Can the company wash its hands off by firing the CEO?
While recruiting for a leadership position, a candidate cannot be judged only on the basis of his performance
By firing its CEO, iGate cannot wash its hands off its liability in the sexual harassment case
Since May 21, outsourcing company iGate has been in the news for all the wrong reasons. The company, which had grown tremendously under the stewardship of Chief Executive Officer Phaneesh Murthy, fired its top gun for not having informed the board about his relationship with a subordinate, something that is mandatory as per the company’s policies, and sexual harassment charges.
The board's decision followed an investigation of the facts and circumstances surrounding the relationship Murthy had with the company's investor relations head Araceli Roiz. “The Boards decision was made as a result of an investigation by outside legal counsel, engaged by the Board, of the facts and circumstances surrounding a relationship Murthy had with a subordinate employee and a claim of sexual harassment,” iGATE said in a statement.
The case gained instant media attention thanks to Murthy’s already tainted resume. He was earlier sacked from Infosys for similar charges. Murthy was a rising star at Infosys as its global head of sales before leaving in 2002 after his executive secretary Rekha Maximovitch leveled charges of sexual harassment against him and the company. Infosys had to shell out $3 million to settle the matter out of court. Murthy had to settle one more sexual harassment lawsuit on his own.
Caught in the eye of the storm, Murthy tried to dismiss the current case by claiming it to be a case of extortion by pointing out that Roiz had appointed the California-based Aiman-Smith & Marcy – whose attorneys previously represented Reka Maximovitch and Jennifer Griffith in sex harassment lawsuits against Murthy for his actions while employed at Infosys – as her legal representation. However, he did accept that he was in a relationship with the complainant. Roiz (whose name was made public by Murthy in a press conference) has decided to file a lawsuit against Murthy as well as iGate. While the case seems to be heading for the courts, the behaviour of iGate as an employer has come into sharp focus.
iGate has maintained that its “board of directors reacted swiftly and appropriately”. The bigger question is has iGate done all it could? Is launching a ‘third-party probe’ in a huff and sacking the accused CEO all that a company could have done to shrug off the responsibility of executing an effective anti-sexual harassment policy? Can the company wash its hands off by firing the CEO? Here are a number of mistakes that iGate made:
Hiring a tainted leader
While recruiting for a leadership position, a candidate cannot be judged only on the basis of his performance. In this case, Murthy who was hired to look after the business and given a free hand was himself accused of gross misconduct in his previous company. Should the company have hired someone with such a background at such a crucial position might be debatable, given Murthy’s outstanding performance.
In an interview published on the website www.sify.com Naina Kapur, an advocate who specialises in Equality & Workplace Sexual Harassment Prevention points out a mistake that iGate made while hiring Murthy, “iGate bent over backwards to state that they had done their “due diligence” and “believe[d] the allegations to be without foundation”. iGate went on to say they had “complete confidence in Phaneesh”. This was akin to extending unconditional support to someone accused of predatory behavior at workplace.
Guilty of negligent hiring
Experts told Economic Times that firing Murthy may not absolve iGate of past liability. “Because he was a chief executive, it brings up an aspect called ‘alter ego’, where his actions are equivalent to the actions of the company. Also, because he was known to have a history of this kind of behaviour, it brings up another aspect called ‘negligent hiring’, where they (management/board) put him in a position where his actions could affect other employees,” said Barbara J Fick, associate professor of law at the University of Notre Dame. “Should the facts be proved, the plaintiff could be awarded several million dollars in compensation and punitive damages.”
Keeping a leader above organisation’s rules
In the last few days it has become a known fact that in a way Murthy was running the company and taking all its major decisions. Secondly, his relationship with Roiz too wasn’t a hidden fact. In an article written for the Economic times, Shelly Singh asks, “Reports suggest that 49-year-old Murthy's relationship with his 31-year-old subordinate Araceli Roiz was the talk within the company for quite some time. In that case, why was the action delayed so much?” This is a valid point. In case it is to be believed that the management wasn’t in the know of things, it raises an even serious question, ‘Did the company have any measure in place for people with tainted reputation, especially when hiring them for top level positions? Or, empowering HR to interfere when required’. The situation clearly indicates that in this case the HR was not empowered enough to counsel the people involved and make them aware of organisation’s policies.