"The large number of CEOs resigning and stepping down is partly due to increased pressure from shareholders and boards to continue producing strong results quarter after quarter," John A. Challenger, founder of the Chicago-based recruiting firm, told Governance Weekly. "The options backdating scandal is really just beginning to take a toll on executives, but the impact will surely grow."

High-profile CEO departures have occurred this year at Ford Motor, Bristol-Myers Squibb, Viacom, Nike, Sun Microsystems, Pfizer, Kraft Foods, and RadioShack. Last week, Sovereign Bancorp's CEO stepped down amid a board revolt, while Sharper Image replaced founder and CEO Richard Thalheimer in late September.

As the Challenger report noted, "the pressure that CEOs are under are best demonstrated by the large percentage of CEOs leaving after relatively short tenures." Of the 387 CEO departure announcements this year for which tenure data is available, 28 percent of the executives were on the job for fewer than three years, the report said. In September, computer retailer CompUSA named its second CEO in four months. Computer manufacturer Gateway has had five CEOs in six years, the report said.

While other factors, such as the growing number of CEOs who are reaching retirement age, have led to departures, Challenger said the trend also reflects greater assertiveness by directors after the Enron and WorldCom scandals. "Boards realized that they can no longer simply be the CEO's rubber stamp," Challenger said.

Likewise, Jennifer Handt, the Business Roundtable's manager of communications, said the increase in CEO departures "reflects in part the fact that boards have become increasingly active and CEOs have much less time in which to perform."

More executive ousters may be on the horizon, as hedge funds and other activist investors press other companies for leadership change. At ImClone Systems, Carl Icahn, the second-largest stockholder in the New York-based biotech firm, is trying to oust interim CEO Joseph Fischer. Meanwhile, Knott Partners and Third Point are seeking to replace CEO Thomas McLain at Nabi Pharmaceuticals, a Florida-based drugmaker.

Option-Related Departures
In addition to McGuire, a growing number of other CEOs have left their jobs after internal or regulatory probes into whether stock option grants were manipulated to maximize executive compensation. On Oct. 17, Sapient, a Massachusetts-based technology consulting company, announced that CEO Jerry Greenberg resigned after an internal review found backdated option grants. The next day, SafeNet, a Maryland-based data-security software maker, replaced CEO Anthony Caputo after an internal probe found backdated options. Last week, McAfee, Cnet Networks, and Boston Communications Group announced CEO changes that stemmed from option probes. Stock options also were a concern at Sharper Image, as the San Francisco-based retailer plans to restate results for the three years to reflect option costs.

For some institutional investors, these CEO exits over stock options are evidence that boards are becoming more responsive. "The willingness of boards to shove executives out the door--via firings, resignations or suspensions--at companies where backdating probes have uncovered wrongdoing shows that directors are taking a strict view of their responsibilities," Amy Borrus, deputy director of the Council of Institutional Investors, told Governance Weekly.

The number of options-related CEO departures likely will increase as more companies review past grants. More than 140 companies have disclosed internal or regulatory probes into their option practices, and at least 60 firms have restated or said they plan to restate earnings, according to Bloomberg News.

Change at UnitedHealth
UnitedHealth, the largest U.S. health insurer, announced McGuire's planned departure on Oct. 15 and released a special board committee report on past option grants. The report, which was prepared by the law firm of WilmerHale, examined 29 grants and concluded that "there were few where a grant date was established on the particular day noted in the documents."

"Between Jan. 3, 1994, and Aug. 28, 2002, the company granted options on 16 separate dates that correspond to the lowest, second-lowest, or third-lowest price for the quarter," the report states. "The options granted on these 16 dates, prior to the passage of [the Sarbanes-Oxley Act], amounted to almost 80 percent of all options granted during this period."

McGuire, who relinquished the title of chairman and left the board, is to step down as CEO by Dec. 1, the company said in its press release. General Counsel David Lubben and Director William Spears also resigned. The board named President and Chief Operating Officer Stephen Hemsley to take over as CEO.

The company said McGuire had agreed to re-price his options from 1994 to 2002 at the annual high share price "to eliminate any possible financial benefit from the option dating issues identified" in the WilmerHale report. UnitedHealth also said that Hemsley had agreed to re-price his grants through 2002 at yearly highs and "expects similar actions" from Lubben and other senior executives.

On Oct. 18, U.S. Senator Charles Grassley, who chairs the Senate Finance Committee, asked the company to release details on McGuire's exit pay and benefits. "We are concerned by recent press reports that Dr. McGuire may have received a compensation package upon his separation of approximately $1.1 billion in spite of allegations that he had been actively involved and benefited from an options backdating scheme," Grassley, an Iowa Republican, said in a letter.

Also, this week, a Securities and Exchange Commission official said the agency is investigating whether board interlocks helped spread the practice of options backdating. "We are looking at the interrelationship between directors on boards of companies that may have problems," Timothy England, an SEC assistant director of enforcement, told Bloomberg News.

Governance Reforms
UnitedHealth was one of six firms profiled by The Wall Street Journal in an article in March on questionable option grants. That story prompted regulators, investors, and directors to start looking at grant practices throughout the healthcare and technology industries. In April, the Minnesota-based company disclosed that McGuire held $1.6 billion in unexercised stock options and received options dated when company shares were at their quarterly lows.

A day before UnitedHealth's annual meeting in May, the board tried to address shareholder concerns by eliminating golden parachute payments for senior executives, ending equity awards for some senior executives, and cutting board pay by 40 percent, but investors still withheld 28 percent support from two compensation committee members. Minnesota's Board of Investment and the California Public Employees' Retirement System were among the institutions that called for withhold votes.

In addition to the executive changes, UnitedHealth has unveiled additional governance reforms. In its Oct. 15 press release, the company said it would fill five board seats with independent directors in the next three years. The company also plans to establish a new chief legal officer and elevate the chief ethics officer to senior executive status. Earlier this year, the board agreed to ask shareholders to vote to establish annual board elections and to rescind supermajority-voting requirements. The company also has established new stock ownership guidelines, dropped certain executive perks, and limited the number of boards on which directors may serve.