SoFi's CEO Steps Down as Sexual Harassment Claims Damage Morale
(Bloomberg) -- The chief executive officer of Social Finance Inc. is stepping down before the end of the year amid sexual harassment accusations leveled at one of the most valuable financial technology startups.
Michael Cagney becomes the highest-profile executive to depart the online lending service that’s grappling with a lawsuit claiming harassment and fraudulent actions by managers. Cagney has engaged in at least one inappropriate relationship with a female employee, with suggestions of others, according to people familiar with the matter. The New York Times earlier reported on the resignation and some of the allegations.
That behavior has fueled a toxic work environment and blurred reporting lines for staff, according to the people, who asked not to be identified talking about sensitive internal matters. Cagney’s relationships, they say, distracted employees and made interactions uncomfortable. Several left SoFi in recent months because of a culture of sexual relationships among the company’s top ranks, one of the people said. Cagney’s wife, June Ou, is SoFi’s vice president of engineering and chief technology officer.
Allegations of misconduct at SoFi come on the heels of high-profile cases of unethical behavior across Silicon Valley, after a former Uber Technologies Inc. employee alleged she was sexually harassed at the company but her case was bungled by human resources. Since then, a series of disclosures from female entrepreneurs have unveiled systemic harassment by venture capitalists. Revelations of discrimination at Uber contributed to the ouster of founder and former CEO Travis Kalanick.
Cagney, who’s said his company would not tolerate sexual misconduct, addressed the issue in a memo sent to employees announcing his resignation.
“I could not be prouder of the company we’ve built together. Recently, though, the focus has shifted more toward litigation and me personally. The combination of HR-related litigation and negative press have become a distraction from the company’s core mission,” he wrote in the memo. A SoFi spokesman declined to comment further.
The firm has started a search for a successor and Cagney will remain in his role until the board makes its selection, the company said in a statement. The board elected Tom Hutton executive chairman, effective immediately, as Cagney gives up the position.
Similar to Uber, SoFi is another well-capitalized Silicon Valley startup that has grown rapidly over the last several years. The company was valued at $4.3 billion in its last financing round in February, raising more than $1 billion from investors including SoftBank Group Corp. and Silver Lake Partners. It started out in 2011 by refinancing loans to high-earning graduates from top universities. It’s since pursued a more ambitious vision, expanding into products from personal loans and mortgages to wealth-management and life insurance.
In August, Brandon Charles, a former senior operations manager at SoFi, sued the startup claiming he was fired for reporting sexual harassment by managers. The case was expanded this month to allege that the startup’s chief executive “fosters a sexually charged corporate culture that condones unlawful conduct,” and deters victims from speaking out. A SoFi spokesman has said the ex-employee’s claims were without merit.