CEOs getting the boot for sexual misconduct
There's a new warning out there for America's corporate executives: Sexual misconduct on the job could get you fired, fast.
The recent resignation of the chief executive officer of Chicago-based Florsheim Group Inc. under a cloud of sexual-wrongdoing charges - and a handful of similar oustings in the past few years - hints at an emerging new standard: It used to be too costly for companies to expose such executive misdeeds. Now it's becoming too costly not to.
It's a trend driven by tectonic shifts in America's legal standards and cultural attitudes. This decade, courts have heaped liability on companies - and increasingly on executives - for sexual harassment. Meanwhile, women employees are gaining
strength in their numbers - and are emboldened by everything from the outspokenness of Anita Hill to the growing number of holes in the glass ceiling.
Certainly many executives toe the line. And those who don't are still protected by the armor-plated wall of silence that encircles many corporate suites. But suddenly, that wall doesn't seem so thick.
"The climate has gotten much tougher," says Paul Salvatore, a partner at the New York law firm Proskauer Rose LLP whose writings were included in a key Supreme Court sexual-harassment decision last year.
"Boards are less likely to look the other way," he says. "The stakes are too high - for the reputation of the product, the company, and management." Top executives especially risk being fired, he adds, because "You can't treat them like a middle manager - you can't demote them."
Last week, Charles Campbell resigned after 3-1/2 years as Florsheim CEO. The company refused comment, but the move came just six weeks after his former assistant filed suit alleging that Mr. Campbell, who is married, had mistresses join him at the corporate apartment, on business trips, and in company limousines.
To be sure, there are other factors involved. Campbell hadn't been able to boost Florsheim's long-lackluster performance. But observers say the suit was the defining factor.
Likewise, when Hans Gutsch, the head of human resources at Houston-based Compaq Computer Corp., quit June 16, many things were involved. But he had been the target of two sexual-harassment suits, which Compaq settled, and other harassment accusations.
As recently as 1991, lawsuits such as these against Florsheim and Compaq executives were essentially unheard of.
Indeed, that was a watershed year. Anita Hill's charges against Supreme Court nominee Clarence Thomas brought the issue into America's living rooms. And a new Civil Rights Act passed. Backers dubbed it "the Anita Hill bill." Before this law, an employee could collect only back pay in a harassment suit - not much of an incentive. Now companies were liable for costly punitive damages.
Suddenly lawyers were willing to take up employee claims. Then came the high-profile cases. Rena Weeks, a secretary who had been on the job for less than a month, brought suit in 1992 against Martin Greenstein, a top lawyer at one of America's biggest law firm, Baker & McKenzie of San Francisco. The courts ruled the firm knew about Mr. Greenstein's long-term harassment of women - and fined it $3.5 million.
Before this and other big cases, "the executive office had been sacrosanct," says Darleen Orlov, president of Orlov Resources for Business in New York. "But now even a temporary secretary ... could blow the whistle."
Meanwhile, other scandals were proving to the masses that egregious harassment could have consequences - even for the nation's most powerful men. Sen. Bob Packwood of Oregon, for instance, was forced to resign in 1995 after it came out that he had harassed numerous female staff members.
"The existence of the law started to cast its shadow on people's behavior," says Linda Hirshman, a visiting professor of women's studies at Brandeis University in Waltham, Mass.
In 1996, in a case that shook the business world, Astra AB, a Swedish pharmaceutical firm, fired its top US executive after a Business Week magazine story reported that he pressured subordinates for sex and created a hard-partying corporate culture. In this case, there hadn't even been a lawsuit - just an embarrassing public allegation.
In fact, some observers say companies have gone too far. "They fire people first and ask questions later," says Steven Sack, a New York-based labor and employment lawyer.
But two 1998 Supreme Court decisions put even more pressure on corporate executives. Not only must their firms have active programs to discourage harassment, but because these chieftans are responsible for such programs, they should know better than to engage in sexual harassment themselves.
Furthermore, the law frowns on people using their power to get sex. And while the amount of power a middle manager has is debatable, there's no question that CEOs and other top executives are in big-power positions. "The stakes are much higher for the CEO, because there's no way out of that one," says Jon Zimring, an associate attorney at Holleb & Coff, a Chicago firm.
To add to the warning, a Supreme Court decision last week opened the way to more big-money settlements. Now punitive damages can be collected in job-bias suits if any intentional discrimination is proved. Before, such damages were awarded only in "egregious" situations.