Unbiased Analysis of Today's Healthcare Issues

UnitedHealth Group CEO stepping down; agrees to reprice $1.6 billion of stock options

Written By: Jason Shafrin - Oct• 16•06

The dealings of William McGuire, CEO of UnitedHealth Group, have been topic occasionally touched on by the Healthcare Economist (see May 19th and February 14th posts).  Today, Yahoo! News reported that Mr. McGuire will step down as chairman and CEO after questions arose regarding Mr. McGuire’s possibly illicit stock option compensation.  More from the Yahoo! article:

“McGuire has been under pressure since The Wall Street Journal reported in March that he received stock options on the days the company’s stock price hit yearly lows in 1997, 1999, and 2000. The timing is unlikely unless the grants were backdated.  Since the option’s price is set according to the stock price on the day of the grant, a low stock price makes an option more valuable.  Backdating stock options isn’t always illegal, but failing to disclose it can trigger tax and regulatory problems. Indeed, on May 11, UnitedHealth acknowledged a “significant deficiency” in its handling of stock options and said it may have to restate as much as $286 million in earnings for 2003, 2004, and 2005.  The company said McGuire had agreed to reprice his stock options to their yearly highs in 1994 through 2002 ‘and take any other appropriate action to eliminate any possible financial benefit from options-related issues identified in the report.’

McGuire had $1.6 billion in exercisable options as of the end of 2005, before the repricing announced Sunday.”

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  1. Scott Peterson says:

    The $1.6 billion value mentioned in connection with these options is mind-boggling. I just checked UnitedHealth’s stock price and the total market value of the company as of today is about $65 billion.

  2. […] UnitedHealth Group CEO William McGuire’s $125 million worth of compensation in 2005 (and his subsequent stepping down from the position). This figure should be seen as the right tail of the health insurance CEO […]

  3. […] time UnitedHealth Group has made it to the Healthcare Economist for unsavory behavior (see “Options Backdating” […]