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Power Sheet: The Murdochs’ Mistake with Roger Ailes

At one level of analysis, Fox News’s handling of the Roger Ailes scandal was a textbook example of crisis management done right. Former anchor Gretchen Carlson’s suit alleging sexual harassment by the boss was like a gift to the mass media, the kind of irresistible story that would keep attracting hordes of viewers and readers for as long as it continued. So the company shut it down, fast – ousting Ailes just two weeks later, in mid-July, and settling with Carlson over the Labor Day weekend for a reported $20 million. Carlson agreed not to talk about the settlement as part of the deal, and she issued a statement yesterday saying she’s “ready to move on.”

But at another level, the story illustrates classically inept leadership at the top, and I don’t mean just by Ailes, but also by 21st Century Fox CEO James Murdoch and his father, controlling shareholder Rupert Murdoch. We can blame them confidently because the extraordinary nature of the Carlson case leaves no possibility that the Murdochs were ignorant of Ailes’s behavior. In most cases that are settled, the allegations remain only that. But this one included an extremely rare feature, an unhedged, fulsome apology by 21st Century Fox: “We sincerely regret and apologize for the fact that Gretchen was not treated with the respect and dignity that she and all of our colleagues deserve.” Why the apology? And how was Carlson able to extract $20 million from Fox in mere weeks? Well, it seems she had recordings. She had reportedly been secretly recording her meetings with Ailes for a year and a half. Allegations in her lawsuit, for example that Ailes said, “I think you and I should have had a sexual relationship a long time ago and then you’d be good and better and I’d be good and better,” were apparently transcribed from the recordings.

So while Ailes maintains he has behaved within the law, and no court has made a finding, I think we can give Carlson’s allegations more than average weight in depicting an atmosphere at Fox. It also becomes harder to dismiss the many allegations by other female former Fox anchors who spoke up after Carlson sued. It thus seems impossible that the Murdochs were clueless about how Ailes ran his ship. They must have chosen not to see what was there.

Such behavior is classically inept leadership because it fits an ancient pattern. How does a leader deal with a manager who’s producing knockout results but behaving repugnantly? The right answer is obviously to discipline or fire the manager. Results may suffer for a time, but the culture grows stronger. The far more common response is to look the other way. Great results continue for a time, but the culture is poisoned.

To switch metaphors, 21st Century Fox skillfully extinguished the fire that Carlson lit, but far greater damage to Fox News had already been done and will take much longer to repair.

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What We’re Reading Today

Ackman takes large Chipotle stake 
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Roger Ailes didn’t pay in Carlson settlement 
21st Century Fox publicly apologized to Gretchen Carlson for not allowing her to work with the dignity she deserved and reportedly paid her $20 million to settle her harassment claim against Ailes. But Ailes’s lawyer says he will pay none of that sum and did nothing wrong. The Wrap

Cable companies continue to fight the FCC…
…over the commission’s plan to open the set-top box market to competition. Representatives for Randall Stephenson‘s AT&T and the industry organization representing Brian Roberts‘s Comcast and other cable companies said they would let subscribers watch shows on third-party devices through apps developed under industry standards, circumventing the set-top box. The FCC has proposed a licensing body that would oversee the effort, which cable companies say will freeze innovation. Bloomberg

Palantir sues early investor
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Building a Better Leader

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Some tactics women use to move up the ladder…
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Companies with profit-sharing…
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Trump Troubles

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Goldman Sachs bans partners from donating to Trump
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Koch brothers set up academy
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Up or Out

Syngenta CFO John Ramsay will retire at the end of the month, to be succeeded by Mark Patrick.  MarketWatch

Morningstar founder Joe Mansueto will step down as CEO at year-end, remaining  chairman and adding the title of executive chairman. Kunal Kapoor will succeed Mansueto as CEO.  Investment News

Fortune Reads and Videos

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On this day…

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Produced by Ryan Derousseau