Clash between VHI board and MD imminent

A CLASH between the board of the VHI and its managing director is expected, as a report recommending significant changes at the organisation comes before the board on Thursday. The report was drawn up by a board subcommittee following a decision at a meeting on June 18th, and comes as the VHI is about to face competition in the Irish market for the first time.

The subcommittee examined the senior management structure of the VHI and is understood to have views different to those of the managing director, Mr Brian Duncan.

The board decided at its June meeting to get a subcommittee to examine a number of issues. These included the overall role, duties and function of the managing director and the board and certain specific matters relating to this area. It was told to report back to the board on its findings.

The four members of the sub committee are Mr Paul Coulson, a businessman; Mr Phil Flynn, former president of ICTU; Ms Suzanne Kelly, a barrister and a tax adviser; and Ms Clare O'Connor. Three of these are among seven directors appointed to the board last May. Ms Kelly is a longer standing board member.

A number of areas of tension between the company's board and management have emerged in recent months. These include the role of a senior executive in the company and the handling of a dispute with the private hospitals. Mr Duncan is understood to have recommended to the board that a settlement be reached in a dispute with the private hospitals. However this did not happen and VHI patients must now pay top ups to their bills for many treatments in these hospitals.

These and other issues led to tensions between the company chairman, Mr Noel Hanlon and Mr Duncan. However, now a number of members of the board are understood to have differences with Mr Duncan. The Minister for Health, Mr Noonan, is understood to have been made aware about the boardroom tensions.

The VHI faces competition in the market for the first time, with the British company, BUPA, due to launch shortly in Ireland. It has already established its headquarters in Fermoy, Co Cork. Two former VHI senior executives are heading up the Irish venture.

The VHI is also facing criticism for implementing regular premium increases, largely due to the costs of new medical technology. Despite these increases it has still incurred underwriting losses, with its financial position supported by return on investments.

These factors and the appointment of seven new board members earlier this year have led to a fresh examination of the company's structures and strategies. A number of board subcommittees is examining the challenges facing the company. However, Thursday's meeting is expected to be dominated by discussion of the report of the four person subcommittee which examined the operation of the management and the board.

Mr Duncan was appointed as managing director of the VHI two years ago, having left Irish Life after a long career with that company. Mr Hanlon is also chairman of Aer Rianta. His current term as chairman will be completed next February.

Following the departure of a former chief executive, Mr Tom Ryan, in early 1994, a special committee was formed to advise on the organisation of the VHI. Former Aer Lingus chief executive Mr David Kennedy chaired the group. One of its recommendations was the enlargement of the board, which previously only had five members, but now has 12. It examined the relationship between the chairman and chief executive. However, this issue has had to be re examined by the latest board subcommittee.