GO
Loading...

Why Do Leaders Get Caught Up in Sex Scandals?

Friday, 20 May 2011 | 3:25 AM ET

The link between illicit sex, money and power goes back as far as David and Bathsheba. This week has added several new names to the list of scandals at the top of the business world.

Dominique Strauss-Kahn in court.
CNBC
Dominique Strauss-Kahn in court.

Dominique Strauss-Kahn resigned as head of the International Monetary Fund late Wednesday amid allegations that he sexually assaulted a maid in a luxury Manhattan hotel.

Soon after the allegations surfaced, more whispers about Strauss-Kahn’s allegedly sexually predatory behaviour emerged.

Sir Fred Goodwin, once one of the most powerful bankers in Europe as head of Royal Bank of Scotland, was said in the British Parliament on Thursday to have used a super-injunction to cover up an extramarital affair with a female subordinate.

On Wednesday, German insurer Munich Re admitted it hired 20 prostitutes as a reward for around 100 of its top sales executives at a party hosted in Budapest in 2007.

The female sex workers reportedly were given arm bands and earned stamps on their forearm to keep track of the services they had to be paid for.

These companies and leaders are far from the first to have their names linked with sex scandals.

Billionaire Jeffrey Epstein was sentenced to 18 months in a Florida jail in 2008 for soliciting an underage girl for prostitution.

Lord Browne famously quit as chief executive of BPin 2007 after lying in court about meeting his ex-partner, Jeff Chevalier, a Canadian former rent boy, through an escort website.

And James McDermott Jr, former chief executive and chairman of Keefe, Bruyette & Woods,

spent five months in prison and was barred from the securities industry in 2000 after leaking stock tips to girlfriend Kathryn Gannon, also known as the porn star Marilyn Star.

Why do high-flying businessmen risk huge reputational damage through their sexual misadventures?

Robert Weiss, founder of the Sexual Recovery Institute and author of Why Men in Power Act Out, said of the Strauss-Kahn affair: “This latest scandal again raises questions about why some men in powerful positions often live out a double life one public and one private that involves impulsive and compulsive sexual behavior."

“Although a sense of strength and fearlessness and a near disregard of consequences can make for great, powerful leaders, problems come when these leaders do not acknowledge that they are human.”

“If their narcissism or egotism isn’t matched by a healthy dose of humility of what it means to be human…and they run on their intellect and don’t attend to their emotions on any level…then they are bound for trouble,” he added.

“People in powerful positions, such as Schwarzenegger and Strauss-Kahn, often don’t make it a priority to care for themselves emotionally, and may start looking for a 'quick fix.'"

“People with money, power, and fame often have poor feedback networks. They are surrounded by people who are dependent on them for employment or security, which makes them reluctant to tell their ‘boss’ that they need to seek help.”

Peter Detwiler, former vice chairman of stock brokerage E.F. Hutton, and Robert West, former chairman of Tesoro Petroleum, got into hot water after soliciting a prostitute for the Trinidad & Tobago finance minister, in an attempt to influence policy in the Caribbean country.

Sexual misbehaviour, as many of these men have found, can cost more than just dignity.

In one of the most famous sexual harassment cases in the financial world, six female workers at Dresdner Kleinwort sued the bank for $1.4 billion in 2006. Allegations that male executives were entertaining clients at strip clubs and bringing prostitutes back to the office surfaced before the case was settled out of court.

The vast majority of sex scandals at the top of the business world involve powerful heterosexual men and women who are less economically powerful.

This is partly simply because there are fewer women in positions of power in this sphere, with women holding just 15.7 percent of board seats at Fortune 500 companies in 2010.

Evolutionary psychologist Nigel Barber believes that high social status in men is often linked to difficulty controlling sexual impulses.

He wrote in an article for Psychology Today: "In the world of animal behaviour, when one sees high status, intense male-male competition, and a high sex drive, one is looking at the unmistakable handiwork of testosterone (and other "male" sex hormones).

"Testosterone also rises with competitive success for humans, and even with sexual intercourse so there is a positive feedback loop whereby prominent men acquire high testosterone levels along with increased social status.

"They are also more attractive to women who acquire status and power themselves through such pairings. It all adds up to an arrogant sense by male leaders that they can treat women as they please."

  Price   Change %Change
KBW
---
TSO
---

Featured

Contact Europe News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Europe Video

  • Jan Dunning, CEO of St Petersburg-headquartered hypermarket chain Lenta, says the situation in Ukraine has had no impact on the group, as consumer confidence remains unaffected in Russia.

  • Vincent Deluard, European strategist at Ned Davis Research Group, says the strong euro is a problem for the region's companies, especially for the large exporters.

  • European shares closed higher on Thursday as investors brushed aside concerns regarding Ukraine and focused instead on Wall Street earnings and the latest U.S. jobs data.