Two years ago, the #MeToo movement exposed the problem of sex-based misconduct by powerful employees, particularly CEOs. It also revealed, in some companies, an organizational culture seemingly permissive of such wrongdoing. In many instances, the misconduct went on for extended periods, involved numerous victims, and was an open secret among corporate officers and directors. Companies typically responded slowly and imposed few consequences on alleged perpetrators, preferring to cover up the problem with confidential settlements and cushioned exits rather than hold the accused accountable. This phenomenon, which we refer to as the ”MeToo accountability problem,” provokes serious questions. Why did companies tolerate such behavior? Why did they choose to protect rather than penalize CEOs? Most importantly, has the MeToo movement changed this culture?

In Anticipating Harassment: #MeToo and the Changing Norms of Executive Contracts, we examine these questions through an empirical study of CEO employment agreements. Unlike ordinary employees, CEOs are protected by written contracts that not only reject the default rule of employment at-will, but contain bespoke provisions that limit the companies’ ability to terminate CEOs without paying significant severance pay. These provisions typically contain a handful of narrowly drafted grounds on which a company can fire a CEO “for cause” (thereby avoiding financial liability), which rarely contemplate sex-based misconduct. Furthermore, existing law generally interprets these provisions in favor of CEOs, making it financially risky for companies to remove CEOs for behavior that—while wrongful—may turn out to fall short of the contractual or legal standard.

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