The arbitration panel said that O’Connell in fact had affairs with two female employees, made millions in profit in a special retirement account by improper transactions, and perhaps stepped over the line in the use of company aircraft. But none of these acts constituted “willful gross misconduct” on his part or resulted in “material harm” to the company, the arbitration panel ruled.
In their decision, the arbitrators ordered MassMutual to pay Mr. O’Connell a lump-sum payment equal to three times the sum of Mr. O’Connell’s base salary and short-term incentive award; a pro-rated payment for Mr. O’Connell’s short-term incentive award; payout of all long-term incentive plan cycles in progress as of June 23, 2005; three years of continued benefits and three years of additional deemed service for the purpose of determining benefits under the company’s defined benefit plans. MassMutual must also pay all legal fees that were incurred . . . and all arbitration expenses.
As one blogger stated: Under the terms of the contract, “mere” incompetence, uncooperativeness, or awful judgment are not enough to justify termination. A “mere” breach of fiduciary duty isn’t either. Same with sexual harassment. Indeed, “willful gross misconduct” isn’t enough unless the firm can prove resulting “material harm” to the company. Sure, the firm could still fire such an incompetent, uncooperative, duty-breaching, harassing, or wrongdoing CEO, but, in a context such as this one, only with a $40-50 million payout.
MassMutual executives declared the panel’s findings “incomprehensible” and inconsistent with good corporate governance. On Friday, the company filed suit in a Massachusetts court to appeal the panel’s findings.
From The Wall Street Journal, January 4, 2007:
MASSMUTUAL ORDERED TO PAY EX-CEO