Dr. William McGuire, who retired as CEO of UnitedHealth Group in 2006, became the poster-child for stock options backdating after a front page Wall Street Journal report.[1] McGuire amassed $2.1 billion in stock options,[2] in part by allegedly picking the lowest price each year for his annual options grants.[3] 

Throughout his tenure as CEO, the UnitedHealth Group board of directors routinely showered McGuire with enormous option grants. They also gave him a guaranteed pension of $5.1 million per year and lifetime health insurance for himself and his wife.[4] 

Both McGuire and UnitedHealth Group’s new CEO Stephen Hemsley had made personal investment management arrangements with former Compensation Committee Chair William G. Spears.[5] Spears resigned from the board the same day McGuire announced his resignation as CEO.

Before the stock options scandal broke at UnitedHealth Group in January 2006, its shares traded at $63, falling to a low of $42 in May.[6] In March 2007, UnitedHealth Group was forced to restate its earnings, reducing them by $1.13 billion over a 12-year period.[7]

The UnitedHealth Group board adopted a number of reforms after McGuire’s departure, including the creation of a non-executive chairman of the board, a chief ethics officer, and eliminating enhanced severance payments to each executive officer in connection with change in control transactions.[8] UnitedHealth Group remains mired in litigation with major institutional investors, including pension funds in Ohio, Minnesota and three other states.[9]  Moreover, the U.S. Securities and Exchange Commission, Internal Revenue Service and the U.S. Department of Justice each continue to investigate the company.[10] 

McGuire’s retirement status and his stock options are frozen while a Special Litigation Committee attempts to resolve matters.[11] His employment agreement provides that all his stock options will vest immediately, in addition to receiving his guaranteed pension.[12] His employment agreement also provides for additional retirement perks, including company payment of his insurance premiums, provision of an office, a secretary and personal use of the company aircraft. [13]