Affairs in the workplace are going public, and CEOs are getting their pay docked for it. Photo / 123rf
Affairs in the workplace are going public, and CEOs are getting their pay docked for it. Photo / 123rf
Chief executives' personal lives used to be just that; what they did in their own time was their business and their business only. As long as he (and it was almost always a he) was performing he could do as he pleased.
That could be changing.
In the past couple of weeks we have learned about two chief executives whose remuneration has been cut because of workplace relationships.
Seven West Media chief executive Tim Worner had his pay cut by A$100,000 (NZ$108,000) for an affair with the person assistant of some other executives.
This has become a very messy affair for Seven, with the assistant Amber Harrison suing the TV network for allegedly breaching an agreement to pay her A$350,000 in return for her silence about the affair.
Seven, for its part, has sued Harrison for allegedly breaking the agreement by making public statements about her affair and has sought a gag order against her.
It is a damaging spat that is doing Seven and Worner's reputations no good and will have investors wondering how much attention the board and management is paying to actually running the business rather than battling a former executive assistant.
Last month it slashed its dividend in half after posting a dramatic profit due to a big fall in the value of its joint venture with Yahoo.
Net profit for the six months to December was A$12.4 million, compared with A$135.2m a year ago. And this can't all be blamed on Yahoo - even without significant items, the underlying net profit would have been down 30 per cent at $96m.
The company is battling a soft TV advertising market as well as a structural shift among viewers away from free to air TV to streaming services. And of course its print media business including West Australia's main daily newspaper and a stable of magazines faces the same problem as other media companies worldwide.
At the earnings presentation, Worner acknowledged the affair with Harrison, saying "I have apologised for what did happen."
Seven West Media chief executive Tim Worner. Photo / Getty
Worner said he remained "very focused" on his job but investors would be entitled to wonder.
Insurer QBE's chief executive's recent public affair with a colleague is also getting a public airing. The affair emerged after John Neal had his short-term incentive docked by 20 per cent - about A$550,000 - because "some recent personal decisions by the CEO have been inconsistent with the board's expectations", according to the company's annual report.
What upset the board was that Neal breached the company's code of conduct by not revealing he had formed a personal relationship with his executive assistant.
The code says: "Any business transaction with a person having a close personal relationship with an employee may generate a conflict of interest for that employee."
The way the two companies have handled their chief executives' behaviour is a study in contrasts. Seven only acknowledged Worner's affair after it turned into a very public spat. QBE's appears to have done so willingly, and the personal assistant is still with the company, though no longer working directly for Neal.
QBE's actions set a new standard in how boards hold chief executives accountable for all of their actions. It's not about setting unrealistic expectations that office romances won't happen so much as ensuring they are disclosed.
The company's code of conduct required disclosure of "close personal relationships that may cause a conflict of interest... Conflicts may also arise where an employee has a close personal relationship with another employee (e.g. direct reporting lines or conflicts in roles and responsibilities)."
News of Neal's affair overshowed QBE's strongest profit result in several years. The company reported a 5 per cent increase in full-year net profit after tax to $US844 million and unveiled a $A1 billion share buyback to reward shareholders who have stuck with the company.
It also announced a 10 per cent increase in its full year dividend.
The strong earnings are a result of better managing insurance claims and price rises. At the same time the company is seeking global growth opportunities.
The insurer's insurance profit margin for the 12 months to December 31 rose 0.7 percentage points to 9.7 per cent, while adjusted profit - which strips out one-off costs and asset sales - rose 2.5 per cent to $US833m.
In the face of such a good performance, many boards would have happily turned a blind eye its CEO's behaviour.
But when they do that, the company's code of conduct becomes nothing more than meaningless words. The company's culture suffers.
What someone does in their personal life is of course their own business. But if they sign up to a code of conduct they need to adhere to it.
By setting standards of behaviour at the very top, the board of QBE has established a welcome precedent. It is one the board of Seven West Media would do well to follow.
