Up in Arms
Readers Protest Conflicts of Interest, Treatment of
By Alan Murray
The Wall Street Journal
Saturday, October 21, 2006
Reaction to last week's Business column, which dealt with
UnitedHealth Chief Executive William McGuire -- who has agreed
to step down by Dec. 1 -- shows the options backdating scandal
continues to feed anger over the high pay of U.S. CEOs.
A few commentators, including my colleague on the Journal's
editorial page, Holman Jenkins, argue the problem has been
overblown. If shareholders want to give top executives stock
options that are already "in the money," why shouldn't they be
But the UnitedHealth case raises questions about whether
shareholders are being fairly represented. Dr. McGuire's
compensation was negotiated by New York investment manager
William Spears, who at the same time was being paid by Dr.
McGuire to manage his money and run two trusts for his
children. To other members of the UnitedHealth board, who
claimed not to know of the relationship until this spring, that
sounded like an obvious conflict of interest.
Here's what reader Syl Kontowicz of Woodlands, Texas, had to say
about it: "Kudos to the WSJ
for exposing the unscrupulous machinations of these
unconscionable, narcissistic executives that are financially
raping their stockholders and clients. I'm a strong free-market
advocate. Free-to-steal is not encompassed under my belief.
Then these guys wonder why the government 'meddles' in their
And here's Anthony Hipp of Greensboro, N.C.:
"What is absolutely amazing
(and disgusting) is that all UnitedHealth employees take
mandatory online 'compliance' courses. Conflicts of interest
are regularly discussed. Hmmm ... I wonder if McGuire took the
courses like all of his employees had to. Probably the more
realistic explanation is that these guys live in a different
world; one in which, I believe, they lose all touch with
reality and are probably convinced they've done nothing wrong…
It's impossible to feel the least bit sorry for these guys."
In the column, I pointed out that shareholders have little
reason to be angry with Dr. McGuire, given the huge increase in
shareholder value that occurred under his leadership. But a
number of readers weren't even willing to give him that credit.
Here's Marty Robins of Buffalo Grove, Ill.:
"I have to take issue with the
last paragraph of this week's column, in which you state that
shareholders should be ambivalent about pushing out CEOs like
Mr. McGuire. While you may be right about the need to provide
large compensation packages to attract or retain outstanding
CEOs, this has nothing to do with tolerating dishonesty.
"Mr. McGuire's sins were
causing UnitedHealth to make untruthful statements to the
marketplace about its option practices and directly making
untruthful statements to his board. Saying that shareholders of
a health-care company should tolerate management dishonesty
because the company is doing well is the ultimate in 'end
justifies the means' reasoning and ultimately puts the company
at extreme risk as such dishonesty seeps into other aspects of
its business – such as patient care."
Finally, Jeff Atwood of Larchmont, N.Y., makes a similar point
more succinctly: "If McGuire
is so good at lining shareholders' pockets, why did he and Mr.
Spears resort to back dating options? I have to ask myself,
what else did they do?"
Write to Alan Murray at