C-Suite

11.11.12

The New Rules of the Game for CEOs

Whether you are male or female, gay or straight, it’s a bad idea to climb into bed with someone who works with you. Just ask David Petraeus, Joe Rogers, or Chris Kubasik.

On Friday, three top executives at major U.S. organizations saw their careers and reputations tarnished by admissions of—or allegations of—sexual indiscretions: CIA head David Petraeus, Waffle House CEO Joe Rogers Jr., and Chris Kubasik, who was slated to assume the CEO post at defense contractor Lockheed-Martin.

Now, sophisticates know that infidelity happens all the time, in the C suite and on the factory floor. And having an affair, in and of itself, doesn’t disqualify anybody from holding a position of public authority. Marital infidelity certainly didn’t end the careers of Bill Clinton, or Newt Gingrich, or Louisiana Sen. David Vitter. In the corporate world, there are plenty of executives, bankers, attorneys—you name it—whose marriages fell apart as they climbed the ladder. Evolved people generally accept that marriage is complicated, and that things happen. And so as a general rule, when top professionals admit to, or are caught in, extramarital activity, it is regarded as a sign of human frailty or failing—not as a disqualification or reason to retire.

But in each of the three cases that came to light on Friday, there are solid organizational and business reasons as to why the activity—or alleged activity—was handled in the way it was. First, the Petraeus bombshell. Petraeus submitted his resignation after admitting he had an affair (revealed to be with the woman who wrote his biography)—even though the affair apparently is over. During the Cold War, it was generally assumed that spies or officials who had affairs posed a potential threat to national security. Why? Officials who fell into “honey traps” would be susceptible to blackmail. If the Soviets had evidence of a high official cheating on his wife—or, worse, in the closeted era, engaging in homosexual activity—the official would be more easily compromised.

That’s not what really happened with Petraeus. Nobody suggested that having an affair compromised his ability to do his job, or even his focus—although it certainly occupied some of his attention. Rather, it makes more sense to think of Petraeus as the CEO of a business. The business of the CIA is discretion, loyalty, keeping secrets, keeping information closely held. In allegedly using his work computer, and his position, to pursue an affair, this CEO was being highly indiscreet. By investing a professional writer-subject relationship with a deeper personal one, he also raised questions about how closely he would guard vital information. Because his personal behavior was at odds with the explicit mission of the organization he led, Petraeus found himself in an untenable position. It would be a little like the CEO of an organic-food company admitting that he subsists entirely on a diet of Cheetos, Twinkies, and Mountain Dew.

The episode involving Waffle House CEO Joe Rogers Jr., would at first blush seem to highlight a double standard. The allegations are much more troubling than those that caused Petraeus to resign, and yet Rogers has not suffered any professional consequences. In a lawsuit, documented here, Rogers is charged with exercising what might be called droit du seigneur. A former personal assistant to Rogers alleges that she was required to perform sexual acts as a condition of employment, and that Rogers routinely harassed her. An attorney for Rogers denies the allegations.

Sure, the revelation is damaging to a brand that stands for friendliness and hospitality. But unlike Petraeus, who had a consensual relationship, the accusations haven’t caused Rogers Jr., to step down. Why? Well, Waffle House is a privately held company. And when CEOs effectively own and run their companies, without the input or oversight of a board or public shareholders, they really answer only to themselves. What’s more, this is an allegation—not an admission—of purely private behavior. The employee in question was not a Waffle House employee. As a result, the company thus far seems to be handling it as a purely private matter. Waffle House hasn’t commented on the allegations, and there has been no visible change in Rogers’s status.

Corporate America has long since stopped resembling Mad Men.

By contrast, Lockheed-Martin, a huge publicly held company that is a government contractor, has been very upfront about the extramarital behavior of its anointed CEO and the reason for his cashiering. On Friday, the company announced that  “[Christopher] Kubasik, previously slated to become CEO in January, resigned after an ethics investigation confirmed that he had a close personal relationship with a subordinate employee. His actions violated the company’s Code of Ethics and Business Conduct, but did not affect the company’s operational or financial performance.” The Washington Post has some of the backstory.

Lockheed-Martin concluded that even though the relationship was completely consensual, and even though it had no bearing on the company’s core business mission of profitably selling defense-related systems and equipment, Kubasik simply couldn’t stay on.

This action highlights a broader trend in big business of greater sensitivity to sexual politics in the workforce, and to the presence and role of women. Corporate America has long since stopped resembling Mad Men, in which male executives viewed the female assistants and secretaries as material for affairs and second wives. And the legal, human-resources, and board functions at Fortune 500 companies have come to recognize that.

We live in a world in which a majority of the college degrees awarded each year go to women, and in which women constitute a majority of the workforce. At every level, in every industry, it is more common to find women working—and in positions of authority. Here are some of the blue-chip companies now run by women: Pepsi, Kraft, Yahoo!, IBM, Hewlett-Packard, Xerox, DuPont, Archer-Daniels-Midland, TJX. The policies that were instituted barring personal relationships with subordinates were originally meant to protect women, who were generally regarded as less powerful and subordinate in the corporate world, from higher-ranking men. But now these policies have a broader role and impact.

People who have affairs in the workplace, regardless of their gender or sexual orientation, open themselves and their companies up to charges of sexual harassment or discrimination. It can also be devastating to corporate morale when senior executives have affairs with—and then favor—junior employees. Whether you are male or female, gay or straight, it’s a bad idea to have a nonprofessional relationship with someone who works for you. At Lockheed-Martin, in fact, it is unacceptable. The policy will apply in exactly the same way to the company’s new female CEO: Marilyn Hewson.