January 4, 2007

SOURCE: InsuranceNewsNet, Inc.

Fifty million dollars worth of severance-pay and benefits.  That’s how much Massachusetts Mutual Life Insurance Co. needs to remunerate to its former Chief Executive Officer Robert J. O'Connell after an independent arbitration committee and lower courts unanimously ruled that they “fired him without cause” last June of 2005.  Or at the very least, that’s the amount a Boston judge is ordering them to pay Mr. O’Connell, after ruling in that recent appeal case.

It seems lawsuits involving CEOs are as prevalent as ever. Other former chiefs who were awarded huge sums of money after successfully challenging their dismissals due to “supposed” cause(s) include:

1. Ronnie Parker, former CEO of Pizza Inn Inc., who initially sought $5.4 million in severance money but later on agreed to settle his dispute with the pizza company for $2.8 million.
2. Ron Zebeck, former CEO of Metris Cos., who was payed $30.2 million after a Minnesota jury ruled that he was improperly terminated.
3. Peter Dolan, former CEO of Bristol-Myers Squibb Co., who was given a conservative exit package by the board.

Stating that he saw no new evidence whatsoever in the case that compels him to junk the October 2006 arbitration decision made by a three-man panel (comprised of Massachusetts' secretary of state, attorney general and insurance commissioner), Suffolk Superior Court Judge Allan van Gestel denied MassMutual's appeal thus enforcing the ruling wherein they would have to pay Mr. O’Connell the specified hefty amount.

Arbitration findings have revealed that although O’Connell border-lined on self-dealings and misappropriations, it said though that he still managed not to violate his fiduciary duty as MassMutual’s CEO and that his overall conduct fell short of the ‘willful gross misconduct causing material harm to the company’ clause that would have been the deal-breaker for O’Connell.

Representatives from O'Connell's camp, hailed the panel’s ruling a 'complete vindication' and said the former CEO, chairman and president was "pleased and gratified" that Judge van Gestel scrapped MassMutual’s appeal and decided to reaffirm the decision of the arbitrating body to award him a $50-million figure.

Representatives of MassMutual, earlier said in a public statement, that this case wasn’t really about the money, but rather about “corporate governance and public policy for the state of Massachusetts .”

Lawyers of Mr. O’Connell however balked at the remark and countered with their own statement saying "if there is a governance issue in this case, it is the failure of the board of MassMutual to follow the terms of Mr. O'Connell's contract.”

Among the allegations concerning Mr. O'Connell’s supposed misconduct include shadow trading, improprieties, engaging in extramarital affairs, granting of promotions and appointments to employees in the company in exchange for their help in concealing his self-dealing activities, as well as, subversion of corporate governance.

A spokesperson of MassMutual said that the company intends to file another appeal, citing how they still standby in their decision to sack Mr. O'Connell for alleged misconduct.  MassMutual “will continue to pursue this matter aggressively”, said the spokesperson.  The company reiterated that every board has a duty to enforce appropriate standards of behavior for management, and that this issue will definitely impact the whole system of corporate governance.

In the meantime, MassMutual said it has already initiated several reforms in the wake of O’Connell’s termination.  Under the leadership of its new CEO, Stuart H. Reese, MassMutual disclosed that it has set-up an "Office of the CEO'' arm which will be mainly responsible for bringing together executives who will fiscalize (i.e. check and balance) the company's operations, strategies and long-term goals.

Amid all the acrimonious proceedings, the fact remains that the industry ought to exercise more restraint and employ more strategic-thinking in the hiring and firing of their CEOs, since it’s becoming increasingly difficult to part ways with them without also parting with some big bucks.

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