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Commentary: Why Matt Lauer’s Mega-Contract Couldn’t Save Him

November 30, 2017, 9:13 PM UTC

Matt Lauer’s unceremonious termination from NBC reveals how quickly the balance of power between companies and their biggest stars has shifted in recent weeks.

On Wednesday, NBC fired the Today host after an employee formally complained about harassment. Since then, two other women accused Lauer of abusive behavior in a New York Times report, and others described to Variety a lewd and sexist atmosphere in the newsroom.

The severity of the allegations against Lauer, and the near-certainty that other complaints would surface, may have forced NBC’s hand. But it also may represent a new normal in which high-ranking employees are losing some of their bargaining power with their employers.

In the recent past, employers generally viewed top employees as precious assets who deserved additional protections. These employees negotiated favorable employment contracts that not only promised generous pay, but additional protections from termination.

For example, filmmaker John Lasseter had a 10-year employment contract with Pixar before the company was acquired by Disney. Under the contract, Pixar could not terminate Lasseter without notice except for “gross negligence,” conviction of a crime, or breach of his employment contract. (The terms of Lasseter’s current contract with Disney are not publicly available. He has taken a six-month leave from Disney.) Similarly, Harvey Weinstein’s lawyers now claim that his contract insulated him from the rigors of the company’s code of conduct. He was fired on Oct. 8.

More commonly, executives are promised large payouts if they are terminated without “cause”—a term that is itself a matter for negotiation.

Corporate big shots also enjoy preferential treatment in their dealings with human resources departments. While a regular employee can expect to be fired immediately for a serious violation of the harassment policy, that’s not always true for those at the top. Fox News renewed Bill O’Reilly’s contract after settling a harassment case for $32 million. Uber’s Susan Fowler claimed in a viral blog post that human resources declined to fire a supervisor who propositioned her because it was his “first offense” and he was a “high performer.” And Lasseter, despite facing multiple accusations of sexual misconduct, is the rare recent example of an high flier who has avoided the axe.

Until recently, companies often gave powerful bad actors the opportunity to save face by resigning rather than being fired outright. For example, in 2010, Hewlett-Packard CEO Mark Hurd faced harassment accusations that led to a trail of inaccurate expense reports. The board pushed him out, but Hewlett-Packard nevertheless announced it as a resignation. Hurd also walked away with a severance package exceeding $12 million.

NBC’s approach to the Lauer situation suggests the employer playbook has changed. Lauer’s $25 million-a-year contract did not save his job. Instead, NBC fired him in a very public fashion within days of receiving an internal complaint.

Now that graceful exits are a thing of the past, employers may be reconsidering those employment contracts as well. For starters, you can expect them to take a hard look at how these contracts define “cause” and whether it includes conduct that violates company policies or is damaging to the company’s reputation. Big severance packages may also be increasingly viewed as a source of corporate risk, since they can cloud company decisions about whether to keep a bad actor on the payroll.

For better or worse, harassment cases are now litigated in the court of public opinion, with the company’s reputation hanging in the balance. Employment contracts and human resources processes take on significance beyond the legal realm. They have become the story of who a company is and what it stands for.

And in the new normal, companies can’t afford to feed a narrative in which their stars play by their own rules.

Elizabeth Tippett is an associate professor at the University of Oregon School of Law.