8-KLeadership ChangesExhibits & Filings

UNITEDHEALTH GROUP INC 8-K Report, Executive Changes (Apr 20, 2007)

Filed April 20, 2007For Securities:UNH

Summary

UnitedHealth Group Inc. (UNH) filed an 8-K on April 20, 2007, primarily detailing changes in its corporate governance and executive compensation structures. Key among these is the appointment of Robert J. Darretta, retired Vice Chairman and CFO of Johnson & Johnson, as a new director. Mr. Darretta's appointment includes an initial equity grant of stock options and restricted stock units, subject to a four-year vesting schedule and a requirement to retain shares net of costs until Board service concludes. Furthermore, the company announced significant updates to its Executive Incentive Plan and equity award agreements, implementing a new 'clawback' policy. This policy mandates repayment of incentive payments or forfeiture of equity gains if misconduct or fraud leads to a material restatement of financial results. The filing also addresses adjustments to stock option exercise prices to comply with Section 409A of the Internal Revenue Code for both executives and non-executive officers, along with details on the new employment agreements for two Executive Vice Presidents, outlining their salaries, bonus potential, benefits, and termination severance packages.

Key Highlights

  • 1Appointment of Robert J. Darretta, former Johnson & Johnson Vice Chairman and CFO, as a new director.
  • 2Mr. Darretta received an initial grant of 12,500 stock options and 3,125 restricted stock units, vesting over four years.
  • 3Implementation of a new 'clawback' policy in the Executive Incentive Plan and equity award agreements, requiring repayment of incentives or forfeiture of gains in cases of fraud or misconduct leading to financial restatements.
  • 4Adjustments to stock option exercise prices for certain executives and non-executive officers to comply with Section 409A of the Internal Revenue Code.
  • 5New employment agreements established for Executive Vice Presidents, including specific base salaries, bonus targets, and severance provisions.
  • 6Elimination of excise tax gross-up payments for Executive Vice President Lois E. Quam in the event of a change in control.

Frequently Asked Questions

The appointment of Robert J. Darretta brings extensive financial and executive leadership experience from Johnson & Johnson to UnitedHealth Group's Board. His background as a former Vice Chairman and CFO is expected to provide valuable oversight and strategic guidance, particularly concerning financial matters and corporate governance.

The new 'clawback' policy requires participants in the Executive Incentive Plan and holders of equity awards to repay incentive payments or forfeit realized gains if fraud or misconduct results in a material restatement of financial results. This policy aims to align executive compensation more closely with accurate financial performance and deter misconduct.

The adjustments to stock option exercise prices are to ensure compliance with Section 409A of the Internal Revenue Code, which governs non-qualified deferred compensation. This action was taken to avoid potential surtax liabilities for certain current and former executives and non-executive officers by aligning option exercise prices with fair market value at the time of grant or measurement date.

The new employment agreements for Messrs. Anderson and Wichmann outline base salaries, annual bonus targets, eligibility for other incentive plans and stock awards, and generally available benefits. They also include provisions for a $2 million term life insurance policy and a long-term disability policy at the company's expense. Crucially, they detail severance packages, providing 200% of base salary and 200% of average bonus in case of termination without Cause or for Good Reason, payable over 24 months.