Corporate culture can drive success or set you up for failure. And in a long overdue era of #MeToo, Under Armour's culture came out on the wrong side, according to a report last night from The Wall Street Journal.

"Over the years, executives and employees of the sports-apparel company, including chairman and chief executive Kevin Plank, went with athletes or co-workers to strip clubs after some corporate and sporting events, and the company often paid for the visits of many attendees, people familiar with the matter said."

[Update 6-Nov-2018 9:55a.m.: The company sent this statement: "Kelley McCormick, senior vice president of corporate communications at Under Armour, said the company doesn't condone use of adult entertainment for business, and Mr. Plank didn't conduct business at strip clubs or use company funds at such venues." A spokesperson underscored that it was false that Plank used corporate dollars for any such activities. However, that is not the same as saying no employees used company funds for such activities.]

Reportedly, that was only one obvious element in a toxic culture, which included inappropriate behavior by top male executives, basing invitations of annual events on female employees' appearances, and a claimed inequality at career opportunities.

A statement to The Journal, attributed to Plank, went as follows:

"Our teammates deserve to work in a respectful and empowering environment. We believe that there is systemic inequality in the global workplace and we will embrace this moment to accelerate the ongoing meaningful cultural transformation that is already under way at Under Armour. We can and will do better."

Over the years, the company has talked a good game:

  • It reportedly ended sponsorship of USA Gymnastics over the massive sexual abuse story about that organization.
  • Under Armour's code of conduct includes a statement that "we will not tolerate harassment of any kind" and includes " sexual harassment and unwelcome conduct, threats or bullying, name-calling, negative stereotyping, unwelcome physical contact, offensive gestures, or damaging the physical property of others."
  • In its supplier code of conduct, Under Armour demands suppliers and their subcontractors "must treat their employees with respect and dignity. No employee shall be subject to physical, sexual, psychological or verbal harassment, or abuse."
  • The Under Armour customer online terms of service include a prohibition against uploading content that, among other things, "exploits people in a sexual or violent manner" or "contains nudity, violence, or pornographic subject matter."

But in the current climate, that isn't enough.

There are two major issues facing Under Armour and its culture, if the report is accurate -- and, independently, facing many other companies. One is its tacit condoning of sexual harassment, even if only in the recent past. When your accounting department is cutting checks to cover expenses that include strip club visits, you can't even pretend the company doesn't know what's going on.

The second issue is the potential hypocrisy of stating a position against harassment, which might be a legal stratagem to help set up an affirmative defense in case of a lawsuit, when certain other things are allowed to slide. Not that it will do much good at this point.

From the reports, the culture seems to have some big problems, and change is tough, as other corporate examples have shown. Look at Papa John's or Uber. In each case, the CEO was pushed out.

Plank might take a lesson, stepping down as CEO while remaining as chairman, to bring in someone who could help reconstitute the workplace. That would likely also require some of his handpicked executives to depart as well.

There would be disruption. But then, the current culture continuously disrupts. By making the changes, the long-term gain in employee morale, access to a greater talent pool willing to work there, and public reputation among consumers and investors would more than offset the short-term pain.

Published on: Nov 6, 2018