Blues board agrees to cancel bonuses for top executives, sell Orioles sky box

October 23, 1992|By Patricia Meisol and Ann LoLordo | Patricia Meisol and Ann LoLordo,Staff Writers

The directors of Blue Cross and Blue Shield of Maryland yesterday agreed to cancel annual bonuses to top executives this year, end its membership in an exclusive golf club and put the health insurer's premium sky box at Oriole Park at Camden Yards up for sale.

The board also canceled the Blues' annual Preakness hospitality tent, saying the event, formerly defended as a marketing tool to draw new business, had now become "a liability instead of an asset for the company."

Future bonuses for the executives as well as heads of Blues subsidiaries -- 28 executives in all -- will be tied to how well the company serves its 1.4 million subscribers, including the speed and accuracy of processing claims. That could eliminate bonuses for a second year, 1993, and perhaps more, the company said.

The cuts, recommended by senior management, may amount to $1 million, a fraction of the health insurer's $1.4 billion annual operation. But they represent the board's first attempt to quell mounting public criticism over extravagant salaries and perks detailed in a recent U.S. Senate subcommittee report.

"We hope these changes will help us regain the public's trust," board Chairman Frank A. Gunther Jr. said. "This was a joint decision by both management and the board based on some heart-wrenching decisions by management."

Mr. Gunther previously said the company would respond all at once with recommended changes in 30 to 60 days rather than announce them "piecemeal." The board yesterday decided to release some of its changes sooner, Mr. Gunther said, because "we continue to get a lot of criticism" and some of the board's most important work requires more study.

"The committee felt strongly, 'Let's get some of the things out in the public,' because if we waited too long, people would think we were not doing anything," he said.

Board members also said they would cut their own pay to the average fees paid to boards of similar- sized Blues plans. They now make an estimated $17,600, depending on attendance at meetings. Their salary is nearly double the average cash compensation for Blues boards nationally.

In making its cuts, the board zeroed in on items that proved most embarrassing to directors in the aftermath of September Senate hearings on the company's management.

Earlier this month the directors stripped company President Carl J. Sardegna of his title as board chair and set up a committee to examine ways to respond to more substantive Senate findings, such as a history of poor management and concern over the financial health of the company. Mr. Sardegna, whose $850,000 compensation makes him one of the highest paid insurance executives in the country, remains in charge of day-to-day operations.

The actions come as the company prepares its third-quarter financial report, due to the state Nov. 30. Mr. Gunther said yesterday the company continues to improve and may have its best year ever.

The executive bonuses, available only to a handful of top officials, amount to 50 percent to 75 percent of annual salary and are pegged to growth in the company's net worth. In 1991, the four top executives received a total of $585,000 in bonuses, including a quarter of a million dollars for Mr. Sardegna. The other corporate executives losing bonuses this year are Charles E. Vadakin II, executive vice president; Fred M. Gloth Jr., corporate secretary; and two senior vice presidents, Stephen E. Bailey and Philip H. Grantham.

The Blues have a four-year lease, at $75,000 a year, for an Orioles sky box that has 14 seats, two color televisions, private bathrooms and a wet bar. The company also will resign its corporate membership in Caves Valley Country Club.

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