Adrian Walker

‘Sunlight really works’

By Adrian Walker
Globe Columnist / July 11, 2011

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You can’t blame Cleve Killingsworth, not entirely, for pocketing his absolutely obscene $4.2 million severance package from Blue Cross Blue Shield, the giant insurance company that he left last year under circumstances that remain unexplained.

But there was a glimmer of justice in Attorney General Martha Coakley’s announcement last week that an amount equal to that hefty sum will be returned to Blue Cross customers. Killingsworth keeps his money, but the customers are no longer left with the tab.

Killingsworth resigned as CEO - apparently, not of his own volition - in March 2010. Like many a corporate honcho, he had earlier negotiated an exit package most of us can only envy. He was due a grand total in salary and severance north of $11 million, which he could lose only if he were fired for “willful misconduct.’’ To be fair, this kind of corporate larceny has become commonplace.

Enter Coakley, whose scathing report prompted a decision by Blue Cross to give back the severance part of Killingsworth’s package. The company had already agreed to stop paying its board members, payments that had been called into question in the Killingsworth probe. “Sunlight really does work on these things,’’ Coakley said in a telephone interview last week. “We don’t want to micromanage the board - that’s not my responsibility - but the board should manage independently, and in the best interest of the institution.’’

Blue Cross customers are not going to see a windfall from this agreement; it works out to about $1.50 per customer, on average. But Coakley said it sends a message of restraint.

Coakley said that Killingsworth’s deal was comparable to others her office reviewed. As a result, charities will be required to disclose the employment deals of senior officials. No more seven-figure severance agreements that come to light only after they are paid - if ever.

A stickier issue is dealing with boards of directors themselves, including whether they should be paid, and whether a paid board should set executive salaries. Coakley argues, forcefully, that it creates inevitable conflicts of interest. To date, Blue Cross and Fallon Community Health Plan have agreed to stop paying board members while Harvard Pilgrim and Tufts say they will continue the practice.

“When you are getting compensation and setting compensation, you’re serving two masters,’’ Coakley said. “I’ll give the [Blue Cross] board their credit - they saw what we saw, and what the public saw.’’ Coakley thinks that the board also is in need of greater financial expertise, believing that a more knowledgeable board would be better equipped to act independently. Makes sense to me.

Since news of his golden parachute broke last winter, Killingsworth has declined to talk about his deal. That’s unfortunate. I would like to know, among other things, how he managed to serve on 14 other boards, three of which were paying him, at the same time that he ran a huge insurance company.

The end - I hope - of backroom dealing over nonprofit salaries is important. Regardless of the true impact on the cost of health care, the public has a right to transparency. If the pressure serves to drive down inflated salaries, so much the better. There is already evidence that it does; Killingsworth’s successor, Andrew Dreyfus, makes substantially less money, and will get a much smaller severance when he leaves. Good.

Victories against shady corporate practices don’t necessarily generate headlines, and AGs have not always been enthusiastic about picking fights with well-heeled adversaries. But, ultimately, the public pays for these deals. Coakley deserves credit for forcing at least one company to behave more responsibly.

Adrian Walker is a Globe columnist. He can be reached at