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Pearlstein

Corporate Ethics

Steven Pearlstein
Washington Post Columnist
Wednesday, March 9, 2005; 11:00 AM

Washington Post business columnist Steven Pearlstein was online to answer your questions about his latest column, which deals with the firing of Boeing's chief executive. He writes that a question that will be played out in ethics classes at business schools for years to come is whether Boeing, one of the largest government contractors, struggling to get out from under an ethics cloud, should have fired its married 68-year-old chief executive for carrying on with one of the company's Washington area employees.

A transcript of the discussion is below:

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Steven Pearlstein writes about business and the economy for The Washington Post. His columns on the economy appear every Wednesday and Friday.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

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Columbia, MD: Steven,

Thank you for walking us out of the cloud of hypocrisy and disportionate punishment. A man (maybe a foolish old goat) has a consensual affair with a woman who works in the company he runs and he is figuratively shot to death by his own board? What have we come to? Leaving aside the laughable 'reason' given by the board for his firing, couldn't they have fined him or suspend him if they felt, for legal reasons if nothing else, that they had to do something? BTW, the ayatollahs are us, not just the religious right. They are just vocal about it. We hold every fraud of a man in high esteem as long as he makes money for us and then smirk and silently gloat when he falls on his face. Sometimes I wonder how we are still the best country in the world. I shudder to think how bad the others are.

Steven Pearlstein: Nicely put....and wise, I'd say.

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Ithaca, N.Y.: This might be more of a Howard Kurtz question, but here goes anyway... Business Week has now named names, outing the woman involved with Stonecipher.

Is this news? It's of prurient interest, to be sure, but is it news? Stonecipher was the senior person here - the one at the center of this maelstrom. Does this woman deserve to have her life made more difficult by being outed in the media?

Steven Pearlstein: This is a very good question. And, no, I don't think it is newsworthy, who the woman is. It might have been worth a reporter's effort to find out who it was to make sure the person wasn't of such notoriety that, in that rare instance, publication of the name was warranted. But in this case, as far as I can tell, the interest was merely purient. If I were the editor, I would have spiked that story (Not much chance of that, by the way).

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Morganfield, Ky.: If the Boeing CEO lost his job because of his relationship with a female executive, against company policy ,why wasn't the woman also fired?

That seems like hypocrisy on the part of Boeing, isnt it?

Steven Pearlstein: Not clear what her status is -- like him, she violated the use of the email policy, but unlike him, she isn't so high up as to potentially bring embarrassment onto the company (at least not on her own). Going forward, however, I'd reckon she won't find it particularly satisfying to stick around Boeing. Which is another reason why this should not have come out. She was entitled to a degree of privacy and this was violated in this case. So, by the way, was the privacy of Mrs. Stonecipher.

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Vienna, Va.: I agree that this was a ridiculous outcome. If not for the Druyun/Sears scandal, Boeing wouldn't have felt compelled to "prove its integrity" by firing a married man for engaging in a consensual, non-chain-of-command affair. If his affair had been discovered in an alternate universe where there were no criminal conflict-of-interest and conspiracy pleas recently given, you can bet he would not have been fired.

Steven Pearlstein: I think the chances would have been greatly reduced. But I'm not sure that, in the current environment of "zero tolerance" for a whole host of activities that, incorrectly, are lumped under "sexual harrassment," another CEO of another company might have met the same fate. I should add that an additional factor here is that Stonecipher's predecessor, who was forced to resign because of the Druyun/Sears debacle as well as other ethical lapses that happened on his watch -- it turns out, reportedly, that he was rather active in his extramarital life as well. This also may have been a factor. The stories on that came out after his resignation, I believe.

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Michigan City, Ind.: You make several good points in your piece on Harry Stonecipher and I must say that the one that strikes closest to my own feelings has to do with how much we are all being controlled by the zealots of the Christian Right. However, it behooves us to remember that this isn't the first time around for Harry. He was at Sundstrand Corp. in the late 80s-early 90s when that company was fined and banned from bidding on government contracts for some time. I don't remember all the details, but I believe he was held up then as "Mr. Clean," who was going to renew the lustre on their reputation. I wonder how far back goes his manner of espousing one set of morals in public while practicing a different one in private.

Steven Pearlstein: Well, I'd like to quibble with you a bit on your use of the term, moral standards. I think there are a whole lot of issues surrounding business ethics that are relevant here and to any discussion of whether an executive ought to go and stay. And I think there are moral standards that apply to how a person conducts his or her personal life -- everything from who they sleep with to how they treat their dying mother. And I'm not sure it is right to confuse the two baskets. There is no indication that Harry Stonecipher was in any way hypocritical about his determination to root out unethical business behavior at Boeing. What he does on his own time is his business -- and that is true even if he messes up a couple of times and uses a Boeing phone or email message to whisper X-rated nothings into somebody's ear.

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Chicago: Would you not think that the judgeent of the Chairman of the Board was much more questionable than the judgement of the hugely successful and largely estimable Stonecipher?

And speaking of the religious right whatever became of the notion that casting the first stone might be something to be thought about rather seriously - and not be a kneejerk reaction? Seems they have got it wrong on all counts and the Board should go.

Steven Pearlstein: Not sure I'd go that far. The Board, as I said, acted rationally under the circumstances. I blame the circumstances, by which I mean the legal and political environment. For example, many people have suggested that the board should have quietly taken Harry aside, read him the riot act, told him to be more discrete, maybe denied him his bonus and left it at that. But there may have been some indication from Boeing lawyers that if they did that, it would have been somehow a material fact that needed to be reported publicly to the SEC and shareholders. I'm not sure that makes a lot of sense in this case.

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Wheaton, MD: Dear Mr. Pearlstein:

I chuckled a a bit about the mention of ethics classes in business schools. My wife is in a business school and recently attended the required ethics classes, a one-shot Saturday seminar. Among the highlights were a whistleblower from the Los Alamos lab who, after years of FBI harassment, concluded that whistle-blowing probably was not worth it; an employee of some prison system who explained how prisoners had to, ahem, take care of themselves while being away from their spouses; and finally, the lackluster show of hands when the question of whether the students would actually resign from a company doing blatantly illegal or unethical things.

This is the type of deep ethical thinking our new executives are equipped with. It seems inevitable that ethics are so rarely considered, and when they are, there is no intellectual depth to the discussion.

I think any responsible institution should simply gather it's staff together periodically and simply have an open discussion about right and wrong (one would hope that such discussions would be occurring outside of work, but sadly, that often is not the case) . Getting people to think about ethics will go much farther than proclamations, strict rules, and penalties. It's so simple.

Steven Pearlstein: I'm not sure how simple it is, but you raise some interesting points and make a good suggestion.

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Huntsville, AL: As a former Boeing manager, I was shocked by the hypocrisy of the Board's decision: Extra-marital liaisons are frequent among the executive class, especially in the Integrated Defense Systems division that is dominated by legacy McDonnell execs. Aren't investors entitled to know, and isn't the Board obligated to disclose the instances of bad judgment that supposedly served as the real basis for the dismissal, rather than leave it to the rumor mills?

Steven Pearlstein: I'm not sure that any of this rises to the level of what investors are entitled to know, as long as it avoids a pattern of serious sexual harrassment. You are not the first person to have mentioned to me about the rash of hanky-panky that went on at Mac Dee. Not sure whether that is true or what that's about.

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Rockville, Md.: I understand that the Boeing CEO was tough on his employees about ethics violations? What is it (or was it) about the culture at Boeing that made him believe he was immune the company's policies?

Steven Pearlstein: Well, this sort of intellectual disconnect is not uncommon in ethical violations. You can ask what Stonecipher was thinking when he sent those mails, just as you can ask what Bill Clinton was thinking when he got into it the first time with young Monica. But of course the answer to that is obvious: they WEREN'T thinking. That's the problem.

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Detroit, Michigan: Boeing has been consistently losing buisness to Airbus (the European airplane consortium) in the past few years. Has any of these scandals at Boeing played a role in this loss of buisness?

Steven Pearlstein: I doubt it. In terms of extra marital affairs, certainly, I'm sure Airbus has it all over Boeing. As for the more business oriented ethical violations, the ones involving too-cozy relations between industry and government, for example, I doubt Airbus could claim to be cleaner than Ceasar's wife on that one either. Anyway, for airline customers, I suspect their concerns lie elsewhere.

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Alexandria, Va.: Do you really think the "religious right" factor played a role in Stonecipher's firing?

Steven Pearlstein: I think the Board certainly considered what the reaction would have been among politicians and Pentagon officials if the emails came out, and suddenly they were asked to cut a ribbon or appear at microphones with the very said chief executive. If you are suggesting that the religious right isn't so petty as to get into these things, I'd ask you how you distinguish that from a harmless cartoon character such as Sponge Bob. I think the religious right actually looks to create these tempests in a teapot in order to flex their muscles and send their messages to the wider public.

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Washington, D.C.: You see much to bemoan in the removal of Boeing's CEO. But I see much to celebrate -- for once, a big fish was held accountable for his actions. Let's hope other corporate boards are watching.

Steven Pearlstein: Well, that's certainly a widely held notion that the Board was very conscious of when it took the action it did.

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Reston, Va.: Was the affair (and explicit e-mails) just an excuse for a decision the board had already arrived at?

Steven Pearlstein: Not that I'm aware of. That sounds wrong, based on my own reporting.

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Washington, DC: First question: What has Airbus been doing since Monday?

Second question: The official Boeing statement was that he was fired after it came to light that his affair led to other misjudgments having to do with his job. What are these misjudgments? Is another shoe going to drop??

Steven Pearlstein: Not that I'm aware of. I think these refer to emails and simply the brazenness of the affair.

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Rockville, MD: I disagree with your column. First, this nonsense about "she wasn't in CEO's chain of command": when you are the CEO, EVERYONE at the company is in your chain of command. That's what it means to be CEO. Second, ethics isn't just about avoiding impropriety, it's about avoiding the appearance of impropriety - at least that's the standard we govt employees are held to. Third, using company emails for sexually explicit messages would be a problem for any company, even if no romance was going on. And finally, you can't compare the Clinton/Livingston/Gingrich sex scandals to a CEO's behavior. Presidents and members of Congress are elected by the people; removing them should make us all hesitate because it counters the voters' will. But nobody has a constitutional right to be CEO, it's a privilege that comes with many responsibilities, and one of them is not to date your underlings. Seems reasonable to me.

Steven Pearlstein: Obviously there is disagreement about what you say. Let's do a little exercise. Suppose the woman was not an employee, but he was sending her X-rated emails from his Boeing-purchased Blackberry. Would that be a firing offense. Or take the opposite set of facts: suppose she was a lower level employee but there had been no emails. I infer from your comment that you would have fired him in both cases. What I'd say is that the emails were an infraction worthy of punishment, not firing, and the affair was nobody's business as long as he had nothing to do with her pay, review, promotion, etc. and scrupulously absented himself from anything having to do with her in an official capacity. People nowadays spend a lot of time at work, and its gonna happen that sometimes they fall in love, or in lust. Let's just get over it.

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Scenic Downtown Merrifield, VA: I disagree that the woman in the affair should keep her job or even, necessarily, her privacy. A zero tolerance policy is just that. The problem with Stonecipher being fired and her not is that it is a soft form of sexism. It says that the woman's actions aren't as important as the man's. It also is a poor business strategy. If known ethical lapses are allowed by someone at an executive level as she apparently was, what message does that send to all of the other employees?

By the way, I don't think Stonecipher should have been fired for a consentual affair and dirty e-mails, but if he goes, she has to go, too. Also, Boeing should have found some other way of explaining his firing to protect both of their privacy, but, again, since Boeing didn't do that, then neither party should enjoy any higher level of privacy.

Steven Pearlstein: Interesting points from scenic Merrifield. I agree about the soft form of sexism, by the way. But you seem to accept the wisdom of a zero tolerance policy for all infractions, no matter how serious. Obviously that is a matter of personal judgment, how serious these things are. But surely you'd agree that sending an X-rated love note meant for private consumption is different than unwanted physical touching/hitting on?

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Clifton, VA: If the lady involved in the affair had decided to sue before this went public, Boeing would have faced additional bad press plus having to pay damages. CEO had a history of affairs. He is CEO and was her boss. Doesn't matter how the organizational flow chart flows. He was brought in to clean things up and his conduct jeorpardized that. If the woman involved became the woman scorned things would have benn very messy. The more interesting question is what would have happened if both were single?

Steven Pearlstein: That is another interesting question. And I'm told the marital status of the parties had nothing to do with anything. Not sure, however, that board members could completely put that out of their minds, particularly as it relates to the public/customer perception part.

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Outside the chain of command: How, exactly, can ANYONE be "outside the chain of command" of the CEO? This is a screamingly obvious rationalization, with no grounding in fact, and no-one has bothered to comment on this.

Steven Pearlstein: Sorry, but no it isn't. Most CEO's have nothing to do with most employees, their pay, their status, their promotion, anything. Would you also extend your rule to the CFO, the Executive Vice President, the head of Human Resources and all members of the board of directors?

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Annapolis, Md.: The military itself is very harsh on superior officers or NCOs who engage in relationships with subordinates. Their view, I believe, is that the potential downsides of these relationships is much more damaging than tolerating benign relationships. I don't want to sound like a prude, but I've seen many cases where work relationships involving senior and junior people went badly awry. Boeing did the right thing -- sending a message to everyone else at the company. Matters of the heart, as you say, are personal, but not when they play out in the workplace.

Steven Pearlstein: What is the evidence that this affair of the heart was playing out at the workplace? Maybe it was. But I'm not sure there are any facts in evidence to support that at this point.

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Washington, D.C.: Steve -- if Stonecipher was a woman and the employee involved a man, would this firing have happened?

Steven Pearlstein: Good question. Don't know, but I suspect yes, it would have.

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Texas: One question about personalities. I agree this was a pretty strange decision, but I worked for HP many years ago, and I distinctly remember Lew Platt as being far and away one of the most decent, thoughtful corporate executives in the whole world of business. Certainly he worked hard to be fair to employees. "The HP Way," "Management by Walking Around," etc. He really seemed to take that stuff seriously. (It might be added that the contrast with his successor was pretty striking in this regard.)

So I have to think that if he and the board made this decision, they must have had serious reasons.

Your comments?

Steven Pearlstein: I'm not sure the board hasn't been very forthcoming about this and put out most of the real reasons, for which we have Lew Platt to thank. And if that is the case, we have to take their explanation on face value. I think the Board did what if felt it had to do. What I question is why the "rules" are such that they felt they had to do it.

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Seattle: The fact is, Harry et al made all Boeing employees sign a "Code of Conduct" that is quite detailed. And there have been LOTS of people run out of the company on a rail recently for violations.

I'm not saying the policy isn't overboard; it is good, however, that it's applied equally regardless of where you sit in the company.

As to why the woman's not canned, simple: Even if she's not a direct report of his, as CEO, he's ultimately her boss and should be bound by a tighter anti-fraternization rule.

Steven Pearlstein: I don't disagree with anything you say. I would add that I think this policy, which isn't unique to Boeing by the way, does go a bit overboard.

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Chain of command, redux: Steven, you seem to have a different definition of this term from many others. "Chain" of command means just that - as in the military sense - the link from one individual through the hierarchy all the way to the very top. Stonecipher was not her direct supervisor, but he -was- in her chain of command.

Steven Pearlstein: Fine, I accept that. But chain of command, then, is the wrong criteria for distinguishing the acceptable relationships from the unacceptable ones in a corporate setting. The military, I admit, may be a different matter.

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Baltimore: So e-mail is the crux of the matter? If Stonecipher and his love had exchanged racy messages via the regular telephone, would any of this have happened? Suggests yet another way how the Internet and its add-ons are changing work culture.

Steven Pearlstein: That's a good question. You could argue, in fact, that using email rather than telephone calls that could be overheard by co-workers is actually being more discrete.

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Chicago: What I want to know is -- which employee was brave enough to read the CEO's e-mail? Privacy in the workplace? Forget about it.

Steven Pearlstein: Good question. Or maybe it was HER assistant. Or maybe someone in systems who had been instructed to devise a program to pick up on certain words in exchanged emails.

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Las Vegas, Nevada: Steven, thanks for questioning this one. I write a column on gender relations in the workplace and this brings up a host of issues in the reality of today's world.

One is that I heard that he and his wife are separated. If true, isn't the man allowed to date if he is in effect no longer "married"?

Also, they said he violated their code of conduct by demonstrating impaired judgement, but they also said her salary and career were not affected and he had no supervisory role over her. So, what's the violation?

Where's the line? There are 20 million office romances going on any given time, so "they" say, and it's also apparent that we meet our mates mostly at work. So, what's right and what's wrong? What's a single person to do?

Steven Pearlstein: Right on, Las Vegas. Yes, I understand that the Stoneciphers were largely leading separate lives. And there may have been similar problems in the other marriage. So what? Its really none of our business in either case. To me, that's really outside the appropriate corporate sphere of concern, let alone the public sphere of concern.

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Lusby, MD: You feel the punishment was too much for Stonecipher, but they probably had to act quickly before any investigations probed deeper. In the past every investigation found much worse situations then originally expected. The Druyun situation was woefully under-reported by the media. She got nine months in prison but should have been given nine yrs. to life for removing a contract requirement in the small diameter bomb contract, (the ability to hit moving targets), that placed an inferior weapon system by Boeing into service instead of the Lockheed version. This may cost the lives of many, even thousands, of servicemen in future years. Why was almost nothing made of this by the media?

Steven Pearlstein: Maybe the media didn't feel about it quite the way you do, including the "knowledge" that it was an inferior product. I can assure you it isn't because reporters aren't interested in such scoops or are afraid to write about it. Believe me on that one.

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Washington, D.C.: Don't you think the fact that he was dishonest in his private life (by cheating on his wife) possibly indicates his potential willingness to be dishonest in his public life? Almost all of the key players in the Enron and other well-known corporate scandals had extra-marital affairs. It seems to indicate that if people are willing to be dishonest - they will not make a distinction between public and private life. The line between honesty and dishonesty is more easily crossed.

Steven Pearlstein: I don't agree with that logic, as I wrote. These are separate spheres of activity, and probably separate sphere in the brain.

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Bethesda: My European friends have constantly razzed me about the puritannical attitudes Americans have about sex and the workplace.

Now I'm starting to agree with them.

Steven Pearlstein: Me too.

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Washington, DC: My company has a zero tolerance policy for sexually explicit material. There are very good reasons for this, sexual harassment reasons and work productivity reasons. It has to be zero tolerance to have teeth. It works. There is nothing wrong with the policy and is was established for good productivity and risk mitigation reasons. It's a business decision that must be enforced. How can you criticize this?

Steven Pearlstein: I can criticize it because I think it is part and parcel with a whole trend of zero tolerance that is really a cop-out. Its like strict sentencing guidelines that turn out really perverse results with some frequency. These are human enterprises run and peopled by human beings who are flawed, and they are not well suited to mechanical rules. They need to be enforced with judgment and an understanding about the importance of, but also the limits of, sending signals to would-be violators in the future. Justice is often a matter of balancing, and a system without justice isn't a good one.

I'd say one problem here is with the lawyers, who search for rules that will put companies into "safe harbors" that give them absolute defenses. That is where a lot of this zero tolerance dogma comes from.

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Northern Va.: What I don't understand is why people are upset that the CEO who violated the rules - rules that -HE- himself either set up or agreed to upon accepting the job - got fired. It's not as though he didn't know the rules of the game and he got caught, plain and simple. If one of his subordinates had done what he did wouldn't the CEO have fired them?

Steven Pearlstein: The question isn't whether he would have fired them but whether he should have, it seems to me.

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Las Vegas, Nevada: If they were both single, it's a non-issue. That's why I mentioned that I understand that he's separated. Using company e-mail for this is stupid but not an offense worthy of termination.

FYI, remember Rupert Murdock had an extra-marital affair with a direct report exec who he then divorced his wife to marry. Is that ok because he owns the company? Don't the shareholders own the company? There are so many examples...

Steven Pearlstein: Precisely.

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Arlington,VA: If a company has a code of conduct but allows employees to follow only the rules they feel are necessary then there is no reason to have them at all.

Steven Pearlstein: Nobody is arguing that. That's a straw man you've set up. Stonecipher violated the rules and he should have been punished. But I question whether the appropriate punishment is firing. One reason I question it is that nobody winds up better off: not the shareholders, not the customers, not Harry, not his girlfriend and not even Mrs. Stonecipher. If that is the case, then maybe there is something wrong with a system that produces his firing as the "right" answer.

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Alexandria, Va.: You're right about zero-tolerance policies -- they're foolish. As a manager, I've dealt with employees who broke major rules but the circumstances begged for a second chance. Luckily, I work in a place where case-by-case decisions are made. We can disagree about the merits of the STonecipher case, but I'll back you every time on zero-tolerance.

Steven Pearlstein: Thanks. Glad you wrote back.

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Steven Pearlstein: Good discussion today, folks. See you next week.

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New York: Steven, You miss the point. Boeing made the right call and it does leave folks better off. In this day and age, with the mere press of a button, sexually explicit e-mails from a CEO can be plastered across the internet, newspapers and magazines for all to see. Our culture thrives on salacious material such as that. Times have changed. CEO's of publicly traded companies simply cannot engage in such behavior without risking their reputations and in turn, the reputations of the companies they lead. It's simply too disturbing to read of folks fetishes like they are entrees on a menu. That should not be business as usual. Re: Welch - Had he been CEO at the time he and Wetlaufer were carrying on their affair...(I'd say his sleeping with a journalist as she was writing an article on him ranks up there with questionable moral and ethical judgement on both their parts.) Shareholders would have had every right to demand his resignation. That type of flagrant disregard for moral and ethical judgement should be unacceptable to shareholders. First of all, in that case there too were e-mails that were intercepted by Jane his wife at the time. Besides there's a solid argument to be made that Welch merely rode the success of the economy in general at the time he was CEO. Immelt is surely doing as well a job. Shareholders and employees want their CEO's to reflect only the very best this country has to offer and if Welch and Stonecipher were/are among the best, that is a sorry comment on our country's quality of leadership. Do you agree? How's that for a question?

Steven Pearlstein: A late entry. I'd say you put your view very well. But in some sense, you assume that which you seek to prove. I'd say this whole thing need not have come out if it had been dealt with quietly, as all personnel matters should be. And it may well be that Stonecipher and Welch ARE among the best of the best in terms of running businesses. I don't think it a sad commentary at all because I do not make judgments about how they live their personal lives. Again, its none of my business. Nor yours, in my opinion.

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