An edited version of this article was first published by The Ethics Centre on the 20th July 2017.

If you heard the phrase “cheaters never prosper” talked about at AFL headquarters, you’d assume they were talking about performance enhancing drugs, salary cap breaches or breaking the rules to win a game.  This week, as AFL CEO Gillion McLachlan announced the resignations of two senior officials after they admitted to adulterous affairs with junior staff, the phrase took on a whole new meaning.

The reaction to McLachlan’s decision has been mixed. Some have applauded the move as a strong defence of the AFL’s culture and values. Others have suggested the AFL has gone too far. Writing in the Australian Financial Review, Josh Bornstein suggested office affairs that don’t involve “harassment or stalking or bullying” should not “be grounds for loss of employment.”

Particulars of the AFL case aside, this view is misguided. It conflates ethics and the law and demonstrates a lack of appreciation for the important role values and principles play in corporate governance. Just because something is legal doesn’t mean it’s ethical.

Yes, the law should play a role in guiding an organisation when developing an ethical framework. But it is far from sufficient. Arguably, the best test of an organisation’s ethics arises when they’re operating in areas not covered by the law.

With that said, what should we make of the AFL’s decision? When announcing the resignation of the two senior officials, McLachlan spoke to his organisation’s values. He stated that he would like to lead “a professional organisation based on integrity, respect, care for each other and responsibility”.

An organisation’s values are affirmed by the actions, choices and decisions that are made and condoned by its people, especially its most senior leaders. This also was not lost on McLachlan. He said, “I expect that executives are role models and set a standard of behaviour for the rest of the organisation. They are judged, as they should be, to a higher standard.”

The response by the Seven West Media board to revelations that their CEO Tim Worner had an adulterous affair with executive assistant Amber Harrison was a little more benign. They engaged a private law firm to undertake an independent investigation into a variety of allegations made by Ms Harrison including the inappropriate use of company funds and illicit drug use by Mr Worner.

Although the findings of the investigation were not made public, the board concluded there was no evidence supporting the claims of wrongdoing by Mr Worner. Furthermore, they stated he had been disciplined “over his ‘personal and consensual’” relationship with Ms Harrison, but which it also said was “inappropriate due to his senior position.”

So what are we to make of these seemingly contrasting responses? Should we cast judgement and declare that one organisation is more virtuous than the other?

It should be acknowledged that although the two organisations handled the incidents differently, neither condoned the conduct of the leaders involved. In addition, when judging the individuals and the organisation’s response, commentators and the public appear to point to two factors.

The first is the power asymmetry that existed between the individuals involved in the affairs. Power asymmetries are inescapable in organisations and all leaders have at some stage, most of the time unwittingly, used their position of power to gain advantage. However, when this is done in a way that could potentially cause harm to the more vulnerable party, then we are right to question the conduct.

The second is that the affairs were adulterous. Understandably, infidelity arouses a whole range of moral responses. But we must be careful not to instantly assume that an individual who has become involved in an extra-marital affair is less committed to the organisation or its values. Infidelity is not necessarily a simple question of character deficiency.

Needless to say, whenever a senior executive becomes involved in a regrettable or unsavoury incident similar to these, an organisation has no choice but to respond. How they do so is a defining moment for the organisation. Their response (or lack thereof) reveals to us what the organisation really values and how committed they are to these values.

However, judging the appropriateness of the response is difficult. Perhaps the best measure is one we don’t have access to, and that is the nature of the stories that these events inspire within the organisation.

Stories are powerful. After notable incidents like these they become folklore within organisations. If they affirm and are aligned to stated values and principles, then the organisation’s ethical foundations are strengthened. If not, people will quickly become cynical and the organisation’s character is compromised.

When we look past the salacious gossip surrounding office romances, this is arguably the most important thing to take from these (most of the time unfortunate) incidents. For the sake of the boards at the AFL and Seven West Media, I hope that the stories being told within their organisations are reflective of the values they extol.

Dennis Gentilin is the author of “The Origins of Ethical Failures” (Routledge, 2016) and an honorary fellow at the Centre for Ethical Leadership.