Investors everywhere should applaud the deal struck last week by the UnitedHealth Group to recover nearly $1 billion in pay from former executives involved in the company’s option backdating mess.
Not only is the number big and round — by far the largest giveback by corporate executives ever — but the recovery sets a standard of behavior for other companies and boards when performance pay is later shown to have been based on ephemeral earnings.
UnitedHealth shareholders have certainly suffered. The company restated 12 years of earnings in the amount of $1.5 billion as a result of the backdating and said it had struck a $55 million settlement with the Internal Revenue Service. The stock is just about where it was in March 2006 before a Wall Street Journal article first questioned the timing of option grants made to Dr. William W. McGuire, UnitedHealth’s longtime chief executive.
So it seems only appropriate that Dr. McGuire will cough up options worth $418 million in addition to the almost $200 million in options he has already forfeited. The agreement also bars him from joining the board of a public company for 10 years.
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