Many average Americans were a little riled when they learned that Stephen Hemsley, CEO of Minnetonka, Minn.-based UnitedHealth Group, earned $8.9 million in 2009 ($1.3 million in base salary plus various awards) while they were being pummeled by ever-higher premium increases. Still, Hemsley's 2009 earnings were relatively modest compared to the likes of Aetna CEO Ron Williams ($18.1 million), Coventry Health Care CEO Allen Wise ($17.4 million) and WellPoint CEO Angela Braly ($13.1 million). But Hemsley's actual take-home pay was far greater: $101.96 million, reports the Star Tribune. That figure dwarfs his compatriots, coming in at 5.6 times higher than Williams' compensation package and six times higher than any other CEO at a publicly traded company in Minnesota.
Hemsley's windfall is the result of exercising stock options, set to expire last year, that he was issued 10 years ago when a previous board of directors used stock options to load executive compensation. That practice stopped four years ago after then-CEO Dr. William McGuire was accused of receiving backdated stock options, reports the blog Health Care Renewal. "They [options] are clearly a holdover from a previously generous compensation committee. But when I see senior executives exercising options and holding on to the shares, that's a very bullish statement about the company's prospects," Sheryl Skolnick of CRT Capital Group told the Star Tribune.
So far this year, Hemsley has already padded his earnings by $21 million exercising additional options he was granted after 1999. He also has an additional six million exercisable and unexercisable options (three million being below the current stock price). However, Hemsley's current pay package is consistent with other corporate leaders, according to John Fossum, professor emeritus at the University of Minnesota's Carlson School of Management. "Companies tend to focus more on restricted shares of stock," he said. "There's less dilution for shareholders than with options."