Pharma Insight

Sunday, October 15, 2006

UnitedHealth (UNH) said Chairman and Chief Executive William McGuire is stepping down as part of a shake-up of its senior ranks following an investigation into the backdating of past stock option awards. McGuire quit Sunday as chairman, and he will resign from the CEO post by Dec. 1. Until then, he will remain CEO to assist in the transition, UnitedHealth said. Replacing McGuire as chief executive will be Stephen Hemsley, the current president and chief operating officer who joined the company in 1997. At the same time, the company created the position of nonexecutive chairman of the board and said Richard Burke, the founding CEO of UnitedHealth and a director since 1977, will take the post immediately. McGuire though, wasn't the only executive on his way out of the health insurer. The board also accepted the resignation of director William Spears, and said David Lubben will proceed with his plans to retire and is stepping down as general counsel and secretary. Hemsley has voluntarily agreed to reprice all options awarded through 2002 to the annual high share price for each year, and "to take any other appropriate action to eliminate any possible financial benefit from options-related issues" found during the options probe. Additionally, McGuire will reprice all the options he received from 1994 through 2002 to the annual high share price for each year. UnitedHealth's board will have five seats filled by new independent directors during the next three years, and a new senior executive position of chief legal officer will be established. The company will also have a chief ethics officer among its senior executives. Going forward, the company will eliminate the authority of management to make equity awards. From now on, broad-based equity awards to executives and employees will occur annually and will be approved at the board meeting that generally coincides with UnitedHealth's annual meeting. UnitedHealth reaffirmed its previously issued guidance for the remainder of 2006 and for 2007, and it plans to hold its quarterly earnings conference call on Oct. 19, as scheduled. However, the company will likely delay filing its third-quarter Form 10-Q with the Securities and Exchange Commission. UnitedHealth hasn't determined whether any restatements of will be required.

posted by pharma-insight @ 7:00 PM

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