For richer or poorer

Personal relationships are increasingly intruding into the corporate arena, but when things go sour how do you minimise the threat to corporate reputation and lessen the effect on employee morale? Jane Lewis finds out

The days when divorce condemned someone to social ruin are fortunately long gone, but few who have been through the process would disagree with what we know statistically: that divorce is one of the most traumatic experiences that life has to offer. As Kingsley Amis remarked in his 1984 novel, Stanley and the Women “Stopping being married to someone is an incredibly violent thing to happen to you, not easy to take in completely, ever.”

But how much worse the experience must be if marital separation somehow becomes a work issue too. To some extent, of course, this is unavoidable – all but the most retrograde employers now recognise that events in the workplace do spill over into home life, and vice versa. Nonetheless, for most people the two still represent fairly distinct spheres of life. If there’s trouble afoot at home, there is at least the possibility of gaining solace by throwing oneself wholeheartedly into professional life. “Work was a complete life-line for me when my marriage broke down,” says stockbroker James Baker. “It was because it was the one area of my life that was somehow unsullied by what was going on.”


Neat division


Yet, as the recent spate of high-profile divorces and separations demonstrates, such a neat division is not always possible. The break-up in May of the Hugh Grant/Elizabeth Hurley partnership is a case in point. When the split was announced spokespeople on both sides were quick to point out that although the relationship was over romantically, the couple would continue to work amicably as business partners in their Simian film production company. This arrangement might well work, but past experience demonstrates the difficulties inherent in operating a successful joint company when the personal relationship that originally fired it has gone cold. It certainly didn’t do much good for the successful Emmanuel dress design company when the marriage of leading protagonists David and Elizabeth failed – and neither individual has since regained the kind of prominence they achieved as a couple. Proof, perhaps, that in this kind of situation the sum of the whole is often far greater than its constituent parts.

Evidence would suggest that a growing number of less celebrated couples are finding themselves in similarly muddy waters as the distinctions between their home and working lives increasingly break down. This can clearly pose substantial problems for the companies involved as well as for other employees caught in the cross-fire. “Class statistics on divorce are a bit iffy,” says Ceridwen Roberts, director of the Family Policy Centre. But although she contends that divorce remains primarily a “poor problem” – the highest proportion of divorces are still sought by “working class” couples – the incidence of marital breakdown in the middle classes is increasing.


Meet at work


Given that a growing number of professional couples (six out of 10 it has been claimed) now meet either at work or as a consequence of it, the ramifications are clear should a divorce ensue. For many the increasingly tight nature of business and professional networks means that it is no longer possible to distance themselves completely from an ex-spouse in the working environment. That person might well emerge as the new squeeze of a colleague or friend – or even as a business associate in their own right.

Obviously the stakes rise depending on the combined power and influence of the couple in question. In recent years the social commentator, Peter York, has identified the emergence of what he calls “wolf pairs” – couples who, while not necessarily working for the same organisation, are nonetheless likely to have influenced the path of the other’s career. High-profile examples in this country include former BSkyB boss Elizabeth Murdoch and the publicist Matthew Freud; Michael and Carolyn Portillo; the architect Richard Rogers and his wife Ruth, co-founder of that favoured New Labour eaterie the River Café; and, indeed, Tony and Cherie themselves. In certain young industries, most notably in the high-tech arena, it is not uncommon to find couples heading-up operations that might either come together in collaboration, or else evolve into deadly rivals. The US CEOs of software houses Onex and Indigo being a case in point.

However, such pairings might deny that their coupled status will influence the direction or strategy of a given company, in reality it is much more difficult to disentangle private alliances, and their possible disintegration, from professional outcomes. This remains true even when one half of a partnership has no formal working relationship with the other. A study of UK chief executives conducted by Ros Taylor of Plus Consulting, for example, has demonstrated the bearing that marital status can have on the perceived effectiveness of executives. She found that while most male CEOs claimed that the principle ingredient of their professional success was a happy family life – typically featuring a stay-at-home “corporate” wife, most of the 25 female CEOs canvassed said they feared their family commitments were actually detracting them from their careers.


Principal’s marital status


Given the importance of the chief executive’s personal contribution to a company’s overall reputation – a recent survey from Burson-Marsteller PR claims this might account for as much as 40 per cent of an organisation’s image – the principal’s marital status clearly has some bearing on the situation, however much we might like to think the opposite. Certainly managers of the old school are inclined to take this line. According to Sir Bob Reid, deputy governor of the Bank of Scotland, a person’s personal history unavoidably affects their professional standing. “I’m suspicious of a man on his third wife. He either has a selection problem or a retention problem. It shows lack of judgement.”

But Joanna Blackburn, senior employment lawyer at Mishcon de Reya, claims the status of an individual’s private morals are no longer an issue to most organisations when it comes to assessing professional reputations – and this is certainly the line taken by the Prime Minister, most notably in 1997 following the marital break-up of Foreign Secretary Robin Cook. “For the most part affairs these days won’t bring disrepute, they’re considered part and parcel of the working environment,” says Blackburn. Indeed, in the US they are so taken for granted that many organisations have introduced “sweetheart contracts” in which co-employees entering into relationships state they are doing so of their own free-will. This is to protect the company from possible litigation if one side of the partnership subsequently claims sexual harassment. “People aren’t quite so litigious over here”, she says. “So for the most part people take a slightly more laissez-faire attitude.”


Upheaval


But few employees these days are unaware of the potential upheaval that internal affairs can wreak on the morale of organisations, in terms of the split loyalties, loss of respect, and fear of favouritism. According to one PR, “A board member at my last company – a married man – was having an affair with a fellow director’s secretary. It got to the point where the whole company was involved and it became a real issue, several of the directors were personal friends of the wife. In the end the MD had to step in – and the secretary left.” But this type of outcome can hold real dangers for companies in terms of subsequent ramifications, most notably actions taken for unfair dismissal.

Moreover, as Blackburn points out, even if at the end of a marriage or affair both parties remain employed by the organisation, there is still the danger of possible legal action. “In a recent case, which we litigated and won, a boss and a line-manager had had an affair lasting many years. When it ended, she claimed she consistently received bad appraisals and had been blocked for promotions.

But by far the most troublesome issue facing those companies whose managers become embroiled in divorce, she claims, comes when the estranged spouse (usually the wife) is on the company pay-roll, despite the fact that she performs no formal function. This typically occurs in small-to-medium sized firms and is usually done to take advantage of tax allowances. “You’d be surprised – it’s very common, but it can lead to real problems for employers.” Because the wife has never actually worked for the company, she can’t be removed from the payroll on the grounds of redundancy or lack of capability. “Her rights are the same as any other employee”, says Blackburn.

“In practice what you have to do is sweep it up into the divorce settlement – it has to be one of the terms of the settlement and that means the husband’s maintenance will go up. If the husband does not own 100 per cent of the company he might feel aggrieved at having to take what he perceives to be an unfair knock on the chin. But it’s the neatest way to wrap it up – when there’s a lot of acrimony anyway, throwing an Employment Tribunal into the picture isn’t going to help.”

But there have been instances when the entire existence of a company has been brought into doubt as a result of divorce. The most likely scenario for this is in jointly-owned husband and wife operations – particularly when the warring parties cannot agree on the value of the company, thereby eliminating the possibility of one side buying the other out. “Women have a far greater chance of getting screwed because, in many cases, the husband knows more about the financial matters of the business,” claims the US author of Smart Ways to Save Money During & After Divorce, Ginita Wall.

Those on the ground in the UK would beg to differ, however. According to Rod Flanagan of Martin Flanagan Associates, a consultancy specialising in conflicts in family businesses, “It’s more typical that the female side of the partnership handles the finances while the male takes on everything else.” However, he claims that in his experience the rate of divorce in this sector is lower than the national average.

The high incidence of executives who choose colleagues from work as their second spouses would appear to bear this theory out. But a growing number of divorce cases in both the US and the UK are beginning to demonstrate the power that ex-partners can wield over companies – and their assets – even when they have no formal association with them, beyond their former marriage to a leading executive. The phenomenon of the “corporate wife” claiming compensation beyond alimony payments in divorce settlements for the contribution she has made to her husband’s career – often at the expense of her own career and pension – is gaining ground by the day. “Would these men have got to where they are if they hadn’t had little wifey in the background to iron their shirts and entertain their clients? I don’t think so,” says Sally Quin, the driving force behind Fair Shares, an organisation which campaigns for better pension entitlements for estranged spouses. She claims that the Welfare Reform and Pensions Act, passed last year, will help redress this injustice by ensuring that company pensions are seen “as just another asset” – enabling the non-contributory partner to transfer their share of the lump sum into their own pension scheme at the time of divorce. Hitherto, they had to wait until the contributor himself retired. “This is going to have quite an impact on corporate organisations and their pension schemes.”

The growing practice of remunerating executives with share options is also likely to cause reverberations for firms if and when these senior executives divorce – because ex-spouses are increasingly claiming their right to a share of such “future values” on the grounds of their earlier non-financial contribution to a marriage.

What these developments illustrate is the long-term consequences that divorce might hold for companies as the hitherto distinctive boundaries between private and professional lives increasingly blur. As one corporate wife points out: “I consider myself a key element in this company. I am very much an equal partner. He says that since we’ve been entertaining as a team, his business has grown appreciably.” Let’s hope they stick together.

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