Watermill publicly calls on portfolio firms to prevent sexual harassment

Watermill Group has sent a letter to its portfolio companies, advocating for a culture of safety and calling on its management teams to update their codes of conduct and launch sexual-harassment training throughout their organizations.

The letter, which comes in the wake of the #MeToo movement, appears to be one of the first instances in which a private equity firm has publicly revealed such communication to its portfolio-company executives.

“I believe that there is a key element of safe work environments that has gone unspoken and under-addressed: the sense of physical and psychological safety that comes when a work environment is intolerant to sexual harassment and actively promotes an inclusive work environment,” Julia Karol, president and COO of the Lexington, Massachusetts, firm, wrote in the letter.

“We expect each of our companies to embrace a culture of gender equality and collegiality.”

Karol, who manages the day-to-day operations at Watermill, is the daughter of the firm’s managing partner and founder, Steven Karol.

In the letter dated March 8, International Women’s Day, Watermill asked that each management team present a progress report on its sexual-harassment policies and training at their upcoming board meetings.

“To be clear, Watermill will not tolerate incidents of sexual harassment or bias related to race, religion, sexual orientation, gender or other identifiers,” the letter states.

“Should a credible claim of misconduct be communicated to Watermill, we will enlist legal support and, if appropriate, instruct the company to open an investigation. We will also not hesitate to notify law enforcement if we reasonably believe such action is appropriate.”

Though the venture capital industry has, unlike private equity, witnessed numerous women come forward with allegations of sexual and diversity harassment, the industry has also been more vocal — at least publicly — when it comes to efforts to fuel change.

Among other initiatives, 42 venture firms united on March 8 to give rise to #MovingForward, a live and collective directory that makes firms’ codes of conduct and policies public and transparent. Sixteen additional firms have since pledged to join the open forum, according to the website.

Such initiatives, however, have followed numerous industry scandals and the downfall of venture leaders such as Binary Capital Co-Founder Justin Caldwell, who faced accusations of misconduct from several female entrepreneurs.

Emily Mendell, a spokeswoman for the Institutional Limited Partners Association, told Buyouts that the industry association is working on its own code of conduct to provide to members and to be shared with their GPs to sign and consider adopting themselves.

ILPA, which hopes to complete its code of conduct in the second quarter, also plans to update its due-diligence questionnaire for limited partners by the end of June, Buyouts has reported.

ILPA is working with counsel to develop new questions that specifically address both sexual harassment and diversity and inclusion. In other words, LPs could soon face pressure to address such issues in their assessments of new managers.

The conversation around the #MeToo movement has sparked other initiatives on the venture capital side.

For instance, the National Venture Capital Association in March launched #VentureForward, through which the association has developed its own industry standard of policies and best practices for VC firms and startups to adopt, among other resources.

Separately, the New England Venture Capital Association put out a statement signed by 28 firms, 1 LP, 47 individuals and 17 companies.

Action Item: Read Watermill’s full letter here: http://www.watermill.com/creating-culture-safety/

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