For Love or Money

Regulating romance in the boardroom.
Laura CameronOctober 1, 2007

It is often said that the relationship between the CEO and CFO is more important than any other in the boardroom. However, this is rarely meant in the romantic sense.

That’s why, when shareholders of Kier, a £1.8 billion (€2.6 billion) UK construction group, found out this summer that CEO John Dodds’ marriage fell apart because he was having an affair with finance director Deena Mattar, they got nervous, doubly so when they learned that the company is currently renovating Mattar’s home.

Kier’s directors have known about the relationship since late 2005, when Dodds’ marriage began to unravel. They quickly installed measures to guard against conflicts of interest, such as forbidding Dodds from signing off Mattar’s expenses, the company says.

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According to Angela Baron, an adviser at the UK’s Chartered Institute of Personnel and Development (CIPD), it’s very difficult to legislate against office relationships. Strict rules often “drive affairs underground, which might be more damaging,” she says.

Though some Kier shareholders grumbled anonymously to the press about the negative corporate governance implications of the CEO-CFO romance, the relationship hasn’t affected the company’s performance. Kier’s share price has risen more than 60% since directors learned of the affair.

At US-based health insurer Wellpoint, on the other hand, the board decided that an office romance involving CFO David Colby crossed the line between personal and professional. In May, Colby resigned, citing “a non-business-related code of conduct violation.” In June, Sarah Waugh, a former Wellpoint employee, filed a lawsuit accusing Colby of sexual battery and the company for negligence. She claims that the ex-CFO was involved with more than 15 women, including her younger sister, over the past three years. It’s one of many suits involving ex-lovers that have now come to light.

Whereas directors at Kier claim that measures are in place to keep office romances from encroaching on business decisions, and the company’s performance shows no ill effects from the relationship between the CEO and CFO, Wellpoint clearly saw Colby, though a well-respected CFO, as more of a risk than an asset.

That’s not to say that some of the women involved with Colby will come to regret their investment in the philanderer. Four of them have reportedly sold their stories to a Hollywood producer.