Sleeping with your employee is bad because sleeping with your employee is bad. Same shit as "weed is bad because it's illegal, and weed is illegal because it's bad". For someone who doesn't (sleep with employee / smoke weed) the obvious action here is to criticize (sleeping with employee / smoking weed) because otherwise they're painted to be a bad person. Only a person who (sleeps with employees / smokes weed) would ever say otherwise, and those are bad people so their opinion isn't exactly valid in a civilized social discourse.

Except that the reasons behind those rules against sleeping with employees is the many, many cases of abuse that have actually happened. Bosses who make it quite clear that the price for a favorable performance review is a sexual favor of some kind. There's even a nickname for this kind of thing in Hollywood — "the casting couch" — and when there's a nickname for it, it's common enough behavior that everybody knows it happens. Not that every single person is doing it, but it's an open secret that it happens a lot in Hollywood.

And it's wrong. At its worst it's rape-by-coercion, trying to hide behind a thin layer of plausible deniability. It's not a circular argument at all: the behavior is bad for objective reasons, and that's why it's forbidden. In more favorable cases (where there's no coercion involved) it's still trading something of monetary value for sexual favors, which makes it a form of "prostitution lite". Again, there are objective, non-circular reasons for it to be forbidden.

Precisely.

If there were anything inherently wrong with it, you would have to ban most family businesses. Just because some forms of something are undesirable, and a corporation out of laziness/practicalities enacts a general policy to ban all forms of it; that does not make the entire thing morally reprehensible automatically.