Sex-scandal CEOs spark surge of notoriety

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(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’s incoming chief executive officer Christopher E Kubasik after a relationship with a subordinate follows similar actions at Best Buy Inc, 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.

Company directors are increasing vigilance of executives’ behaviour because they are being held accountable for governance.

Communication via e-mail and text messaging, as well as cell 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 centre 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.

“Yes it happens, but the directors can’t excuse it, because the moral credibility of the organisation simply matters more,” said James Post, a professor at Boston University School of Management, who has written on governance and business ethics.

“There are subcultures within our society where this sort of activity is seen as normal, such as the movie industry, where it has been for decades. But in most boardrooms it isn’t.”

Kubasik resigned following a probe that confirmed a “lengthy, close and personal relationship” with someone who worked for him, current Chairman and CEO Robert Stevens said on a November 9 conference call.

Lockheed hasn’t provided details about Kubasik’s relationship with the female subordinate, who it said is no longer with the company. Molly Weaver, a spokesman for Kubasik, also has declined to provide more information beyond the married executive’s November 9 statement in which he expressed regret.

In 2005, Lockheed competitor Boeing Co ousted then-CEO Harry Stonecipher for having an affair with an employee. The move came 15 months after he returned from retirement to lead the company’s recovery from a purchasing scandal.

A top executive hired to take risks in the market is probably going to take risks in other aspects of his life, including relationships, said Noel Biderman, CEO of Avid Life Media Inc in Toronto. Avid operates the AshleyMadison.com service to help connect married people for illicit affairs.

In a survey of 573 AshleyMadison.com members who self- identified themselves as a CEO of a company, 91 percent said they had already had an affair prior to signing up and 52 percent said those relationships were with a co-worker or professional associate.

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