Personal boundaries shrink as companies punish bad behavior

0 Comments | Deseret News (Salt Lake City), Jul 1, 2007 | by Carol Hymowitz The Wall Street Journal

As with politicians, today's ambitious business managers need to be aware that their personal behavior will be as closely scrutinized and judged as their work performance.

Corporate directors are far less willing than they were a few years ago to look the other way if an executive does something that threatens to embarrass a company. This is the case even if the executive is a star performer. It's also true even if the action had nothing to do directly with work and isn't tied to illegal behavior, such as sexual harassment or "creating a hostile work environment." The offense could be getting drunk or acting lewd at parties or having tangled or abusive love relationships.

Time Warner asked Chris Albrecht, CEO of its Home Box Office unit and a star at the company, to resign recently after he was accused of assaulting his girlfriend in a hotel parking lot in Las Vegas. Directors at Wellpoint, the nation's largest health insurer, fired chief financial officer David Colby for violating the company's code of conduct. The company won't elaborate but, according to several women, Colby was conducting numerous affairs that were becoming public and embarrassing.

And in April, Starwood Hotel and Resorts' board ousted CEO Steven Heyer after receiving an anonymous letter accusing him of making sexual advances to female employees. An independent investigation reportedly uncovered e-mails substantiating the claims. Heyer has denied the allegations.

"It used to be that as long as an executive performed well on the job, no one cared much about what they were doing in their free time -- or even behind closed doors in the office," says Doug Schwarz, an attorney at Bingham, McCutchen in New York. "But a sea change has occurred, with every aspect of managers' conduct being scrutinized - - and ever more closely the higher up one goes."

One reason for the change is the increasingly blurred line between work and home. With everyone carrying BlackBerrys and responding to customers and colleagues 24/7, there is no such thing as completely personal or off-work time. In addition, misbehaving managers often leave a trail of incriminating e-mail and text messages -- forgetting that the cell phones and wireless devices they are using are their employers' property.

The increased scrutiny of executives' conduct also reflects heightened governance in general, and a greater willingness on the part of employees to blow the whistle. Some who see executives behaving in ways that could hurt their company's reputation are speaking out more -- helped by employer hot lines established after the accounting scandals of prior years.

And even if the employees don't alert superiors, many are publicizing executive misbehavior on Internet chat sites. They can say whatever they want, without having to disclose their names. Dozens of people posted anonymous comments on the Web about Colby, the ousted Wellpoint executive, and his affairs.

Given all this, it's not surprising that more companies are explicit when they dismiss an executive for indiscretions. Relatively few are willing to explain away an executive's ouster for bad behavior as leaving for "personal reasons."

Kaiser Aluminum, in a press release in January 2006, said that Kerry A. Shiba had resigned as CFO because of "a personal relationship with another employee, which the company determined to be inappropriate." Kaiser also described Shiba as a talented financial executive and asserted that his resignation "in no way related to the company's internal controls ... or financial performance."

Similarly, Boeing's board in 2005 ousted former president and CEO Harry Stonecipher because he was romantically involved with an employee, who didn't report to him.

The company said it wasn't concerned that he had an extramarital affair, but that he had put Boeing in a potentially embarrassing situation. Stonecipher later agreed that he had "used poor judgment" and had "violated my own standards."

Companies aren't in the business of dictating employees' morality, but they expect a certain decorum. One female executive at a large financial-services company says she moves quickly to confront -- and at times dismiss -- employees "engaged in indiscretions that are clearly in their control," including consensual affairs with other employees. "I call it the H-R moment," she says, "when you look someone in the eye and say, 'This isn't all right."'

Companies that confront employees at the first hint of misbehavior, however, often are willing to give a manager a second chance -- especially if he or she agrees to correct the mistake and get counseling.

"If I hear someone got drunk at a party with clients, I confront them about that. But if the drinking problem isn't severe, I can also tell them to get help if they want to keep their job," says the financial-services executive.

But managers with a reputation for sexual indiscretions and hard living will have trouble landing a job. Pat Cook, who runs an executive-search firm based in Bonxville, N.Y., says the code of behavior is strict. "If you sense when doing reference checks even a whiff of impropriety with a particular candidate, that glows nuclear and you move right on."