BUSINESSWEEK ONLINE : JULY 5, 1999 ISSUE
PEOPLE

Commentary: Keeping an Investigation on the Right Track


So what should a CEO do when he--or perhaps she--is accused by an employee of sexual harassment? First, say experts in employment law and corporate governance, get out of the way. When such explosive charges reach all the way to the top, it's crucial that the board, not the CEO or other senior executives, take control of the matter immediately. Even if a CEO steps back from an investigation overseen by a company's general counsel or head of human resources, no one questioned by his subordinates is likely to forget who is the boss. Workers' fears that the allegations will be swept under the rug--or that any negative comments they make will get back to the chief--risk stifling any probe even remotely linked to the corner office. ''It's never an easy decision to come forward,'' says Michelle Phillips, a specialist in employment law at Jackson, Lewis, Schnitzler & Krupman in New York.

Fairness isn't the only concern; liability is, too. Ultimately, it is the board's fiduciary responsibility to the company and to shareholders to ensure a thorough investigation. That means that once a company's general counsel gets wind of allegations made against the CEO, the course is clear. First, the general counsel must make the CEO understand that the company's, and ultimately his own, interests will be best served if he limits his involvement in the investigation to simply being a cooperative witness. And at that, the chief executive should be treated no differently from any other witness; showing greater deference to the CEO's views is the fastest way to signal to the whole organization that the probe is not serious.

DIRECTORS SHOULD DIRECT. Second, the general counsel should immediately apprise the board of the allegations and make clear that any investigation should be directed by them. Typically, a board might then set up a committee of two or three outside board members who would be responsible for quickly hiring an outside investigator. And any report should be presented first to the directors. That way, it will be clear to everyone that the board, not the CEO, is running the show, says John Nash, president emeritus of the National Association of Corporate Directors and vice-chairman of the Center for Board Leadership in Washington, D.C.

The investigator must personally interview each potential witness privately, and he should never rely on hearsay from others. Above all, no executive should be involved in questioning witnesses or the subject of the allegations. The investigation should be done quickly, too, so that charges aren't allowed to fester. In all cases, discretion and sensitivity are critical. ''The first thing is to tell the parties involved and their supervisors not to talk to anyone else,'' says Nancy Shilepsky, an employment specialist at the Boston law firm of Goulston & Storrs.

If only Compuware and its board of directors had searched out such common-sense advice. They might have resolved the allegations against Pete Karmanos with far less rancor--and far more clarity.

By Joann Muller

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Commentary: Keeping an Investigation on the Right Track



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