Former UnitedHealth CEO made $142.2M last year

The former CEO of UnitedHealth Group realized $142.2 million last year in what might be the biggest ever compensation package for a Minnesota-based public company.

The pay for David Wichmann, who left the company in February 2021 after 17 years, was primarily in previously issued equity awards accumulated through his tenure that he elected to exercise or vested during 2021.

Wichmann made $42.1 million in 2020 and $52.1 million in 2019.

The Star Tribune maintains a compensation database on hundreds of Minnesota public company officials that goes back more than 20 years. The $142.2 million package is the largest disclosed number yet, topping nine-digit realized pay totals from longer serving UnitedHealth CEOs, including William McGuire and Stephen Hemsley.

UnitedHealth Group executives have routinely had the highest compensation among Minnesota public companies. UnitedHealth is the largest company in Minnesota and among the 10 largest U.S. public companies.

Throughout the company's history, it has used equity awards, both stock options and various restricted stock awards, as major components of executive pay. And because the company has thrived financially and the stock price even more so, executives and shareholders have done very well.

A UnitedHealth Group spokesperson referred to the compensation details in the proxy statement and declined to give an additional comment.

From the end of 2011 to the end of 2021, UnitedHealth Group's stock has posted a total return of approximately 1,057% compared to the S&P 500's 363% and the Dow Jones Industrial Index's return of 197%. UnitedHealth is a component in both of those major market indexes.

In 2021 UnitedHealth's stock had a total return of 45.2%, outpacing both major indexes for the year.

The return led to current CEO Andrew Witty's $26.5 million compensation for 2021.

Witty, who became CEO on Feb. 3, 2021, had an annual salary of $1.5 million and a cash bonus for reaching annual incentive targets of $2.55 million. Witty also had 48,418 restricted shares awarded previously that vested in 2021, worth $22.4 million.

His compensation was $17.4 million in 2020 when he was president and CEO of UnitedHealth's Optum business.

Witty also received new restricted stock and option awards in 2021 with a combined grant date value of $14.4 million. The realized value of those awards will depend on UnitedHealth's financial and stock price performance in future years and could be much different than the initial calculated value.

Wichmann joined UnitedHealth Group in 1998, accumulating stock options and other equity awards as a senior executive. He became CEO in 2017. His salary for the first few months of 2021 was $393,077. He was not eligible for a cash bonus, and the company said in its proxy that he did not receive any additional compensation since his departure.

But as part of Wichmann's employment contract, he was entitled to separation pay that was equal to about two times his previous annual salary and non-equity incentive plan compensation, or $10.8 million.

The 458,832 previously issued stock options that Wichmann exercised were worth $110.4 million. It appears Wichmann exercised as many options as he had vested, including those that still had years before they expired. He also realized $20.7 million from 45,520 restricted stock awards that vested during 2021.

Some corporate pay-watchers question the pay totals of executives who've seen the value of equity awards at public companies escalate during a bull market.

"He didn't invent something new or create a new technology, he was managing an existing company," said Rosanna Landis Weaver, senior manager for the Wage Justice & Executive Pay Program at the shareholder advocacy group As You Sow.

At last year's annual meeting, 72% of UnitedHealth shareholders supported the executive compensation plan in the annual non-binding vote on pay. Most companies consider any total for such shareholder votes under 90% approval a cause for concern and usually take actions to better communicate their pay policies or make changes to them.

At this year's meeting on June 6, besides the say on pay vote, there is a shareholder proposal on termination pay for executives.

The median pay of UnitedHealth's 333,499 employees in 2021 was $61,379, up from $55,696 in 2020. ​The CEO pay ratio is based on a CEO's total compensation according to the summary compensation table, including grant date values of equity awards — $18,448,785 for Witty in 2021. It was 301 to 1 for UnitedHealth in 2021, down from 321 to 1 in 2020.