Last week, Nestl\u00e9, the $244 billion food conglomerate behind some of the world\u2019s most beloved candy and coffee brands, announced that its CEO, Laurent Freixe, had been dismissed for violating the company code of conduct after just one year on the job.\u00a0<\/p>\n
An investigation had confirmed reports that he was having an inappropriate relationship with a direct report, the company said<\/a>. Nestl\u00e9, a category laggard<\/a> whose share price has been slipping, had already installed a new CEO, Philipp Navratil, an internal hire who previously led the company\u2019s Nespresso business. The subtext of the press release was clear: Nothing to see here.\u00a0<\/p>\n Despite the lack of kiss cams and celebrity hijinks<\/a>, however, the story has continued to hold people\u2019s attention, prompting conversations about the ethical nuances of consensual office romances, changing norms for how companies handle them, and the standards for personal behavior that CEOs are held to.<\/p>\n Here are some takeaways from Nestl\u00e9\u2019s CEO ouster:\u00a0<\/p>\n The consequences for an improper romance can be severe<\/p>\n Boards have less tolerance now for CEO misconduct, like office romances, compared to 20 or 30 years ago, and are generally moving quickly to replace problematic leaders. The exits following a scandal like this can be far more punitive than when leaders are removed for performance issues, often with \u201cgolden parachutes.\u201d As my colleague Eva Roytburg reported, Freixe left Nestl\u00e9 without any pay package<\/a>.\u00a0<\/p>\n The shift toward tough enforcement is partly due to concerns about perceptions of the company. \u201cThe scrutiny is both internal and external,\u201d says Schloetzer, adding that it goes beyond shareholders. \u201cIt\u2019s boards, it\u2019s peers in the C suite, it\u2019s people one level below the C suite. Everybody has a heightened sense of what\u2019s the right thing to do, and the leash for not doing the right thing has become shorter and shorter.\u201d<\/p>\n The devil is in the details of disclosure<\/p>\n Nestl\u00e9\u2019s news release said the ex-CEO was being dismissed not just for having a relationship, but for having an undisclosed relationship. (Freixe was reportedly investigated twice and denied the affair during the first inquiry.)\u00a0<\/p>\n So would he have been safe if he had come clean?<\/p>\n Probably not, as a chief executive. Most companies have a zero-tolerance policy for CEOs dating employees because no matter where they are on the org chart, the power imbalance is too great for there not to be questions about the CEO\u2019s decision-making and ethics. \u201cI mean, human resources and the board would have to go through some pretty serious mitigation to assuage concerns of favoritism or retaliation or harassment,\u201d\u00a0 says Jason Schloetzer, associate professor at Georgetown University\u2019s McDonough School of Business. <\/p>\n That said, work has always been and is still a common place for people to meet (even if it\u2019s no longer the starting point for one in five relationships, as it was<\/a> in the latter part of last century). For executives who aren\u2019t CEOs, disclosure of a relationship can sometimes address the problem, along with a reorganization so that one lovestruck employee doesn\u2019t report to the other.<\/p>\n Boards have been known to look past misconduct by high performers<\/p>\n Although star CEOs have been taken down by affairs, it\u2019s also true that when a CEO is not living up to expectations, the board might find a way to send that CEO packing using corporate policy for cover, says Schloetzer. Before he became an academic, the professor tells Fortune, he became aware that \u201cit is not unusual for companies to do things to get the conclusion that they\u2019re looking for.\u201d\u00a0<\/p>\n \u201cFor instance, I can suddenly decide to audit expense reports just to make sure that everybody\u2019s expense reports are following company practices,\u201d he says. \u201cAnd lo and behold, this person was not following company practices. Now I have a reason to get rid of them.\u201d<\/p>\n Kabrina Chang, clinical professor of business law and ethics at Boston University\u2019s Questrom School of Business, agrees, adding that on the flip side, businesses have a way of willfully ignoring poor behavior when it comes to rainmakers.\u00a0<\/p>\n But complaints from employees about a leader\u2019s behavior can sometimes force action. \u201cWhile a hypothetical board member might turn a hypothetical blind eye,\u201d she says, employees don\u2019t have the same incentive to do so.<\/p>\n If your spouse used to report to you, you probably shouldn\u2019t be a CEO<\/p>\n The Nestl\u00e9 board overlooked an important detail about Freixe when he was first nominated for the corner office, argues\u00a0Guido Palazzo<\/a>, a professor of business ethics at the University of Lausanne and co-author of\u00a0The Dark Pattern: The Hidden Dynamics of Corporate Scandals<\/a>:\u00a0According to\u00a0reports<\/a>, the CEO married a woman he\u00a0met at Nestl\u00e9<\/a>; the pair disclosed the relationship, then she left the company.<\/p>\n Nestl\u00e9\u2019s board would likely have been aware of that background,\u00a0and hiring him anyway sent a mixed message. \u201cHe should never have become CEO if this behavior was not acceptable at Nestl\u00e9,\u201d says Palazzo. \u201cInstead, it was tolerated, and he continued to be promoted.\u201d\n<\/p>\n