Today's General Counsel, Spring 2019

Page 36



#M&AToo By Devjani H. Mishra and Raoul Parekh



hat started with a single tweet is now a boardroom issue. Since late 2017, allegations of historical and recent sexual harassment have swept across every area of public and private life, with no sphere and no industry immune. Below, we consider how the M&A world has responded, and explain why investors and trade buyers alike should consider altering their deal practices in the #MeToo era. Apart from a desire to “do the right thing,” why does this issue hit home? First, there is the direct legal liability for the target company. In the UK and most European jurisdictions, damages for sexual harassment claims are uncapped, and compensatory damages for highly paid employees can edge into the

Devjani H. Mishra is a Shareholder in Littler’s New York Office. She works closely with senior management and human resources personnel to establish corporate compliance, ethics and training programs and codes of conduct, and assists clients with transactional due diligence, employment practices audits and investigations. Raoul Parekh is a Partner with GQ|Littler in London, and works across all areas of employment law, including advisory, litigation and transactional support. He regularly co-ordinates international employment law advice across EMEA for United States-headquartered multinationals.

millions of dollars. In the United States, damages under federal law are generally capped at $300,000 (plus attorneys’ fees) but are often uncapped under parallel state and municipal laws, and can similarly run into the millions. Accompanying that liability is the obvious destruction of the target’s value. There can also be more indirect legal risk. For example, the UK financial regulator has indicated an unwillingness to approve for senior or sensitive roles candidates who participated in the management of a company that failed

to address an inappropriate workplace culture. Shareholder derivative actions against the board could also follow, particularly if they knew or should have known about the issues (as has been alleged of the Weinstein Company board). Lastly, the reputation risk of a highprofile and/or poorly handled sexual harassment scandal can dramatically impact the profits or even financial viability of a business. In bygone days, a cynical investor or executive might have justified inaction as the expedient