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Up in Arms About UnitedHealth
Readers Protest Conflicts of Interest, Treatment of Shareholders, Clients
By Alan Murray
The Wall Street Journal
Saturday, October 21, 2006

Reaction to last week's Business column, which dealt with UnitedHealth Chief Executive William McGuire -- who has agreed to step down by Dec. 1 -- shows the options backdating scandal continues to feed anger over the high pay of U.S. CEOs.

A few commentators, including my colleague on the Journal's editorial page, Holman Jenkins, argue the problem has been overblown.  If shareholders want to give top executives stock options that are already "in the money," why shouldn't they be able to?

But the UnitedHealth case raises questions about whether shareholders are being fairly represented.  Dr. McGuire's compensation was negotiated by New York investment manager William Spears, who at the same time was being paid by Dr. McGuire to manage his money and run two trusts for his children.  To other members of the UnitedHealth board, who claimed not to know of the relationship until this spring, that sounded like an obvious conflict of interest.

Here's what reader Syl Kontowicz of Woodlands, Texas, had to say about it:  "Kudos to the WSJ for exposing the unscrupulous machinations of these unconscionable, narcissistic executives that are financially raping their stockholders and clients.  I'm a strong free-market advocate.  Free-to-steal is not encompassed under my belief.  Then these guys wonder why the government 'meddles' in their business?"

And here's Anthony Hipp of Greensboro, N.C.: "What is absolutely amazing (and disgusting) is that all UnitedHealth employees take mandatory online 'compliance' courses.  Conflicts of interest are regularly discussed.  Hmmm ... I wonder if McGuire took the courses like all of his employees had to.  Probably the more realistic explanation is that these guys live in a different world;  one in which, I believe, they lose all touch with reality and are probably convinced they've done nothing wrong…  It's impossible to feel the least bit sorry for these guys."

In the column, I pointed out that shareholders have little reason to be angry with Dr. McGuire, given the huge increase in shareholder value that occurred under his leadership.  But a number of readers weren't even willing to give him that credit.  Here's Marty Robins of Buffalo Grove, Ill.:  "I have to take issue with the last paragraph of this week's column, in which you state that shareholders should be ambivalent about pushing out CEOs like Mr. McGuire.  While you may be right about the need to provide large compensation packages to attract or retain outstanding CEOs, this has nothing to do with tolerating dishonesty.

"Mr. McGuire's sins were causing UnitedHealth to make untruthful statements to the marketplace about its option practices and directly making untruthful statements to his board.  Saying that shareholders of a health-care company should tolerate management dishonesty because the company is doing well is the ultimate in 'end justifies the means' reasoning and ultimately puts the company at extreme risk as such dishonesty seeps into other aspects of its business – such as patient care."

Finally, Jeff Atwood of Larchmont, N.Y., makes a similar point more succinctly: "If McGuire is so good at lining shareholders' pockets, why did he and Mr. Spears resort to back dating options?  I have to ask myself, what else did they do?"

Write to Alan Murray at