I mean—certainly if it turns into the kind of situation where the higher-ups can’t look the other way. It probably becomes a problem as soon as your supervisors have to think about it. It definitely becomes a problem as soon as it becomes their problem, or a distraction from what everybody’s there to do.
By the time it’s public knowledge and reflecting on the company, yes, that’s a failure—and the failure of discretion is probably closer to the board’s clammy little hearts than any particular fluids (or allegations of favoritism) that may have been swapped along the way.
It's difficult (impossible really) to hide such affairs indefintiely when you've reached that kind of status and notoriety. No amount of discretion will keep someone from finding out eventually when so many eyes are on you, so it's really just a matter of time till some sort of public disclosure.
By the time it’s public knowledge and reflecting on the company, yes, that’s a failure—and the failure of discretion is probably closer to the board’s clammy little hearts than any particular fluids (or allegations of favoritism) that may have been swapped along the way.