Alibaba (NYSE:BABA) stock could have a rough couple of months as questions about the company’s approach to employee conduct gain greater traction. 

The New York Times recently reported a rape accusation that paints a very unseemly and misogynistic corporate culture within Alibaba. While Chinese police are continuing to investigate the accusation, I’m left wondering if my ongoing support of BABA stock makes sense at this point. 

Fact. I have absolutely no time for the mistreatment of any employee: man or woman. 

However, given that women have generally been given the wrong end of the stick when it comes to corporate America, any time a corporate culture is called out for being misogynistic or sexually charged, the hairs on the back of my neck stand up.

In 2018, I questioned investing in Nike (NYSE:NKE) after its alleged marginalization of women came to light. 

“For Nike to really become the leader of the women’s market, it’s going to have to continue to show that it actually cares about women, starting with its own employees,” I wrote on Oct. 18, 2018.

“It’s not enough for Nike to fire a bunch of male executives or settle a few lawsuits. Instead, the company has to completely change how it hires and pays its employees, whether they work in stores or in the company’s executive offices in Beaverton.”

NKE stock is up 122% in the nearly three years since which likely has more to do with its push to a direct-to-consumer business model than it does with cleaning up its corporate culture. 

Currently, Nike has four women on its board out of 12. One of my favorite retailers is Williams-Sonoma (NYSE:WSM). Four out of seven board members are women. More importantly, the CEO is a woman. WSM is a much better example of gender diversity. 

It’s no coincidence that over the past five years, WSM has outperformed NKE by 67 percentage points on a cumulative basis. 

BABA Stock Could Drop Like JD Stock Did

Do you remember the allegations of rape leveled by a Chinese student studying at the University of Minnesota against JD.com (NASDAQ:JD) CEO and founder Richard Liu?

Well, JD stock was pummeled when the allegations first surfaced in September 2018. In two days of trading, JD.com lost 16% of its value on the news.

The shares ultimately bottomed at $19 in November of that year. Liu wasn’t charged or found to have done anything wrong. JD stock has since recovered to $80.

At the time, I recommended that investors wait for Liu’s name to be cleared before buying JD stock. 

“Although innocent until proven guilty is the foundation of our democracy, it’s also true that a fish rots from the head down. The mere suspicion that Richard Liu forced himself on a young woman suggests that JD.com’s corporate culture encourages this sort of behavior,” I wrote at the time. 

Liu was ultimately cleared but not before investors wondered about the company’s corporate culture. I continue to wonder. It has one woman on a board of six people, including the founder. 

Here We Go Again

Back to the rape accusation at Alibaba. 

“Interviews with nine former employees suggest that casual sexism is common at Alibaba,” the NYT has reported.  

“They describe a work environment in which women are made to feel embarrassed and belittled during team-building and other activities that the company has incorporated in its culture, a striking departure from the image of inclusion Alibaba has tried to project.”

Anytime a boss does anything to undermine the self-esteem or personal well-being of a subordinate, regardless of the circumstance, that manager should at the very least be suspended with pay until an internal investigation is undertaken. 

In this instance, Alibaba fired the boss. The company has said it would implement an anti-sexual harassment policy, but it’s way too early to know whether it’s made a difference in the corporate culture. 

According to the paper, 10 employees have been fired for leaking information about the situation. I guess whistleblower laws don’t matter to Alibaba. 

On Aug. 25, I suggested that BABA stock at $171 was growth at a reasonable price. 

The latest accusations against the company’s corporate culture, combined with the ongoing regulatory crackdown by the Chinese government, have me whistling a different tune. 

If you can ignore what’s clearly a problem, Alibaba’s business is still very healthy. 

However, I can’t turn a blind eye. Until I’m satisfied Alibaba isn’t some pervy old boys club, I won’t be able to recommend its stock.

Oh,  in case you’re wondering, Alibaba has two women on its board of 11. That’s a pitiful 18% gender diversity. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.