Money is Power
Remember the first time that you, as a kid, were able to use your own money to buy something without a parent saying OK? So liberating. And when you could support yourself for the first time? Amazing independence. Being debt-free (even if only for a short while)? Such freedom!
All of those feelings relate to a sense of personal power. This is why equity is so important - ownership, skin in the game, a vote that has real weight behind it. This is also why it is so deeply personal and uncomfortable when we are not paid our full value at work, or have to haggle to get paid what we should. It feels like a statement about our worth to our company, our client, our boss.
Of course our value is derived from so much more than money. But in a workplace that operates as a meritocracy - real or imagined - compensation holds major weight on the equality and value scales.
A new focus among institutional investors emerged this week that looks to manage behavior through financial penalties. It is a new "Weinstein clause," a nickname for a guarantee investors are using that legally vouches for the behavior of management*. It brings with it a new wave of due diligence and risk management, one that has major financial implications for inappropriate behavior and sexual harassment within companies, even in the past.
The good news here is when major money gets involved things start to change institutionally. It can be a catalyst for making real behavioral change across organizations and industries. The clause has already been used in investments in hospitality, entertainment and real estate, and looks at behavior not just of C-level leadership but also of executives and managers a few levels below.
Earlier this year BlackRock, the world's largest money manager, publicly stated that the companies in which it invests need to have at least 2 female directors on their boards**. While BlackRock and others have privately encouraged this before, this is the first time this expectation has been stated publicly as a standard. Other money managers and investors quickly followed suit.
This new social due diligence shifts the thinking from a success-at-any-cost mentality to investors rewarding companies who do right by their people, and thereby do right for the long-term success of the company. Given how influential the investment community is in the corporate world, this is a major step forward in removing behavioral barriers that have held women back in their career progression, pay and equity.
Sources: * Bloomberg, August 1, 2018; ** The Wall Street Journal, February 2, 2018