The corporate board of any company that has been subjected to public outrage over its business practices, been the subject of civil and criminal investigations by regulators and suffered stock price declines of more than 40 percent in the same year would be smart to mount a campaign to substantially address those challenges before shareholders apply pressure to force major change. Finding itself in that exact situation, the UnitedHealth Group board recently announced the formation of a new “public responsibility” board committee. It will be interesting to see if other corporate boards form similar committees to help them mitigate governance challenges and reputational risk.
According to a recent SEC filing, the new committee “will monitor and oversee financial, regulatory and reputational risks that may affect the company’s operations and mission. Core oversight responsibilities include underwriting and forecasting, regulatory relationships, reputational matters and mergers and acquisitions.” The four-member committee will be chaired by Michele Hooper, who will step down as lead independent director. Board member F. William McNabb, the former CEO of the Vanguard Group, will replace Hooper as lead independent director.
Coming on the heels of UnitedHealth Group CEO Andrew Witty stepping down in May and being replaced by Stephen Hemsley, the formation of the “public responsibility” committee is part of Hemsley’s initial push to rehabilitate the reputation of the health insurer. However, a lot more than naming a committee on the board will need to be done to prove to investors and the public that UnitedHealth Group is serious about reform. Here’s what may be needed to ensure the formation of the “public responsibility” committee is viewed as a good faith effort at change:
Publicly announce how the new committee intends to change internal operations at UnitedHealth Group. Any new initiative must outline concrete steps, procedures or policy changes that will be implemented to achieve measurable results and goals. This transparency will give the effort more credibility with the public, regulators and the financial markets. Without goals that can be measured, the committee may be viewed as performative.
Tout the experience and credentials of the committee members to carry out the intended oversight. The new committee is tasked with improving the company’s record on “underwriting and forecasting, regulatory relationships, reputational matters and mergers and acquisitions.” If committee members don’t have the proper background to effectively mitigate the financial and reputational damage, it may be necessary to add one or more new directors with the requisite experience to affect the desired changes. If financial market analysts and regulators don’t believe the committee members are capable of delivering results, the effort may be met with skepticism or backlash.
Engage with regulators and key stakeholders in the community to identify top areas of concern that need to be addressed. Announce that the committee members will engage with key stakeholders and meet with them. If the committee can quickly eliminate areas of concern that regulators, market observers and community leaders have criticized the company over, that will build trust and begin the long and complex process of repairing the reputation of UnitedHealth Group.
