In 2005, we entitled a post, "How Can a $124.8 Million a Year CEO Make Health Care More Affordable?" At that time, we contrasted the enormous compensation given to the then CEO of UnitedHealth, Dr William McGuire, with the stated mission of his corporation. Since then, we have traced the travails of UnitedHealth and its leadership. Dr McGuire was eventually accused of receiving backdated stock options (which at one time raised his personal fortune to over $1 billion), and was pushed into retirement. UnitedHealth was accused of a variety of management and ethical lapses. The rather sorry story as of April, 2010 was summarized here.
The more things change, the more they stay the same. The Minneapolis Star-Tribune just reported:
Stephen Hemsley, a serious and studious man, is known for his marathon-like work schedule, which regularly includes Saturdays and Sundays, in his role as chief executive of Minnetonka-based UnitedHealth Group.
Now, he also is known as the highest-paid CEO in Minnesota with a 2009 pay package totaling $101.96 million, six times the amount paid to the next CEO in the Star Tribune's annual survey of the state's 100 highest-paid chief executives at publicly traded companies.
But Hemsley's big pay package is also a vestige of the company's former practice of loading executive compensation heavily with stock options, a practice that changed in the wake of a crippling backdating scandal four years ago.
Those options, granted under a different regime of board directors, accounted for $98.6 million of Hemsley's income in 2009.
The attempts company officials made to minimize Hemsley's outsized compensation were almost funny:
UnitedHealth officials assert that Hemsley's 2009 pay package minus the 10-year-old options was $8.9 million, far less than the compensation paid to CEOs in other health insurance organizations.
But Hemsley did exercise the options, so he did receive the additional $98.6 million.
Hemsley also seems on target to get gargantuan compensation this year too:
Nonetheless, Hemsley has already put up good compensation numbers for 2010 with the exercising of additional options granted after 1999 worth $21 million. He also controls 6 million exercisable and unexercisable options, half of which are underwater or below the stock's current value.
The cringe-inducing contrast is with UnitedHealth's high-minded mission statement:
Our mission is to help people live healthier lives.
* We seek to enhance the performance of the health system and improve the overall health and well-being of the people we serve and their communities.
* We work with health care professionals and other key partners to expand access to quality health care so people get the care they need at an affordable price.
* We support the physician/patient relationship and empower people with the information, guidance and tools they need to make personal health choices and decisions.
Hemsley's compensation could have provided "care they need" to quite a few people at an affordable price.
More to the point, it is hard to imagine that a company that feels the need to pay so much to its CEO, and a CEO that can accept such riches, have the slightest understanding or interest in providing people "the care they need at an affordable price."
In this cynical age, I doubt many people credit the UnitedHealth mission statement with being more than advertising fluff. Nonetheless, I suspect most people believe that our society should try to provide as many people as possible with "the care they need at an affordable price," but realize that we are far from doing so. Health care insurance companies/ managed care organizations that see fit to make their hired leaders extremely rich seem to be part of the problem, not the solution.
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