Here is the story of the $50 million payday that the fired chief executive of MassMutual Financial Group has been awarded in an arbitration. There are a lot of lessons here, and maybe the first one is that in some instances it may just be better to be wrongly fired than rightly employed. Of course he was making over $11 million a year when he was fired, a fact apparently justified by the company’s growth cited in the article.
But beyond that, the better lesson may be that it is simply not wise to just insert arbitration agreements willy nilly into employment contracts and other agreements. As the article points out, the award only came to light because the arbitration award is being appealed to the courts. As the article also rightly – and correctly – points out, the grounds on which a court can overturn that award are pretty narrow, a point I have discussed before. In comparison, of course, if a trial court had imposed that award, at least one, and perhaps two, levels of appellate review would remain before courts possessing broad powers to overturn the award.
I have often said that companies that want to be able to assert their full panoply of legal rights should avoid arbitration like the plague, and I am betting that MassMutual, stuck with a huge arbitration verdict against it and a limited ability to overturn it, recognizes that now. This is particularly interesting because it reflects in a way on something I discussed the other day, that statistics indicate that the most sophisticated companies are avoiding inserting arbitration clauses in their contracts, and this MassMutual result suggests the wisdom of that.