As we discussed in our March 2018 webcast on boardroom diversity, the #MeToo movement has raised questions about corporate boards’ oversight of employment and labor-related risks, and has also increased the stakes for companies that do not effectively implement appropriate processes and procedures around anti-harassment training and internal reporting and investigations. During the 2018 proxy and proposal season, a number of public companies found themselves under a particularly unforgiving spotlight during their proxy preparation and solicitation periods.
In February 2018, about two months before filing its preliminary proxy statement, Lululemon Athletica Inc. announced the departure of their Chief Executive Officer, Laurent Potdevin, stating that the company “expects all employees to exemplify the highest levels of integrity and respect for one another” and that “Mr. Potdevin fell short of these standards of conduct.” The resignation followed a lawsuit alleging that Lululemon knowingly allowed a manager who had been the subject of sexual harassment complaints to continue working for the company.
Also in February 2018, Stephen A. Wynn resigned as Chairman of the Board and Chief executive Officer of Wynn Resorts, Limited. In his statement accompanying the company’s press release, Mr. Wynn stated that he had found himself “the focus of an avalanche of negative publicity,” and that he therefore could not “continue to be effective in [his] current roles.” The resignation followed allegations that Mr. Wynn had harassed female employees for decades, according to an in-depth Wall Street Journal investigation, resulting in a more than 8% decline in the company’s stock price in the days immediately following the news of the allegations, and the initiation of a suit by New York State Comptroller Thomas DiNapoli against the company’s board of directors. The resignation was not enough to halt the activist campaign waged by Mr. Wynn’s ex-wife, Elaine Wynn.
A New York-based real estate investment trust, Cedar Realty Trust, similarly faced an activist campaign brought by Snow Park Capital Partners while confronting a sexual harassment suit filed against their Chief Executive Officer.