CalPERS Calls for Investigation of Proposed PacifiCare-UnitedHealth Merger
The CalPERS board of directors on Monday voted unanimously to oppose the proposed merger of PacifiCare Health Systems with UnitedHealth Group unless shareholders voted separately on an executive compensation package, the AP/San Jose Mercury News reports (AP/San Jose Mercury News, 11/15). The board also said it would ask the attorney general to investigate possible improprieties related to the executive compensation packages, the Los Angeles Times reports.
CalPERS directors said they are concerned about the timing of a decision in May to increase pay packages to PacifiCare executives to $345 million. The pay packages also include immediate vesting of previously held PacifiCare stock options and additional incentive payments to executives who remain with the company (Vrana, Los Angeles Times, 11/15).
The change in executive compensation was approved two months before the merger was announced, according to the Sacramento Bee (Chan, Sacramento Bee, 11/15). PacifiCare had been in talks with UnitedHealth for five months prior to the announcement of the merger, the Times reports.
CalPERS senior portfolio manager Dennis Johnson said the decision "raises questions about conflict of interest and breach of fiduciary duty."
PacifiCare officials said a shareholders' vote on the merger is scheduled for Thursday, adding that they are confident it will be approved. PacifiCare will not hold a separate vote on executive compensation, the company said.
CalPERS owns $33 million worth of shares in PacifiCare and $400 million worth of shares in UnitedHealth (Los Angeles Times, 11/15).