How CEOs are being held to higher ethics

An executive working long hours, away from the family on business trips, develops a close relationship with a subordinate executive of the opposite sex. More than business is transacted.

These days, companies are starting to further define the boundaries for such relationships. Some businesses are asking employees to sign "love contracts" that give information about sexual harassment and let both parties admit to "consensual sex."

On Monday, Boeing's board of directors took another approach - forcing out the chief executive officer for an extramarital relationship with another employee.

Corporate observers believe Boeing's move may foretell a higher standard for personal behavior in the post-Enron world. In effect, the Boeing decision says that the chief executive, while no longer the meanest businessperson on the planet, has a responsibility to set the highest ethical standards in the company.

"Every CEO knows about this today," says Steve Scalet, an assistant professor of philosophy at Binghamton University in New York. "Will this have an effect? To some extent it has to."

Workplace romance is an issue that has dogged companies for as long as there has been a water cooler. But in recent years, it appears these kinds of relationships are multiplying.

"The workplace is a meeting ground," says John Challenger of Challenger, Gray & Christmas, a Chicago outplacement company. "People work longer and travel more, and there are not as many places to meet people, especially when you are sitting alone in front of a computer all day."

Although some companies may be willing to look the other way when it comes to office dating, infidelity is a tougher issue. For many Americans, the issue of adultery joined everyday discourse when reports surfaced that President Clinton had had an affair with an intern, Monica Lewinsky.

Of course, infidelity was around well before Clinton's problems. Some studies have found that in the 1940s, 50 percent of men and 25 percent of women confessed to extramarital linkups. A University of Chicago study done five years ago found 25 percent of married men and about 15 percent of married women had cheated.

A 2003 Oxford University study, conducted over seven years, found that offices with both men and women (in comparison with single-sex offices) increased the divorce rate by 70 percent.

Examples abound of CEO indiscretions. In the early 1980s, the nation debated the adulterous romance between William Agee, then president of Bendix Corp., and his blond 29-year-old assistant, Mary Cunningham.

Affairs have roiled the executive ranks at such companies as Ashland, Staples, Blue Cross & Blue Shield of Missouri, and General Public Utilities.

More recently, the nation read about how the former chairman of General Electric, Jack Welch, had an affair with an editor at the Harvard Business Review.

Because of these types of affairs, companies have started to enact new and tougher ethics codes. One indication: In 1988 when the Conference Board, a business research group, had its first ethics conference, it found only one attendee with the word ethics in his or her title, says Ron Berenheim, the board's principal researcher. Today, 1,200 ethics officers in 500 to 600 companies are members of a professional ethics association.

Corporate ethicists may be on the rise, says Mr. Berenheim, because new federal sentencing guidelines say companies need an effective compliance program to affect an ethical culture: "Corporate boards are now under greater responsibility for oversight of their ethics programs."

In fact, some companies are enacting "zero tolerance" on anything that even approaches a conflict of interest. "It does not mean the ethical policy says, 'Thou shalt not commit adultery,' " says Berenheim. "But the board is saying, 'You acted like a dummy, get out of here.' "

That is apparently what has happened at Chicago-based Boeing. Only 15 months ago, the company was reeling from a series of scandals. It had fired its CEO, Phil Condit, after defense contracting scandals sent two of the company's executives to prison and the company had lost an enormous contract. To try to show that it had changed its culture, it brought in Harry Stonecipher, who enacted a zero-tolerance policy.

In recent weeks, Boeing's chairman, Lew Platt, received an anonymous tip that Mr. Stonecipher was having an affair with a female executive. When confronted, Stonecipher did not deny the affair.

In its official statement, Boeing said, "The CEO must set the standard for unimpeachable professional and personal behavior."

In the past, a corporate board might have announced a resignation for "personal reasons," or so the individual could spend more time with family. But, Berenheim says, "Now the view is whatever the level may be - even CEO or chairman - we need to separate ourselves from this person fast."

In Boeing's case, says Mr. Challenger, it may not have had too many options left: "It may have felt, 'We have two strikes against us, two big ethical lapses. We must take preemptive action here.' "

However, Challenger says it may be too soon to say if more companies will follow suit. "We just don't know if there is some heavy-duty sexual harassment going on that's been capped by the company," he says.

But he adds, "I think it's interesting that in the wake of Enron and other ethics scandals, there are now ways for more anonymous whistle-blowing, which could lead to more of these things coming out."