Recent headlines from Bill Gates romantic openings to women employed by the Bill and Melinda Gates Foundation is an important reminder that nonprofit boards are not immune to the risks posed by employee fraternization. In fact, stakeholders may demand even higher standards from nonprofits than for profit organizations.
Fraternization is the interaction between colleagues that extends beyond business relationships, the most problematic being romantic relationships. While an employer may prefer their employees not to date each other, blanket bans on dating co-workers can be difficult to enforce and only discourage employees from reporting. A 2019 investigation produced by the job site Vault.com found that 58% of employees have formed romantic relationships with co-workers.
Meeting in the workplace does not violate any laws, but it can lead to legal, reputational and employee morale issues. The main legal risks are sexual harassment, conflicts of interest and violence at work. Beyond legal risks, management issues such as favoritism, lack of objectivity and unprofessional behavior can arise.
Many donors and other organizations emphasize nonprofit governance. Watch groups such as the Wise Giving Alliance and the Better Business Bureau’s Charity Navigator assess nonprofits against their governance structures. IRS Form 990, which most US nonprofits must file annually, requests detailed information about governance practices and policies.
Let us also not forget that the directors of nonprofit organizations have a duty of supervision or due diligence. In the wake of #MeToo, questions were raised as to whether the board’s actions or inactions regarding workplace harassment breached these fiduciary duties, either by tolerating or willfully ignoring any obvious misconduct.
Here are some steps a proactive nonprofit board can take to manage the risks posed by employee fraternization:
1. Update policies annually. Annually review policies that may be involved in employee fraternization (e.g., sexual harassment, conflict of interest, close personal relationships policies) and notify directors of issues that have arisen in the past year. This includes examining the material report romantic relationships. Key questions to consider include:
- What do the association’s reporting statistics look like? Are there repeat offenders, problematic services or concerns that come up more frequently?
- When was the last time the association updated its policies, organized training and carried out crisis management exercises?
- What steps have been taken to promote an inclusive, diverse and secure culture? What is the current state of the association’s culture?
2. Have a checklist for reports. Institute a leadership checklist that requires disclosures of consensual romantic relationships or allegations of sexual harassment involving key leaders to be promptly reported to the board. The board should also require that a report on investigations and disciplinary measures for harassment in the workplace be submitted annually.
Since management is responsible for day-to-day operations, while boards of directors perform only an oversight function, it is essential that management keep directors informed. While nonprofit boards cannot and should not micromanage the close personal relationships of employees or, depending on the size of the organization, every harassment allegation, certain relationship or allegation can reach the level of involvement of the board of directors.
3. Form an oversight committee. Form a committee to oversee personnel issues involving key executives, manage a whistleblower channel, and review compliance issues more generally. Addressing these issues at a committee level, rather than a board level, may be desirable for several reasons. The committee may be composed of subject matter experts, and can generally react with greater agility than a board of directors appointed by larger and heavier donors.
4. Create a crisis response plan. Develop a crisis response plan for high stakes charges. If there is an allegation of misconduct, a nonprofit organization will need to act quickly. A crisis response plan can be important in ensuring a timely and thoughtful response. The plan should address public relations considerations as well as:
- Identify additional human resources consultants who can be hired on a short-term basis.
- Address succession planning to ensure there are adequate resources in the event of a conflict or employee termination; and
- Describe how to provide a “notice of potential claim” to the directors and officers liability insurance company of the nonprofit organization, to ensure that the company has no grounds for refusing to cover any liability resulting.
5. Recruit a director with expertise in HR and employment law. Favor the recruitment of one or more administrators familiar with human resources practices and labor law. Nonprofits tend to prioritize fundraising in board recruiting processes. Focusing on operational expertise can help improve board oversight, complementing areas where internal resources may be low.
New directors should be given a list of close personal relationships involving key members of management. This prevents some members from being informed while others are not.
6. Touch Culture. Consider taking the pulse of the nonprofit organization’s work environment beyond top management through an employee survey to identify and understand trends and patterns around fraternization and sexual harassment . Periodic refreshing trainings that address fellowship issues, including board level trainings, can help establish an organizational culture through a ‘tone from above’. It may also be legally required in some jurisdictions, such as new York.
Boards of directors of nonprofits should be made aware of critical personnel issues. When problems arise, they should ask questions and may need to retain the services of independent advisers who report directly to them. Nonprofit boards should never accept a “report” from management indicating that a personnel issue has been investigated and resolved, especially when a matter involves allegations. serious misconduct on the part of key employees.
This column does not necessarily reflect the opinion of the Bureau of National Affairs, Inc. or its owners.
Michelle R. Heisner is a partner in the Global Corporate and Securities Practice group of Baker McKenzie in New York.