A sky full of scars – the perils of love, leadership and legal exposure

We've all seen the video: the moment the CEO of tech company Astronomer was caught snuggling with the company’s Chief Human Resources Officer on the kiss cam at a Coldplay concert. The global attention has moved on, but Astronomer is still dealing with the fallout, which now includes the CEO's conscious uncoupling from the company [UPDATE: since this article was published, the HR chief has also left the company].

While there is limited capacity for an employer to regulate an employee's out of hours activities, workplace romances can create significant ethical, legal, and reputational risks – particularly if a clear power imbalance or a reporting relationship is involved. When one involving someone in the C-suite is revealed, voluntarily or involuntarily, it can lead to frantic out-of-hours phone calls as management scrambles to deal with it.

What would you do if you received one of those frantic phone calls? That depends on how well you are prepared for the particular risks and consequences.

Feelslikeimfallinginlove: the risks of office Sparks

It's certainly not unusual for people to form personal relationships at work, including romantic ones, and experienced managers will be familiar with some of the challenges they can create in the workplace. Those challenges are not only greater when the romantic entanglement is at a C-suite level, but there are more of them.

Relationships between CEOs or executives and their staff can undermine trust across the organisation, as they may:

• create a real or perceived conflict of interest;

• give rise to allegations of misusing one's position for personal gain; and

• undermine the trust and integrity of internal decision-making processes, particularly with decisions that benefit one or both of the parties concerned.

The stakes are often higher for companies led by high-profile founders or charismatic CEOs who are embroiled in a scandal of this nature. Investors expect transparency, and sudden departures or controversies can destabilise an organisation and its market position. Let's unpack the implications of all of this.

Directors' duties and good corporate governance

Directors and officers of companies owe duties to act in the best interests of the company and to avoid actual or perceived conflicts. Failing to disclose a personal relationship that has the potential to affect decision-making (especially in relation to remuneration, promotions or disciplinary matters) could amount to a breach of those duties. This can have a flow-on effect to the cost of D&O insurance, as insurers reassess the company’s governance risk.

Continuous disclosure obligations, the effect on company value, and shareholder action

Listed companies must promptly inform the market of any information that a reasonable person would expect to have a material effect on the price or value of their securities. What exactly will affect the price or value of securities will depend very much on the circumstances, so getting advice quickly is crucial.

Whether these continuous disclosure obligations are triggered or not, the fallout from a C-suite office romance could still have long-term effects on a company's value, particularly where such fallout is public and irrespective of whether any claims or litigation follows.

Whistleblower complaints and internal investigations

Depending on how egregious the C-suite officer's behaviour has been, the revelation of a workplace romance could trigger further revelations, headaches – and investigations.

The most obvious is a complaint of perceived favouritism or retaliation from other employees, but there are some less appreciated whistleblower complaints that could arise.

The temptation to use workplace resources when conducting an office romance for some people is irresistible, much like their colleague turned romantic partner. Some uses of these resources might be fairly benign, but others could easily breach company policies on (for example) the use of employer credit cards or IT systems. Your internal finance or IT teams could therefore be the first to spot a relationship, however careful the lovebirds think they are being, and raise the alarm which should trigger some form of investigation (regardless of the person's seniority).

The revelation of the office romance could also prompt a different type of whistleblower complaint. If the C-suite officer has previously had (or attempted to have) a workplace relationship with a subordinate, the public revelation could encourage those subordinates to lodge complaints of sexual harassment.

What happens when the "Paradise" is over: claims and investigations

Where there is a breakdown in the relationship of work colleagues, employers may observe a range of changed behaviours that are inappropriate for a work environment, and must take reasonable steps to manage them where they arise.

Claims and grievances that commonly arise in the aftermath of a relationship breakdown include:

• Sexual harassment claims: Allegations of this nature commonly arise where one person continues to pursue the other after they have ended the relationship, or where one person does not respect boundaries set in place by the other person (eg. in relation to acceptable behaviours at the workplace).

• Bullying / harassment claims: An employee may allege that they were subjected to repeated unreasonable behaviour by their partner or former partner (eg. intimidation, persistent messaging or monitoring of their whereabouts, stalking etc).

• Adverse action claims: An employee may allege they have been adversely treated (e.g. through the commencement of a performance management process, through changes to their role or work location, or termination) because of the breakdown of a workplace relationship and/or a complaint they have made about that relationship.

• Workers' compensation claims: Where the breakdown of the relationship or its aftermath causes a mental health condition.

Removing the C-suite officer as part of the management of these claims (or accepting their resignation) could well be a sensible move, but employers should balance that against the possibility that this could be treated as a form of admission.