CHICAGO – At many corporations, an affair between the chief executive and a female employee would be prime fodder for office gossip but hardly a career-ending move for the guy at the top.
Not at Boeing Co. The Chicago aerospace manufacturer took drastic action Monday, ousting its well-liked and respected CEO because he had a consensual affair with a female Boeing executive. It’s a move that likely has many philandering executives rethinking the wisdom of their workplace romances.
Boeing’s board asked Harry Stonecipher, a 68-year-old married man with grandchildren, for his resignation over the weekend after Boeing’s chairman asked Stonecipher about the relationship and he acknowledged it.
The affair “reflected poorly on Harry’s judgment,” Boeing Chairman Lewis Platt told analysts and reporters in a conference call Monday.
Although the relationship did not directly violate Boeing’s code of conduct, the board determined that there were “certain details” about it that would be embarrassing for the company if they came out, Platt said.
Boeing declined to provide further details of Stonecipher’s conduct except to say there was no evidence he misspent company money. The female executive, who was not named, is still employed but a company spokesman declined to discuss her future.
The affair, which started in January, came to the attention of Boeing’s board through an anonymous letter, Platt said. Other allegations that Stonecipher showed favoritism toward the woman were not substantiated by an investigation, he added.
Given the wave of scandals that have buffeted companies such as WorldCom, Enron and Tyco International, directors can no longer turn a blind eye to the personal conduct of CEOs, said Stephen Mader, vice chairman and leader of the board practice group at Christian and Timbers, an executive recruiting firm.
“In normal circumstances, there would be other ways to deal with it, and they might deal with it quietly,” he said. “Boeing couldn’t even afford to have that conversation.”
Indeed, Boeing has been at the center of one ethical scandal or another for a year and a half now. In one case, it was banned from government satellite launches because it was found to have thousands of documents from competitor Lockheed Martin in its possession.
In 2003, an ethics scandal tied to a $20-billion-plus contract for Air Force refueling tankers led to the firing of Michael Sears, Boeing’s chief financial officer, and a week later, the resignation of its popular CEO, Phil Condit.
Stonecipher, a defense industry veteran and the former CEO of McDonnell Douglas Corp., was brought back from retirement after Condit’s exit to lead Boeing out of its ethical morass. He was a champion of strengthening the company’s code of conduct and insisted that even small infractions would be taken seriously.
“He drew a very bright line for all employees,” said Platt. “And when one does that, you have to live by that standard.”
Corporate directors are changing their minds about what they are willing to put up with because they fear the repercussions – and personal liability – that may come with covering up executive indiscretions, recruiting experts say.
“I see a changed attitude,” said Mader. “Everybody feels much more exposed to the public eye and they aren’t willing to take the risk that things will be uncovered.”
Boeing’s board did exactly the right thing in taking a hard line, according to employment lawyers.
“That’s what boards are for – to make those kinds of judgment calls,” said Sheribel Rothenberg, a Chicago employment attorney.
“What happened at Boeing was not illegal if it truly was a consensual relationship. But the board of directors can make a decision that they won’t tolerate that. It’s an ethics question really.”
Despite the higher standards that some boards are using to judge executive performance, some experts doubt much will change when it comes to the tricky area of CEO affairs or sexual misconduct.
“For every one of these situations where the company takes action with a senior executive, there are five companies that find a way to bury it,” said Michael Karpeles, head of the labor and employment group at Chicago law firm Goldberg Kohn.
Others
Stonecipher isn’t the only Chicago CEO who has lost his job after unsavory allegations were made about his personal life.
Last month, Steven McMillan, Sara Lee Corp.’s chairman and chief executive, said he was stepping down as CEO. The news came seven weeks after the Chicago food and apparel company reached a confidential settlement with a woman who had accused him of offering her a $140,000 job in exchange for having a sexual relationship with him.
The woman accused McMillan, who is divorced, of reneging on the job offer after she refused to continue having sex.
A Sara Lee spokesman said McMillan’s exit is “a planned transition” and noted that he is staying on as chairman until October. She said she was unable to comment on the litigation “beyond saying it has been resolved.”
In 1999, Charles Campbell, then-CEO of Florsheim Group Inc., resigned without explanation six weeks after he was accused of arranging to have mistresses join him on business trips, conducting midday trysts at Florsheim’s corporate apartment and having sexual liaisons in limousines leased by the Chicago shoe maker.
The allegations against Campbell, a married man, were contained in a lawsuit filed by Campbell’s former assistant. They were investigated by Florsheim’s outside auditors, but the findings were never made public.
More recently, an affair between retired GE Corp. Chairman Jack Welch and the then-editor of the Harvard Business Review led to an ugly divorce fight with his second wife, who revealed millions in perks Welch was still receiving from GE.
To quell the uproar from shareholder activists, Welch agreed to reimburse GE for some of the perks, which included a New York apartment, tickets to NBA games and regular deliveries of fresh flowers.
But a larger question remains: Why would a married CEO with money and power would risk everything for an extramarital affair?
Getting to the top requires a certain drive and competitive spirit that some CEOs fail to redirect in productive ways, psychologists say.
Once there’s no more challenge, these high-achievers may become depressed and channel some of their energy into risky behaviors such as heavy drinking and having affairs.
“The American dream – that wealth transmutes success into happiness – always end in bitter disappointment. You’re the same you, just in posher surroundings,” Terence Real, author of “I Don’t Want to Talk About It: Overcoming the Secret Legacy of Male Depression” told Psychology Today magazine in 2003.
“You can feel like a failure because you’re now measuring yourself against the CEO of a company even bigger than yours.”
Office romance is a bete noire for human resource executives. Even consensual relationships among equals can break down, sometimes resulting in nasty sexual harassment allegations.
When the power relationship is uneven, the lines of correct behavior are more muddled, employment expert say. The relationship may compromise the objectivity of the supervision and raises being awarded to an employee. It also may affect morale if other employees come to believe someone is being treated better because of a sexual relationship with a powerful person.
That’s why some companies have “nonfraternization” policies that may prohibit relationships between supervisors and subordinates. In some drastic cases, the policies may prohibit any dating among company employees, said attorney Karpeles.
When a company does have policies on the books, it’s critical that they be applied to everyone – even the CEO.
“Five to 10 years ago, it would have been very surprising to the business community that a CEO of a major public company could be let go because of a relationship,” Karpeles said.
“But the environment for both legislation and litigation has dramatically changed in the employment area, generally, and the harassment area specifically.”
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