The ruling was kept confidential until last week, when the company filed it as part of a lawsuit against O’Connell in Suffolk Superior Court seeking to have the award set aside.
The panel ruled that the company owed O’Connell a lump-sum payment equal to:
- three times the sum of his base salary and short-term incentive award;
- a pro-rata payment for O’Connell’s 2005 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.
An attorney for O’Connell estimated the total amount owed to O’Connell is about $50 million, while MassMutual estimated the figure is more than $40 million.
In its appeal, MassMutual called the arbitration panel’s decision an “erroneous interpretation” of the employment agreement and said it “subverts fundamental public policies regulating corporate governance.”
When it fired O’Connell in 2005, MassMutual said hat he had abused his authority by improperly manipulating his stock accounts and interfering with an internal investigation, among other things (see O’Connell Firing Goes to Arbitration ). The panel of the American Arbitration Association said O’Connell “has essentially prevailed on most of his claim” that his termination was improper, though the panel found MassMutual could keep $23.6 million of gains O’Connell racked up in one trading account.
According to the Boston Globe, O'Connell, who arrived at MassMutual in 1998, earned $4.5 million in 2000 and his compensation rose to $11.4 million in 2005. The origins of the current dispute began in February 2004, the panel wrote, when O'Connell's wife, Claire, told a MassMutual director that her husband was having an affair with an executive vice president at the company. MassMutual found insufficient evidence to support the charge, but did unearth other issues including excessive use of company aircraft and O'Connell's "failure to inform the board of his marital difficulties," the panel found (see MassMutual Board Reiterates O'Connell Firing ).
No "Material Harm"
However, no real action was taken, and the matter might have ended there except that Claire O'Connell repeated her charges to other executives, who hired a law firm and pursued the claims against O'Connell, the panel reported. The board subsequently claimed that O'Connell misused trading accounts, funded by MassMutual, that were set up in place of awarding him stock options typically given to chief executives (see Report: MassMutual Chief Charges Included Retirement Account Improprieties ). While the arbitration panel said the claims against O'Connell were overstated, and noted that O'Connell's arrangements were approved by MassMutual, it nonetheless rejected some of O'Connell's trading gains and ruled the company could keep $23.6 million.
The panel also dismissed other claims against O'Connell including that he made an improper purchase of a condominium, interfered with an internal investigation, and used company aircraft excessively. While it found that "affairs did occur" between O'Connell and two women, "we do not see proof of material harm to the company or even willful gross misconduct."