Stryker pushed out CEO despite his having sought permission for office romance
Thursday, May 24, 2012/
Sometimes following the letter of the law isn’t enough to keep you out of trouble.
Stryker Corp, a large maker of medical-devices, ditched its CEO Stephen MacMillan two months ago. MacMillan, lauded for Stryker’s steady performance during an economic downturn, was at the time said to have left for “family reasons”. But an intriguing comment by Stryker’s chairman last month led reporters at The Wall Street Journal to do a bit of digging.
“Just to clarify, on behalf of the board of directors, we’d like to clearly state that Steve never violated any company policy nor code of conduct,” the chairman William Parfet said at the company’s AGM on April 24.
The Wall Street Journal is now alleging that MacMillan left after an office romance led to his losing the confidence of a majority of the board.
Office romances are a reality. Studies have found at any one time 11% of Australian workers are involved in romantic relationships with a co-worker, while US studies have found a third of all romantic relationships begin in the office. In a survey conducted by vault.com, more than a quarter admitted to dating a subordinate and 18% said they have dated a supervisor.
Given their ubiquity, leading companies have developed policies and procedures to deal with workplace romance. In Australia, companies have policies that limit people’s ability to have romantic relationships with people who have authority over them, M+K Lawyers principal Andrew Douglas tells LeadingCompany. “The reason they do it is because relationships turning sour often require people to leave the business, and can also lead to claims or instances of favouritism,” he says.
Generally, laws in Australia are more lax on this issue than those in America, Douglas explains, although subsidiaries of American companies operating in Australia often make their workers sign their general regulations.
In the United States and United Kingdom the use of “love contracts” is common. These legal documents require both members of a romance to sign contracts saying the relationship is consensual, and outlining what both parties will do should the relationship cease. These contracts protect the employer against any sexual harassment claims, but they have their critics, who argue they are intrusive, ineffective and unnecessary. A 2010 study in the Hastings Law Journal found four in 10 American employers just ignore their own policies on fraternisation because they were too difficult to monitor or enforce.
But even if workplaces institute comprehensive relationship guidelines and contracts, and those contracts are followed, relationships in the office are likely to stay a very tricky area.
MacMillan was reportedly perfectly upfront about his intentions. He approached both Parfet and the head of the board’s corporate governance and nominating committee in September to seek permission to date 41-year old Jennifer Koch, a flight attendant on the company’s corporate jet.
The directors told him on the same day he could, as long as she quit.
A few weeks later, Koch did just that and began dating MacMillan. But suspicions the relationship had begun before Koch left began to plague the CEO.
In response to anonymous comments questioning MacMillan’s integrity posted to an online industry message board, the directors hired a lawyer to investigate the matter.
Mark Goodman, a partner at Debevoise & Plimpton LLP, analysed more than a year of records and found just one mistake: at a dinner in Dubai, a human resources guest had been listed as MacMillan’s dinner companion, when he had actually dined with Ms Koch.
This was in itself no evidence of a relationship. Goodman turned up nothing to suggest anything else had happened.
Last summer, MacMillan separated from his wife after 24 years of marriage. His dinner with Koch was before this separation. Unnamed sources told the Wall Street Journal he had held off dating Koch until his divorce proceedings were underway and he had obtained the board’s approval, having seen too many company leaders bought down by inappropriate behaviour.
Nonetheless, while Goodman was still conducting his investigation, Parfet grilled two of MacMillan’s immediate underlings about whether they thought the romance had begun before Koch left the company. The vice-presidents said they thought it had.
Three days later Parfet confronted MacMillan in the CEO’s office. Parfet told his CEO some executives found him “divisive”, and questioned whether he had shown good judgement in dating Koch.
At a special meeting on January 7, Goodman told the full board he had found no improper use of company assets nor evidence the affair had started before Koch quit.
Though a minority of board directors felt MacMillian was being treated unfairly, his support was slipping away.
The largest shareholder was unhappy the CEO, who remained legally married, was conducting an affair with an ex-employee. MacMillan asked at the January meeting whether they were trying to drive him out, a question which saw him criticised for his combative tone.
“I am prepared to still run this company,” MacMillan is reported as saying at the board’s next meeting in February. “But if you guys want to make a change, I will offer my resignation.”
Stryker announced the termination “without cause” on February 8. MacMillian is now reportedly vying for a senior position at Johnson & Johnson, a company he previously spent 11 years with. It’s a good role if he lands it, but MacMillian lost a lot when he was let go, including $6 million in stock options.
Stryker appointed Curt Hartman, the company’s CFO, as interim CEO while they find a new chief.
The lesson for leaders is that workplace romances, common as they are, pose a great risk. Even exemplarity behaviour and following rules and policies may not save negative perceptions of your integrity, or your job.