Sex On The Job

The Lewinsky Effect: Business takes a closer look at executive affairs

A few months back, Garry G. Mathiason, senior partner with Littler, Mendelson, Fastiff, Tichy & Mathiason, the nation's largest employment law firm, got a call from a very sheepish general counsel for a major company. The president of the company, the counsel said, "is planning to have a consensual affair with one of his employees," but before he does, "he wants to draft a written agreement" stating that the affair is voluntary--to reduce the chance that the woman might file a sexual-harassment suit if they broke up. "You won't believe it," Mathiason assured the nervous counsel. "But we've already drafted a standard form" for just such cases.

STUNNING. Welcome to the minefield that is office romance in the Nervous Nineties. Sure, President Clinton might survive the scandalous charges that he had an affair with former White House intern Monica S. Lewinsky, even if proved true. But few senior executives think they could do the same. Indeed, while just 43% of the executives responding to a new BUSINESS WEEK/Harris Poll believe an affair with Lewinsky would affect Clinton's "ability to serve as President," 59% say an extramarital affair by a CEO is detrimental.

While the President of the U.S. is just learning how an alleged office indiscretion might backfire, presidents, CEOs, and other top corporate execs have already discovered that an old-fashioned fling between boss and subordinate can be a fatal distraction. In fact, says Mathiason, "in the last three years, I've been involved in more terminations of CEOs due to claims of sex harassment" than for anything else.

That's a stunning change. In the old days, a top exec who requested some intimate overtime risked, at most, a slap in the face and the loss of a good secretary. These days the object of the boss's unwanted affection is likely to respond with a sexual-harassment suit. And as Mathiason's client feared, even when a relationship begins with mutual consent, after the breakup, the plaintiff lawyers appear. Elizabeth J. du Fresne, a senior partner at Miami law firm Steel, Hector & Davis, says she settles 10 or 15 such cases a year for over $500,000, and a few that top $1 million--double or triple the number of cases five years ago. Says Susan Meisinger, senior vice-president at the Society for Human Resource Management: "Romance in the office ain't cheap."

As a result, more companies have adopted policies to minimize the liability. "Businesses that always closed their eyes to office romance...are having to think about it," says du Fresne. So far, however, less than 30% of companies have a clear policy on relationships between senior execs and their subordinates, according to a January survey by Human Resource Management.

After the Lewinsky scandal, however, it's a safe bet that more companies will make new rules. So what's the best policy? The options range from voluntary disclosure to rigid rules with strict penalties. Intel Corp., for example, is among the companies that explicitly and severely limit office dating between superiors and subordinates. Intel's "non-fraternization guideline," for instance, forbids managers from dating any employee they supervise and warns violators that they may face termination.

But such iron-clad prohibitions "merely drive the relationships underground," says Freada Klein, founder of a Cambridge (Mass.) employee-relations consulting firm. She favors the more flexible policy adopted by companies such as General Motors Corp. There, managers are encouraged to report romantic involvements with subordinates. Usually, GM reacts by "creating a different reporting relationship to protect everyone," says a GM spokesman.

Given today's intense business climate, in which men and women are thrown together for days on end in meetings or on trips, "no company is going to stop Cupid at the front door," says Eric Greenberg, director of management studies at the American Management Assn. "People meet at work. They date," says Gordon E. Eubanks Jr., chief executive of software maker Symantec Corp.

The good news is that most relationships don't lead to trouble. Eubanks' office romance, for instance, led to marriage. "It's common in Silicon Valley," he says. And elsewhere: 55% of the 617 respondents to the Human Resource Management survey said romances in their companies resulted in marriage. There are many famous examples: Microsoft CEO William H. Gates III met wife Melinda French while she was a product manager at the company. General Motors Chairman John F. Smith Jr. met his wife Lydia when she was briefly assigned to be his secretary in the late 1980s. French quit when she had a baby, and to avoid problems, Lydia Smith left her GM job shortly after meeting her future husband.

Still, when relationships don't end at the altar, "it can get very complicated afterwards," warns Ellen Bravo, co-director of 9to5, National Association of Working Women. Her group receives 15,000 calls a year from non-executive women, many complaining about a relationship with a superior.

The problems only get bigger when the superior is the CEO. Says Patricia Arredondo, president of Boston-based Empowerment Workshops, which offers training on office relationships between the sexes: "It becomes a free-for-all if the CEO can behave this way." At Astra USA Inc., Chief Executive Lars Bildman became a role model for untoward behavior and a dozen female employees told BUSINESS WEEK in 1996 they had been fondled or propositioned by Bildman or other executives. Bildman was fired after the charges became public in BUSINESS WEEK.

MORALE PROBLEMS. Indeed, even less serious CEO imbroglios spice up the business news. Silicon Valley buzzed for years about charges brought against Oracle Chairman Lawrence J. Ellison by an employee who alleged that he fired her when their affair fizzled. Ellison eventually prevailed in court, but it didn't help the corporate image.

Even if an affair doesn't cause legal problems, it can hurt morale. In 1996, Edward R. McCracken, then chairman and CEO of Silicon Graphics Inc., began dating a much younger woman who worked in human resources. That's where McCracken had met his wife of 11 years, from whom he was separated. McCracken has said the relationship was proper and above board. But the affair upset other employees, says one former SGI employee: "It's hard to be credible about sexual harassment when the chairman of the company dates somebody who works for him, even indirectly."

Whatever the policy, almost no one feels that Corporate America can relax about affairs of the CEO's heart. If anything, the charges swirling around Clinton "have heightened concerns about the potential for abuse of power" in office romances, says Arredondo. That goes for the Oval Office or the corner office.

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