7 ms·

Square's Keith Rabois Resigns Amid Sexual-Harassment Claims

93 points by bradleyjoyce 14y ago

eurodance 14y ago
Am I the only one who doesn't understand why he resigned if he is innocent, as he claims?
- RaphiePS 14y ago
  Quoting from his blog post above (http://keithrabois.tumblr.com/post/41463189288/a-note-from-keith http://keithrabois.tumblr.com/post/41463189288/a-note-from-k...): "I decided to resign from Square so my colleagues could continue to do great work without the distraction that a lawsuit would most certainly bring."
  - DannyBee 14y ago
    If Square was also sued, it's still going to be a huge distraction (large number of emails produced, employees deposed, etc) unless they settled. If he was sued personally, but Square was not, then yes, cutting this link probably would help.
- DannyBee 14y ago
  Because when you are a high level executive at a company, part of what you are being paid for is understanding you need to protect the company above your job. I'm not talking about fraud here, or things like that. I'm talking about when you get into a situation which can only cause the company harm and embarrassment, the generally appropriate thing to do is remove your link to the company. If he was a random employee, sure, they don't pay you to do that, but executives, yeah, this is one of the reasons they are paid well. I'm sure he also holds enough options/stock that he has a financial incentive to not cause the company financial trouble through his alleged personal indiscretions.
- davidtyleryork 14y ago
  Based on the last line of his post, it looks like he was working on his own startup anyway. While the timing is suspicious, I think he might have felt that a clean break was the best solution to a situation where no one wins.
- gojomo 14y ago
  At the same time as Rabois asserts innocence with regard to legal offenses, his statement on Tumblr says, "I realize that continuing any physical relationship after he began working at Square was poor judgment on my part." This is consistent with the Square statement: "While we have not found evidence to support any claims, Keith exercised poor judgment that ultimately undermined his ability to remain an effective leader at Square." In other words, both Square and Rabois suggest that what transpired was an error in judgement which would complicate things if he continued at Square, but not legally actionable. Since both Rabois and Square can continue independently, minimizing the complications with a resignation can make sense even if completely 'innocent' of legally-enforceable damages.
- chollida1 14y ago
  It's extremely doubtful that square would have allowed him to stay. I'm guessing they offered him the choice of resign and possibly vest a few more options or not resign and be fired by square.
tinok 14y ago
Very disturbing that mere allegation by any random person can bring down a COO of a major payment processor and cause future hiring troubles to a company that's going up against giants such as Visa. Do I smell a conspiracy?
- rmc 14y ago
  Or a crime has happened. It's not uncommon for the accused to step down, or step away, while an issue is being investigated.
  - tinok 14y ago
    That's my point exactly. In theory, even an unpaid intern has the power to bring down top-level executives by simply walking into a police precinct. For a competitor, it's a better and far quicker strategy than competing on product features.
    - danilocampos 14y ago
      That's not remotely what happened here, according to Rabois.
    - rmc 14y ago
      The biggest problem with sexual harassment is not that police over over zealous with prosecuting, but that they don't prosecute enough. just look at the stats for the amount of rapes which don't go to court.
    - king_jester 14y ago
      This isn't even remotely true, most sexual assault cases result in no arrest or prosecution. Even in significant cases where a person of power commits sexual assault, they are likely to win their case -- the Diallo case comes to mind: http://en.wikipedia.org/wiki/New_York_v._Strauss-Kahn http://en.wikipedia.org/wiki/New_York_v._Strauss-Kahn
  - Alex3917 14y ago
    For what it's worth, sexual harassment is not a crime.
ry0ohki 14y ago
Keith's response to the allegations http://keithrabois.tumblr.com/post/41463189288/a-note-from-keith http://keithrabois.tumblr.com/post/41463189288/a-note-from-k...
- danso 14y ago
  People should read this before they make judgments about what might of or might not have happened edit: obviously, this is only what Keith claims on his part. I'm only saying, these are the assertions that he's adding to the record 1. Keith and the accuser were in a consensual relationship before the accuser came to work at Square. 2. Keith encouraged his accuser to join the company but asserts that he did not give his accuser any favors or preferential treatment, nor did his accuser ever report directly to him 3. Keith admits that continuing the relationship after his accuser started working at Square was poor judgment. 4. The accuser is claiming that some of the acts in the relationship were not consensual, and Keith unequivocally denies doing the "horrendous things I am told I may be accused of". 5. Keith insinuates that his accuser tried to blackmail him on the order of millions of dollars.
  - corin_ 14y ago
    Truthfully people still shouldn't make judgements after reading this either. When I read his blog I felt extremely sorry for him, and if it is true then he does deserve our sympathy. But I don't know nearly enough about him to make a judgement either side, after all if the allegations were true it's not like he would have written a blog agreeing with them.
  - scarmig 14y ago
    Good to get his side of the story, but everything has to be known as alleged: we don't actually know (yet) whether there actually was a consensual relationship before the accuser joined Square, for instance. It's a fairly convincing defense and good tactics to get this out there immediately to the public mind--and it rings as pretty plausible for me--but it's still just a claim that might just be cleverly engineered to protect Keith. Edited to add: There's also the altogether not-minor point that even a consensual relationship preceding and concurrent with Square employment wouldn't mean sexual harassment was impossible. Imagine the accuser, say, breaking up with Keith and getting stalked or threatened by him as a result.
grellas 14y ago
Sexual harassment as a form of legal wrong is defined in extensive caselaw that practitioners in the field can recite verbatim. The problem is that all the refined nuances of this law turn on facts and circumstances, most of which depend on the word of the parties involved. Lessons and risks to founders: 1. Absurd as it may seem (because it is natural that attachments may be formed by those working together), from the standpoint of protecting your stake in your venture, it should be a categorical rule for a founder never to have any form of sexual or romantic interaction with a co-worker in your venture and this applies especially if you are an officer or director of the company. Why? Because it is a certainty that you can be "set up" by the other party at any time after the company begins to prosper. Accusations can be made from any direction, real or fabricated. All they need is some fragment of verifiable support and you can be guaranteed that you will be on the hot seat for all allegations made, whether true or not. 2. Among the risks, say, if you are an officer, a VC-controlled board will almost certainly demand that you "resign" or, if you do not, will fire you. This may be because the board members do not want to fool with defending potentially indefensible facts or it may be that they simply want to consolidate investor control of the company by using the event as a reason to get rid of an otherwise dominant founder. 3. Which leads to a further risk: when your employment gets terminated in this way (or you are forced to resign), you will very typically forfeit all of your unvested stock and options, usually meaning that your founder stake will get cut to less than half of what you could have gotten upon earning it out. Of course, your value to the company may be such that a board will prefer to defend you and allow you to continue to vest but the point is that, through this set of events, you are vulnerable to the whims of whatever investors happen to control the board. This is a huge vulnerability and (from an economic standpoint) a risk never worth taking in exchange for a few moments of fun. 4. You will also be sued personally if a lawsuit ensues and that lawsuit will typically be ugly, both financially and emotionally. Of course, the company would get sued as well and this is the justification for your being terminated in the first place - your actions as an officer would be seen as irresponsible at best and you would have caused some serious harm to the company as a result of subjecting the company to the risks of a multi-million dollar lawsuit. Worse than that, the company may or may not choose to indemnify you for your personal costs in defending the lawsuit or in paying any resulting judgment. Even with an indemnity agreement in place, there is a strong incentive here for the company to claim that your conduct falls outside its parameters. You may win on this point in the end but, even if you do, who wants to have a huge liability threat looming over him for the duration of such a lawsuit. 5. Even if you manage to keep a half-decent financial stake, you can lose further once you are bounced from the company in this. For example, if the company later has a down round, resulting in a huge dilutive hit for all original shareholders, it may continue to incentivize its then current employees (including your co-founders) with a "refresh" on option grants so that they keep some form of parity with the new equity structure, but you will be left holding only a severely diluted equity piece in the end. Your apparently secure "vested" stake will be worth very little. The above is based on real-world experiences that I have gone through with startups and the risks are very real. When this sort of thing happens, you will get no sympathy from those on whom you counted. In effect, you become tainted and those around you will either attack you or will keep distance in order to play safe. What is worse, common sense does not prevail in these situations. The company lawyers will work to ensure that all emphasis is placed on the worst legal risks imaginable, even if there is another side of the story. This may not be as true in Forture 1000 companies where the positions are more entrenched, but it is true in startups and is therefore murder for founders who get caught up in such a mess. So, beware - when doing that international travel for conferences, when doing those late-night sessions with co-workers, etc., etc. - don't leave yourself in situations where you can be second-guessed. Remember too that the other party need not be some high-up person in the company and, indeed, usually is not. Keep it clean, then, for sure. But also keep the appearances clean. If the above sounds too much like a lawyer's perspective, it's because it is. I realize that people place value on real-life affections that have nothing whatever to do with money and these may be enough to trump the legal risks. In my experience, though, in the startup context for founders, the mixture is too lethal in its consequences to make it worthwhile. That is a personal judgment for every founder to make. Do so with open eyes, however, for once you start down this road, you will be completely at the mercy of the person with whom you are flirting or whatever else you may be doing. Should it go bad, you will have little to fall back on.
seivan 14y ago
Wow, poor guy; http://keithrabois.tumblr.com http://keithrabois.tumblr.com It does feel like a shake down.
danbmil99 14y ago
It's pretty simple: don't get your SO a job at your company. If you end up in a relationship with someone at your company, one of you should probably change jobs. Having said this, the sexual harassment laws are a minefield with serious unintended consequences, and there is a cadre of lawyers ready to start what amount to shakedowns at the drop of a hat. I once heard someone say (very cynically, and I hope not truthfully) that he preferred to hire "young white males of means" because he believed they would have no cause of action to sue. Apparently even such shamefully prejudiced behavior is no longer protection against this sort of outcome.

93 points by bradleyjoyce 14y ago

eurodance 14y ago

Am I the only one who doesn't understand why he resigned if he is innocent, as he claims?

RaphiePS 14y ago
Quoting from his blog post above (http://keithrabois.tumblr.com/post/41463189288/a-note-from-keith http://keithrabois.tumblr.com/post/41463189288/a-note-from-k...): "I decided to resign from Square so my colleagues could continue to do great work without the distraction that a lawsuit would most certainly bring."
- DannyBee 14y ago
  If Square was also sued, it's still going to be a huge distraction (large number of emails produced, employees deposed, etc) unless they settled. If he was sued personally, but Square was not, then yes, cutting this link probably would help.
DannyBee 14y ago
Because when you are a high level executive at a company, part of what you are being paid for is understanding you need to protect the company above your job. I'm not talking about fraud here, or things like that. I'm talking about when you get into a situation which can only cause the company harm and embarrassment, the generally appropriate thing to do is remove your link to the company. If he was a random employee, sure, they don't pay you to do that, but executives, yeah, this is one of the reasons they are paid well. I'm sure he also holds enough options/stock that he has a financial incentive to not cause the company financial trouble through his alleged personal indiscretions.
davidtyleryork 14y ago
Based on the last line of his post, it looks like he was working on his own startup anyway. While the timing is suspicious, I think he might have felt that a clean break was the best solution to a situation where no one wins.
gojomo 14y ago
At the same time as Rabois asserts innocence with regard to legal offenses, his statement on Tumblr says, "I realize that continuing any physical relationship after he began working at Square was poor judgment on my part." This is consistent with the Square statement: "While we have not found evidence to support any claims, Keith exercised poor judgment that ultimately undermined his ability to remain an effective leader at Square." In other words, both Square and Rabois suggest that what transpired was an error in judgement which would complicate things if he continued at Square, but not legally actionable. Since both Rabois and Square can continue independently, minimizing the complications with a resignation can make sense even if completely 'innocent' of legally-enforceable damages.
chollida1 14y ago
It's extremely doubtful that square would have allowed him to stay. I'm guessing they offered him the choice of resign and possibly vest a few more options or not resign and be fired by square.

tinok 14y ago

Very disturbing that mere allegation by any random person can bring down a COO of a major payment processor and cause future hiring troubles to a company that's going up against giants such as Visa. Do I smell a conspiracy?

rmc 14y ago
Or a crime has happened. It's not uncommon for the accused to step down, or step away, while an issue is being investigated.
- tinok 14y ago
  That's my point exactly. In theory, even an unpaid intern has the power to bring down top-level executives by simply walking into a police precinct. For a competitor, it's a better and far quicker strategy than competing on product features.
  - danilocampos 14y ago
    That's not remotely what happened here, according to Rabois.
  - rmc 14y ago
    The biggest problem with sexual harassment is not that police over over zealous with prosecuting, but that they don't prosecute enough. just look at the stats for the amount of rapes which don't go to court.
  - king_jester 14y ago
    This isn't even remotely true, most sexual assault cases result in no arrest or prosecution. Even in significant cases where a person of power commits sexual assault, they are likely to win their case -- the Diallo case comes to mind: http://en.wikipedia.org/wiki/New_York_v._Strauss-Kahn http://en.wikipedia.org/wiki/New_York_v._Strauss-Kahn
- Alex3917 14y ago
  For what it's worth, sexual harassment is not a crime.

ry0ohki 14y ago

Keith's response to the allegations http://keithrabois.tumblr.com/post/41463189288/a-note-from-keith http://keithrabois.tumblr.com/post/41463189288/a-note-from-k...

danso 14y ago
People should read this before they make judgments about what might of or might not have happened edit: obviously, this is only what Keith claims on his part. I'm only saying, these are the assertions that he's adding to the record 1. Keith and the accuser were in a consensual relationship before the accuser came to work at Square. 2. Keith encouraged his accuser to join the company but asserts that he did not give his accuser any favors or preferential treatment, nor did his accuser ever report directly to him 3. Keith admits that continuing the relationship after his accuser started working at Square was poor judgment. 4. The accuser is claiming that some of the acts in the relationship were not consensual, and Keith unequivocally denies doing the "horrendous things I am told I may be accused of". 5. Keith insinuates that his accuser tried to blackmail him on the order of millions of dollars.
- corin_ 14y ago
  Truthfully people still shouldn't make judgements after reading this either. When I read his blog I felt extremely sorry for him, and if it is true then he does deserve our sympathy. But I don't know nearly enough about him to make a judgement either side, after all if the allegations were true it's not like he would have written a blog agreeing with them.
- scarmig 14y ago
  Good to get his side of the story, but everything has to be known as alleged: we don't actually know (yet) whether there actually was a consensual relationship before the accuser joined Square, for instance. It's a fairly convincing defense and good tactics to get this out there immediately to the public mind--and it rings as pretty plausible for me--but it's still just a claim that might just be cleverly engineered to protect Keith. Edited to add: There's also the altogether not-minor point that even a consensual relationship preceding and concurrent with Square employment wouldn't mean sexual harassment was impossible. Imagine the accuser, say, breaking up with Keith and getting stalked or threatened by him as a result.

grellas 14y ago

Sexual harassment as a form of legal wrong is defined in extensive caselaw that practitioners in the field can recite verbatim. The problem is that all the refined nuances of this law turn on facts and circumstances, most of which depend on the word of the parties involved. Lessons and risks to founders: 1. Absurd as it may seem (because it is natural that attachments may be formed by those working together), from the standpoint of protecting your stake in your venture, it should be a categorical rule for a founder never to have any form of sexual or romantic interaction with a co-worker in your venture and this applies especially if you are an officer or director of the company. Why? Because it is a certainty that you can be "set up" by the other party at any time after the company begins to prosper. Accusations can be made from any direction, real or fabricated. All they need is some fragment of verifiable support and you can be guaranteed that you will be on the hot seat for all allegations made, whether true or not. 2. Among the risks, say, if you are an officer, a VC-controlled board will almost certainly demand that you "resign" or, if you do not, will fire you. This may be because the board members do not want to fool with defending potentially indefensible facts or it may be that they simply want to consolidate investor control of the company by using the event as a reason to get rid of an otherwise dominant founder. 3. Which leads to a further risk: when your employment gets terminated in this way (or you are forced to resign), you will very typically forfeit all of your unvested stock and options, usually meaning that your founder stake will get cut to less than half of what you could have gotten upon earning it out. Of course, your value to the company may be such that a board will prefer to defend you and allow you to continue to vest but the point is that, through this set of events, you are vulnerable to the whims of whatever investors happen to control the board. This is a huge vulnerability and (from an economic standpoint) a risk never worth taking in exchange for a few moments of fun. 4. You will also be sued personally if a lawsuit ensues and that lawsuit will typically be ugly, both financially and emotionally. Of course, the company would get sued as well and this is the justification for your being terminated in the first place - your actions as an officer would be seen as irresponsible at best and you would have caused some serious harm to the company as a result of subjecting the company to the risks of a multi-million dollar lawsuit. Worse than that, the company may or may not choose to indemnify you for your personal costs in defending the lawsuit or in paying any resulting judgment. Even with an indemnity agreement in place, there is a strong incentive here for the company to claim that your conduct falls outside its parameters. You may win on this point in the end but, even if you do, who wants to have a huge liability threat looming over him for the duration of such a lawsuit. 5. Even if you manage to keep a half-decent financial stake, you can lose further once you are bounced from the company in this. For example, if the company later has a down round, resulting in a huge dilutive hit for all original shareholders, it may continue to incentivize its then current employees (including your co-founders) with a "refresh" on option grants so that they keep some form of parity with the new equity structure, but you will be left holding only a severely diluted equity piece in the end. Your apparently secure "vested" stake will be worth very little. The above is based on real-world experiences that I have gone through with startups and the risks are very real. When this sort of thing happens, you will get no sympathy from those on whom you counted. In effect, you become tainted and those around you will either attack you or will keep distance in order to play safe. What is worse, common sense does not prevail in these situations. The company lawyers will work to ensure that all emphasis is placed on the worst legal risks imaginable, even if there is another side of the story. This may not be as true in Forture 1000 companies where the positions are more entrenched, but it is true in startups and is therefore murder for founders who get caught up in such a mess. So, beware - when doing that international travel for conferences, when doing those late-night sessions with co-workers, etc., etc. - don't leave yourself in situations where you can be second-guessed. Remember too that the other party need not be some high-up person in the company and, indeed, usually is not. Keep it clean, then, for sure. But also keep the appearances clean. If the above sounds too much like a lawyer's perspective, it's because it is. I realize that people place value on real-life affections that have nothing whatever to do with money and these may be enough to trump the legal risks. In my experience, though, in the startup context for founders, the mixture is too lethal in its consequences to make it worthwhile. That is a personal judgment for every founder to make. Do so with open eyes, however, for once you start down this road, you will be completely at the mercy of the person with whom you are flirting or whatever else you may be doing. Should it go bad, you will have little to fall back on.

seivan 14y ago

Wow, poor guy; http://keithrabois.tumblr.com http://keithrabois.tumblr.com It does feel like a shake down.

danbmil99 14y ago

It's pretty simple: don't get your SO a job at your company. If you end up in a relationship with someone at your company, one of you should probably change jobs. Having said this, the sexual harassment laws are a minefield with serious unintended consequences, and there is a cadre of lawyers ready to start what amount to shakedowns at the drop of a hat. I once heard someone say (very cynically, and I hope not truthfully) that he preferred to hire "young white males of means" because he believed they would have no cause of action to sue. Apparently even such shamefully prejudiced behavior is no longer protection against this sort of outcome.