John Neal was fined $550,000 after having an affair with his executive assistant. Photo: Louise Kennerley Seven West Media is still grappling with the relationship between CEO Tim Worner and Amber Harrison.
Kerry Stokes has withstood a barrage of criticism in order to keep Worner. Photo: Marco Del Grande
It’s hard to believe that there aren’t plenty of executives around town sweating a little more profusely this week as they delete their text messages and rethink the merits of any secret romantic trysts with their staff.
Twenty years ago the office affair was not especially frowned on. But today this behaviour can trash reputations, shred careers or, in the case of two recent high profile affairs, cost the executive a lot of money.
For the company it’s now a public relations disaster, requiring specialist spin doctors to manage and at the very least lead to questions about effective governance.
QBE Insurance will be the talked about company in financial circles this week – fodder for water cooler huddle gossip, the buzz around traders desks and the chatter around media newsrooms – but for all wrong reasons. The insurer’s financial performance was completely overshadowed on Monday by the bombshell that its chief executive, John Neal, is having a romantic relationship with his executive assistant and the board docked his pay by $550,000.
It wasn’t the kind of salacious affair that the public has been riveted by over the past few months over at Seven West Media involving its chief executive Tim Worner and his former much-younger staffer Amber Harrison. No sexting and allegations of cocaine, other women, wild office parties and abuses of credit cards.
Neal is separated from his wife and it seems now in a stable relationship with his executive assistant, although she is no longer working for him.
Corporate governance expert Dean Paatsch says it is not about a moral judgment, but the fact that leaders need to abide by the standards they set for others in the organisation.
The conflict can arise because employees in a relationship with their boss can be given favourable treatment. In Neal’s case his secretary travelled overseas with him on several occasions as part of her job.
However dealing with the public relations scandal was always going to be easier for QBE, which also had the advantage of watching the Seven nightmare unfold.
Seven has become the textbook case of what not to do when the boss is caught misbehaving.
Seven’s first mistake was to engage in a cover up. If Seven believed Harrison was rorting her company credit card it should have dealt with that situation independently. Instead it offered her $100,000 and a promotion. The company panicked because its first priority was to protect Worner.
Neal did the right thing by informing the board of his romance with his executive assistant, but he did so too late, which is why he has sustained a half a million dollars worth of financial punishment.
(Seven did extract $100,000 from Worner, which now looks like a pretty light fine for the affair.)
Harrison believes she has been treated unfairly by Seven when Worner has retained his job and she wants payback.
Her cause was given additional oxygen by the resignation of a Seven West director, Sheila McGregor, on the eve of the release of a company-commissioned report that cleared Worner of any wrongdoing.
Twenty years ago Harrison would have had no avenue for fightback. Today she has social media and, until last week when she became subject to a gag order, was using Twitter rather effectively to drip feed information she had on Worner and Seven.
Although Neal did inform ultimately the board of his relationship, it appears he breached an internal code of conduct that specifically deals with this issue.
“Employees must disclose to their manager any close personal relationships that may cause a conflict of interest” and that “depending on the nature of the conflict or potential conflict, action will be determined on a case by case basis”.
The $550,000 cost of this romance is large but not particularly onerous given Neal retains $2.2 million on his bonus plus base pay and long-term incentives.
Embarrassing as these affairs can be for those involved in both cases, the executives retained their jobs because the board considered they were talented bosses that were making money for shareholders.
Kerry Stokes has withstood a barrage of criticism in order to keep Worner because he reckons he is the best person for the job.
In the case of Neal – who delivered a very good set of results yesterday – many investors would have been unhappy had the board sought his resignation.
Instead, tucked away 70 pages into QBE’s annual report the company included a note reading. “His performance is well regarded by the board, however both parties agree some recent personal decisions by the CEO have been inconsistent with the board’s expectations. Therefore the board has decided that his 2016 short-term incentive will be reduced by 20 per cent.”