
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. McGuire amassed $2.1 billion in stock options, in part by allegedly picking the lowest price each year for his annual options grants.
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.
Both McGuire and UnitedHealth Group’s new CEO Stephen Hemsley had made personal investment management arrangements with former Compensation Committee Chair William G. Spears. 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. In March 2007, UnitedHealth Group was forced to restate its earnings, reducing them by $1.13 billion over a 12-year period.
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. UnitedHealth Group remains mired in litigation with major institutional investors, including pension funds in Ohio, Minnesota and three other states. Moreover, the U.S. Securities and Exchange Commission, Internal Revenue Service and the U.S. Department of Justice each continue to investigate the company.
McGuire’s retirement status and his stock options are frozen while a Special Litigation Committee attempts to resolve matters. His employment agreement provides that all his stock options will vest immediately, in addition to receiving his guaranteed pension. 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.