Danger of Power Misused
Quite by coincidence after my post on power, an article appeared in the new issue of Fortune on United Healthcare and it's CEO. UnitedHealth is a hugely successful company. It was run by a man that grew it from $600 million in revenues to over $70 billion. The stock compounded at 30% a year during his 15 years far outsurpassing the returns of the market.

The CEO's status grew during those 15 years and he became the "face of healthcare" in America. By the end of 2005, his personal net worth exceeded $2 billion - a staggering amount of money that was all given to him via stock options. The article talks about how he abused power and how, as his status grew, so did the company's problem with curtailing him.

"A great CEO becomes dangerous over time. If you are incredibly successful as CEO, you have tremendous power (there is the word...power) within the company, over the board, and everybody's telling you that you are invincible. And then you become the risk to the extent that your own arrogance becomes the problem" said Goldman Sachs' analyst Matthew Borsch.

"Everyone telling you that you are invincible..." ---- remember how power is "intoxicating"?

McGuire never thought it was enough. He tracked the slightest movements of the stock. At the beginning of 1999, McGuire was already rich. He netted almost $49 million from stock sales and was sitting on options worth another $22 million. But he wasn't satisfied. As he began negotiations for a new contract with his board at the height of the tech bubble, McGuire fumed about all the dot-com twentysomething billionaires from their stakes in companies that hadn't made a dime. He was being recognized as one of the most successful CEO's in the country and he was asking to paid accordingly.

He demanded a new option grant of 2 million shares and the board agreed to give him 1 million options. Even has he unloaded shares every year or two (he netted $469 million from stock sales), the board gave him millions of new options.

As the story unfolded, it turns out that McGuire "backdated" his stock options to coincide with the annual low-point in the stock. If the board awarded him options at $50 and the stock fell to $40, he backdated those options as if they were given to him at $40. Of course, he claims he did no wrong but the odds of his timing those options were 1 in 200 million. The one director that he got approval from had a conflict of interest as he served as McGuire's investment manager.

McGuire, once the strongest man in all of healthcare and builder of a hugely successful company, lost his job and his reputation over his greed.

It is an amazing story - a classic story of greed gone too far. It wasn't enough that he built and ran an incredible company. It wasn't enough that he was viewed as the most powerful CEO in healthcare. It wasn't enough that when he walked into a room, he was clearly the most powerful man in the room. it wasn't enough that he was worth about $100 million and made $10 million more a year.

No, what stuck in this guy's craw was that in the dot-com boom, some young tech guys were suddenly billionaires and he didn't think it was fair. Once he was the most powerful man in the room, he did everything he could to leverage his power to make himself even more powerful. A billion wasn't enough, he reached for $2 billion. That last handful in the candy jar cost this man his job and a lifetime's reputation as a great CEO. Like the country music band Montgomery Gentry's song "Gone" - "Gone like a freight train, gone like yesterday....gone."

He leveraged to try to protect his power and grow his power rather than trying to use his incredible power to help others. It cost him everything. Gone.

Soar!