The Fall of The House of Weinstein

On October 8th, 2016, just three days after the New York Times published a report which detailed extensive allegations of abuse and harassment by Harvey Weinstein, he was fired by the board of directors, though he still retained an ownership of the company.

After the sexual misconduct emerged from the murky depths, many more improprieties emerged, many of which had been going on for decades. The Weinstein brothers, Harvey and Bill, created Miramax in 1979 and began producing many films that did extraordinarily well at the box office. By the ‘90’s, Disney took notice of their success and acquired the company in 1993. Disney decided to keep both brothers on board since they had an eye for talent and success and were given virtual autonomy in a move to preserve Miramax’s creative culture. That laissez-faire approach inadvertently created opportunities for misconduct that Harvey exploited. Laissez-faire is a policy of letting things take their own course, without interfering. It didn’t take long for the relationship to sour, however. The Weinsteins spent exuberant amounts of money, they took on films that made Disney cringe, and they negotiated deals without Disney’s knowledge or approval. Yet Disney continued to finance their activities with millions of dollars and tolerate their behavior, as long as they continued to produce hits.

Eventually the chasm between Disney and the Weinsteins widened until, in 2005, the parties split and went their separate ways after some legal battles the year before. Disney retained Miramax, and the Weinsteins created The Weinstein Company (TWC). By the time TWC was founded, there had already been dozens of victims of Harvey’s sexual abuse. Because of Disney’s desire for reputation management, which is the practice of caring for the “image” of a firm, they allowed his behavior to go unabated and ultimately failed in their duty of care, which involves the exercise of reasonable care by a board member to ensure that the corporate executives with whom he or she works carry out their management responsibilities and comply with the law in the best interests of the corporation. Instead of revealing the misconduct under their watch, Disney chose to protect their family-friendly image thus allowing Harvey to continue unchecked.

During his reign at TWC, Harvey built for himself a powerful network of movers and shakers from the worlds of finance, journalism, and politics. Leveraging these resources for his own benefit, he would often promote his own business or punish rivals.

TWC’s own board, with a total of 9 members, boasted several men who were described as “Harvey Loyalists”. None of those “loyalists” stayed after the allegations came to light. The mass exodus from the board left it crippled. Of the original nine, only three remained, including Bob Weinstein and two directors who had wanted to drop Harvey for some time. The men who abandoned ship failed in their Duty of Loyalty, which requires faithfulness in that a board member must give undivided allegiance when making decisions affecting the organization. This means that conflicts of interest are always to be resolved in the favor or the corporation.

It was revealed that Harvey bullied and insulted employees, directors, and even his own brother. He also squandered millions of dollars of investors’ money. As one of the board members was quoted in saying, “If Harvey Weinstein had run TWC honestly and responsibly, and shown respect for the people around him and investors’ money… I would have supported.