Memo to the CEO: Office romance is also the board’s business

NESTLE’S dismissal last week of its chief executive officer Laurent Freixe for failing to disclose a romantic relationship fits an all-too-familiar pattern. 

It follows the ousting of Bernard Looney on similar grounds at BP in 2023, the resignation of NBC’s Jeff Zucker in 2022, McDonald’s sacking of Steve Easterbrook in 2019, and so on, back to Harry Stonecipher, who stepped down at Boeing in 2005. All had failed to reveal relationships with colleagues.

The problem of how, or even whether, to regulate a natural human instinct persists. The evidence suggests codes of conduct are not working. Is there a better way?

The aim of corporate guidelines in this area is not to rule on personal morality. The heart wants what it wants. Sometimes that leads to messy situations, and few are in a position to judge who is in the right.

The real problems for companies and their boards arise when an imbalance of power leads to conflicts of interest, favouritism, or, at worst, sexual harassment. Codes help protect the junior colleague in any intimate relationship. They also help ensure the smooth running of the organisation.

The mere perception of favouritism can rot a collegial culture and prevent managers who sit between the chief executive and their partner from doing their jobs. Potential conflicts of interest abound if the senior executive has to decide on the promotion or compensation of a romantically connected junior colleague.

If the workplace tryst goes bad, disfavouring or distancing an ex-lover can be equally damaging. Belated exposure of ill-judged liaisons can hit the company’s reputation, as Nestle, forced to appoint a backup CEO barely a year after Freixe took office, is discovering. Such risks also apply to other close work relationships, between relatives or even close friends.

Stonecipher’s departure from Boeing 20 years ago was widely held to be a consequence of “new puritanism” in corporate America. Some commentators at the time frowned at the interference of boards in the personal lives of executives. A few pointed out it was humanly impossible to meet Boeing’s requirement that its CEOs should “set the standard for unimpeachable professional and personal behaviour”.

Times have changed

Times have changed, most notably because of #MeToo-era recognition of the extent of the threat of sexual harassment and violence by over-mighty leaders. Human resources and compliance departments have a clear role in policing abuse. Hotlines have made it easier for staff to speak up.

The temptation to leave consensual office romances alone is still strong and when they take place between colleagues of similar seniority, it is usually the best approach.

CEOs, though, operate at a different level. Their privileges and power come with responsibilities and sacrifices. The boss should have to declare any close workplace relationships to the board so the consequences can be managed, by, for instance, moving subordinates out of the chief’s direct reporting line.

Whatever the surface similarity between recent examples of CEO non-disclosure, every case is different. Over-strict codes can drive relationships underground, with even more explosive fallout. The board has a role, therefore, in applying common sense about the necessary action.

Unfortunately, in the cases of Looney and Freixe, directors seem to have given their CEOs the benefit of the doubt for too long, until whistleblowers made the problem impossible to ignore.

As for the CEO, disclosure is the best policy. Good judgment is, after all, precisely what chief executives are usually hired for.