USA
CEOs getting the boot for sexual misconduct
Abraham McLaughlin (mclaughlina@csps.com)
Staff writer of The Christian Science Monitor
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There's a new warning out there for America's corporate executives: Sexual misconduct on the job could get you fired, fast.
The recent resignation of the chief executive officer of Chicago-based Florsheim Group Inc. under a cloud of sexual-wrongdoing charges - and a handful of similar oustings in the past few years - hints at an emerging new standard: It used to be too costly for companies to expose such executive misdeeds. Now it's becoming too costly not to.
It's a trend driven by tectonic shifts in America's legal standards and cultural attitudes. This decade, courts have heaped liability on companies - and increasingly on executives - for sexual harassment. Meanwhile, women employees are gaining strength in their numbers - and are emboldened by everything from the outspokenness of Anita Hill to the growing number of holes in the glass ceiling.
Certainly many executives toe the line. And those who don't are still protected by the armor-plated wall of silence that encircles many corporate suites. But suddenly, that wall doesn't seem so thick.
"The climate has gotten much tougher," says Paul Salvatore, a partner at the New York law firm Proskauer Rose LLP whose writings were included in a key Supreme Court sexual-harassment decision last year.
"Boards are less likely to look the other way," he says. "The stakes are too high - for the reputation of the product, the company, and management." Top executives especially risk being fired, he adds, because "You can't treat them like a middle manager - you can't demote them."
Last week, Charles Campbell resigned after 3-1/2 years as Florsheim CEO. The company refused comment, but the move came just six weeks after his former assistant filed suit alleging that Mr. Campbell, who is married, had mistresses join him at the corporate apartment, on business trips, and in company limousines.
To be sure, there are other factors involved. Campbell hadn't been able to boost Florsheim's long-lackluster performance. But observers say the suit was the defining factor.
Likewise, when Hans Gutsch, the head of human resources at Houston-based Compaq Computer Corp., quit June 16, many things were involved. But he had been the target of two sexual-harassment suits, which Compaq settled, and other harassment accusations.
As recently as 1991, lawsuits such as these against Florsheim and Compaq executives were essentially unheard of.
Indeed, that was a watershed year. Anita Hill's charges against Supreme Court nominee Clarence Thomas brought the issue into America's living rooms. And a new Civil Rights Act passed. Backers dubbed it "the Anita Hill bill." Before this law, an employee could collect only back pay in a harassment suit - not much of an incentive. Now companies were liable for costly punitive damages.
Suddenly lawyers were willing to take up employee claims. Then came the high-profile cases. Rena Weeks, a secretary who had been on the job for less than a month, brought suit in 1992 against Martin Greenstein, a top lawyer at one of America's biggest law firm, Baker & McKenzie of San Francisco. The courts ruled the firm knew about Mr. Greenstein's long-term harassment of women - and fined it $3.5 million.
Before this and other big cases, "the executive office had been sacrosanct," says Darleen Orlov, president of Orlov Resources for Business in New York. "But now even a temporary secretary ... could blow the whistle."
Meanwhile, other scandals were proving to the masses that egregious harassment could have consequences - even for the nation's most powerful men. Sen. Bob Packwood of Oregon, for instance, was forced to resign in 1995 after it came out that he had harassed numerous female staff members.
"The existence of the law started to cast its shadow on people's behavior," says Linda Hirshman, a visiting professor of women's studies at Brandeis University in Waltham, Mass.
In 1996, in a case that shook the business world, Astra AB, a Swedish pharmaceutical firm, fired its top US executive after a Business Week magazine story reported that he pressured subordinates for sex and created a hard-partying corporate culture. In this case, there hadn't even been a lawsuit - just an embarrassing public allegation.
In fact, some observers say companies have gone too far. "They fire people first and ask questions later," says Steven Sack, a New York-based labor and employment lawyer.
But two 1998 Supreme Court decisions put even more pressure on corporate executives. Not only must their firms have active programs to discourage harassment, but because these chieftans are responsible for such programs, they should know better than to engage in sexual harassment themselves.
Furthermore, the law frowns on people using their power to get sex. And while the amount of power a middle manager has is debatable, there's no question that CEOs and other top executives are in big-power positions. "The stakes are much higher for the CEO, because there's no way out of that one," says Jon Zimring, an associate attorney at Holleb & Coff, a Chicago firm.
To add to the warning, a Supreme Court decision last week opened the way to more big-money settlements. Now punitive damages can be collected in job-bias suits if any intentional discrimination is proved. Before, such damages were awarded only in "egregious" situations.
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Sexual Harassment: What Is It?
Matthew Robinson
Investor's Business Daily - April 6, 1998
CEOs' Standards Higher Than Judge's In Jones Case
While the nation's chief executive grapples with numerous sex charges, more than six in 10 top corporate officers don't think similar conduct would be tolerated in their offices.
In fact, 67% say they doubt they'd be able to keep their jobs if several of their employees charged them with sexual misconduct, according to an exclusive poll of leaders of the country's fastest- growing companies.
Fully 87% of them don't think politicians should be governed by different moral and ethical standards than business leaders. And 97% of business leaders put a high premium on honesty and integrity.
They also take a strong stand against sexual harassment. Nine in 10 have formal policies against it, and 56% put managers through preventive training.
Three quarters don't even think dating their employees is appropriate. In fact, one in six has a written policy against dating subordinates.
Ethics aside, one CEO says, fooling around with workers is just stupid. It makes leaders and their companies vulnerable to blackmail.
What constitutes sexual harassment?
The majority of top executives think it involves one or more of the following:
* Requests for sex in exchange for a benefit like a job, promotion or raise.
* Demands for sex under threat of termination, demotion, pay cut or some other penalty.
* Indecent exposure.
* Sexually explicit language.
* Gender-related comments or physical descriptions.
How does that square with last week's ruling in the Paula Jones case?
In tossing out Jones' charge that Bill Clinton sexually harassed her, a federal judge concluded that there was not "tangible" proof that Jones suffered in her state job after she refused the then governor's sexual advances.
But that still left the matter of Clinton allegedly exposing himself to Jones - "boorish and offensive" behavior, if true, opined the judge. Was that harassment? No, ruled the judge.
That's at odds with executives' thinking.
Ninety-eight percent of them say indecent exposure is sexual harassment - second only to sexual propositions tied to job perks or penalties.
The judge's decision "really flabbergasted me - as it did everybody," said Wilburn Smith, president of Ada, Okla.-based Pre- Paid Legal Services Inc. "This person can sexually harass, but it's not OK for everybody else."
"I can tell you if I did that in my company," he added, "I would be history in a week."
Last month, IBD and TechnoMetrica Institute of Policy and Politics asked 210 CEOs and CFOs of leading companies to take part in a poll on leadership and conduct. Exactly 100 responded.
The panel of executives was picked in July '97 based on their companies' earnings and stock growth.
The IBD/TIPP poll found that the cream of American business leaders view moral behavior as critical to their success. But they say politicians seem to be ruled by a different set of mores.
President Clinton apparently is a textbook example. On moral leadership, 73% of executives give him an "F."
Strict workplace policies on sexual conduct grew out of the increased awareness generated by sex-harassment charges against then- Sen. Bob Packwood and against Clarence Thomas during '91 hearings on his nomination to be a Supreme Court justice.
Some executives think it ironic that a president who claims to champion feminist causes is being accused of sexually harassing women who worked for him. Former White House aide Kathleen Willey has claimed Clinton groped her.
"There are a lot of good Clinton jokes running around out there, but employees are afraid to tell them for fear of sexually harassing someone," said James Durrell, chief financial officer of Harris Savings Bank Financial in Harrisburg, Pa.
Some 55% of top officers think it is "unlikely" that a CEO could "retain his or her job" in the face of "allegations of sexual misconduct by several of the company's employees." Another 12% think it is "somewhat unlikely."
"If Clinton had to work in this environment, where he is subjected to the same rules and regulations and doesn't have people running around him putting their spin on this stuff, I don't think Clinton would get away with it," Durrell said. "Most boards of directors would have gotten rid of him by now."
For many, it's puzzling that Clinton, despite so many scandals, is still popular - as shown by his high job-approval ratings.
Most top executives don't think he's doing a good job. Overall, they give him a "C-" grade. He scores lowest on moral leadership, statesmanship and upholding constitutional principles.
Only 3% of officers rate his private conduct as good. And 86% say it's poor. By comparison, only 20% think political leaders in general act badly. Of course, 72% of executives rate their own conduct good, while none thinks they behave badly.
Why are politicians able to live by different rules?
"A lot of these people are lawyers, or they are around lawyers," Smith said. "In Washington, D.C., in front of one of the buildings it says, 'Equal Justice for All.' But that simply isn't true. A lot of these politicians can afford a lot more 'justice' than most folks."
"In the real America," he added, "real people can't get away with what they can get away with it."
Durrell says the booming economy is insulating Clinton from public disgrace.
"The only reason Clinton survives politically is because people look at what's actually going on economically in the country and tend to identify it with him," he said.
Some 87% of executives say their moral and ethical behavior has a "great" effect on worker morale. And half say customer loyalty is greatly affected by how honest they are.
In fact, the vast majority of executives rate honesty, dependability and character as the most important traits of a leader. They rank charisma and looks last.
Ethics are key to success, they say.
"Price has become a little more sensitive with the changes in the economy, so maybe it's No. 1," said Dan Tuchter, CEO for Houston- based Midcoast Energy Resources. "But No. 2 right behind it is honesty and your reputation."
Durrell agrees.
"My experience has been over the years (that) most business people treat each other like they are basically honest," he said. "Once that integrity is destroyed, it's awfully hard to get back. You can spend the rest of your career trying to get it back."
Mega-investor Warren Buffett told a Harvard Business School audience that character is the most important of the three qualities he looks for when considering someone for a key job. He said the other two, intelligence and energy, can actually be liabilities if strong character is lacking.
And Buffett's advice for success was simple: "You should try to behave in an honorable manner all the time."
CEOs concur. Overwhelmingly, they think setting higher standards for themselves in both their public and private lives is critical.
Some 95% agree that business leaders "have an obligation to maintain certain standards of private conduct."
This can mean setting an example -even outside the office.
"One of my personal rules is that I don't visit bars or drink with my people," Smith said. "It just leaves the wrong impression."
tipponline.com
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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