Combating discrimination

Basic steps can help prevent harassment and the damage it does to women’s careers. It’s time firms in real estate and other asset classes took them.

Private equity real estate firm Wafra Investment Advisory Group is a facing a complaint from Sabine Kraut, a vice-president. She filed a complaint on 1 June with the US’s Equal Employment Opportunity Commission, alleging the firm’s head of real estate, Frank Lively, sexually harassed her for at least six years and stunted her career because of her gender.

Kraut reported the harassment to Wafra in April. Lively was fired. Since then, she alleges that members of the real estate team have retaliated by diminishing her responsibilities, among other issues. Kraut is highly critical of the firm’s HR process calling the department “non-existent” when she joined in 2012 and it was a two-person unit. She claims the department is still ineffective because she has been “aggressively retaliated against by her peers, replacement supervisors and Wafra’s management despite frequently reporting such incidences to human resources”.

The firm said it “is committed to a safe and welcoming environment for all of our team members” but declined further comment. Lively could not be reached for comment.

The answers?

While no single fix stops harassment, mechanisms should be put in place. The easy one: firms must have a functioning human resources team. A dedicated team may not prevent harassment, as many recent #MeToo stories have shown, but it is an important step. If small and mid-sized managers lack the capacity, consultants can ensure there are proper reporting steps and an independent review process if it becomes necessary. Arrangements should offer protection from retaliation.

Firms should also incorporate multiple executives’ input on staff careers when they can. If one leader is responsible for promotions and pay decisions, it increases the possibility of bias. Blackstone’s promotion process is an example of a different way of doing it; the cross-business management committee reviews promotions, rather than one person.

Balanced leadership – a tall order for most private real estate firms – is also key to fostering a culture where women feel comfortable reporting discrimination. Sister publication PERE examined the top 10 global investment managers and found an eight-to-one average ratio of men to women senior leaders, as listed on management committees, partner lists and other groups. However, recruiters tell PERE they are now almost always tasked with slating at least one female candidate in their searches.

Some investors are already chiming in. The Los Angeles County Employees’ Retirement Association said at its May meeting that its investment division will implement enhanced approach for external managers’ policies on diversity and inclusion, including due diligence on sexual harassment.

LACERA cited a desire to encourage inclusion and a need to mitigate asset risk. Earlier this year, Ivanhoé Cambridge deemed the Presidents Club scandal so unacceptable that it pulled future funding for the investments of Residential Land, the London-based private property company of former Presidents Club trustee Bruce Ritchie.

But, as PERE said when the Presidents Club debacle broke, fear of losing money is a misguided reaction because it misses the most important issue: harassment has no place at a social occasion or during the working day. While the private real estate industry has largely been spared the #MeToo spotlight, Wafra’s example is a reminder of the importance of having the correct protections in place – not for firms or for capital, but for the women serving both.