Members of the board of the Weinstein Company are resigning as sexual assault and harassment allegations against the firm’s co-founder, Harvey Weinstein, proliferate. Stepping down may help them preserve their reputations, but these former directors—as well as the current ones—might not be able to escape legal consequences for their apparent failure to address Weinstein’s allegedly widespread pattern of sexual misconduct, which may ultimately lead to the company’s demise.
Specifically, the company’s board members could be found liable for a breach of their fiduciary duty to investors—that is, for exposing the company to unreasonable financial risk, whether negligently or knowingly. Lawsuits alleging breaches of fiduciary duty can be brought by investors, and while Harvey Weinstein and his brother Bob own 42 percent of the firm, there are still several outside investors who may seek millions of dollars in damages from former and current members of the company’s board—including from Harvey Weinstein himself.
Aside from the potential financial fallout, a lawsuit against the Weinstein Company’s board could raise larger questions about the legal duties (to say nothing of the moral ones) of corporate directors in cases of sexual misconduct by top management. While courts have said that a corporate board generally has no duty to monitor a corporate officer’s personal affairs, the Weinstein episode illustrates the possibility that a pattern of sexual assault and harassment by a top executive may reach the point that it threatens the company and triggers liability for the directors. (The Weinstein Company did not respond to a request for comment.)