This Is 1 Incredible CEO
The Motley Fool readers have spoken, and I have heeded your cries. After months of pointing out CEO gaffes and faux pas, I've decided to make it a weekly tradition to also point out corporate leaders who are putting shareholder interests and those of the public first and are generally deserving of kudos from investors. For reference, here is last week's selection.
This week, I suggest we take a closer look at UnitedHealth Group (NYS: UNH) CEO Stephen Hemsley, and I'll show you why his company and his leadership could cure many of your investment ills.
Kudos to you, Mr. Hemsley
Unless you've been hiding under a rock, you're probably well aware that the Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act in a landmark decision last week.
The ruling has huge implications for the health care sector as a whole. Medical device companies such as Medtronic (NYS: MDT) are preparing to cope with a 2.3% medical device excise tax that will accrue based on total revenue beginning in 2013. Meanwhile, Medicaid-based health plan providers Molina Healthcare (NYS: MOH) and Centene (NYS: CNC) are rejoicing as some 16 million people will soon become eligible under the proposed Medicaid expansion portion of the ACA.
Perhaps no sector will face bigger changes than health plan providers such as UnitedHealth and WellPoint (NYS: WLP) . Health benefits organizations are going to be required to spend a minimum of 80% of collected premium on patient care and will be unable to pass along rapid price increases within their network. Most importantly, they won't be able to turn down people with pre-existing conditions.
The move could be crippling to WellPoint, which has a wide pool of small group and individual policyholders in its network. As I've proposed, the bill essentially caps its earnings potential.
UnitedHealth, on the other hand, has been proactive in implementing the changes proposed in the ACA, and has minimal exposure to the small group and individual coverage segment. With medical device sectors largely warning of jobs and cutbacks in research and development spending, UnitedHealth has done no such thing. In fact, since the announcement, UnitedHealth has been on a hiring spree.
Two weeks ago, Connextions, a UHG subsidiary, announced it would be hiring 550 people in Colorado for the opening of its eighth call center. Then, last week, shortly after the Supreme Court upheld the ACA, UnitedHealth announced the hiring of an additional 1,500 workers in Texas. A sea of new patients from the ACA means the need for more staff and is yet another way UnitedHealth is putting America back to work.
A step above his peers
I could probably stop with the fact that Hemsley is overseeing rapid hiring and implementing many facets of the ACA well ahead of its implementation date in 2014 -- but that would be doing this incredible CEO a disservice.
In addition to hiring, UnitedHealth is beginning to creep on the radars of income-seeking investors as it has been aggressively buying its own shares and raising its dividend within the past few years. In early June, the company boosted its quarterly dividend by 31% to $0.2125 per share and upped its share repurchase program to 110 million shares -- a big jump from the 33 million remaining under its original repurchasing agreement. With the company paying dividends quarterly instead of just once a year and with the focus on shareholder value, you can literally spot the night-and-day difference:
Source: Dividata. *Assumes quarterly payouts of $0.2125 for remainder of 2012.
Hemsley and UnitedHealth have made it very clear since 2010 that shareholders come first -- an approach that more corporate leaders would be wise to take note of. Some would argue that Hemsley's pay is a bit overboard (he took home more than $48 million last year), but the majority of his pay has resulted from long-tenured stock options and hitting cumulative earnings goals for the company. In short, his pay is tied to performance, as it should be!
UnitedHealth has done a fantastic job of preparing for the implementation of the ACA, and appears it will be ahead of its peers come 2014. I give you a sincere two thumbs-up, Mr. Hemsley, on a job well done.
Do you have a CEO you'd like to nominate for this prestigious weekly honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just might see your nominee in the spotlight.
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At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He loves giving credit when credit is due. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Medtronic and WellPoint. Motley Fool newsletter services have recommended buying shares of UnitedHealth Group and WellPoint, as well as creating a diagonal call position in UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that strongly believes in doing right by investors.