Much has been made of recent scandals arising from sexual relationships in the workplace and in most cases the relationships are said to have been ‘personal and consensual’. While not a new issue, we have seen changes to the way organisations have responded to the relationships, perhaps as a reflection that our culture is less accepting of the conduct.

Is it ever appropriate for a senior executive to conduct a sexual relationship with a workplace colleague, whether they are an employee, a representative of a client or customer, contractor or consultant to the business?

When these matters become public, the relationship and if it constituted misconduct or was otherwise inappropriate is generally not the issue itself. What is questioned is the potential misuse of corporate resources and engaging in decisions without disclosure of the conflict of interest, such as decisions about the other relationship participant’s remuneration or promotion. In other cases, the failure to disclose the relationship is the concern but again apparently not the fact of the relationship.

Commonly, workplace relationship policies permit workplace relationships but might require disclosure to the participants’ managers (that may be then kept confidential) and removal from decision making and work that would otherwise include or relate to both parties to the relationship.

But should the position for senior executives, especially CEOs, be different? Should senior executives be expressly prohibited from conducting a sexual relationship with someone they work with?

The ASX Corporate Governance Council Corporate Governance Principles and Recommendations include the obligation to act ethically and responsibly, requiring executives to consider the brand and reputation of the business and manage related risks, to act in the best interests of the business, avoid conflicts of interest and perceived conflicts of interest. The Principles also expressly recommend that listed entities should have a code of conduct applicable to directors, senior executives and employees. The basis for this recommendation is that investor confidence is enhanced by the ethics or moral principles and personal integrity of directors and executives as expressed in such a code.

Despite what the participants may believe at the commencement of a romantic relationship, any romantic workplace relationship has the potential to end badly and involve bad publicity for the individuals and the business – but does this mean a workplace relationship is never in the best interest of a business? Will there always be the potential for at least a perception of conflict of interest when a relationship is conducted by a CEO or other senior executive with another employee in the organisation at a lower level? If the answer to these questions is yes, then it is appropriate and necessary, from a corporate governance perspective, to maintain a workplace relationships policy, at least applicable to the CEO, and perhaps also direct reports to the CEO, that prohibits the executives from engaging in any sexual workplace relationships, whether ongoing or ‘one-off’ encounters.

In our next corporate governance blog we’ll discuss how to lay solid foundations for management in executive employment agreements and workplace policies.


Director Dashboard – This is the first in our series of blogs discussing corporate governance issues relating to executive employment arrangements.