$895 Million Settlement in Stock Option Case
Yesterday, United Health Group agreed to pay $895 million and to implement sweeping corporate governance changes as part of a tentative settlement of a stock option backdating lawsuit.
United Health agreed to: (1) take the company’s performance into account when setting executive compensation; (2) create a shareholder-elected position on its board of directors; (3) implement stringent director-independence policies; (4) mandate an options holding period for all executives; and (5) require shareholder approval prior to any option repricing.
Excluded from the settlement are the company’s former CEO, William McGuire and former top lawyer, William Lubben. In 2007, McGuire agreed to pay the Securities and Exchange Commission $468 million related to the backdating allegations. Several lawsuits remain pending against the two former executives.
The Lesson
Stock option lawsuits have rocked the business and HR world for the past several years. As discussed previously here on the Blawg, some HR execs have even gone to jail when they failed to blow the whistle on backdating schemes.
HR leaders have a tremendous opportunity to influence others to do right — or to do wrong. One of our Top Ten Greatest Hits of Employment Law Advice is “The Mom Test.” When making decisions, ask yourself: “What would my mom think if she read about this on the front page of the paper?” If it would disappoint mom, don’t do it.
The lesson is simple: failing to do the right thing as an HR leader can land you and your company in legal hot water. It could cost you your job, your money and your reputation. Don’t let that happen to you. Know the law, follow it and help others to do the same.
