{"id":13134,"date":"2018-08-05T22:27:44","date_gmt":"2018-08-05T22:27:44","guid":{"rendered":"http:\/\/www.lifeandnews.com\/articles\/?p=13134"},"modified":"2018-08-05T22:27:44","modified_gmt":"2018-08-05T22:27:44","slug":"metoo-movement-finds-an-unlikely-champion-in-wall-street-with-the-new-weinstein-clause","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/metoo-movement-finds-an-unlikely-champion-in-wall-street-with-the-new-weinstein-clause\/","title":{"rendered":"#MeToo movement finds an unlikely champion in Wall Street with the new \u2018Weinstein clause\u2019"},"content":{"rendered":"

Elizabeth C. Tippett<\/a>, University of Oregon<\/a><\/em><\/span><\/p>\n

If you were worried that the #MeToo movement might fade away, fear not. It has been carved into one of the most immovable objects in human history. <\/p>\n

Legal boilerplate.<\/p>\n

And not just any boilerplate. But the language in giant merger agreements, used when one company is buying out another company.<\/p>\n

Basically, corporate lawyers have been adding<\/a> a sentence that forces companies to disclose allegations of sexual harassment. On Wall Street, it has come to be known as the \u201cWeinstein clause.\u201d<\/p>\n

That\u2019s new. In my years as an employment lawyer, I worked on more than 50 corporate acquisitions. The work somehow managed to be both boring and stressful, as I rapidly sifted through masses of personnel documents to figure out what needed to be disclosed.<\/p>\n

Although it was common to disclose ongoing lawsuits or threats of litigation, \u201callegations\u201d or even internal complaints of harassment were not on anyone\u2019s radar.<\/p>\n

The arrival of the Weinstein clause signals how important #MeToo has become \u2013 not just as a social movement but as a business risk.<\/p>\n

When employment law was small potatoes<\/h2>\n

The \u201cWeinstein clause\u201d appears in a section of the agreement called the \u201crepresentations and warranties,\u201d where the seller attests that it has complied with certain laws or denies certain liabilities. <\/p>\n

For example, the agreement might say that there are no ongoing lawsuits against the company. If that statement is untrue because the company is litigating a discrimination case in federal court, then the company needs to list the name of the case in a huge side document called a \u201cdisclosure schedule.\u201d <\/p>\n

Previously, employment-related stuff, like harassment or discrimination, was considered small potatoes in a corporate acquisition. These cases are usually not worth more than US$100,000 or $200,000, which is practically a rounding error when you\u2019re talking about a merger worth hundreds of millions or even billions of dollars. <\/p>\n

So in large mergers, the representations and warranties tend to only call for the disclosure of big ticket liabilities. A disclosure schedule in those deals is like the All-Star Team of massive liabilities. It\u2019s where \u201cWe don\u2019t own any of our intellectual property\u201d goes to hang out with \u201cWe bribed foreign government officials\u201d and \u201cOur only liquid assets are fidget spinners.\u201d<\/p>\n

As an employment lawyer on a large deal, I was essentially a benchwarmer. I was pumped if I got a lawsuit or two added to the disclosure schedule \u2013 that was my two minutes of playing time. <\/p>\n

A mere harassment allegation? Please. That wouldn\u2019t even make it into the memo I prepared that no one would read. <\/p>\n

The advent of the Weinstein clause<\/h2>\n

But sometime around March<\/a> of this year, lawyers started adding so-called \u201cWeinstein clauses<\/a>\u201d to their merger agreements. <\/p>\n

For example, in a $4.9 billion deal<\/a> in June to acquire health care analytics company, Cotiviti, the merger agreement<\/a> called for the disclosure of any \u201callegations of sexual harassment\u201d against officers, directors or employees who supervise at least eight other employees if it would result in a \u201cmaterial adverse event.\u201d <\/p>\n

The term \u201cmaterial adverse event\u201d means \u201cso bad that it would noticeably affect our profits, keeping in mind that we\u2019re worth 4.9 billion dollars.\u201d<\/p>\n

The inclusion of this language is remarkable because it assumes that an allegation of harassment might actually turn out to be more than a blip on the radar of a big company. <\/p>\n

That would have been unthinkable a year ago. And yet now is firmly within the realm of the plausible after Harvey Weinstein\u2019s $200 million entertainment company went bankrupt<\/a> and shareholders of Wynn Resorts lost $3.5 billion in value<\/a> in the wake of harassment scandals.<\/p>\n

Other mergers compel similar disclosures, regardless of whether the allegations are \u201cmaterial.\u201d In some cases, they ask about allegations against high-level employees going back five<\/a>, eight<\/a> or 10<\/a> years. <\/p>\n

That\u2019s way past<\/a> the statute of limitations. In other words, we\u2019re not talking about legal risks any more. This is about the seismic risk of a brand tainted by misconduct.<\/p>\n

A new normal for compliance<\/h2>\n

The arrival of the Weinstein clause may seem inconsequential, but it signals recognition that harassment qualifies as a massive liability. And massive liabilities command attention and resources before a merger is even in the cards.<\/p>\n

In a business environment where initial public offerings are few and far between<\/a>, a merger may be the best way for early investors to profit. Investors and venture capitalists will now care a lot more about how companies handle their harassment complaints, because it affects their ability to cash out. These players will then put pressure<\/a> on startups and other fast-growing companies to clean up their acts.<\/p>\n

\"TheThat\u2019s the best performance I\u2019ve seen from boilerplate in a long time.<\/p>\n

Elizabeth C. Tippett<\/a>, Associate Professor, School of Law, University of Oregon<\/a><\/em><\/span><\/p>\n

This article was originally published on The Conversation<\/a>. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Elizabeth C. Tippett, University of Oregon If you were worried that the #MeToo movement might fade away, fear not. It has been carved into one of the most immovable objects in human history. Legal boilerplate. And not just any boilerplate. But the language in giant merger agreements, used when one company is buying out another […]<\/p>\n","protected":false},"author":44,"featured_media":13128,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[277],"tags":[3473,4904,1581,3349,1409,840,4903,3194,157,1441,1516,2259],"_links":{"self":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/13134"}],"collection":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/users\/44"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/comments?post=13134"}],"version-history":[{"count":1,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/13134\/revisions"}],"predecessor-version":[{"id":13135,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/13134\/revisions\/13135"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media\/13128"}],"wp:attachment":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media?parent=13134"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/categories?post=13134"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/tags?post=13134"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}