The Impact of Harassment and Discrimination in Corporate America’s Policies

If there’s one issue that social media has shined a vivid light upon, it’s discrimination.

In recent years, #MeToo, Black Lives Matter, and other movements have pushed for increased awareness in regards to a variety of harassment and discrimination cases. Not much stays under the rug anymore.

Although these conversations cannot remove systemic challenges to inequity on their own, they’ve made enormous waves in business and politics. Brands and individuals seem to be called out almost daily for homophobic, racist, sexist, or otherwise discriminatory behaviors.

Most recently, you may have seen a beloved ice cream brand in the headlines. Ben & Jerry’s said that it would stop retailing its products in Jewish settlements located in the Israeli-occupied West Bank. As a result of this new policy, several U.S. state financial funds are selling or threatening to sell their investments in Unilever, the ice cream brand’s parent company.

This is just one example demonstrating how a simple (or complex) discriminatory policy can lead to lost revenue, a tarnished reputation, and vast criticism.

If you’re a corporate leader in America right now, you need to understand the potential impact of harassment and discriminatory policies within your business. That’s why today, on the Strategy People Culture blog, we want to dive deeper into the repercussions – specifically from a financial standpoint.

Let’s take a look.

Discrimination Drains Profits

It seems excessively obvious to say that businesses lose money when they’re outed for discriminatory or harassing policies. However, many still don’t realize just how expensive discrimination can be.

In a world where news is instantaneous, and every individual has their own platform for calling out bigoted brands, your business doesn’t have the time or money to risk a scandal.

Crosby Burn, a research associate in the American Progress LGBT Research and Communications Program, supported this theory, stating:

“In today’s economic climate, discrimination is an unnecessary and costly distraction. Businesses simply cannot afford to discriminate against gay and transgender individuals while simultaneously outperforming the competition.”

As a matter of fact, he can actually put a price on workplace discrimination – a whopping $64 billion. This accounts for the estimated annual cost of losing and replacing more than two million American workers who leave their places of employment due to unfairness, discrimination, or harassment.

That’s just the tip of the iceberg. Let’s talk about additional ways that discrimination can seriously deplete your profits and rack up expenses.

1) Damaged Revenue Generation

A 2021 study by the Economic Policy Institute found that companies with the highest rate of harassment cases – specifically sexual harassment – took the most significant financial hits. Those assessed experienced a 4.2% decline in Return On Assets (ROA) and a 10.9% decline in Return On Equity (ROE).

Without getting into the nitty-gritty, we’ll say this: claims of harassment and discrimination undoubtedly have an impact on potential revenue. Whether it’s due to the tarnished reputation or internal setbacks, lost revenue is lost revenue.

2) Recruitment Losses

Discriminatory policies and actions don’t just damage your revenue – they discourage talented employees from joining your organization. Employees want to work with a diverse team, but more than that, they want to know that your business will offer them a safe, comfortable environment – no matter their age, gender, race, or sexuality.

If your organization is tainted by discriminatory practices and harassing behaviors, you can bet a large sum of money you’ll lose some of your talent pool to the competition.

3) Retention Problems

Any enlightened business person knows that retaining employees is far more cost-effective than hiring new ones. In fact, it’s estimated losing just one entry-level employee can cost your organization at least 50% of their salary. Some sources state that replacing a senior-level member can have an overall cost of up to 200%.

However, companies with discriminatory policies or tendencies experience higher levels of turnover. Employees depart for safer, more respectful workplaces, leaving your company tens of thousands (or even hundreds of thousands) in the hole.

4) Poor Job Satisfaction and Employee Morale

Lastly, we need to talk about how unhappy (and harassed) employees translate to lost money.

According to calculations by Forbes, just a single disengaged employee with an average salary can cost your business roughly $16,000 annually. Imagine how much costlier an employee becomes when they’re not just disengaged, but also the victim of workplace harassment or discrimination.

As you can see, there are numerous ways that discriminatory practices, policies, or workplace behaviors can cut into your company’s profits. This brings us to another financial factor we cannot ignore: legal expenses.

Litigation Fees Are Hefty

Business discrimination isn’t just immoral – it’s illegal in the United States. There’s extensive federal legislation prohibiting discrimination against employees, as well as harassment.

If an employee or customer files a discrimination claim against your business, you could find yourself in an extremely costly lawsuit. Median costs for a small business employment lawsuit start at $200,000, but can easily escalate to millions. The larger the company, the higher the cost.

Since 2000, roughly 99% of Fortune 500 companies have paid settlements in at least one discrimination or harassment lawsuit. That’s not even including cases that are missing public records.

So, what kind of litigation exists in regards to discrimination in business? Here are five you need to be aware of at the moment.

1) Title VII of the Civil Rights Act of 1964

This act makes it illegal to discriminate against someone because of their race, color, religion, national origin, or sex. These protections have been largely expanded in the decades since 1964. Furthermore, it protects employees against retaliation for filing a workplace discrimination claim. Company executives and co-workers cannot legally take any action against the employee for doing so.

2) The Pregnancy Discrimination Act

Under this amendment to Title VII, employees cannot be discriminated against due to pregnancy, childbirth, or a medical condition related to the two. An employer cannot legally allow pregnancy or related conditions to affect an employee’s firing, hiring, pay, assignments, promotions, layoffs, or health insurance.

3) The Equal Pay Act of 1963 (EPA)

If a woman and man perform equal work in the workplace, they must be paid equally. Sex-based wage discrimination is illegal under the EPA.

4) The Age Discrimination in Employment Act of 1967 (ADEA)

This act protects employees (or potential employees) ages 40 and older. It is illegal to discriminate against an employee or candidate based on their age.

5) Title I of the Americans with Disabilities Act of 1990 (ADA)

Lastly, we have the ADA, which made it illegal to discriminate against a qualified person with a disability. This applies to the hiring process and during the individual’s duration of employment.

These laws, enacted and enforced by the EEOC, serve as the basis for a lot of discrimination and harassment lawsuits against businesses. Of course, as times continue to change, we expect to see further amendments to these laws, as well as new acts.  Many states around the country have also passed their own laws, creating further employee protections against harassment and discrimination in the workplace.

Harassment in the Workplace

While some laws explicitly cite discrimination and not necessarily sexual harassment, make no mistake: an employee can still file a lawsuit against an employer on the basis of harassment.

The EEOC states:

“Although the law doesn’t prohibit simple teasing, offhand comments, or isolated incidents that are not very serious, harassment is illegal when it is so frequent or severe that it creates a hostile or offensive work environment or when it results in an adverse employment decision (such as the victim being fired or demoted).”

Even if the employer did not encourage the harassing behavior, or if they were not aware of it, they can still be deemed responsible for not expressly forbidding the action in its policies and taking necessary actions to correct such behavior.

Additionally, cases of sexual harassment fall under the Title VII of the Civil Rights Act of 1964, which prohibits discriminatory treatment on the basis of sex. As long as a business has 15 or more employees, an individual can legally file a sexual harassment claim through the EEOC.  Some states even have laws that essentially reduce this requirement to employers of all sizes.

This is fairly common. The EEOC has reported that an average of 12,000 sexual-based harassment allegations is made every year by employees in America.

How to Legally Protect Your Company

Considering that employee lawsuits have risen by roughly 400% in the last 20 years, it’s in your best interest to prepare for and prevent legal claims now.

Start by putting your anti-discrimination and harassment policies in writing. Make them well-known to your employees and review any literature or agreements that do not align with your company’s guidelines.

Furthermore, we strongly recommend seeking anti-harassment and anti-discrimination training for your leaders and employees. Prevention is key, as is understanding local laws, forms of harassment, discriminatory behaviors, and strategies for maintaining a safe workplace. Federal case law prevents certain defenses to employers who have claims against them if this type of training has not been provided.

Now that we’ve skimmed the surface of the legal repercussions discriminatory policies can incur, let’s move on to talking about a less tangible consequence: the loss of your reputation.

Bad Policies Give the Competition the Upper Hand

We touched on this lightly in the first section of this post, but this is a complex, important subject to thoroughly explore.

Your community, audience, and customers are watching how your company handles social curveballs and treats its people. One discriminatory action, policy, or comment can easily set off alarm bells, forever tainting how others perceive your brand.

Don’t believe us? Take a look at a few brands that took a hard hit in the past few months alone.

Companies Accused of Discriminatory Policies or Behaviors

• Tesla will likely have to pay $137 million in a lawsuit. An employee accused the company of ignoring discrimination, including harassing comments, in regards to his race. Twitter is now alight with people calling Elon Musk’s views “oppressive, racist, & classist.”
• The NFL is under heavy pressure to release data after Jon Gruden was fired (or resigned) for misogynistic, homophobic, and racist language. “It is further evidence that the league is just corrupt on a larger scale than we can even begin to imagine,” said Melanie Coburn, a former cheerleader, and marketing director for the WFT.
• Game maker Activision Blizzard, the producer of Minecraft and World of Warcraft, has reached an $18 million settlement with the U.S. government over allegations of sexual harassment and discrimination. Now, social media users are raising their eyebrows at allegations the company is “destroying” evidence of the harassment.
• Dollar General is facing an age discrimination lawsuit in Oklahoma after a regional director enacted a policy centered on building a “millennial team” with “young blood,” threatening district managers in their 50s. “Employers must take serious, effective steps to ensure that employees, regardless of their age, can work in a setting free from discrimination and harassment,” said the EEOC’s regional attorney in St. Louis.
• A fired doctor is suing NYU Langone Health for discrimination, defamation, and retaliation. “Pretty shocking stuff alleged in this lawsuit of NYU by a doc who was terminated,” Tweeted ICU doctor Nick Mark MD, a prominent figure in the online medical community.

It takes a lifetime to cultivate a brand reputation and mere seconds to destroy one. Public conversations are happening ever before, and discrimination/harassment doesn’t stay hidden for long.

What Happens to Companies With Tarnished Reputations?

Many companies are able to recover from discrimination lawsuits and harassment allegations, but the smaller the company, the harder it is to bounce back.

In 2018, a Harvard Business Review study indicated that just one sexual harassment claim can be viewed as a sign of a larger cultural problem within an organization. People take notice of accusations, big and small, and their perceptions of brands shift quickly.

A lawsuit or ugly allegation doesn’t just affect your brand’s reputation, but also your value to shareholders. The “fear factor” makes people hesitant to back a company with a tumultuous, risky stance in the public eye.

So, what can you do to protect your brand’s reputation?

Tips for Preserving Your Company’s Reputation

At this point, your company’s leaders should essentially presume that the organization’s policies, actions, and “secrets” will become common knowledge. Behind-closed-door behavior doesn’t stay hidden for long today, and many people are even pushing for bans against enforceable nondisclosure agreements.

The key is ensuring whatever the public finds out is a boon to your reputation, not a detriment – because they can and will find out.

Be proactive. Publicly and internally, voice your policies in regards to protecting employees and promoting equality. Build your brand reputation as one based on respect, social awareness, and ethical behavior.

If claims of harassment or discrimination do occur within your business, don’t hide them in your closet alongside the other skeletons. Instead, reveal your dedication to eliminating such behavior with a comprehensive workplace investigation and clear policies on the matter.

When potentially compromising events occur, it’s better to be at the forefront of the reaction, rather than staying on the sidelines. By conducting an internal investigation without prompting, your business can strengthen its stance as a brand that does not and will not tolerate discrimination.

Need an Investigation? Anti-Discrimination Training?

You cannot simply “have” policies against discrimination and harassment. In today’s fast-paced world, employers must make these policies accessible and clear to employees. Not only does doing so decrease the risk of ugly events, but it also promotes a safer, more respectful workplace.

At Strategy People Culture, we specialize in helping businesses unearth their weaknesses and become stronger as a team. We offer federal and state-compliant employee training, as well as leadership and executive coaching specifically designed to build a better company culture.

Your team can reach out to us for a range of vital services, including:

• Guidance on the right procedures to follow in the event of a claim
• Information on discrimination and harassment prevention
• Strategies for employee training and management
• Practice with hypothetical situations in regards to sexual harassment, racism, etc.

This is our area of expertise. As much as we wish discrimination and harassment didn’t occur in corporate America, it does. Leaders and executives need the right tools to minimize incidents within their own companies, as well as tactics for protecting themselves from financial and social blows.

To Wrap It All Up

We just tackled a big topic, and one that cannot be fully addressed in a simple post. However, if there’s one message you walk away with, let it be this: harassment and discrimination have an enormous social and financial impact on businesses, especially in today’s world.

It doesn’t matter how big or small your business is, or how successful it might be. A failure to protect, respect, and train your employees can result in massive expenses and a severely tarnished reputation.

If you’re looking for more information on anti-discrimination and anti-harassment services, reach out to the Strategy People Culture team today. We’re happy to help your company and its leaders build a better, safer company culture.

Send us a message online or call 833-ROCK-SPC.