MINNEAPOLIS (AP) - Last May, UnitedHealth held its annual meeting in a wide spot in a hallway at its leafy suburban campus. Chairman and Chief Executive William McGuire apologized to about 100 shareholders for a stock options scandal that wasn't yet at a full boil.
This year McGuire is gone but the Securities and Exchange Commission investigation isn't, and Tuesday's annual meeting is moving to the Minneapolis Convention Center.
One proposal seeks an advisory vote for shareholders on executive compensation. Another, from the California public pension system, would allow shareholders who own more than 3 percent of UnitedHealth Group Inc. shares to put up director candidates. UnitedHealth opposes all shareholders proposals that have been put forth.
Instead, it has taken measures to respond to shareholder anger over the stock options scandal. McGuire, a director, and the company's general counsel all stepped down. UnitedHealth has tightened corporate governance policies and cut executive perks. New CEO Stephen Hemsley, unlike his predecessor, can't take personal flights on the corporate jet.
UnitedHealth was one of the companies caught up in stock-option backdating investigations in which options grant dates are artificially pegged to the lowest price for a company's shares, meaning windfall profits for the grantee.
The company is making concessions by proposing a switch to annual elections for company directors who must win a majority of votes in uncontested elections, rather than the plurality vote required in the past.
UnitedHealth also said it will add five new independent directors, one of whom is up for a shareholder vote on Tuesday.
Shareholder advisory firm Institutional Shareholder Services rates UnitedHealth's corporate governance practices above 91 percent of other large companies, up from 19 percent a year ago.
Will it be enough?
The three major shareholder advisory firms are divided. Proxy Governance Inc. sided with the company on each issue coming before shareholders. Glass Lewis & Co. is recommending that shareholders withhold votes from all but the new independent director, arguing the other three, including Hemsley, were present when the options backdating happened. Glass Lewis is even opposing the usually routine ratification of UnitedHealth auditor Deloitte & Touche LLP, saying it should have picked up on the irregularities.
A company-sponsored report said Hemsley had as much as $52 million under management last year with director and one-time compensation committee member William G. Spears, who has worked as an investment manager. Spears stepped down last fall after the same report raised questions about whether he had disclosed to the board that he was managing some of McGuire's investments.
'All of those things in combination are not solved magically by reforming a few corporate governance issues,' Glass Lewis analyst Nathan Williams said.
The shareholder proposals, however, now appear dated following reforms at UnitedHealth, said Shirley Westcott, the managing director of the policy staff at shareholder advisory firm Proxy Governance Inc.
'They've really engaged in a good deal of housecleaning,' she said.
'Despite the scandals, they've done well,' Westcott said. 'And I think that's really the bottom line for most shareholders.'
UnitedHealth shares rose from a split-adjusted 30 cents per share in 1990 to a peak of over $62 in December 2005. A $10,000 investment in 1990 would have been worth more than $2 million at its peak.
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