THE running of the entire public transport system in the Scottish capital is under review after the implosion of the board at Lothian Buses.

A leaked letter by Edinburgh City Council director of corporate governance finance reveals a "phased approach to resolve the challenges of the dysfunctional executive director team and secure leadership and control" is being put in place at the troubled bus firm.

The correspondence from Alastair McLean reveals the bus board overhaul has prompted a wider "review of governance" of Transport for Edinburgh, which encompasses Edinburgh Trams and Lothian Buses.

Lothian Buses has been mired in an embarrassing boardroom dispute among four directors - chief executive Ian Craig and directors Bill Devlin, Bill Campbell and Norman Strachan.

The tussle ended with allegations made against Mr Craig, but an investigation cleared him of any wrongdoing.

Part of the overhaul is to introduce new non-executive director positions on Transport for Edinburgh's boards as it moves to stabilise management of the bus firm.

A new system of meetings between the bus and tram boards is being planned to foster "strong liaison" between directors of both those and the umbrella firm.

It is thought this will also help prevent isolated disputes descending to a damaging level.

The four directors, who each earned between £190,000 and £270,000 in 2013, have agreed handshake deals with two years' notice.

The first steps in the overhaul of the top flight at the Edinburgh City Council-owned bus company are already in place, with an interim chairman, Tony Depledge and general manager, Jim McFarlane.

A new vice chairman, John Martin, is also appointed to the board.

A recruitment process is now under way for non-executive director positions on the Transport for Edinburgh, Lothian Buses and Edinburgh Trams boards.

The transport group is also recruiting a non-executive chair for Lothian Buses and a separate non-executive chair for Edinburgh Trams.

The bus company came under the spotlight again last week after diary entries obtained under Freedom of Information revealed the four directors accepted hospitality from Volvo on seven occasions in just over a year as it sealed two consignments of a total of 45 new green buses with £10 million-plus.

Although the practice is normal and no wrongdoing by either suppliers or directors was suggested, Lothian Buses moved to tighten up its protocol on transparency after it was revealed.

The firm said it has since updated its code of conduct and changed its policy to ensure all gifts and hospitality over £100 are recorded, instead of a previous £300 threshold that was in place prior to January.

A spokesman for Lothian Buses said: "Interim management arrangements are in now place and working well.

"Recent passenger satisfaction rates were among the highest in the country and the company is performing well against a range of other important measures.

"The priority now is to maintain this level of performance and to ensure our passengers get the best possible service."

Lesley Hinds, Edinburgh City Council's transport chair, said: "Edinburgh has much to shout about with a highly rated publicly owned bus company, a growing international airport, quality rail links and, of course, a new tram system with genuine potential for expansion.

"Transport for Edinburgh's vision is to provide a seamless a public transport offer, combining Lothian Buses and Edinburgh Trams, to drive the future success of the city.

"We're looking for people to join us on our boards to help us achieve that vision."