UnitedHealth Shareholder Proposes Policy for Independent Board Chair Amid CEO’s Dual Role

The proposal, announced on Friday, comes at a critical time for UnitedHealth, the largest U.S. health insurer, as it strives to regain the confidence of its shareholders. Recently, the company has faced significant challenges, including missing Wall Street’s earnings targets for two consecutive quarters, pulling back its 2025 outlook due to soaring medical costs and shortfalls in government-backed plans, and dealing with a cyberattack, the murder of its insurance unit chief, and a federal investigation. The Accountability Board, a nonprofit advocacy group and UnitedHealth shareholder, believes that the current structure, where CEO Stephen Hemsley also serves as the board chair, decreases the board’s ability to provide independent oversight, which is essential for the company’s success and accountability to its shareholders.

Background and Current Situation

The proposal is a response to the current leadership structure at UnitedHealth, where Stephen Hemsley holds both the CEO and board chair positions. Hemsley took on the CEO role after his predecessor, Andrew Witty, resigned abruptly in May. Prior to this, Hemsley had served as the board chair since 2017. The Accountability Board argues that this consolidation of power is detrimental to the company’s governance, stating, “Now, a single person holds both roles — which is as far as it gets from the independent oversight shareholders so critically need.” This concern is not unfounded, given the recent struggles of UnitedHealth, which have included a cyberattack at its technology unit, a major backbone of the U.S. healthcare system, the tragic murder of its insurance unit chief in December, and an ongoing federal investigation into its government-backed health plans.

Reasons Behind the Proposal

The reasons behind the Accountability Board’s proposal are multifaceted and centered around the principle of good governance and the need for independent oversight. Key highlights of the proposal and the current situation include:
* The consolidation of power in the hands of one individual decreases the board’s ability to provide checks and balances.
* The need for independent oversight to ensure that the company is managed in the best interest of its shareholders.
* The recent performance and challenges faced by UnitedHealth, which underscore the importance of robust governance structures.
* The proposal is not merely a reaction to current leadership but a proactive measure to ensure the long-term success and accountability of the company.

Quotes and Reactions

Matt Prescott, president of the Accountability Board, emphasized the importance of this proposal for UnitedHealth’s future. While declining to disclose the exact stake of the Accountability Board in UnitedHealth, Prescott noted that the organization has held at least $25,000 in the company for the past year, demonstrating its commitment to the company’s success and its right to advocate for better governance. The proposal reflects a broader concern among shareholders and governance experts about the dual role of CEO and board chair, which can lead to a lack of independent oversight and potentially harmful consequences for the company’s performance and reputation.

Implications and Future Directions

The implications of this proposal are significant, both for UnitedHealth and for corporate governance practices more broadly. If adopted, the policy would require the separation of the CEO and board chair roles, potentially leading to improved governance and increased confidence among shareholders. This move could also set a precedent for other companies, highlighting the importance of independent oversight in ensuring that companies are managed in a responsible and ethical manner. As UnitedHealth navigates its current challenges, the adoption of such a policy could be a crucial step towards regaining the trust of its shareholders and positioning the company for long-term success.