Four Board Members Re-Elected to UnitedHealth Board
UnitedHealth Group shareholders on Tuesday at an annual meeting voted to retain all four board members who sought re-election, despite concerns over compensation for CEO William McGuire and other top executives, AP/Hartford Courant reports (Freed, AP/Hartford Courant, 5/3).
A federal civil lawsuit filed last month alleges that McGuire, UnitedHealth Chief Operating Officer Stephen Hemsley and several board members harmed shareholders through the issue of backdated stock options. McGuire has received about $1.6 billion in unexercised stock options.
The board has launched an investigation into the issue, and the company has received a related telephone call from the Securities and Exchange Commission. In response, several large shareholders and proxy companies threatened to withhold votes for some or all of the four board members who sought re-election (California Healthline, 4/26).
On Monday, the board voted to end equity-based awards for McGuire and Hemsley and to eliminate a number of other benefits for top executives (California Healthline, 5/2).
At the meeting on Tuesday, shareholders withheld more than 28% of their votes for board members James Johnson and Mary Mundinger, both members of the compensation committee, and 4% of their votes for McGuire and board member Douglas Leatherdale. According to the Wall Street Journal, "Withholding more than 20% of the votes cast for directors is generally considered to be a notable expression of discontent by shareholders."
The controversy over compensation for top executives prompted about 200 shareholders to attend the meeting -- several times more than in previous years -- as well as a protest outside the UnitedHealth headquarters in Minneapolis (Fuhrmans, Wall Street Journal, 5/3).
Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, said, "Those are big numbers. Almost a third of the shareholders who voted are expressing discontent" (Forster, St. Paul Pioneer Press, 5/3).
McGuire, in a speech to shareholders, said that he could not respond to questions about his stock options because of potential interference with the board investigation into the issue. He said, "We are committed to an open and thorough process, which is the current approach" (Wall Street Journal, 5/3). McGuire added, "I apologize that we find ourselves in the spotlight related to stock options at all. It is not what our customers, our shareholders or our employees deserve from me or an organization with our values and our mission."
McGuire said, "We are aware of the fact that people had issues -- they raised those issues. I think the board responded to the vast majority of those issues" (St. Paul Pioneer Press, 5/3).