Private equity firms grapple with #MeToo fallout

Some PE executives are 'treading on eggshells' when it comes to approaches to sexual harassment.

Vantage Leadership Consulting, a US talent management and leadership development firm, has reported a decline in the willingness of some private equity executives to address sexual harassment post-#MeToo.

The Chicago-based consultancy, which advises 10 mid-market private equity firms, runs simulations to assess whether internal candidates are suitable for leadership roles. One scenario involves an underperforming direct report that has been accused of making a sexist comment in the workplace.

“In the past, we’d see the majority of people – over 50 percent – address this comment in that coaching simulation,” Stefanie Mockler, a consultant at Vantage, told Private Equity International.

“When #MeToo really blew up we saw a trend where a lot of people didn’t address it at all – only around 25 percent. Part of it is people simply not knowing how to approach a conversation like that when they haven’t had any training, or the organisation hasn’t given them the right resources.”

#MeToo came to prominence in 2017 following allegations of sexual abuse in Hollywood and has since expanded to workplaces globally, including finance and law.

“#MeToo has brought a lot of topics that were discussed behind closed doors to the surface,” Mockler said. “On the flip side, we’ve seen some firms almost back away from diversity efforts in the wake of #MeToo because it’s scary if you don’t have the right training, resources or policies in place to know how to handle sexual harassment cases.”

Women occupy less than 10 percent of senior positions at private equity firms globally, according to a study from HEC Paris and MVision Private Equity Advisers. The report found that investment committee teams with at least one female member perform better and have a lower risk of failure than all-male teams.

Private equity firms could look to the legal sector for inspiration on how to improve workplace culture. London-based law firm Travers Smith, which advises private equity sponsors, last year introduced the safe words “that’s not cool” for employees feeling uncomfortable with something a colleague has said, according to the Law Gazette.

The Institutional Limited Partners Association is tackling diversity issues in three ways post-#MeToo, managing director Emily Mendell said last year. These include asking GPs to provide metrics related to diversity and inclusion, asking for information regarding their human resources policies that prevent harassment and discrimination, and adding more pointed questions about employee departures.

Some executives are struggling to understand what is expected of them.

“HR professionals have said male partners are unsure what to do and have asked whether they’re allowed to travel with females,” said Gail McManus, managing director of executive search firm Private Equity Recruitment. “They’re treading on eggshells.”

In December, PER hosted a legal workshop for private equity executives discussing how best to prevent sexual harassment and protect employees. Attendees were urged to ensure their limited liability partnership agreements included a bespoke sexual harassment policy  to ensure that partners can be removed for breaching those rules.

The structure of private equity firms, which typically operate with small investment teams, could complicate any potential investigation into allegations of misconduct, McManus noted.

“In a big business you might be able to move them to another office during the investigation but in small firms they might be sitting next to each other,” she said. “There might be an accused and an accuser but you have to treat people on both sides of the equation fairly through an investigation.”

– This article has been updated to reflect that Travers Smith did not introduce its “that’s not cool” initiative in response to #MeToo.