UnitedHealth asks shareholders to support CEO’s $60M stock options

UnitedHealth Group is urging shareholders to reject a proxy alert and support a compensation package, including $60 million in stock options, for returning CEO Stephen Hemsley.

A letter to shareholders dated Tuesday refutes a recent opinion from Institutional Shareholder Services “against” Hemsley’s compensation. The ISS proxy alert cites the stock options, which comprise nearly all of Hemsley's three-year compensation package.

Hemsley, who returned to the CEO seat last week following the abrupt resignation of Andrew Witty, will also receive a base annual salary of $1 million if the package is approved. The shareholder vote, commonly referred to as a "Say-on-Pay" vote, is not binding on the board.

Shareholders will vote during a UHG virtual annual meeting on June 2. ISS had previously supported UHG's compensation structure for Witty.

“ISS’s stated rationale for the updated recommendation does not take the full picture of UHG’s leadership transition into account, nor does it adequately assess the timeframe of the new agreement and the assurance that the CEO’s interests are aligned with those of shareholders moving forward,” reads the UHG letter signed by Christopher R. Zaetta, executive vice president, chief legal officer and corporate secretary.

The ISS proxy alert states that recent fluctuations in stock price could create a “windfall” for Hemsley, the UHG letter notes.

“[I]n reality, all shareholders would gain from increases in the company’s stock price relative to current levels,” Zaetta writes.

ISS did not return a request for comment.

Big share purchase

The UHG letter notes that Hemsley’s overall compensation level is designed to encourage fulfillment of the three-year contract and is in the “median” range for large-company CEOs. And if Hemsley, 72, resigns or is terminated by UHG “for cause,” he will “forfeit the [stock] options in their entirety.”

"Hemsley himself currently holds a significant portion of his net worth in our shares," the letter states. On May 16, "he purchased more than $25 million of our shares on the open market with his own funds, further signaling his commitment to and stake in building long-term shareholder value."

Glass Lewis, another prominent proxy advisory firm, has recommended shareholders vote “For” the compensation structure, the UHG letter says.

On May 12, UHG announced Witty's departure, Hemsley's return, and suspended its 2025 earnings outlook less than four weeks after its first-quarter earnings release and call with analysts.

“Care activity continued to accelerate while also broadening to more types of benefit offerings than seen in the first quarter, and the medical costs of many Medicare Advantage beneficiaries new to UnitedHealthcare remained higher than expected,” the insurer said in a news release.

A day later, the Wall Street Journal broke the news that the Department of Justice is investigating UHG for Medicare fraud. UHG stock continued tumbling for days before company insiders, led by Hemsley, began buying thousands of shares.

Witty, who was named CEO in 2021, received a 2024 compensation package that included salary, stock awards, and option awards, totaling $26.3 million.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.