Dozens of companies have been scrutinized for their stock options granting practices in the wake of a Wall Street Journal article published last spring, which highlighted the issue.Since then, United Health has been in the media spotlight on the matter.
The upheaval at United Health Group comes a few days after the company's board members saw the damning conclusions of an investigation by an outside law firm looking into backdating.
The report found the effective dates for most of the option grants reviewed were wrong, and many options were likely backdated.
Grants of one million shares to Mc Guire and half a million to Hemsley in 1999 were likely backdated.
After months of questions surrounding United Health Group's stock options practices, the weekend brought a major shakeup in the company's leadership.
In addition to announcing the retirement of CEO Bill Mc Guire, the company also says a board member and the company's general counsel will retire.
Both Mc Guire and his replacement have agreed to reprice their stock options to eliminate any gain from backdating.Backdating involves using the benefit of hindsight to select the effective date and price of an option.Grants to new hires and people receiving promotions were backdated as a matter of policy.Despite Mc Guire's contention that grant dates were chosen without benefit of hindsight, the report says "facts run contrary to this assertion." A company spokesman would not comment on any aspect of the findings, instead deferring to the report and a press release.But Thrivent Financial analyst David Heupel says the report sheds light on why Mc Guire is stepping down, given his apparent knowledge of the options back-dating."It seems as though it was completely determinate by him; he had complete and total control over the when and the amounts of these awards, which is very counter to how a company should work," Heupel says.