A contract of the heart

While some US companies have drawn up “love contracts” for their executives and employees, leading WA businesswoman Diane Smith-Gander does not want Australia going down that track.

Despite public scandals and salacious headlines involving high-profile companies, Smith-Gander says every company should have a comprehensive code of conduct that addresses workplace relationships while avoid the issuing of rules.

Smith-Gander, who sits on the board of Wesfarmers, AGL Energy and was a former NBN deputy chair, says disclosure is more important than rules or contracts.

“Blanket bans are never a good thing,” she says.

She says executives and officers, particularly key management personnel, should “declare their standing interests at least annually for peer review and scrutiny, as getting it on with a colleague can impact decisions”.

“At each board meeting the directors should consider whether they have interests in the matters being discussed, point them out—whether already disclosed nor not,” she says.

“If these necessary routines are in place, it will be second nature that transparency and disclosure should be made of anything that can, or perception, affect individual judgment on an issue.

“Workplace relationships clearly pass the test of affecting judgment.”

Smith-Gander says at the end of the day, workplace relationships are a fact of life.

“If an executive does not do the right thing and disclose, this gives the board important information,” she says.

“When people are working together for a common purpose, it is easy to become close.”

Smith-Gander, a former president of Chief Executive Women, an organisation representing more than 400 of Australia’s most distinguished female leaders, says in her experience at executive and board level there have been a few other cases of failed romances that have not become high-profile.

“In my experience, there are some cases; not many. And those that have been declared and managed well have lasted the test of time,” she says. “A relationship the parties are not prepared to disclose does not feel too solid to me.”

While the US has gone the way of love contracts where guidelines and policies are put in place for canoodling co-workers, Smith-Gander does not think this is the answer.

“Putting a titillating title on anything takes matters too far,” she says.

“I do not believe in rules—however, I suspect we’ll see clauses to this effect in some executive contracts going forward.

“I think it is better handled by ensuring the code of conduct gives explicit guidance about workplace relationship and their disclosure.

“The executive contract then demands compliance with the code of conduct.”

When a romance or affair ends, employees should not be left to “just deal with it”.

“Flexibility in workplaces to accommodate changes in individual’s circumstances is a hallmark of a good workplace,” she says.

“So, leaving people and their co-workers to just deal with it is bad management.”

As men have the greater share of senior, well-paid positions in Australian companies, Smith-Gander says it’s almost inevitable that the women involved are more likely to be the ones that move to another company or role after a workplace relationship breaks down.

“Protecting the greater value of the more senior career is economically rational,” she says.

“The impact of such career disruption is hard to measure, but it is reasonable to suggest that the impact is generally going to be negative.”

You have heard on the grapevine a manager is in a relationship with one of their subordinates. What would you do in this case?

1. Have a frank conversation with the manager to determine if the rumours are true.

2. Discuss the potential for this being viewed as inappropriate, given the power differential, and the risk it may, at some stage, be considered as sexual harassment.

3. Make it clear to the manager that he or she has a duty to report any conflicts of interest to the business, and it would be a breach of contract not to do so.

4. If the relationship is confirmed, come up with an agreed plan to change reporting lines so the parties do not report to each other, or make decisions around pay increases, and other contentious issues.

5. Be clear with both parties that certain behaviour is not appropriate in the workplace; for example, remind them the company can and does monitor work mobile, internet and email use.

6. If the relationship breaks down, be clear to both parties (again) that certain behaviours are unacceptable and they must comply with the code of conduct, or be subject to disciplinary action.


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