Editor’s note: Kristina Bergman is the co-founder of Seattle-based startup Integris Software. She wrote this guest post in response to the recent reports of sexual harassment in the tech industry. It’s a guide for how companies can remove a board member in the event of sexual harassment.
When I formed Integris Software in early 2016, I knew I wanted to create a culture of inclusion and respect supported by board members who shared my values. What I didn’t want was a work environment that allowed for, or turned a blind eye to, sexual harassment — something women in our industry face all too often. So, I acted preemptively to protect my team, my business and myself from the dangers and strife brought on by unethical behavior.
I reached out to my lead investors and legal counsel and quickly realized that we were in unchartered waters.
While company employees are subject to standard discipline, there are normally very few circumstances where a company director can be removed for “cause.” Typically, “cause” is defined as fraud, embezzlement or breach of fiduciary duty — not sexual harassment. And there is also no governing body for the relationship companies have with their board, which means it’s a self-regulating relationship.
Our legal counsel informed me that once a director is appointed, due to contractual and state statutory requirements, it is extremely difficult to force another party with the right to designate a board seat to change the individual sitting in such board seat, even if the director is behaving very poorly. Translated, that means state laws and contractual obligations probably prevent a company from removing a board member for sexual harassment. That was clearly not the answer I wanted to hear given the climate for women in tech.
What I wanted was clarity on what constitutes “cause” and for that definition to include sexual harassment. I worked with legal counsel and my incoming board — Julie Sandler, then at Madrona Venture Group, and Mike Dauber from Amplify Partners — to define a clause in our Voting Agreement (the document that entitled each investing party to their right to designate a director) that created a clear and mutually agreed upon definition and process.
We also wanted to make sure we solved for the needs of the company and not just one individual. From Dauber’s perspective, “there are a number of areas where investors need their rights protected, but this isn’t one of them,” he said. “This was a common sense provision that protects the founders from a bad board member while preserving the rights of the venture firm. This was just good governance.”
At Integris, we created a mechanism that forces a designating party (investor) to replace the director in the event of sexual harassment. Here are its core components:
- Process: The process is simple. In the event of a complaint of sexual harassment, Integris’ legal counsel appoints special counsel to interview the people involved. Once the interviews are complete, the appointed counsel issues a final determination to the board with the findings. If there is a finding that there was a reasonable probability that sexual harassment occurred, then the director must be replaced by the party entitled to designate the board seat.
- Lower Threshold: The threshold for action is lower to avoid lengthy legal procedures and the “he said she said” framing that is often used to cast doubt on a victim’s claims. The language we used was that there needs to be “reasonable probability” that the event occurred. That doesn’t mean an individual is proven guilty, but rather that the incident was likely to have happened.
- Investor Protections: The removal of the director doesn’t mean the investing firm loses its board seat. Instead, the firm would need to appoint a different partner from the firm to fill the seat once a director is removed.
As Sandler will tell you, when we created this clause “our goal was to create a prescriptive, smart precedent founders and board members can draw upon to protect a company, its culture, and its employees,” she said. Our current Madrona board member, Tim Porter, echoed this sentiment.
“Sexual harassment shouldn’t be tolerated in any business relationship, and this provision is a great forward-looking practice that makes it clear this includes the investor-entrepreneur relationship,” he said. “Madrona invests in people as much as ideas and this was a clear way to ensure the people we invest in have the right protections in place so they can focus on building great companies.”
We were, in partnership, blazing new trails.
Everyone deserves to feel safe at work, which is why clauses like this are so important to reshape the tech industry into a healthy, inclusive environment where everyone is comfortable going to work.