CEOs, Just Cause, and $$$$

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4 Responses

  1. Can you elaborate as to why this should be a breach of the duty of care? The board did in fact overcome the “chill” and fire him. Are you suggesting that courts should second guess informed decisions by a board of directors concerning a CEO’s employment contract or that the board here was not adequately informed?

  2. Tim Glynn says:

    Hi Bill:

    Thanks for your question. First of all, it is true that the MassMutual board ultimately fired O’Connell, but it might have been slow to act or not pursued these matters aggressively earlier on because of the terms of the contract. And one can easily foresee other boards being completely deterred from acting (particularly after the outcome in this case). By the way, there was some discussion in the accounts of an earlier investigation, but, again, I do not have enough information to determine what actually occurred and when, or, downstream, whether the arbitration panel reached the right decision.

    As for my conclusion, yes, I am suggesting that it ought to be considered a breach of the duty of care for a board of directors – even one adequately informed as to the material provisions of the deal – to contract away its ability to engage in effective oversight of the CEO. For the reasons I discussed, I think the terms contained in this particular agreement (and the enhanced scope of freedom from board control they effectively give the CEO) cross that line. Again, I am not claiming current law necessarily supports this argument; I am suggesting that it ought to.

  3. Bev Shaw says:

    Is the text of the panel’s report available to the public? I would be interested in reading it.

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