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Eddy Elfenbein submits: On the front page of today’s WSJ, James Bandler and Charles Forelle look at how UnitedHealth’s (UNH) board gradually turned against CEO Bill McGuire during the options back-dating scandal. This is a good story, and I think I’ve misjudged what happened at UNH.

From reading today’s article, I don’t think McGuire believed he had done anything wrong. Of course, intent to break the law isn’t an issue for the courts, but it is an issue for me and how I value a company. I can’t say that UNH was guided by a culture of corruption. If McGuire did break the law—and it appears he did—it was probably a case of negligence and oversight. As far as the company goes, it looks fine. Business is booming.

Obviously, any wrong-doing should be punished, but McGuire never acted as a criminal. Even as the scandal broke, he responded quickly and prudently. Enron, to use an unpleasant comparison, was a criminal enterprise, pure and simple. The company was a fraud and its business was to deceive investors. By contrast, UnitedHealth has been a spectacularly successful company, thanks in large measure to McGuire’s leadership.

As an investor, the more important issue to me is how the board could have authorized such large options grants to their CEO. Look, I’m all for rich people being rich, but… come on. His options were worth over $1 billion. Now that he’s gone, that will no longer be a problem. Plus, it will take a long time to figure out exactly what he’ll be able to keep.

If anything, I’m more inclined to like UNH by seeing how responsibly it behaved during this ordeal. The company now has a new CEO and a (somewhat) clean slate. For the first nine months of this year, EPS has increased by 21.8%, from $1.74 to $2.12. But the stock is almost a mirror image, down 21.1%.

UNH 1-yr chart:

unh chart

I’m going to unveil my 2007 Buy List next Friday, December 15. Expect to see UNH there.

Related: UnitedHealth to Restate 12 Years' Worth of Earnings Following Options Scandal

Source: Backdating at UnitedHealth: An Investor's Assessment