If you own Microsoft (NASDAQ:MSFT) stock, you might want to take the latest allegations against the company seriously. Here’s why.

It began innocently enough with a female Microsoft employee asking some other women at the company how to get ahead at the tech company. She’d been in the same position for six years with little hope of moving up the corporate ladder; she was looking for answers.

Instead, what transpired was an email chain that painted an alarming picture of sexual harassment and discrimination at Microsoft. In response to these allegations, the company’s head of HR, Kathleen Hogan, has said the Redmond, Washington company will investigate all allegations stemming from the 90 pages of emails collected by Quartz as part of its investigation into the matter.

Also, it will hold meetings starting April 22 that will allow women at the company to tell their stories. Based on these meetings, Hogan and CEO Satya Nadella will figure out what actions are necessary to address these issues.

“We are appalled and sad to hear about these experiences,” said Hogan. “We must do better.”

That’s very lovely corporate speak.

Microsoft’s Poor Record

Microsoft has a poor record of dealing with sexual harassment. In the six years between 2010 and 2016, out of 118 internal sex discrimination complaints brought forward, only one was investigated.

In 2018, a federal judge refused to certify a class-action lawsuit brought by three women working at Microsoft. The judge bought Microsoft’s argument that it would be unfair to lump together thousands of women at the company because the three women failed to identify Microsoft policies that led to unequal pay between men and women. 

The company has a history of creating a boys’ club work culture. The fact that a judge won’t recognize a class-action lawsuit doesn’t mean this kind of work culture doesn’t exist.

The latest email scandal all but confirms this to be the case.

Here’s Why It’s Bad for Microsoft Stock?

Microsoft’s a big player in the cloud business. Its roster of clients is a corporate who’s who.

If you’re one of these S&P 500 index companies and you have a predominately female workforce (think retail), do you want to be using Microsoft’s cloud products and services if there are other, less-discriminating companies out there that can get the job done?

Some might not care about the connection but the excellent ones — Wegmans, Publix, REI — are likely to revisit their relationship with Microsoft. They might not do anything, but you don’t get an excellent reputation for treating your employees right by ignoring issues in the press that could affect them.

With several large companies vying for some of the cloud business now dominated by Amazon (NASDAQ:AMZN) and Microsoft, Satya Nadella had better take forceful action on this or MSFT stock will take a bit of a hit over the long term.

Reputation is everything.

If only half of the claims made in these emails are correct, it’s still a nightmare situation for Microsoft. Especially when it’s been shown that companies with three or more women in senior managerial positions do better in all aspects of organizational performance. Women occupy three out of seven executive officer positions at MSFT.

Bottom Line on Microsoft Stock

I’ve come around to Satya Nadella’s style of leadership.

At one time, I thought Microsoft was wasting their money on the CEO. However, he’s managed to get the company moving in a single direction that revolves around the cloud and Microsoft stock investors have benefited greatly — up 217% since Nadella took the top job in early February 2014.

There’s no denying Microsoft is a more focused company today than it was five years ago when he took over. That’s why I’ve considered it a must-own tech stock.

That said, I’m also married to a very talented woman. If I knew that she and her colleagues were being sexually harassed or discriminated against, I’d be furious. There’s no excuse for bad behavior by men in the workplace or poor pay practices by companies when it comes to women.

It’s time for Satya Nadella to earn his pay. If he doesn’t, expect Microsoft stock to lose ground over the next 12-24 months.

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.