Board of Md. Blue Cross rebuffs senior executives Directors increase financial oversight

February 06, 1993|By Patricia Meisol | Patricia Meisol,Staff Writer

In a sign that it is taking a more questioning stance toward management, the board of Blue Cross and Blue Shield of Maryland has rebuffed senior executives on two major issues and stepped up its oversight of company finances.

In the first instance, the directors told the only remaining member of the former executive team to retire even though the Blues' interim chief executive wanted him to stay. In the second, the directors postponed a vote on a major contract on electronic claims processing that some employees feared would hurt the insurer in the long term. The board decided to put off a vote until it obtained an "objective" expert opinion from outside the company.

Blues Chairman Frank A. Gunther Jr. said both actions came at the board's Jan. 28 meeting. In addition, he said, the debate over the contract sparked a discussion on when the board should be involved in management decisions. He said guidelines are being prepared.

The directors also decided to meet monthly instead of eight times a year and to keep closer tabs on finances: The board's audit committee will meet quarterly, including one-on-one sessions with outside auditors to ensure independence, company officials said.

Mr. Gunther became chairman in October after a congressional probe detailed mismanagement and excessive spending at the state's largest health insurer. Top management left in December, and a longtime director, William A. Beasman Jr., was named to temporarily run the insurer's day-to-day operations.

In a prepared statement yesterday, Mr. Beasman said the board is doing "what it should. It is providing a check-and-balance system for the management of this company."

The insurer is on the verge of signing a contract with Electronic Data Systems Inc. of Dallas to take over and manage its electronic claims network. But directors first want to assure themselves that signing the contract would not lock the insurer into giving away a huge chunk of Blues business down the road, Mr. Gunther said.

The deal involves a multimillion-dollar cash contribution from EDS for an aging Blues subsidiary, LifeCard, a move some insiders saw as the computer company's bid to get a toehold on potentially far more lucrative claims processing business down the road.

Mr. Gunther said the outside expert, yet to be named, is to verify that the contract is limited in scope and won't lock in the insurer. He said he himself raised the question.

Also yesterday, the Blues announced the retirement of Fred M. Gloth Jr. after 42 years as a senior vice president and corporate secretary. Mr. Gloth has been slated to retire at least three times, most recently in December, when Mr. Beasman asked him to stay through 1993. At the time, Mr. Beasman said his hands would be tied without Mr. Gloth, whom he has known for several decades and who "knows what questions to ask."

But Mr. Gunther said the directors felt he should go, particularly given the board's decision to hire lawyers to try to reduce Mr. Gloth's supplementary retirement package of more than $2 million. "We had to decide what was in the best interests of Blue Cross and Blue Shield, not necessarily what is in the interest of Bill Beasman," Mr. Gunther said.

Mr. Gloth joined Blue Cross in April 1951 and has held the titles of senior vice president, general counsel and corporate secretary.

His job as board secretary and his company salary ends Feb. 14, but Mr. Gloth said he is not going any time soon.

Reached yesterday, Mr. Gloth said he is "running the company, or helping to run it," and will continue to work for Mr. Beasman on a "pro bono," or unpaid, basis after his formal retirement.

"I still am staying," Mr. Gloth said.

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