Fox News Creates Workplace Council to Settle Harassment Suit

(Bloomberg) -- 21st Century Fox Inc. agreed to create a workplace council at its embattled Fox News channel and will receive a $90 million insurance payment as part of a deal settling shareholder litigation over sex-harassment scandals at the network.

The conduct of Fox News has become a threat to 21st Century Fox’s efforts to acquire full ownership of Sky Plc, one of Europe’s biggest pay-TV providers. The deal is the latest step in the company’s attempt to address reporting and oversight failures that allowed alleged sexual misconduct by its chief of its news operations, the now-deceased Roger Ailes, and others to continue without the board being aware.

Former Fox employees involved in harassment and discrimination lawsuits against the company have been testifying to U.K regulators who are scrutinizing the $15.4 billion offer for British pay-TV company. The litigation has threatened to derail the bid.

The council will help ensure a proper workplace environment for employees and guests, strengthen reporting practices for wrongdoing, bolster human-resources training and help recruitment and advancement of women and minorities, 21st Century Fox said Monday in a statement. The City of Monroe Employees’ Retirement System, a shareholder, sued controlling shareholder and Executive Chairman Rupert Murdoch, along with his two sons, other directors, and the estate of Ailes in Delaware Chancery Court.

“Fox News is taking historic steps to address harassment, discrimination and retaliation in the workplace that we believe should create a model for corporations across the country to protect their employees and enhance shareholder value,” said Max Berger, an attorney with Bernstein Litowitz Berger & Grossmann LLP who represented the Michigan municipal pension fund. 

Settlement Payment

Fox will receive $90 million, less any court-awarded fees and expenses, from third-party insurers to the company. The council was created after more than a year of talks. The suit and settlement were filed on Monday and don’t include any admission of wrongdoing by the parent company.

The settlement filing reveals that in July 2016, in the wake of the allegations against Ailes, the pension fund asked for and received thousands of pages of documents concerning the allegations. The plaintiff’s conducted interviews with 21st Century Fox General Counsel Gerson Zweifach and Viet Dinh, a board member.

A derivative lawsuit typically claims officers and directors of a company failed in their fiduciary duty to the company and its shareholders. Any money recovered goes into the company’s coffers rather than to individual investors. Many of the accords are funded by insurance.

Panel Members

The news council will include Thomas Gaissmaier, 21st Century Fox’s global head of human resources, as well as Kevin Lord, head of HR at Fox News. The other members are: Barbara Jones, a former U.S. judge; former Gannett Co. diversity executive Virgil Smith; Brande Stellings of Catalyst; and Sylvia Ann Hewlett, founder and head of the Center for Talent Innovation.

Jones chaired a panel created by Congress aimed at assessing the investigation, prosecution, and adjudication of sexual assaults in the military.

The Fox News council will report to a 21st Century Fox board committee and issue public statements on efforts to address any misconduct that happened at its news division.

Since 2016, as allegations sexual and racial bias emerged at Fox News, 21st Century Fox has replaced the human-resources leadership at the network and at the company worldwide.

It is not the first time the Murdochs have had to settle such a suit. Rupert Murdoch’s News Corp. received a $139 million insurance payout in response to investor lawsuits claiming directors ignored employee misconduct, including phone-hacking. Monday’s agreement is
one of the largest derivative settlements ever, according to the filing.

A wave of sexual harassment claims in the entertainment industry over recent months could lead to more such settlements, according to Kirk O. Hanson, executive director of the Markkula Center for Applied Ethics at Santa Clara University.

“We’ll see a lot more derivative lawsuits and share price lawsuits over sexual harassment cases in coming months,” Hanson said in an interview.

--With assistance from Jef Feeley and Laura Colby

To contact the reporters on this story: Anousha Sakoui in Los Angeles at asakoui@bloomberg.net, Christie Smythe in Brooklyn at csmythe1@bloomberg.net.

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Rob Golum, Bruce Rule

©2017 Bloomberg L.P.