Will the new CEO of United Health Group will get the huge payment package that the Board of Directors wants to grant?
This eight -numbers are increased amid the unprecedented value of UHG in the past few weeks. UHG is the largest health care company in America, No. 3 on Fortune 500, but in April I reported amazingly the first terrible quarter. The share price decreased, then continued to decrease for weeks. CEO Andrew Wei suddenly resigned for unlimited personal reasons, and the Chairman of the Board of Directors, Stephen Hemsli, seized as CEO.
Hemsley, 73, in June, will try to save Colossus who helped build it as an executive from 2006 to 2017. While investors may expect that he will only occupy the job until the Board of Directors finds the new CEO, Hemsley and The Board have other ideas. The extraordinary payment package that they created for Hasli shows how.
He will receive a basic salary of one million dollars annually – beige money, but in reality less than the usual salary of executives for such large companies. More importantly, it will receive a single -time grant worth $ 60 million of stock options, with a development: he will only get the reward if the CEO remains for a period of three years. He will not receive any other stock prizes on that period.
The shareholders will receive a vote on the unconventional wage plan at the annual UHG meeting on June 2. Institutional shareholders services, the largest company that advises major shareholders on how to vote, recommends voting number
Iss He sees multiple problems with Hemsley. Such great prizes loaded with the interface, “limiting the council’s ability to control future wages opportunities useful,” says ISS. In addition, Hemsley did not need to meet any performance standards to earn the Mammoth Stock Award; He got everything on the first day. Hemsley also won the award just as Bad News was bombing the share price to its lowest levels in nearly five years, which means that he may get a “surprise” just because of “a recovery in the share price.” It combines these factors, as ISS says, and there is no “justified vote now”.
UHG again struck, and sent the shareholders an explanation of what ISS missed and why they should vote in favor of Hemsley’s payment package. The central point of the company: “The award is only a value if the value of the shareholders is created and to some extent.” As for the “Windfall” argument for ISS, UHG stated that “in reality it is everyone The shareholders (under which a line and bold in the UHG document will get increases in the company’s share price for the current levels. “
It is likely to win this vote? The bottom line, Hemsley and UHG are likely to get the payment package that negotiates. ISS recommendations are taken seriously, but shareholders usually vote for management. Even if UHG loses the shareholders ’vote on wages, which must carry companies under the law, the result is not binding and consulting only; The Board of Directors can simply ignore the desires of the shareholders. In addition, UHG notes that the main ISS competitor, Glass Lewis, recommends that the shareholders be voted in favor of the Hemsley payment package. “At a quick look,” its customers tell, “(Hemsley) annual compensation is not excessive.”
Regardless of the result, the disputed vote will be great. It will already raise the high risks of UHG, its managers and Hemsley. Three years from now, success will look more heroic – and failure will be more bitter.
This story was originally shown on Fortune.com
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