UnitedHealth Plans to Shake Up Governance Policy [WSJ]
By VANESSA FUHRMANS
April 27, 2006; Page A17
UnitedHealth Group Inc.'s board, under fire for past stock-option granting practices, said it would adopt several changes to its corporate-governance policies.
The board also said it would meet Monday to act on recommendations that Chief Executive William McGuire, in a bid to respond to questions surrounding his stock options, made last week. They include terminating further equity-based awards for a small number of the company's most senior executives with large numbers of stock options already, and doing away with noncash forms of compensation.
MORE ON MCGUIRE
• Option grants to William McGuire in 1997, 1999 and 2000 carried dates on which UnitedHealth's stock hit its low for the year. Read more about the grants and those made to other companies' executives in The Perfect Payday (March 18, 2006) and see charts of the option grants.
The health-insurance titan, based in Minnetonka, Minn., has been reviewing some of its corporate-governance policies since last year. But the changes announced yesterday come amid scrutiny of the circumstances under which Dr. McGuire obtained some of the $1.6 billion in unrealized gains he holds in UnitedHealth stock options. He and at least 10 other top executives at times received options just before big run-ups in the company's share price or at the lowest price points in the year, raising questions about the timing of those grants.
The board is expected to adopt Dr. McGuire's recommendations on executive pay. A spokesman said it will be up to the board to decide how many of UnitedHealth's top executives won't be awarded further stock options.
The board said it would recommend to shareholders that the board be declassified, meaning all directors would stand for annual election. Many companies have switched to declassified boards lately, and by year's end, proxy advisory firm Institutional Shareholder Services says, fewer than 50% of companies in the Standard & Poor's 500-stock index are expected to have boards with staggered terms for directors.
UnitedHealth's directors currently serve three-year staggered terms. ISS previously gave UnitedHealth a low ranking for corporate governance, in the bottom 20% of S&P 500 companies.
The board added it would eliminate supermajority-approval requirements in place for some decisions, such as changing control of the company, and limit the number of boards on which its directors serve to six. Other changes include requiring that directors attend director-education sessions and that all members of the audit committee be financial experts.
In addition, it said it would review the company's overall levels of equity-based compensation, performance criteria and vesting policies for equity grants, as well as the level of compensation for board directors.
The questions surrounding UnitedHealth's previous stock-option grant practices, reported in a Wall Street Journal article last month, have prompted a review by a UnitedHealth board committee. The company said it also has received a call from the Securities and Exchange Commission. Dr. McGuire has said the company believes all of its managers followed "appropriate practices" in how past stock options were granted. |
