For the first time, what is called the "clawback" provision within the Sarbanes-Oxley corporate reform law, was activated in the case of former UnitedHealth (UNH) CEO William McGuire, which deals with executives making profits from sales of stock and receiving bonuses, while misleading investors.
How it works with McGuire, is while he had received over $1.6 billion in stock options by the end of 2005, he has to now reprice them, thus reducing their value. The reduction in value is what constitutes the majority of the $400 million he gave up in the settlement.
It breaks down to stock options valued at $320 million, his interest in the supplemental executive-retirement plan in the company, valued at $91 million, along with another $8 million in his executive-savings plan.
With this new repricing, McGuire has now lost over $600 million in potential compensation in the overall case. He also has to pay a fine of $7 million.
McGuire has had to settle claims with both the company and the U.S. Securities and Exchange Commission, of which both were investigating his options' practices.
Other former executives in the company have also reached settlement, brought about from reviews of federal and state lawsuits related to derivatives; including former director William Spears and general counsel David Lubben.
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