Even if you don't care about the adultery aspect, or the spying aspect(!), having sex with the people who report to you is a huge problem. First of all the power imbalance complicates questions of consent. Secondly, even if that's all fine, there are legitimate questions that could be raised by other employees about objectivity and favoritism. And for all of these reasons and more, it reflects very poorly on a leader in terms of their judgement and impulse control, which are reasonable traits to want a CEO to have.