David Letterman and the high cost of workplace hanky panky

Extra-marital affairs get a lot of public attention, particularly when the initiators are in the public eye. In the workplace, such affairs create significant costs because instigators usually rank higher than the people with whom they cheat. This exposes their employers to the costs of litigating and/or settling charges of sexual harassment. And this doesn't take into account the pain that affairs cause all the people involved.

Not only is sexual harassment illegal, it can also cost big employers lots of money. In 2005, Ford (F) agreed to pay $7.5 million to settle sexual harassment charges and to pay up to $10 million to train employees to prevent sexual harassment. Lowe's Companies (LOW) paid $1.72 million to settle such charges made by three employees. Many other examples suggest that settlement amounts are often at least $1 million.

Two prominent cases are in the news today. CBS's (CBS) David Letterman, who hosts the top-ratedLate Show, spent his monologue last night declaring that he had engaged in multiple affairs with staffers on his show. And that's not all -- it's been alleged that Robert J. Halderman, a producer with CBS' 48 Hours, has been arrested in connection with a $2 million extortion plot against Letterman; the DA confirmed Halderman's involvement this morning.

No word on whether Letterman will lose his job over this, whether those affair participants will sue for sexual harassment, or whether his wife will divorce him. Moreover, judging by the reaction last night to his announcement, it is unclear whether it will cost him many listeners or advertisers.

Letterman is not the only one to engage in costly extra-marital shenanigans. Consider the case of Sen. John Ensign (R-Nev.), who had an affair with a female staff member and then misled associates in an effort to get work for that staffer's husband, according to The New York Times. At the time of the affair, Cynthia Hampton was treasurer of Ensign's political action committee and re-election campaign while her husband, Doug Hampton, was a senior aide on Ensign's Senate staff, according to The Las Vegas Sun.

While the affair was not a violation of Senate ethics guidelines, lobbying to help Doug Hampton find a job within a year after his departure from Ensign's staff was. Evidently, Ensign lobbied all sorts of people to get three clients for Hampton to make up for the loss of his $144,000 a year job as an administrative assistant to the senator in exchange for keeping Ensign's affair with his wife quiet.

Ensign is a champion of conservative values -- he voted to impeach Bill Clinton over the Monica Lewinsky affair -- who had 2012 presidential ambitions. Those ambitions may explain why he allowed himself to be extorted by the husband of the staffer with whom he conducted his affair. Unlike the Letterman case, Ensign's employer, the Senate, will not be liable for any sexual harassment litigation that might ensue.

But with all the costs that workplace affairs generate for those involved, these two cases make me wonder why they happen at all.

Peter Cohan is a management consultant, Babson professor and author of eight books including, You Can't Order Change. Follow him on Twitter. He has no financial interest in the securities mentioned.

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