The departing chief executive at Blue Cross and Blue Shield of Minnesota earned about $20,000 in consulting income from an investment banking firm during his time as CEO, but didn't disclose the arrangement to the health insurer's board of directors.
Eagan-based Blue Cross said it learned of the payments only after being contacted by the Star Tribune, adding that Michael Guyette's move to a new CEO job in California is unrelated to the payments.
Guyette, who was unavailable for comment, served his last day at Blue Cross on Friday. The insurer said Guyette is giving the money to Blue Cross for donation to health care charities.
"We were unaware of this prior to your question and have determined that these consulting activities were not previously disclosed," Blue Cross said in a statement to the Star Tribune. "We do have conflict of interest and disclosure policies."
Guyette took the top job in January 2013 at Blue Cross, which is one of the state's largest heath insurers. As such, he's been one of the most highly paid CEOs among nonprofits in the state, with income in 2014 and 2015 of more than $2.9 million each year, according to the Star Tribune's annual survey of executive compensation at Minnesota nonprofits.
In 2014, Guyette earned $5,000 in consulting income from an unnamed investment banking firm, according a court document related to the dissolution of his marriage. In 2015, Guyette earned business income of $15,500 for providing consulting services to the same investment banking firm, according to the court document.
"This de minimus, nonrecurring supplemental income is not consistently or regularly received and will not be considered in the analysis of spousal maintenance," according to January 2017 findings of fact from the judge in the case.
Blue Cross did not identify the investment banking firm in written responses to questions from the Star Tribune.
"The board has reviewed this matter," the insurer said in a statement. "Mike will provide these external consulting fees to Blue Cross and Blue Shield of Minnesota. We will direct these funds to Minnesota charities dedicated to improving the health of Minnesotans."
Blue Cross is a nonprofit with about 3,500 employees and 2016 revenue of $12.1 billion. It's unusual for a CEO at a large company to do outside consulting work, corporate governance experts said.
"The board is paying the CEO to focus, generally, 100 percent on the corporation's business," said Louis Ainsworth, a faculty member at Mitchell Hamline School of Law in St. Paul. "If he's not, how much time does this consulting really interfere with what he should be doing?"
Disclosure is important, he said, because the board needs to know if the CEO has a relationship with an investment bank, in the event Blue Cross might need to hire such a service provider.
"Suppose Blue Cross Blue Shield were in a situation where they needed financial advice," Ainsworth said. "To what extent could that financial advice be steered toward a particular firm? That's the conflict of interest that the board would want to know about."
In statements to the Star Tribune, Blue Cross did not say whether the insurance company did business with the investment bank that hired Guyette as a consultant. The insurer did not describe the nature of the consulting work.
Guyette was named in February as the next chief executive of VSP Global, an insurer based in California. Before hiring Guyette, the Blue Cross board of trustees said it had questions about whether previous CEO Kenneth Burdick had adequately disclosed "anticipated business activities," according to a July 2012 statement announcing Burdick's departure.
"The internal investigation concluded there had been no financial impropriety or unlawful actions, but the lack of disclosure was not in alignment with Blue Cross policies and management expectations," the insurer said at the time. "In addition, the board concluded that the organization required a different style of leadership to lead the organization."
With Guyette's departure, board member Kathleen Blatz is serving as interim CEO at Blue Cross. The insurer didn't say whether it is changing its disclosure and conflict of interest policies, or reinforcing the existing rules, as it searches for a permanent chief executive.