Richard A. Kranitz,
Esq., veteran business attorney, notes the emergence of sexual misconduct due
diligence as a new issue in corporate mergers and acquisitions.
“With the
increase of high-profile sexual misconduct cases against high ranking corporate
officers, buyers are increasingly turning more attention to social due
diligence and including the so called ‘Weinstein Clause’ in their offer terms”,
says veteran attorney Richard A. Kranitz.
The Weinstein Clause, a moniker originating from the widely publicized
allegations against movie producer Harvey Weinstein, could refer to many
different forms of a contractual clause ranging from escrowed funds against
potential damaging claims arising after the sale to guarantees that there are
no known claims of sexual misconduct against current high-level corporate executives. The increasing use of the Weinstein clause
highlights the concerns that many buyers have of later revealed damaging
information.
Such
concerns are also increasing buyers’ focus on social due diligence. No longer looking just at financial
information, prospective buyers are digging deeper into a company’s overall
health, such as online reputation, social media presence, as well as potential
outstanding misconduct claims or liabilities.
Increased emphasis on responding to sexual misconducts against high
level corporate executives is a growing trend in the business world. According to Temin & Co., a consulting
group, corporations have drastically shortened the average time between report
of alleged misconduct and dismissal from six weeks in mid-2017 to little over
two weeks in mid-2018.
Some,
however, are skeptical as to the real-life impact of increased efforts to
mitigate risk from corporate sexual misconducts. In an interview with the Washington Post,
noted attorney Debra Katz welcomed the focus such efforts put on sexual
misconduct, but was unsure whether it would have real life impact. Ms. Katz noted that high number of sexual
misconduct cases go unreported.
Furthermore,
if the misconduct was perpetrated by an executive at the highest level, efforts
such as the Weinstein Clause may be unlikely to cause disclosure of information
regarding the misconduct.
Even if
there are hurdles such as calculations of damages in enforcing such a clause,
the attention on the issue of unknown sexual misconduct by the seller in
corporate M&A shows the increased significance of such issue. It will take a multi-dimensional approach,
including contractual clauses and deeper due diligence to address the issue of unknown
sexual misconduct in corporate acquisitions.
*** Richard Kranitz (Wisconsin) is an experienced attorney and business consultant in the areas of corporate, securities and tax planning for corporations, partnerships, joint ventures, limited liability companies, multi-unit enterprises, and a variety of different non-profit entities. In addition, he has counseled their owners and executives in compensation planning, estate plans, and asset protection. Attorney profile at: https://solomonlawguild.com/richard-a-kranitz-esq
References
Website:
https://advicoach.com/rkranitz/
LinkedIn
Profile: https://www.linkedin.com/in/richard-kranitz-63684b
Attorney
Profile: https://solomonlawguild.com/richard-a-kranitz-esq
News
at: https://hype.news/attorney-richard-a-kranitz/n-16281b97-6a6a-4de2-be3e-796f2da08677/stories
