UPDATED: June 2 at 3 p.m.
UnitedHealth Group shareholders signed off on the planned compensation package for newly-reinstated CEO Stephen Hemsley.
Hemsley, who returned to the CEO role last month, will earn a $1 million base salary each year. He will also receive a one-time $60 million equity award in nonqualified stock options.
In speaking to the shareholders on Monday, Hemsley said that he is focused on winning back trust and confidence from the investor community. Following a rare miss in the first quarter due to unexpectedly high utilization, UnitedHealth's shares have tumbled to their lowest prices in years.
Hemsley said the company intends to review its policies in multiple key areas, including risk assessments and pharmacy services. He added that the team is moving forward into its Medicare Advantage bids and accounting for the elevated medical costs experienced in Q1 through its pricing practices.
UnitedHealth Group revealed additional details about the compensation package for CEO Stephen Hemsley in a filing with the Securities and Exchange Commission.
In the document, the company said Hemsley will earn a $1 million annual base salary and will not receive an annual cash incentive. He will also secure a one-time $60 million equity award in the form of nonqualified stock options, with cliff vesting in three years.
Hemsley will not receive any additional equity awards in his first three years as CEO, per the filing.
Hemsley returned to the CEO role at UnitedHealth effective Monday, replacing Andrew Witty. The company said Witty stepped down for personal reasons but will stay on as an advisor to Hemsley.
Hemsley first led UnitedHealth Group from 2006 to 2017, steering the ship as it shaped its UnitedHealthcare and Optum divisions. He is also chairman of the company's board.
The CEO change is the latest event in a tumultuous year that saw a massive cyberattack bring payments to a standstill in February 2024 and the murder of a top executive. The company reported a rare miss in the first quarter, and its stock has plunged over the past month.
Alongside news that Witty would step down, UnitedHealth Group suspended its guidance for 2025 as it looks to address rising medical costs.
With the ongoing turmoil at the company, investors are taking a skeptical view of the coming quarters. Bank of America downgraded UnitedHealth and expects to see its 2025 outlook slashed by 10% to 20%.
Edward Jones also downgraded UHG to "hold" from its previous "buy" rating, as the CEO change and executive commentary suggest the challenges around utilization are worse than investors initially feared. Given that the company is experiencing far worse issues around medical costs in the early part of the year, the Edward Jones analysts suggest the situation is likely "management-related."
"This is a big surprise for a company that was considered by some as one of the better-run companies in healthcare," the analysts wrote. "Sometimes CEO resignations such as this can be an opportunity to revisit the shares, as new management may fix internal issues."
"However, in this case, with Stephen Hemsley over 70 years of age, the CEO will not only need to stabilize the organization but also need to eventually appoint a new CEO that has the confidence of investors," the analysts continued.