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Many Companies Look The Other Way at Employee Affairs

Carol Hymowitz and Joann S. Lublin

An office romance can mean many things: sizzling passion, a date for Saturday night, a lifetime commitment.

For Harry Stonecipher, it meant his ouster.

Boeing Co. directors asked Mr. Stonecipher, the company's president and chief executive, to vacate his corner office after they learned from an anonymous message about his consensual extramarital affair with a female executive.

For a major U.S. corporation to boot a top executive because of romantic indiscretions, particularly if the affair is consensual, is rare indeed. But another scandal of any sort is the last thing the aerospace company wants -- or that it expected from Mr. Stonecipher.

Fifteen months ago, Chicago-based Boeing brought back Mr. Stonecipher, its retired president, to bolster ethical practices after a string of scandals. Boeing's code of conduct prohibits behavior that may embarrass the company -- which is what directors decided Mr. Stonecipher's affair could do.

Boeing and countless other major corporations generally don't fire staffers involved in a consensual affair where neither partner directly reports to the other. Sexual harassment, which consists of unwelcome advances or conduct that creates a hostile or offensive workplace, remains illegal. But consensual romances are lawful and tolerated far more today than in the past so long as they don't involve a mixing of passion and performance reviews.

Companies such as International Business Machines Corp. and Xerox Corp. now have formal policies allowing relationships between employees who aren't in the same management chain. Some 25% of harassment policies now include guidelines about office romances, compared with just a handful five years ago, estimates Merrick Rossein, a law school professor at City University of New York who advises companies about harassment policies.

Employers also don't seem to care if those having office romances are single or if they are married. In fact, Boeing said the affair violated its code of conduct not because it was extramarital but because the CEO used poor judgment and placed Boeing in a potentially embarrassing and damaging situation. Mr. Rossein says companies don't want to take up morality situations.

"Usually when a top executive has to resign over having had [consensual] sex with an employee, that's just an excuse to get rid of that executive," says Kathleen Peratis, a partner at law firm Outten & Golden who has counseled hundreds of women about sex harassment. Almost every company has policies warning against harassment and offering guidelines on romances, she says, but "the policies are about protecting the company from potential liability, not about who is sleeping with whom."

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Directors are more apt to take action when an employee blows the whistle -- and when their companies therefore are subject to bad publicity. Boeing directors got the tip about Mr. Stonecipher's romance from a Boeing employee, who intercepted some intimate e-mail between the lovers.

Executives who have gotten in trouble with the law over an office romance have taken falls. In 1997, Martin Hanaka resigned from his post as president of Staples Inc. after a support staffer with whom he had had an affair alleged that he assaulted her in the course of an argument at her apartment. She called the police, who arrested Mr. Hanaka. His lawyer denied the assault charges.

The staffer, Cheryl Gordon, subsequently dropped the charges after Mr. Hanaka left Staples.

Boston-based Staples said it conducted an internal investigation and concluded that he had violated the company's "fraternization policy," which prohibited managers from having a romantic relationship with a subordinate. The company said Mr. Hanaka resigned voluntarily. Ms. Gordon also is no longer with the company.

For other top executives, however, the traditional laissez-faire treatment persists. Such was the case last July when Brenda Jarvis filed suit against C. Steven McMillan, then CEO of Chicago's Sara Lee Corp., and the company itself in federal district court.

Ms. Jarvis alleged that Mr. McMillan, who was not married, had offered her a $140,000 position in July 2003, and the pair then had sex at his request. He withdrew the job offer soon after when she "refused to continue a sexual relationship with him and refused to travel with him for that purpose," the suit alleged. Ms. Jarvis claimed defamation and violation of federal employment sex-bias law.

In a court filing last August, Sara Lee denied most of the suit's allegations. The company said that as chief executive, Mr. McMillan invited Ms. Jarvis to Chicago for a social weekend rather than a job interview.

Sara Lee also denied that the CEO offered Ms. Jarvis a job or discussed possible job duties with her "at any time." But the company confirmed the pair had sexual intercourse.

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Last month, Sara Lee elevated Brenda Barnes, its second in command, to succeed Mr. McMillan, who will remain chairman until October. The settled suit "was not the reason that Steve was replaced," one person close to the situation says.

Sara Lee has struggled to increase sales across a vast portfolio and is undertaking a huge restructuring. A spokeswoman yesterday declined to comment on the settlement.

Boeing's ouster of Mr. Stonecipher also raises new questions about privacy in the workplace. With employees and executives spending long days at the office, they often use their e-mail systems and phones to send personal messages.

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