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2 Blue Cross directors justify stipends

COMPENSATION “Because it’s a $13 billion company, there’s a lot of responsibility for directors,” said Blue Cross director Paul Guzzi, who received $84,463 from the insurer last year. COMPENSATION “Because it’s a $13 billion company, there’s a lot of responsibility for directors,” said Blue Cross director Paul Guzzi, who received $84,463 from the insurer last year.
By Michael Levenson and Robert Weisman
Globe Staff / March 8, 2011

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Two Blue Cross Blue Shield of Massachusetts board members yesterday defended accepting payments for their part-time work on behalf of the nonprofit insurer.

Money disbursed to 18 company directors in 2010 became an issue after Blue Cross last week disclosed in a public filing that its board voted to give former chief executive Cleve L. Killingsworth $8.6 million in severance and other compensation last year, plus $2.7 million in additional severance over the next two years.

Attorney General Martha Coakley said her office is investigating whether the payment, stipulated by Killingsworth’s contract, was proper. It is also conducting an inquiry into director compensation at Blue Cross, the state’s largest health insurer.

Robert J. Haynes, president of the Massachusetts AFL-CIO and a critic of excessive corporate pay, was questioned about his role on the board following a State House news conference he held on a union-backed plan aimed at lowering health care costs. He said he would not give up his $72,000 annual payment from Blue Cross until the issue was reviewed by the company, and said the money given to board members does not play a role in rising health care costs.

“The cost of health insurance is not affected very much,’’ Haynes said. “It’s about $1 million that board members get paid. On $13 billion in revenue, it’s like pennies a year.’’ Nevertheless, he said, Coakley and Blue Cross are “going to deal with that.’’

Haynes also said he had reservations about Killingsworth’s $8.6 million payout, but did not say whether he spoke out against it or voted against the deal.

“Blue Cross Blue Shield is a Fortune 500-sized company that mirrors their business practices and their compensation practices with their peers and competitors in the marketplace,’’ he said. “So, yeah, I’m a little uncomfortable with huge payments like that. I’m one member of the board and a lot of things get done there.’’

The issue is an awkward one for Haynes, who frequently excoriates executives for their lavish compensation and says he sits on the board to represent “working men and women.’’

Blue Cross director Paul Guzzi, who received $84,463 from the insurer last year, said in an interview that board members attended more than two dozen board and committee meetings in 2010, working on issues ranging from audit review to corporate governance to health care quality.

“Because it’s a $13 billion company, there’s a lot of responsibility for directors,’’ said Guzzi, who is also president of the Greater Boston Chamber of Commerce. “The attorney general is reviewing all of this. We’re going to actively cooperate with the attorney general’s investigation, and we’ll go from there.’’

The state’s other nonprofit health insurers also pay board members, as do Blue Cross organizations in most other states. But many other Massachusetts nonprofits, including hospitals and universities, do not compensate board members.

Guzzi, who was chairman of the Blue Cross board when it negotiated Killingsworth’s departure, said, “The basic point is the company was honoring a contract and contract provisions with Cleve.’’

Other members of the Blue Cross board did not return phone calls yesterday.

Michael Levenson can be reached at mlevenson@globe.com and Robert Weisman can be reached at weisman@globe.com.