Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
UnitedHealth’s returning chief executive faces the spectre of shareholder fury on Monday after commanding a $60mn pay package in his abrupt return to the top of the company, with its stock trading at a five-year low.
After he was named CEO on May 13, Stephen Hemsley was awarded $60mn of stock options that begin to pay out in three years. The pay “raises significant concerns” because it was awarded up front and lacks any performance criteria, according to Institutional Shareholder Services, which recommended UnitedHealth’s shareholders vote against Hemsley’s compensation.
Meanwhile, Norges Bank Investment Management, Norway’ s $1.8tn sovereign wealth fund and UnitedHealth’s 11th-largest shareholder, has said it voted against Hemsley because he now holds both the chief executive and chair roles. The company’s share price is down 40 per cent this year, making it the worst performer in the Dow Industrials index.
Hemsley, 72, previously served as UnitedHealth from 2006 to 2017 and oversaw strong growth for the company and its stock. With his return as CEO, UnitedHealth simultaneously withdrew its earnings guidance, and he is scheduled to face shareholders for the first time in the company’s annual meeting on Monday.
Governance issues are just one in a litany of challenges facing Hemsley as he retakes leadership of the healthcare giant, after the startling resignation of former head Andrew Witty and the December 4 killing of senior executive Brian Thompson.
Sources close to the company said Thompson, or “BT” as he was known inside the company, was widely seen as the most likely candidate to eventually takeover as chief executive. His killing outside a Manhattan hotel set up a succession problem for the company.
In a response to the ISS recommendation, UnitedHealth said in a regulatory filing that the board determined Hemsley’s pay was “reasonable” and “strongly aligned with shareholder interest”.
UnitedHealth is one of the world’s largest health companies, providing medical benefits to about 51mn people, including about 1mn outside the US as of December 2024, according to Morningstar. It operates a pharmacy business, and its healthcare services division was the largest caregiver in the US, Morningstar said.
UnitedHealth is fighting with the US justice department over an attempted $3.3bn acquisition of a rival home care provider, while also the subject of another justice department investigation into the company’s Medicare billing. UnitedHealth has said it was unaware of any new investigation.
The company’s earnings growth had depended on its acquisitions, said Whit Mayo, an analyst at Leerink, a healthcare investment firm. “A major element of [its] growth has been dependent on the inorganic engine,” he said. Now, with the justice department scrutiny on UnitedHealth, “are they going to be able to buy at the same pace?”
Hemsley would share more details about the business performance at the annual meeting, the company spokesman said, adding, “[Hemsley] is confident about the future of UnitedHealth.” With his return as chief, Hemsley bought $25mn of UnitedHealth stock.
UnitedHealth would be facing a challenging next few months, said Paige Meyer, an analyst at CFRA. The company was still reeling from the Covid-19 pandemic, she said. “People paused their care during the pandemic,” and now that people had resumed services, “costs are extremely high” for UnitedHealth.
Additional reporting by Andrew Jack in New York
