Sex Scandal CEOs Spark Surge of Notoriety in the C-SuiteBy Jeff Green to Bloomberg
Chief executives may be no more prone to extramarital affairs than in the past, yet the notoriety for getting caught has exploded.
The resignation of Lockheed Martin Corp. (LMT)’s incoming chief executive officer Christopher E. Kubasik after a relationship with a subordinate follows similar actions at Best Buy Inc. (BBY), Restoration Hardware Holdings Inc., and Hewlett-Packard Co., among others. The day Kubasik stepped down, Central Intelligence Agency Director David Petraeus resigned because of an affair.
Lockheed Martin Corp. Former Vice Chairman, Christopher Eugene Kubasik.
Company directors are increasing vigilance of executives’ behavior because they are being held accountable for governance. Communication via e-mail and text messaging, as well as mobile phone records and social media interaction, often detail the exploits, making it harder to cover them up.
“It’s more zero tolerance,” said Elaine Eisenman, dean of executive and enterprise education at Babson College in Wellesley, Massachusetts, and a director at shoe retailer DSW Inc. said. “It used to be more of the boy’s club – more of a ’wink, wink” situation. Now ’wink, wink’ doesn’t work anymore.”
Because corporate boards are more willing to take action, employees are also more likely to use hotlines and other tools to turn in the boss, Eisenman said.
“The executive’s whole life gets consumed by the company and there’s less social interaction outside of the office, so there is more temptation to create a relationship in the work arena,” said Bill Ide, chairman of the governance center at law firm McKenna Long & Aldridge LLP.
At the same time, corporations need to police the activity more aggressively in the face of a more-demanding public and stricter governance standards. E-mails and text messages give them the means to uncover it.