Severance deal will depend on why CEO left

Whether Putnam's former chief executive, Lawrence J. Lasser, walks away with more than $46 million depends on whether he was forced to resign yesterday by his employer or simply left the company on his own.

According to Lasser's employment agreement and compensation consultants who examined the document, Lasser could be eligible for a multimillion-dollar compensation package after he leaves, if his former employer honors the terms of the agreement Lasser signed in 1997 and which was updated two years ago.

But, if Lasser was let go by the company "for cause" -- a term that is not defined in filings but typically means egregious acts by an employee -- he would not be eligible for the most lucrative provisions of the package he negotiated years ago in the event of his departure.

Compensation experts said it is likely Lasser, who led Putnam for 18 years, agreed to resign only after negotiating some kind of severance package from Putnam's parent company, Marsh & McLennan Companies Inc.

Lasser is a brilliant negotiator and can be expected to push for the most advantageous departure package possible, said his former associates, who refused to be quoted by name.

The circumstances surrounding Lasser's sudden resignation were extraordinary and came after a week of relentless publicity sparked by civil fraud charges filed by state and federal regulators who allege improper trading by two Putnam money managers and a failure by top executives to stop it.

Federal investigators have also launched a criminal investigation into the Boston company, which manages about $272 billion in mutual funds.

Marsh & McLennan yesterday confirmed Lasser is leaving Putnam but would not say why.

"We're not going to get into the specifics" of why Lasser left or the terms of his agreement with the company, said Marsh & McLennan spokesman Jim Fingeroth.

"I can tell you Mr. Lasser has a contract and that the company's advisers are reviewing its terms to determine its obligations to him."

Jeffrey Greenberg, Marsh & McLennan's chairman and chief executive, repeatedly refused to answer questions about Lasser's departure yesterday at a press conference.

Lasser's wife, Michelle Lasser, reached at their Brookline home, said her husband would not comment.

Lasser's severance pay depends entirely on the conditions under which he left and the result of his likely negotiations with Marsh & McLennan, consultants said. Compensation specialists said how much he receives hinges on language in the existing employment contract and whether Lasser violated the terms on which the package depends.

For example, in the employment contract, Marsh & McLennan agreed to pay Lasser's $1 million annual salary plus a bonus through the expiration date of the agreement, Dec. 31, 2005.

If he does receive bonuses for 2003, 2004, and 2005 equal to his 2002 bonus of $7 million, the total bonus plus two years' salary would be $23 million. It could vary, however, depending onPutnam's performance this year. Lasser's bonus reached $33 million during the surging stock market in 2000.

Lasser might not be eligible for continuing salary and bonus if he was terminated "for cause," meaning he was deemed to have committed egregious acts.

Bob Eubank, president of Swift & Murdock, an independent management consulting firm, said Lasser could have been asked to resign "for cause" -- thereby jeopardizing some aspects of his compensation package -- if his actions were deemed egregious by Marsh & McLennan or if fraud inside the company could be linked directly to him.

But he said that errors of judgment or mistakes made as chief executive are probably not grounds for such a harsh dismissal, which would leave Lasser room to negotiate.

"When you have a `for cause' termination, it's something the individual generally did wrong," he said. A company's overall "performance is often not as attributable to a single individual, even if he's the head of the organization."

Even with an employment contract, Larry Casey, a partner with the Boston law firm Perkins Smith & Cohen LLP, said Lasser and Marsh & McLennan could settle the matter in various ways.

They may negotiate a settlement using the contract as a starting point, or they may simply agree to a flat dollar amount to compensate him for his departure.

"I have no idea what that scenario would be," Casey said. "They could throw everything out the window and say we'd like you to resign and this is what we'll offer you. It could be any or a combination of scenarios."

In Lasser's employment contract, the biggest contingent payment would be $15 million for what is termed "a special retirement benefit in consideration for a non-competition covenant and post-consulting employment arrangement."

In other words, Casey said, this provision means that Lasser had agreed to stay on as a consultant after his retirement.

It is unclear under the circumstances whether Lasser would receive this payment and whether Marsh & McLennan would agree that he has actually retired. "We don't know what `retirement' means," Casey said, because this definition is not disclosed by Marsh & McLennan.

Whether Lasser is paid a special grant awarded him in February 2001 also depends on whether he was terminated for cause. The grant was an amount equal to the value of 150,000 shares of Marsh & McLennan, when the stock was about $55.67 a share, for a total of about $8.35 million. The contract said, "Mr. Lasser will not receive the Putnam Fund Payment if he is terminated for cause or terminates his own employment (other than for `good cause') prior to Dec. 31, 2005." The grant was invested in Putnam mutual funds, making it impossible to determine its current worth.

Lasser's compensation package may be much larger if thousands of stock options granted him in recent years by Marsh & McLennan are vested on an accelerated basis and are included in the package. Last year, for example, he was awarded options to purchase 100,000 shares of Marsh & McLennan and 50,000 shares of Putnam's private stock, valued at $74.57 per share in March 2003. Under a contract favorable to Lasser, vesting for Lasser's shares could be accelerated. Not enough information was available in the March 2003 proxy to determine the value of the options.

Kimberly Blanton can be reached at blanton@globe.com. Andrew Caffrey contributed to this article.