A Matter of Ethics

The company was, and is, healthy as a horse.

So why is it that Robert O'Connell and two other high-ranking executives are no longer working at MassMutual?

That was the question being asked in every downtown elevator last Friday, and on every golf course the following weekend. This is

And this is just one of the many intriguing story lines that have emerged from MassMutual's purging of O'Connell, the now former chairman, president, and CEO, and also Susan Alfano, executive vice president for enterprise systems and services, and Ann Lomelli, senior vice president, cogeneral counsel and secretary. O'Connell led the company to strong fiscal health, but apparently had some issues of 'conduct.'

This was all MassMutual would say in response to questions about the firing, although some further indication as to the nature of that conduct could be gleaned from E-mails sent to employees by the new president and CEO, Stuart Reese, and the new chairman, James R. Birle.

"The board is committed to strong governance practices and ethical leadership," Birle wrote in his E-mail, "and we believe that the standard of behavior must be set at the top." The new chairman said the appointment of Reese "signals the beginning of a new era of greater transparency, clear accountability, and meritocracy (a system by which individuals advance on the basis of achievement) at MassMutual."

While only adding speculation to incessant rumors about the alleged improper behavior - talk is of everything from personal relationships O'Connell may have had with subordinates to misuse of the company's private jet and helicopter - the E-mails; serve to punctuate the fact that at MassMutual, and in today's corporate world in general, CEOs not only have to perform, they have to behave.

So says Larry Zacharias, a management professor at UMass who teaches, among other things, corporate ethics. He told BusinessWest that, in the post-Bill Clinton era, CEOs, be they in government or business, are under more scrutiny and being held to certain standards for behavior, usually set down in handbooks and corporate codes of conduct.

"That wasn't really the case 20 or 30 years ago," said Zacharias. "But now, if you violate the code, part of the board's job is to enforce that code."

But Jennifer Taub, another management professor at UMass and expert on corporate ethics, said the emphasis on proper behavior in the comer office is nothing new - only a matter that is perhaps getting more attention in the press in the wake of high-profile ethics-related terminations at Boeing and other major corporations. She said that one matter being pushed to the side amid the gossip spreading through the community is the impact that such a termination has on a company's employees.

"Any time one's employer is in the spotlight and under accusations of wrongdoing, it's the employees who suffer," she said. "They tend to internalize any image tarnishment; right now, there are 4,000 employees who have something on their mind other than doing their best work."

There are other issues arising from the MassMutual's house cleaning, including the way the company went about its business. Some analysts say the company's silence is only fueling speculation about the nature of the firings, and thus doing a disservice to the employees and the community at large.

"I think it was handled in a very unprofessional manner," said one area employment law specialist who requested anonymity. "It wasn't handled cleanly; the abruptness of this, coupled with the lack of anything concrete as to the reason why, has allowed the rumor mill to percolate and go wild - and that doesn't help anyone."

Ira Smolowitz, a management professor at American International College who also teaches corporate ethics, also found the lack of stated cause of termination strange. "You would think that when someone is summarily dismissed like this, they would say why," he explained. "If you don't, the information gap is filled by rumors."

BusinessWest looks at this issue and many others as it examines the MassMutual terminations and what can be taken from them.

Boot Camp Paul Rothschild didn't want to speculate on the nature of the conduct that led to O'Connell's termination from MassMutual. "I really have no idea what transpired ... like everyone, I've heard the rumors, but all I know is what I read in the papers," said the employment law specialist with the Springfield firm Bacon & Wilson.

What he does know is that termination in this manner - the abrupt dismissal of a CEO who had led a company to strong profits - is quite rare. Like other analysts responding to the news, he would say only that the transgression was clearly "something serious" that obviously violated behavior clauses in the CEO's contract.

What falls into that realm?

Again, Rothschild wouldn't speculate on this specific case, opting instead to say that, in general, there are several categories of misdeeds that would be grounds for such termination. Dishonesty and fraud would obviously qualify, he said, as would, in many cases, sexual indiscretions or personal relationships, especially those involving subordinates.

Such relationships are frowned upon in general, he said, but especially when they lead to promotions or preferential treatment for the subordinate, or the perception of same. "The concern there is that there will be favoritism that will enhance the position of the subordinate to the detriment of the other employees."

Another employment law specialist, also requesting anonymity, said most CEO contracts contain language listing behaviors in two broad areas that would be grounds for termination. The first includes conduct that is "materially harmful to the business, interests, or reputation of the company," he said, quoting common boilerplate language. "And this leaves a lot of leeway."

The second category includes "fraud, embezzlement, dishonesty, or the intentional disclosure of confidential information or trade secrets," he continued, adding that speculation, in the case of O'Connell, is that the conduct in question falls in the former category, not the latter.

And Zacharias told BusinessWest that, to him, the MassMutual case offers evidence that conduct unbecoming a CEO will no longer be tolerated by boards, even when the leader in question is posting strong financial numbers. And this represents a shift in attitudes.

"There have been some cases in recent years which suggest that companies are quicker to pull the trigger on these kinds of things where an executive is acting in ways that are socially unacceptable rather than economically problematic," he said. "Twenty or thirty years ago, the head of a company that was doing well and might have been engaging discretely in some activity that was not socially acceptable might have been treated differently."

Whatever the nature of the indiscretions committed by O'Connell, and presumably by the others who were also terminated, they probably resulted from an arrogance or air of invincibility common to those in corporate high places, said Smolowitz.

He noted that such attitudes are the product of the sky-high salaries paid to executives, which are exponentially higher than rank-and-file workers, and also the power and perks that come with the title and the office.

"When you look at these salaries, I think they create an 'I walk on water mentality,"' he said. "I think that the worst thing a CEO can do is to believe his or her own press release; you feel that you're above the law and that the rules don't apply to you, and this encourages improper behavior."

Rothschild agreed. "There is a feeling of invincibility for many people in positions, like this," he said. "There is so much power, and so many people working under these CEOs ... and when the company's doing well, some of them start to think, 'they can't do anything to me."'

The fact that MassMutual's board did do something to O'Connell and the others might be one of the good things to come out of this saga, said Rothschild. A clear example has been set, he explained, adding that, by firing three top executives in such fashion, the company's board is sending a strong message about what is expected from employees - and that the rules apply to everyone.

"And that's important," he continued. "People need to know that no one is above the rules. This sends a message - that everyone from the president on down to the people in the mailroom has to play by the same rules."

Taub agreed. She said that a CEO sets a tone for a company, in terms of both operational style and patterns of conduct, and that it's very important for the person at the top to behave in a way that instills both confidence and pride.

And that's why there is a grieving period, as she called it, when a CEO is fired or forced to step down in this manner.

"When you work in a large organization like this, and a charismatic leader steps down or is forced out, it becomes disruptive in a personal way," she said. "It leaves questions about leadership in the future, and until things settle down, there's disruption and questions; relationships are built around the existing power structure, and when that shifts, people become uncertain."

End of the Line

Just when things will settle down at MassMutual remains to be seen. For now, the company is saying that the changes will not impact the company's strategic direction or track record for community involvement.

But the burning question is still why? Unless or until it is answered, the community is left with only speculation - not only about what happened, but about what it all means.