Commissioners Back Leonardi Corporate Governance Idea, While Opponents Cite Flawed Process
December 18, 2013 by Thomas Harman
WASHINGTON – Commissioners watching the National Association of Insurance Commissioners’ executive committee’s controversial vote rejecting having a consultant examine the NAIC’s corporate governance practices said they may still support the idea, while one who voted against it said he agreed with the motion in principle but differed on the process.
The panel’s vote rejecting the idea followed a letter from the motion’s sponsor, Connecticut Commissioner Thomas Leonardi, to individual commissioners that indicated NAIC was rife with corporate governance problems, cronyism among them (Best’s News Service, Dec. 16, 2013). The Executive Committee then voted to allow review by an ad hoc corporate governance committee, which has been at work examining corporate governance. Ad hoc Panel Chairman John Huff of Missouri said corporate governance work would continue in that group. “The group has begun an outside review of the NAIC bylaws and other corporate governance issues and will incorporate the proposal to seek an outside consultant as that work continues,” Huff said.North Carolina Insurance Commissioner Wayne Goodwin told Best’s News Service he favored Leonardi’s position and would have voted for it had he been a panel member. “I’m with Leonardi,” he said. “There needs to be a critical evaluation of what we do as an association, and how we do our jobs as an association,” he said. Goodwin said it is not helpful for any association to have such battles in public when they can be addressed privately.
Goodwin said the closure of debate before several interested parties had finished speaking — himself included — was upsetting. “I would like to have voted [for the measure],” he said. “I anticipate that this issue is not done, given the players and the topic involved.”
Goodwin said he is trying to take positives from the exchange, and said it was good that NAIC is “having such a vigorous debate about what to do and what we have to do,” he said. “It shows we’re having growing pains as an association.”
Washington Commissioner Mike Kreidler was another commissioner who was present for the discussion although he was not a member. “If I had been, I would have voted for it,” he said of Leonardi’s motion. Kreidler offered no comment on the wording of Leonardi’s letter, but said Leonardi was proposing ways in which the NAIC could be more effective.
One opponent of Leonardi’s motion, Stephen Robertson of Indiana, said he voted against the motion but not because he is opposed to the notion of outside corporate governance. “I believe in process,” he said. Leonardi’s proposal, he said, lacked definition as to what the outside group was going to do. “I’m not opposed to Commissioner Leonardi,” Robertson said. “It was more of a process issue.”
South Dakota Insurance Director Merle Scheiber’s reaction was in line with Robertson’s. Scheiber, while not a panel member, was present for the meeting. He did not agree with what happened in terms of comment being cut off during debate, but agreed with the ultimate result.
Scheiber told Best’s News Service he differed with the idea that NAIC should move to immediately obtain an outside consultant. “We have a process that we’re working through to address all of the challenges we have lately,” he said. Those who seek an outside consultant, he said, should make use of NAIC’s process.
Scheiber said the tipping point for the matter should be in February, which is when the ad hoc corporate governance committee should report to a meeting of commissioners in Arizona. However, if the committee does not perform its work by then, NAIC should move toward Leonardi’s proposal and find an outside consultant, he said.
The 12-5 vote at the NAIC Fall National Meeting in Washington came just five days after Leonardi sent a private letter to all 56 U.S. insurance commissioners and supervisors that was highly critical of NAIC’s governance failings. Leonardi brought a motion to the committee seeking to authorize a committee to hire a consultant who would examine NAIC corporate governance (Best’s News Service, Dec. 16, 2013).
In his letter, he asked that an outside consultant be allowed to investigate NAIC’s governance structure and pursue initiatives that included a clarification of the role and authorities of officers, the executive commissioner and broader membership in making key decisions impacting state regulation, with particular attention given to how NAIC appoints representatives to external forums such as the International Association of Insurance Supervisors. Also, consultants should review the best practices of NAIC elections, and to clarify the role of chief executive officer to determine whether best practices are being followed.
After the panel’s vote on Dec. 16, Leonardi expressed surprise that not everyone who wanted to speak got a chance to do so. He said it was “an unfortunate public display that showed poor support for transparency.” He said he was asking to find a consultant by having the same type of process that involved the hiring of Sen. Ben Nelson as chief executive officer. “What are we afraid of?” he asked, wondering out loud whether NAIC was so insecure that it was afraid of having a consultant look (Best’s News Service, Dec. 16, 2013).
(By Thomas Harman, associate editor, BestWeek: Tom.Harman@ambest.com)
