Drury, who founded the payroll management business in 2006, has now released a statement denying “any allegation of wrongdoing”.
“Communications show a friendship over the course of two years and that Ally was a willing participant in that limited relationship,” he said.
“That friendship was based on us working closely together and having children of a similar age. We spent time together socially, including her arranging a visit to my holiday home over summer.”
Xero founder Sir Rod Drury denies “any allegation of wrongdoing” and says he has always tried to be open and honest.
Stuff reported Naylor first raised concerns in a conversation with her boss in 2016, who suggested she speak to the company’s HR department.
But she decided against taking formal action at the time because she was a solo mother and feared for her career progression.
Then in 2017, on her last day of employment, Naylor wrote a formal complaint to Xero saying “it’s hard to put into words how this has impacted me emotionally”.
“There’s a range of emotions from shame, confusion, fear, to anger and hopelessness. Hopelessness because of the power imbalance between the CEO and me.”
Drury said he had not been aware Naylor viewed the relationship as “anything but consensual and mutual” until Xero’s investigation.
He said he had believed the matter had been closed when the Xero probe concluded, noting he stayed on the board for several years, and it was “deeply upsetting” the allegations had been raised again.
“Throughout my life I have always tried to be open and honest. This difficult situation is no different and it is why I am making this statement today,” he said.
Drury said he felt the need to provide context now “to set the record straight” for his and his family’s sake.
“I do not intend to engage in public back-and-forth on private matters or cause further distress to those involved.”
Naylor told the Herald she stands by her allegation there was “unwanted and inappropriate sexual contact”.
“A formal complaint is not made lightly, particularly by a junior employee against a well-known CEO, at personal and professional risk,” she said.
“I am co-operating fully with New Zealand Police and welcome the independent review being led by Maria Dew, KC.”
The New Zealander of the Year Awards Office told the Herald representatives had been in touch with the businessman since learning of the allegations, and no evidence or cause for concern came to light during the awards judging process.
Drury hoped the scandal did not “dissuade” others from putting themselves forward for awards.
He wanted “to continue focusing on the New Zealand Inc projects, thought leadership and the many philanthropic initiatives I’ve dedicated my post-career life to”.
Dew has been appointed to review Naylor’s allegations, a Xero spokesperson told the Herald.
“We treat all allegations seriously. Given the matters raised relate to historical events and confidential matters, we are limited in what we can say.
“Xero’s board and leadership are committed to fully understanding and evaluating the events and Xero’s response with expert assistance.”
The company said it was “committed to maintaining a safe, inclusive and respectful environment for all our people”.