Well before questions arose about the timing of options grants for UnitedHealth CEO William W. McGuire, critics derided directors of the giant health insurer for lax oversight of its powerful chief. Some say UnitedHealth's board -- which has included numerous former stars from the political and health-care worlds such as ex-Vice-President Walter Mondale and former Health & Human Services Secretary Donna Shalala -- has been too deferential to McGuire. The tenures of United's board members (8 of the 10 outside directors have served for a decade or more) is also a red flag. Years of working together can lead directors to identify too closely with executives they oversee.
Another critical issue is whether outside ties influence what goes on inside the boardroom. While the individual connections may be benign, governance experts warn that such links can make it hard for directors to stand up to a CEO. "Few people choose to go through life confronting people who are conferring benefit on them," says Robert A.G. Monks, principal of Lens Governance Advisors. Here's a snapshot of key board members, their tenure, and their ties:
James A. Johnson (1993). The head of the compensation committee, Johnson is vice-chairman of merchant bank Perseus, a former CEO of mortgage giant Fannie Mae (FNM), and a onetime political adviser to Mondale. Johnson chaired the John F. Kennedy Center for the Performing Arts from 1996 to 2004. McGuire's family foundation gave $15,000, and the United Health Foundation gave $5,000 to the center during that time; McGuire's wife also served on the Kennedy Center National Committee. Johnson and McGuire have also both been large donors to the Minneapolis Institute of Arts.
William G. Spears (1991). The senior principal of investment firm Spears Grisanti & Brown, he headed the comp committee from 1991 to 2003, overseeing the 1999 deal allowing McGuire to choose option grant dates.
Mary O. Mundinger (1997). Dean of the School of Nursing at Columbia University, she has been on the comp committee since joining the board.
William C. Ballard Jr. (1993). A member of the comp committee from 1993 to 1998 and the retired CFO of Humana Inc. (HUM), Ballard was chairman and a shareholder of Healthcare Recoveries Inc. until August, 1995. Over the preceding four years, United paid $6.3 million to Healthcare Recoveries for help collecting claims overpayments.
Richard T. Burke (1977). UnitedHealth's CEO until 1988, Burke served on the comp committee in 1992-94. His wife worked for United- Health from 1990 to 1996.
Thomas H. Kean (1993). A former Republican governor of New Jersey, Kean was on the comp committee between 1994 and 2002. He became chairman of the board of the Robert Wood Johnson Foundation, a health-care charity, in 2005. The United Health Foundation gave it $80,000 in 2004.
Gail R. Wilensky (1993). A senior fellow at Project HOPE, the global health foundation, and former policy aide to both Presidents Bush, Wilensky chairs the committee that oversees governance. She's an adviser to the Robert Wood Johnson Foundation.
Douglas W. Leatherdale (1983). The former CEO of insurer St. Paul Cos. is a life trustee and ex-chair of the University of Minnesota Foundation. The McGuire family foundation has pledged $10 million to the university's medical school, and in January, announced an additional $10 million donation to the university and two outside organizations. From 1992 to 1997, UnitedHealth also paid $4.4 million in insurance premiums to St Paul.
Walter F. Mondale (1991-93; 1997-2002). Mondale's law firm, Dorsey & Whitney, is UnitedHealth's outside counsel and has worked for the McGuire family foundation. The company also employed Mondale's son from 1992 to 1996.