The recent controversy regarding the reaction of the Humane Society board to allegations of sexual harassment by its CEO reflects the fiduciary "tug-and-pull" involved with decisions that implicate a combination of director judgment, elements of fairness and equity, and the obligation to protect the reputation of the organization.
As reported in The Washington Post, the controversy arose from an internal investigation conducted by the Humane Society, that identified three sexual harassment complaints made against the CEO, as well as internal complaints from "senior female leaders" that their concerns regarding workplace misconduct had been ignored. Some of the allegations related to conduct that occurred 13 years ago. Initially, the board voted to close the investigation and to retain the CEO (with the media reporting a controversial quote from a board member). However, seven directors who disagreed with the decision subsequently resigned from the board. Following the initial published reports, and related concerns expressed by staff and some donors, the CEO elected to resign.
The Humane Society controversy provides a useful example of how board treatment of "fitness to serve" issues at either the executive or board level can be a "gray area" in terms of application of fiduciary principles. It is not unusual for boards to adopt what they believe to be principled stands supporting the retention of officers or directors who are accused of certain conduct, on an "innocent until proven guilty" perspective. The board also has the authority to exercise informed business judgment in reacting to the results of an internal investigation and any related recommendations. It can, for example, conclude that the facts developed by the investigation are inconclusive, or absolve the target of wrongdoing; in either case not justifying punishment or termination. (Of course, the board may reach an opposite conclusion as well.)
The board's ultimate responsibility is to act in what it reasonably believes to be in the best interests of the organization and its mission. With matters of personal fitness to serve, there are increasing concerns that the board's obligation to protect the reputation of the organization may be a paramount consideration, regardless of the equity of the circumstances and the impact that a punishment-grounded decision may have on employee or board morale and the ability to recruit or retain directors and executives. "Optical matters" can create negative publicity that is harmful to the organization, can prompt regulatory investigation and can lead to significant donor backlash. Fitness to serve issues can be complicated decisions for governing boards—for which there may not always be a "right answer." Ultimately, informed, good-faith board decision-making is key.
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