
Square's Keith Rabois Resigns Amid Sexual-Harassment Claims - bradleyjoyce
http://online.wsj.com/article_email/SB10001424127887324539304578264153187663828-lMyQjAxMTAzMDIwNTEyNDUyWj.html
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grellas
Sexual harassment as a form of legal wrong is defined in extensive caselaw
that practitioners in the field can recite verbatim.

The problem is that all the refined nuances of this law turn on facts and
circumstances, most of which depend on the word of the parties involved.

Lessons and risks to founders:

1\. Absurd as it may seem (because it is natural that attachments may be
formed by those working together), from the standpoint of protecting your
stake in your venture, it should be a categorical rule for a founder _never_
to have _any_ form of sexual or romantic interaction with a co-worker in your
venture and this applies especially if you are an officer or director of the
company. Why? Because it is a certainty that you can be "set up" by the other
party at any time after the company begins to prosper. Accusations can be made
from any direction, real or fabricated. All they need is _some_ fragment of
verifiable support and you can be guaranteed that you will be on the hot seat
for all allegations made, whether true or not.

2\. Among the risks, say, if you are an officer, a VC-controlled board will
almost certainly demand that you "resign" or, if you do not, will fire you.
This may be because the board members do not want to fool with defending
potentially indefensible facts or it may be that they simply want to
consolidate investor control of the company by using the event as a reason to
get rid of an otherwise dominant founder.

3\. Which leads to a further risk: when your employment gets terminated in
this way (or you are forced to resign), you will very typically forfeit all of
your unvested stock and options, usually meaning that your founder stake will
get cut to less than half of what you could have gotten upon earning it out.
Of course, your value to the company may be such that a board will prefer to
defend you and allow you to continue to vest but the point is that, through
this set of events, you are vulnerable to the whims of whatever investors
happen to control the board. This is a _huge vulnerability_ and (from an
economic standpoint) a risk never worth taking in exchange for a few moments
of fun.

4\. You will also be sued personally if a lawsuit ensues and that lawsuit will
typically be ugly, both financially and emotionally. Of course, the company
would get sued as well and this is the justification for your being terminated
in the first place - your actions as an officer would be seen as irresponsible
at best and you would have caused some serious harm to the company as a result
of subjecting the company to the risks of a multi-million dollar lawsuit.
Worse than that, the company may or may not choose to indemnify you for your
personal costs in defending the lawsuit or in paying any resulting judgment.
Even with an indemnity agreement in place, there is a strong incentive here
for the company to claim that your conduct falls outside its parameters. You
may win on this point in the end but, even if you do, who wants to have a huge
liability threat looming over him for the duration of such a lawsuit.

5\. Even if you manage to keep a half-decent financial stake, you can lose
further once you are bounced from the company in this. For example, if the
company later has a down round, resulting in a huge dilutive hit for all
original shareholders, it may continue to incentivize its then current
employees (including your co-founders) with a "refresh" on option grants so
that they keep some form of parity with the new equity structure, but you will
be left holding only a severely diluted equity piece in the end. Your
apparently secure "vested" stake will be worth very little.

The above is based on real-world experiences that I have gone through with
startups and the risks are very real. When this sort of thing happens, you
will get no sympathy from those on whom you counted. In effect, you become
tainted and those around you will either attack you or will keep distance in
order to play safe. What is worse, common sense does not prevail in these
situations. The company lawyers will work to ensure that all emphasis is
placed on the worst legal risks imaginable, even if there is another side of
the story. This may not be as true in Forture 1000 companies where the
positions are more entrenched, but it is true in startups and is therefore
murder for founders who get caught up in such a mess.

So, beware - when doing that international travel for conferences, when doing
those late-night sessions with co-workers, etc., etc. - don't leave yourself
in situations where you can be second-guessed. Remember too that the other
party need not be some high-up person in the company and, indeed, usually is
not. Keep it clean, then, for sure. But also keep the appearances clean.

If the above sounds too much like a lawyer's perspective, it's because it is.
I realize that people place value on real-life affections that have nothing
whatever to do with money and these may be enough to trump the legal risks. In
my experience, though, in the startup context for founders, the mixture is too
lethal in its consequences to make it worthwhile. That is a personal judgment
for every founder to make. Do so with open eyes, however, for once you start
down this road, you will be completely at the mercy of the person with whom
you are flirting or whatever else you may be doing. Should it go bad, you will
have little to fall back on.

~~~
dctoedt
Seconded (and it's nice to see 'grellas back on the board).

I hope it's not discourteous to emphasize one of George's points as a tl;dr:

> "don't leave yourself in situations where you can be second-guessed"

THAT'S THE KEY TAKEAWAY -- HERE ARE TWO RULES OF THUMB:

(1) Never make comments of an even-remotely sexual nature, joking or
otherwise, to anyone, at any time.

In particular, don't so much as hint that a co-worker should go out with you.

You also want to be extremely careful about complimenting anyone's appearance.

Here's why:

* If there ever _is_ a lawsuit, you will be asked, under oath, whether you ever made such comments.

* Moreover, people who work with you are likely to be asked, also under oath, whether they ever heard you make such comments.

* If the answer is yes, you did make such comments, then the jurors will be that much more likely to believe your accuser. Plaintiffs' lawyers know this and will take advantage of it every time.

* If you deny ever having made such comments, but other people said you did, then your credibility will take a serious and possibly-fatal hit --- not a happy event in a he-said / she-said situation.

(2) To the greatest extent possible, avoid being alone with _anyone_ , of
either sex and of any age, who might conceivably bring a sexual-harassment
charge against you --- you want always to have a neutral witness who could
testify in your favor.

~~~
jseliger
>THAT'S THE KEY TAKEAWAY -- HERE ARE TWO RULES OF THUMB:

>(1) Never make comments of an even-remotely sexual nature, joking or
otherwise, to anyone, at any time.

So much of humor and personality are bound up in sexuality that this is
tantamount to saying, for many people, "Leave your personality at the door."

I also worry that this kind of principle, and especially your second
principle, will lead to founders doing the easy thing and simply not hiring
women.

Notice that I'm _not_ arguing in favor of sexual harassment or not hiring
women.

For an alternate cultural perspective, read Elaine Sciolino's _La Seduction:
How the French Play the Game of Life_ , which has a section on the workplace
and love; in it she says this:

 _The game of the sexes also extends deep into the workplace. In the United
States, the mildest playfulness during business hours and in a business
setting is forbidden; in France, it is encouraged. In American corporations,
men are told routinely that they cross the line when they compliment a female
employee on the color of her dress or the style of her hair. In France,
flirtation is part of the job._

(I wrote more about the book here:
[https://jseliger.wordpress.com/2011/08/09/la-seduction-
how-t...](https://jseliger.wordpress.com/2011/08/09/la-seduction-how-the-
french-play-the-game-of-life-elaine-sciolino/)).

It might be that we have a large-scale cultural problem that has bled into
legal problems.

~~~
henrikschroder
> will lead to founders doing the easy thing and simply not hiring women.

Plot twist: In this specific case, he's being accused by another man.

------
ry0ohki
Keith's response to the allegations
[http://keithrabois.tumblr.com/post/41463189288/a-note-
from-k...](http://keithrabois.tumblr.com/post/41463189288/a-note-from-keith)

~~~
danso
People should read this before they make judgments about what might of or
might not have happened

 _edit: obviously, this is only what Keith claims on his part. I'm only
saying, these are the assertions that he's adding to the record_

1\. Keith and the accuser were in a consensual relationship before the accuser
came to work at Square.

2\. Keith encouraged his accuser to join the company but asserts that he did
not give his accuser any favors or preferential treatment, nor did his accuser
ever report directly to him

3\. Keith admits that continuing the relationship after his accuser started
working at Square was poor judgment.

4\. The accuser is claiming that some of the acts in the relationship were not
consensual, and Keith unequivocally denies doing the "horrendous things I am
told I may be accused of".

5\. Keith insinuates that his accuser tried to blackmail him on the order of
millions of dollars.

~~~
ionforce
How do we verify that any of the above is true?

~~~
rmc
That's why we have a criminal justice system. Lets hope it finds truth.

~~~
DannyBee
I honestly hope this was a joke. First, this is going to be a civil trial, not
a criminal one :) The goal of the civil system is definitely not to find
truth, only settle disputes "fairly". This often does not require truth. This
is why the evidentiary rules/burdens in a civil trial are very different.

Even in the criminal justice system, the goal of the criminal justice system
has never been to find truth, only produce justice or deterrence.

The last part sounds a bit like a tautology, but essentially, most criminal
justice systems were created with the knowledge they can't figure out what
really happened in most cases (take murder, where at least one person who
knows what happened is dead, and another stands accused), so the goal is
usually not to find the truth. Justice is easy, truth is hard.

There are also plenty of cases where truth is irrelevant to the aim of
deterrence. It doesn't matter if you catch everyone who is speeding, or even
that everyone you ticket was speeding, your goal is usually to get a high
enough rate of catching actual speeders to deter the conduct.

~~~
cgio
I would argue the opposite. Truth is not easy, but it is much easier than
justice. Truth exists in a definite manner. Justice has to be decided and is
itself perceived by many different parties in a gamut of relevant shades (what
was justice for other similar cases, what will be fair etc.) Furthermore,
Justice is questioned at every other decision making moment. If I was cutting
everybody's hand if they steal and then decide to just cut a finger, it will
not be just to the people who lost their hands.

Edit: I am referring to the canonical definition of justice, not the
bureaucratic one.

------
seivan
Wow, poor guy; <http://keithrabois.tumblr.com> It does feel like a shake down.

------
danbmil99
It's pretty simple: don't get your SO a job at your company. If you end up in
a relationship with someone at your company, one of you should probably change
jobs.

Having said this, the sexual harassment laws are a minefield with serious
unintended consequences, and there is a cadre of lawyers ready to start what
amount to shakedowns at the drop of a hat.

I once heard someone say (very cynically, and I hope not truthfully) that he
preferred to hire "young white males of means" because he believed they would
have no cause of action to sue. Apparently even such shamefully prejudiced
behavior is no longer protection against this sort of outcome.

------
eurodance
Am I the only one who doesn't understand why he resigned if he is innocent, as
he claims?

~~~
RaphiePS
Quoting from his blog post above
([http://keithrabois.tumblr.com/post/41463189288/a-note-
from-k...](http://keithrabois.tumblr.com/post/41463189288/a-note-from-keith)):
"I decided to resign from Square so my colleagues could continue to do great
work without the distraction that a lawsuit would most certainly bring."

~~~
DannyBee
If Square was also sued, it's still going to be a huge distraction (large
number of emails produced, employees deposed, etc) unless they settled.

If he was sued personally, but Square was not, then yes, cutting this link
probably would help.

------
tinok
Very disturbing that mere allegation by any random person can bring down a COO
of a major payment processor and cause future hiring troubles to a company
that's going up against giants such as Visa. Do I smell a conspiracy?

~~~
protomyth
This is why Billy Graham had a policy to avoid being alone with any woman
other than his wife. Hard to do in a modern office, but a good rule for high
power folks who might be a good lawsuit target. Works equally well for other
partner combinations.

Although I doubt this case was some conspiracy.

~~~
danilocampos
Welp, good luck doing this if you're a man into men and you work in tech.

~~~
protomyth
Its the same principal. A high powered person has an assistant they can trust
to witness their interactions with people of the sex they would be interested
in. Requires money, but then again, targets generally have cash.

~~~
rmc
Bisexuals are doomed.

~~~
protomyth
Go with the always on camera

