"I told him to take his hand away and I said 'that's totally inappropriate, you can't behave like that' and he apologised. But it's not good enough that women should be subjected to that in business, it's so last century," she said.
"And that's what makes it tougher for women in business, you have to do the deal but you have to put up with that kind of crap."
Ms Foreman's speech was to promote In The Arena, her new book about getting to the top and why businesses need to work harder to get more women into executive and board roles.
It charts her rise from a 21-year-old solo mum barely able to pay her mortgage to a fortune estimated at $180 million in this year's NBR Rich List.
Ms Foreman said she chose not to include the incident in the book because she didn't want to make a big deal of it. But it was a learning experience she wanted to share with a female audience. Similar incidents were far less likely to happen to men in business, she said.
"Women are still not treated as professionally as they should be in the workplace and it doesn't matter where you are, you still get subjected to that sort of stuff so that was the point I was making to the women last night," Ms Foreman said.
One audience member said the crowd of around 200 women were shocked by the story.
"Everyone was in disbelief and said 'oh my God'... to think that this happens in this day and age. She said [the story] was about how women have to keep the power when negotiating."
The speech was at an event hosted by the Women's Collective.
Chief executive of YWCA Auckland Monica Briggs said in a statement that Ms Foreman's experience was "abhorrent".
"Women facing barriers in business is an ongoing issue, but to hear of incidences of sexual harassment still occurring today is abhorrent.
"Diane Foreman has shared this story to emphasise society still has a way to go to ensure women are treated equally.
"Sexual harassment is one of many hurdles that stymies a woman's confidence in the workplace and we must work to remove these barriers."
Ms Briggs said she congratulated Ms Foreman on her book.