It's disappointing that this comment is getting downvoted. This case would be so much simpler if Pao had started talking about needing HR policies before she had an affair with a married co-worker.
The case could stand on its own without those events -- I think it's within good decency to point out the danger/distraction of these lateral issues.
Most people keep their work and personal lives somewhat separate for a reason.
Another fact: it would also be simpler had she not been (allegedly) lied to about the marriage status of the co-worker.
If all of this is true, and it was the ethical baseline for co-worker relationships, what's the ethical baseline for client relationships?