business Law Blog

Les Moonves Allegations: How Sexual Harassment Claims Can Become SEC Violations

In July, the New Yorker published allegations against CBS CEO Leslie Moonves, with six women claiming Moonves subjected them to sexual harassment, including "forcible touching or kissing during business meetings." Moonves admitted in a statement that he "may have made some women uncomfortable by making advances," but asserted: "I always understood and respected -- and abided by the principle -- that 'no' means 'no,' and I have never misused my position to harm or hinder anyone's career."

While the accusations against Moonves could be seen as further evidence of just how pervasive sexual harassment is in corporate culture and how far the #MeToo movement reaches, CBS has another problem on its hands. A new lawsuit claims the network violated securities laws when it "made materially false and misleading statements regarding the Company's business, operational and compliance policies," specifically those relating to a code of conduct that bans sexual harassment.

Inadequate Enforcement

The suit -- filed by a CBS shareholder against the company and seeking class action status -- alleges:

Defendants made false and/or misleading statements and/or failed to disclose that: (i) CBS executives, including the Company's Chairman and Chief Executive Officer ("CEO"), Defendant Leslie "Les" Moonves, had engaged in widespread workplace sexual harassment at CBS; (ii) CBS's enforcement of its own purported policies was inadequate to prevent the foregoing conduct; (iii) the foregoing conduct, when revealed, would foreseeably subject CBS to heightened legal liability and impede the ability of key CBS personnel to execute the Company's business strategy; and (iv) as a result, CBS's public statements were materially false and misleading at all relevant times.

Not only does the lawsuit blame the decline in CBS's stock price on the Moonves allegations, but also claims the failure to disclose the allegations sooner or enforce their own anti-sexual harassment policy equated to violations of federal Exchange Act statutes.

Legal Lessons

The obvious lesson for small business owners to take from the lawsuit is: don't permit sexual harassment in the workplace, no matter whom it involves. The subtler lesson is, if you are going to have a zero-tolerance policy against sexual harassment, you better enforce it, especially if you're publicly traded and filing statements with the U.S. Securities and Exchange Commission saying that all your employees are complying with that policy.

And you should probably consult an experienced employment attorney when crafting, enforcing, and reporting on your workplace harassment policies.

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