MINNEAPOLIS – The stock options scandal claimed its biggest corporate chief yet on Sunday, with UnitedHealth Group Inc. saying Chairman and CEO William McGuire would step down because an outside report found that his option grants “were likely backdated.”
UnitedHealth, the nation’s second-largest managed care company, named its President and Chief Operating Officer Stephen Hemsley to be the new CEO. It installed Richard Burke, the founding CEO of UnitedHealth’s predecessor company, as chairman.
In one example after another, the report by a firm hired by the company’s board said McGuire’s huge awards of stock options got a boost in value because they were issued on one day but priced as if they’d been issued earlier, when the stock price was lower.
That prompted UnitedHealth’s board to announce sweeping changes on Sunday. McGuire will step down immediately as chairman and as a director. The company said that McGuire would continue as CEO until he leaves, no later than Dec. 1, and that he would “assist in an orderly transition to new leadership.”
The company said board member William G. Spears was resigning, and that General Counsel David J. Lubben would retire. The report found that Spears, a member of the board’s compensation committee, managed some of McGuire’s money, something that other board members didn’t believe they had been told.
The UnitedHealth shakeup adds to the list of corner-office victims of stock option backdating. So far, at least 30 senior executives or directors at 16 companies with stock option problems have resigned or been fired. There may be many more to come: At least 135 companies have disclosed Securities and Exchange Commission, Department of Justice or internal investigations according to an Associated Press review.
This past week, McAfee Inc. and CNet Networks Inc. both announced their CEOs would resign, and McAfee also fired its president.