Senior executives’ undisclosed relationships with direct reports or other work colleagues do not usually come to light in the way in which Andy Byron, the former CEO of Astronomer, was caught at a Coldplay concert cuddling his chief people officer, Kristin Cabot. The video of their reaction when they appeared on the jumbotron at Boston’s Gillette Stadium, with Byron ducking and Cabot turning away, amassed more than 99 million views.

Astronomer, a software company, responded appropriately to the ‘Coldplay-gate’ saga by issuing a statement which said in part that “Astronomer is committed to the values and culture that have guided us since our founding… Our leaders are expected to set the standard in both conduct and accountability. The board of directors has initiated formal investigation into this matter and we will have additional details to share very shortly.” Byron resigned from the company though there had been some delay, apparently owing in part to Byron’s slow resignation and exit package negotiations.

Mad, bad and dangerous to know?

The governance implications of this case and others which have preceded it are significant. By failing to disclose the relationship to his board of directors, Byron placed himself in an impossible situation with a direct report. How did he suppose that he would manage Cabot’s appraisal, assessment of her bonus and possible award of stock options? How would he resolve issues which arose in the business where Cabot as chief people officer was proposing a course of action with which other C-suite colleagues might disagree? In short, his folly created a conflict of interest and duty.

Why do senior executives get themselves into this sort of mess? Do they result from a narcissistic personality disorder where reality monitoring is skewed? Do they feel that “rules don’t apply to me”? Or do they like engaging in risk-taking scenarios—thrill-seeking? With ‘Coldplaygate’, one wonders why Cabot, presumably an experienced human resources specialist, could not see the danger and urge caution. Perhaps the thrill of being in an undisclosed relationship with the boss was too much for her to pass it up. The outcome for Byron and Cabot is well summed up by another stadium-filling star, Taylor Swift: “Play stupid games, win stupid prizes.”

Byron is not the first CEO to be caught in an undisclosed relationship and is unlikely to be the last, though his conduct was not quite as egregious as that of Steve Easterbrook, the former McDonald’s CEO. His employment was terminated in 2019 for violating company policy that he had promulgated by having one consensual relationship with an employee.

An anonymous tip-off several months later alleged that he had had another relationship. The ensuing investigation revealed that he had apparently had three relationships with employees beyond the liaison to which he admitted, including with one woman for whom he approved a stock grant worth hundreds of thousands of dollars.

Unpalatable takeaway

Easterbrook’s “stupid game” won him the “stupid prize” of being charged by the US Securities & Exchange Commission with making misleading statements to investors as to why he left McDonald’s. This resulted in a civil penalty of $400,000 and a five-year ban on directorships. These came on top of McDonald’s clawing back $105m in stock awards and cash.

There is no shortage of further examples of these “stupid games”: Bernard Looney had to resign from BP for failing to come clean to the board about relationships with female colleagues, the ‘Bernadettes’. And former CFOs of the FTSE100 RS Group plc and Royal Bank of Canada and a former CEO of Norfolk Southern, the US railroad company, departed for similar reasons.

How can boards try to address these problems? One must keep a sense of proportion—it cannot be assumed that every senior executive may indulge in an undisclosed cinq à sept with a work colleague. But when cases do come to light, they are hugely disruptive. The business loses a key executive; the dynamic of the senior management team is disrupted; an interim replacement may also be covering their old role (bringing added stress) but not secure the appointment, leading to further disruption if they leave; employee morale can be affected because of negative media publicity; and the shareholders, as ultimate owners of the business, may take a hit because of damages or regulatory penalties.

How robust are the selection processes and checks which should be made to try to ensure that the company is not recruiting a future problem? How thoroughly are references taken up? How thoroughly are CVs and psychological profiles scrutinised? Recruiters can ask short-listed candidates, including internal candidates, to agree to ‘hostile profiling’, whereby their backgrounds are thoroughly researched. Admittedly, the process is intrusive, but a candidate who displays integrity is unlikely to fear the outcome.

Boards of directors need also to make it clear to senior executives that undisclosed relationships with work colleagues, particularly ones giving rise to a conflict of interest and/or duty, will (not ‘may’) result in departure as a bad leaver. The costs of not being robust are too great for any company or its owners to have to bear.

Simon Osborne is an executive fellow at London Business School and a founder/director of Conseo Board Review