It has recently been reported in the press that John Neal, the
CEO of the Australian headquartered insurance and reinsurance
company QBE, had his annual bonus cut by twenty per cent (which
equated to AU$550,000 or £340,000) for failing to disclose a
personal relationship with his executive assistant. The decision to
cut his bonus was taken despite what QBE described as a
"commendable year [during which he] delivered a strong full
year result". It has been reported that Mr Neal's
executive assistant was also executive assistant to the
board. QBE requires executives to disclose workplace
relationships under its executive code of conduct.
Workplace relationships are common. Employees necessarily spend
significant time together, and in many cases will have common
interests. Some employers view these relationships as a
positive. For example, one of the UK's largest
independent travel agencies is known to have produced well in
excess of 100 marriages. However, workplace relationships can
be a distraction, can fuel gossip and can sometimes complicate
decision making. To be clear as to their expectations,
employers should consider the circumstances in which workplace
relationships may be inappropriate, and may wish to put in place a
policy on them. Any policy should strike a balance between an
employee's right to a private life, and the employer's
right to protect its business interests. In most cases, this
is likely to include a requirement that an employee discloses any
workplace relationship that may give rise to a conflict of interest
or a breach of confidentiality. It should also be made clear
to employees that they must not allow personal relationships to
influence their conduct in the workplace.
Mr Neal's case is an extreme example. As CEO, he was
clearly obliged under the executive code of conduct to disclose any
personal relationship with a colleague. Mr Neal has himself
admitted that he did not do this, and that he could see that it
might cause damage to the company's reputation. It is
important to remember that the issue here was not the relationship
itself so much as Mr Neal's failure to abide by the code of
conduct, and disclose it. Whilst it has been reported that Mr
Neal's executive assistant has decided to leave QBE, it is
understood that no action was taken against her, presumably because
she was not subject to the code of conduct. It is unlikely to
be appropriate for employers to take steps to reduce bonuses, or
take disciplinary action against an employee, simply for having a
personal relationship with a colleague. Such steps may be
appropriate though, where an employer has a policy on workplace
relationships which an employee deliberately disregards. As
always, when making a decision to reduce a bonus payment in any
circumstances, an employer should consider whether the terms of the
bonus scheme allow it to do this. Failure to do so might lead
to a claim for unlawful deduction from wages, or breach of
contract. The specific terms of the bonus scheme which
applied to Mr Neal are not known.
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