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“Let’s talk about sex, baby Let’s talk about you and me Let’s talk about all the good things And the bad things that may be Let’s talk about sex.” — Salt N Pepa If we ever needed evidence of the schizoid impulses deranging Corporate America today, the “Stonecipher affair” serves perfectly. The affair in question is the one Boeing Co. chief executive Harry Stonecipher was having with a female executive at the company and that cost him his job on March 6, when the aviation giant forced him to resign. Once upon a time, corporate directors politely ignored such hijinks. If they hadn’t, over the years lots of legendary executive skirt-chasers — Jack Welch and Ron Perelman come to mind — would have been sent packing for their indiscretions (which for some reason never seem to include firing battalions of employees). Enron Corp., of course, changed all that. The energy company’s demise, along with the other scandals that followed, gave the corporate governance movement a powerful new raison d’�tre. The result is that top executives, squeezed by the SarbOxian rigor on the one side and the Street’s boundless demands on the other, have little room for error. Corporate directors, who are now legally liable for failing to adequately monitor a company, are on edge. The phrase of choice among boardroom ethicists? Zero tolerance. Even for mathematicians, though, zero is an abstruse concept. And tolerance of what, exactly? Anything or nothing? Boeing’s case against Stonecipher is that his actions “would impair his ability to lead” and that they could “embarrass” the company. Governance gurus generally agree, while conceding that Boeing had no better option than allowing Stonecipher to fall on his propeller. “They could have fired him, but it’s important to say that there was no good decision — only grades of bad,” said Nell Minow, editor of The Corporate Library. Stonecipher’s offense clearly had nothing to do with sexual impropriety — the relationship was consensual, after all — but rather with exposing Boeing to litigation. As Minow and others point out, romantic relationships, once the romance ebbs, often leave a residue of ill will. That spells danger for companies, especially when sticky questions arise about whether a relationship between titular unequals was coercive. “The problem with the relationship isn’t the relationship itself, it’s the collateral things that come out of it,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. Another sticky question, though, is what the “ability to lead,” itself a highly relative notion, consists of. By many measures, Stonecipher was exceptionally able to lead. He took over in late 2003 in the wake of a series of scandals at Boeing that forced former CEO Phil Condit to resign and landed the company’s former CFO in prison. Since then, Stonecipher has received consistently high marks for reviving Boeing, whose stock has more than doubled since he came aboard. He has steered the Chicago company though a Welchian overhaul involving the sale of underperforming businesses. Most important, he (and the board) was lauded for restoring Boeing’s reputation following the company’s procurement and other scandals. Boeing effectively acknowledged as much when it asserted in a statement that Stonecipher’s affair, while undermining his leadership, would not hurt the company’s business. And that, perhaps, suggests the real reason Stonecipher, who was slated to retire next year, had to go. With Boeing on the rebound and lucrative weapons contracts on the line — contracts the company lost because of its past chicanery — directors were in no mood to indulge the canoodlings of a 68-year-old man. So precisely what “collateral things” have emerged from Stonecipher’s philandering? Do such acts, as Boeing and the governance crowd attest, reflect poorly on his judgment (probably), undermine his leadership (marginally) and expose the company to serious risk (unlikely)? Does Stonecipher’s departure help or hurt Boeing shareholders? What’s the relationship between private and public moralities and how, in turn, does such calculations inform corporate ethics? Is the new governance ethos — laudable as it is in trying to keep companies on the straight and narrow — too rigid to distinguish real corporate malfeasance from mere tomfoolery? Copyright �2005 TDD, LLC. All rights reserved.

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