UnitedHealth Sinks on Shakeup

Updated from Oct. 15

UnitedHealth (UNH Quote) fell 2% Monday after the options backdating scandal claimed its biggest scalp yet: longtime CEO William McGuire.

The Minnetonka, Minn., health insurer said McGuire will step down as CEO on Dec. 1 and as chairman immediately following a board panel's finding of backdating of past stock option awards.

Replacing McGuire as chief executive will be Stephen Hemsley, the current president and chief operating officer, who joined the company in 1997. At the same time, the board created the position of nonexecutive chairman and named Richard Burke, the founding CEO of UnitedHealth and a director since 1977, to the post.

McGuire, though, wasn't the only official on his way out of the health insurer. The board also accepted the resignation of director William Spears and said David Lubben will proceed with his plans to retire and is stepping down as general counsel and secretary.

Hemsley has voluntarily agreed to reprice all options awarded through 2002 to the annual high share price for each year, and "to take any other appropriate action to eliminate any possible financial benefit from options-related issues" found during the options probe. Additionally, McGuire will reprice all the options he received from 1994 through 2002 to the annual high share price for each year.