Are startups and investors doing enough to check sexual harassment?

Early this week, several women alleged sexual harassment by Arunabh Kumar, founder and chief executive of digital entertainment channel The Viral Fever (TVF). The issue has brought to spotlight low compliance levels at Indian startups when it comes to guidelines on prevention of sexual harassment at workplace.

At early-stage startups, a framework to handle cases of sexual harassment is usually missing even though government rules mandate formation of a sexual harassment complaints committee if the number of employees at the firm exceeds 10.

In case of TVF, the Prevention of Sexual Harassment committee was formed just last year, VCCircle has learnt from a company employee. TVF has been in existence since 2010.

According to Complykaro Services, which helps companies comply with Supreme Court guidelines to check sexual harassment, the lack of a proper framework is not an India-specific problem; it is a global issue.

Not the top priority Companies usually become serious about compliance in this regard only after they reach considerable scale.

"At the early stage, all employees come from the same close network. But as [staff] strength grows, from Series A onwards, we start telling them to have HR policies for ESOPs and other things. It is at the Series B level onwards when compliance becomes serious," says Nagaraj Prakasam, an angel investor.

The internal complaints committee to check sexual harassment needs to have one woman employee from the team and one person from outside, such as from an NGO. According to Suhas Tuljapurkar, founder of legal support services company Legasis, which makes compliance software for companies, the way internal committees are structured today shows that putting in place a policy to prevent sexual harassment at workplace is not a priority for startups.

"If you are the first institutional investor and team size is small, you usually do not expect these processes to be in place. But, at the later stage, investors do HR diligence and see if there are proper training sessions. At this stage, they expect them to have more comprehensive manuals in place," says Kunal Khattar, partner at early-stage venture capital fund advantEdge.

Mere formality for investors? "When investors sign an agreement to invest in a company, they tend to look at all sorts of compliance, and the implementation of the Prevention of Sexual Harassment Act is one factor. However, it's just a tick-box formality in most investments, whereas they need to sensitise all employees about what constitutes sexual harassment at regular intervals to prevent such possible behaviour," says Vishal Kedia, founder of Complykaro Services.

While investors don't have any active liability in such issues, they have to deal with bad press, Kedia said.

However, Pankaj Jain, founder of Impact Law Ventures, says his law firm has seen a few deals where investors have been concerned about legal as well as the reputational ramifications of sexual harassment issues and have taken cognisance of it.

"The issues related to harassment are not merely compliance-oriented, but also have implications on governance, reputation and talent morale," says Jain.

The clauses related to the consequences of breaching laws and misconduct are included in employment and investment agreements. This covers sexual harassment and applies to promoters as well, he adds.

More teeth for law? According to lawyers, in cases like TVF, the victim has an option to file a complaint with the internal complaints committee. If he or she is not comfortable approaching such a committee since the allegations are against the founder/promoter, he/she can approach the local complaint committee constituted by the government in each district.

If a company fails to constitute an internal complaints committee, it will be fined Rs 50,000 at the first instance and can even have its licence cancelled at subsequent instances, explains Poorvi Chothani, founder of LawQuest International, a law firm that advises companies on HR issues.

However, Chothani feels the fact that offences under the statute are non-cognisable, makes them weak. (In case of a non-cognisable offence, an investigation cannot be initiated and an arrest cannot be made without a warrant and court order.)

"If they were taking it seriously, it would be cognisable. That is a weakness in the law," she explains.