Sex and the CEO

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Amorous relationships between bosses and subordinates are fraught with risk. Boards need to deal with the issue head-on to protect employees, the company, shareholders and themselves.

The CEOs of McDonald’s, Intel and Boeing are among the executives who have lost their jobs as a result of having, by all accounts, welcome and consensual sexual relationships with subordinate employees.

To avoid the taboo of discussing sex in the workplace, we typically use the terms “romantic,” “intimate” or “personal” to discuss this office relationships. But while those words may make us feel more comfortable, they also may result in a board not addressing relationships that are fraught with legal and reputational risks. How we frame the question we ask ourselves may dictate our answer:

Option A: Should a board proactively address the issue of executives having personal and intimate relationships with individuals employed by the same company?

Option B: Should a board proactively address the issue of executives having sex with individuals over whom they have institutional power?

We really need to ask the second question to really understand the risks of an executive, particularly a CEO, having what, by all accounts, appears to be a consensual, sexual relationship with someone over whom he or she has direct or indirect authority—that is, anyone in the organization. Here are but some of the risks:

• The employee could claim later that, while she or he was a willing participant, they felt pressure to become involved, that is, the relationship was not truly welcome. An executive does not leave his or her power at the entrance to the bedroom door.

• Even if the employee acknowledges that the relationship was welcome when it started, what happens if and when it ends? Any adverse action against the employee is subject to a potential retaliation claim, i.e., I was denied a promotion because I ended my relationship with the CEO.

• Assuming the relationship flourishes without problems, will the employee’s supervisor feel truly comfortable addressing concerns with his or her performance knowing this may make the CEO less than happy?

• If the CEO sleeps with a subordinate, does not he or she invite managers to say #MeToo and have their subordinates respond with #MeToo claims?

Indeed, just the process of leading up to the sexual relationship is risky. For example:

• What if the CEO pursues a relationship and the subordinate signals a lack of interest but the supervisor pursues it? An employee is more likely to say, “Thank you, but I have other plans,” than “You repulse me sexually.” The CEO may not get the less direct message, and the continued pursuit invites a hostile work environment claim.

• What if the employee is direct and says, “I want to keep the relationship strictly professional” and the CEO does not pursue? Is not any adverse action against the employee subject to a potential retaliation claim? The answer is “yes.” Of course, the employer may prevail—but only after an embarrassing, salacious trial.

Boards need to deal with the issue head on to protect employees from what may be unwelcome pressure, to protect the organization from potential litigation and to protect themselves. For public companies, directors may face derivative claims by shareholders when such foreseeable risks materialize. Even in private companies, there may be a claim of breach of fiduciary duty.

While boards need to focus on the risky combination of sex and power, this does not mean that the policy itself needs to be this explicit. Indeed, some of the best policies I have seen in this area focus on intimate and/or personal relationships.

Further, there are many different policy options. Some employers prohibit intimate relationships where there is a power imbalance. In other companies, there is no prohibition but there is a reporting requirement. And, in still other companies, there are prohibitions for some types of senior leaders and reporting requirements for others.

No one size fits all organizations; there are benefits and risks to each approach. What is critical is that boards focus on the issue and make a reasoned decision on what will be an effective way to address the legal, reputational and other risks associated with high-risk relationships.

While this starts with a policy, it does not end there. It is strongly recommended that policy be coupled with training. When executives understand the personal risks to them of these high-risk relationships, they may be less likely to engage in them. At a minimum, you will hopefully learn of such a relationship from the executive—and not an online headline.

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