Wednesday 17 October 2018

Comment: Harvey Weinstein scandal should prompt questions of culture for all corporations

Harvey Weinstein is at the centre of a torrent of sexual misconduct allegations, including rape, from women on both sides of the Atlantic. Photo: Reuters
Harvey Weinstein is at the centre of a torrent of sexual misconduct allegations, including rape, from women on both sides of the Atlantic. Photo: Reuters
Richard Curran

Richard Curran

It is 2003. Four of the five Academy Award nominees for Best Picture have involved film producer Harvey Weinstein - 'Gangs of New York', 'The Hours', 'Chicago' and 'The Lord of the Rings: Two Towers'.

Fast forward 14 years and Weinstein has been booted out of the Academy, fired from the Weinstein Company and is facing numerous investigations, including two police probes in the UK for allegations of rape. His company looks set to change hands through a forced sale as it grapples with the financial fallout of the sexual harassment scandal.

But rather than ask how did it all come to this - because we all know the answer to that - the biggest question being asked is why didn't it all come to this a lot sooner?

Weinstein faces allegations that he sexually assaulted and harassed possibly dozens of women over a long period dating back to 1980. The outing of the 'Weinstein monster' shows not only how things are changing in Hollywood but also how much they still have to change.

His behaviour was said to be an 'open secret' in Hollywood. It actually sounds like template with which we in Ireland are very familiar. It is an open secret that somebody is doing something wrong.

Nobody does anything about it for years and then suddenly a journalist blows it open and everybody is outraged.

But there are serious corporate questions to be asked here too. The first reaction of the Weinstein Company was to communicate its shock at the revelations.

Yet David Boies, a lawyer who advised Weinstein during 2015 contract negotiations, has said the board of the company was told about three or four settlements with women at the time.

Harvey Weinstein's brother, Bob, issued a statement in which he denied all knowledge of his brother's "depravities".

He went on to insist: "Our banks, partners and shareholders are fully supportive of our company and it is untrue that the company or board is exploring a sale or shutdown of the company."

Yet not only is the firm receiving an infusion of new capital from Tom Barrack's Colony Capital to stabilise operations but Colony is also weighing up the purchase of some or all of the business.

The problem for the Weinstein Company was that it was utterly implausible to think it could be fully separated from its boss's behaviour.

Several members of the board resigned, including the deputy chief executive of Technicolor.

It emerged very quickly that Technicolor had declined to provide any more credit to the Weinstein Company and was insisting on being paid up front.

Other major corporations started running for the hills too. Viacom and Disney removed Weinstein as a producer. Apple cancelled a project with his company and the publisher Hachette said it was shutting its Weinstein Books imprint.

Harvey Weinstein owns around 42pc of the company, while Goldman Sachs owns around 5pc.

As the remaining directors move to sell what is left of the business, it is worth exploring just what there is to sell.

Like any other business on the block, it has both tangible and intangible assets. Its tangible assets are likely to be relatively small. Its intangible assets would include Harvey Weinstein's contacts and reputation - now worth what exactly? - its name or brand, now practically worthless; the talent and experience of its 150 staff - probably valuable in the industry; and its ownership of rights to past productions and those in production or due to be released. These are its biggest remaining asset. They were described by one industry person as "potentially worth hundreds of millions of dollars".

Private equity group Colony Capital, which is injecting money into the business and may end up owning what is left of it, has made millions from Harvey Weinstein's previous film business, Miramax.

Colony bought Miramax from Disney in 2010 for around $660m. Quite quickly, it securitised the firm's back library of films. It owned the rights to around 700 films and Colony got most of its money back on Miramax through that $500m securitisation. It later sold the business to Qatar firm BeIn.

Coming back to the question of how it all went on so long, Weinstein used legal agreements - settlements and non-disclosure agreements - to cover up and basically buy the silence of his alleged victims. It has been reported that at least one of the women was advised that she would face enormous legal actions if she breached the confidentiality agreement reached.

It is a divide-and-conquer approach to buying silence. As long as one woman believed she would be sued, she might not be willing to go it alone and take a public legal action. The multiple women who reached settlements would not necessarily know of the existence or identity of the others.

Use of these kinds of agreements raises the question of whether the courts should be used in this way to cover up multiple abuses of power, which could have constituted a crime.

Some commentators are suggesting that the Weinstein case now marks the end of hypocrisy at the top of large organisations. Sadly, that may not be the case but hopefully it is a significant blow to it.

Corporate culture is changing but sometimes the company escapes the sins of its executives.

Take Fox News in the US. Its former CEO, Roger Ailes, and former star presenter, Bill O'Reilly, both left after allegations of sexual harassment and claims of settlements being made.

Yet Fox News is as strong as ever.

Perhaps one way to make real progress on all of these issues is to have more women in the boardrooms of large corporations. But questions of gender equality run right through organisations.

In Hollywood, men directed 96 of the 100 top-grossing films last year. Some 97pc of cinematographers are men in top-grossing films.

A spotlight has been thrown on the issue of gender pay gaps from top to bottom in organisations. More big companies are seeking to have more women on their boards.

Unfortunately, too much of this is driven by 'the optics', as they say in PR. In other words, large publicly listed firms that might feature in published surveys or which hold public AGMs are leading the way. But are they motivated by fairness and the desire to run a better business or are they paying lip service to gender equality in order to avoid negative publicity?

Irrespective of the motive, I have no doubt those companies are benefiting in real terms from having more women directors, which should improve the culture of the entire organisation.

But lots of smaller companies or large private companies are still sorely lacking on this issue.

Weinstein appears to have embodied the worst kind of Jurassic-era depravity. Yet up until a fortnight ago, he was still a major film industry figure.

He could not have lasted as long as he did without the complicit silence of so many individuals in the corporate world around him and throughout the wider industry.

It isn't the end of this kind of hypocrisy but perhaps it is the beginning of the end.

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