It’s been an expensive year to be a company with a sexual-harassment problem. According to regulatory paperwork filed Monday, 21st Century Fox paid out about $50 million in the fiscal year that ended on June 30 to cover costs related to a slew of sexual-harassment and discrimination settlements at Fox News. The New York Times reports that $50 million is $5 million more than what the company said it had paid out as of the end of March, meaning that either the company’s calculations have changed since then or Fox News continued racking up settlement expenses through the end of spring.
The network’s costly tailspin began last July, when former host Gretchen Carlson filed a blistering suit alleging that she’d been subjected to repeated instances of sexual harassment at Fox News, including regular come-ons from then-chairman Roger Ailes. Carlson got a major chunk of the network’s FY2016 settlement costs—$20 million—after Ailes walked the plank onto a $40 million lifeboat. A few months later, the Times revealed that Fox News and former primetime star Bill O’Reilly had paid a cumulative $13 million since 2002 to settle harassment suits brought against him by fellow employees and network contributors. When he got ousted, O’Reilly got about $25 million from Fox News to help ease his pain.
The $50 million figure reported on Monday doesn’t include these payouts to Ailes and O’Reilly; nor does it include the millions of dollars spent before the summer of 2016 to settle with O’Reilly’s accusers. According to the Securities and Exchange Commission form, 21st Century Fox spent $224 million on “management and employee transitions and restructuring” at a group of businesses that includes Fox News, where management shake-ups and extra human-resources burdens have created the need for a significant hiring expenses and severance packages. Monday’s filing also notes that the harassment and discrimination allegations could cause a ripple effect of liabilities and hard-to-quantify losses. In a section titled “Risk Factors,” the form notes that “prospective investors should consider carefully,” among other possibilities, the chance that the misconduct allegations against Fox News could lead to future payouts, expensive litigation from related investigations, and diminished ratings due to the departures of several network personalities. Some of those consequences could materialize in the very near future: More than 20 current and former Fox News employees are currently enmeshed in racial- and gender-discrimination suits against the company, which recently declined to settle them all for a lump sum of $60 million.
If you’re a business leader looking at Fox News right now, you’re probably pretty pleased that you’re not responsible for digging the company out of its self-created trap. (If you are a Fox News executive, thanks for reading, and please accept my best wishes on your future endeavors.) Companies are known to quietly shell out cash to protect their employees from public scrutiny over sexual-harassment claims—and if that doesn’t work, they often give big-time stars-cum-harassers tidy sums to get them to resign. These corporate behaviors are not unique to Fox News. But, in part because the major players in the Fox News sexual-harassment scandals visited millions of Americans in their living rooms each night at the time the allegations arose, the network has become one of the most visible case studies of how much it can cost a business to enable the toxic behavior of its precious stars.
Personnel decisions made around sexual-harassment allegations are all about risks and rewards. Businesses don’t run on good feelings—toxic employees get fired because they pose a risk to a company’s bottom line, whether through litigation costs or reputational damage. For a decade and a half, Fox News executives had to weigh O’Reilly’s worth against the financial damage he caused: How much money does it cost to hush up O’Reilly’s accusers? How much prestige does he bring the Fox News brand? How much money do his advertisers bring in? How famous are his accusers? Would their complaints be enough to cause widespread public condemnation? At the same time, 21st Century Fox and its Murdoch family owners were asking similar questions about Ailes: How many more women will bring suits against him in the next few years? What will the average suit cost to settle? How many more potential harassers would he bring on board and cover for? When do the risks outweigh the benefits?
For the business leaders of Fox News, emboldening famous men to hit on, grab at, and demean women who worked for and with them was cheaper than creating a workplace free from sexual intimidation—until it wasn’t. In O’Reilly’s case, that balance shifted when advertisers, under pressure from consumers, began pulling out of his top-rated show. For Ailes, it shifted when an investigation and reporting hotline revealed an alleged pattern of abuse too entrenched, long-running, and public to squash. Because so many women made their allegations known to the world outside the network, Fox had to do its calculations out in the open. Everyone could read the lawsuits, learn about the payouts, and see companies tweeting their decisions to end their advertising relationships with O’Reilly. Now, thanks to the SEC form, we have a bit of a better idea of how much it’s cost so far.
That makes Fox News an exemplary cautionary tale of the expense that may befall a 21st-century business led by a man who molds his workplace in his own pitiful, lecherous self-image. And it’s not just Fox: Harassment and discrimination claims at Uber helped relieve the company of its CEO, Travis Kalanick, and the company he built is still struggling to overhaul its culture. Women are more likely to share their experiences of sexual harassment today than they’ve ever been, and observers in the general public are more likely to believe them. The dozens of millions of dollars Fox News has spent making amends for and covering up its sexual-harassment problem are not “material” to 21st Century Fox, its SEC form claims. Other business leaders making their own calculations may feel differently.
