Posted on 08/13/2004 3:23:16 PM PDT by NormsRevenge
SACRAMENTO (AP) - The nation's largest public pension fund will lead a drive to rein in lucrative severance packages designed by and for corporate executives and that are triggered by they mergers they engineer, officials said Friday.
California Treasurer Phil Angelides and other members of the California Public Employees' Retirement System board plan to recruit other pension systems and shareholder groups nationwide to fight the recent escalation by targeting selected merger proposals for defeat next year.
The initiative is the latest in a series of steps by CalPERS and the nation's third-largest pension system, the California State Teachers Retirement System, to reform what officials contend is a corporate culture and financial marketplace that benefits insiders at the expense of investors.
The new move was spurred by the proposed merger between Anthem Inc. and WellPoint Health Networks Inc. to create the nation's largest health insurer, a merger stymied only by California Insurance Commissioner John Garamendi's refusal to approve the deal.
CalPERS opposed the merger in part because of what Angelides called the "outrageous executive pay outs" that could cost shareholders more than a half-billion dollars. Executives there negotiated the severance packages before announcing the merger plans, and defended the packages as common practice.
"We've got to actively target the most egregious cases," Angelides said. "If we successfully target four or five companies, others will watch and listen."
Angelides, joined by five other board members, said they specifically want to lower the amount of severance pay in such circumstances, and end the practice where executives can immediately cash in on stock options instead of waiting to see if the merger succeeds. If the severance pay is enough to trigger federal excise taxes, the tax should be paid by the executive and not the company and its shareholders, they said.
In a response letter to the CalPERS board, WellPoint Executive Vice President and Chief Financial Officer David Colby said the board "is clearly engaging in an important and relevant discussion on compensation issues associated with mergers and acquisitions."
But he emphasized WellPoint executives can cash in their stock options only if they are fired, and said WellPoint's 13 top executives have agreed they won't immediately cash in even if they are terminated.
More than 95 percent of the Thousand Oaks-based company's officers would receive severance pay below the level the CalPERS officers said is reasonable, Colby said. And he said the company will not pay federal excise taxes for its employees.
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On the Net:
Read the letter to CalPERS at www.treasurer.ca.gov
california continues its efforts to make itself more business friendly...
A yes, doing everything possible to attract new business investment. What little good Arnie's entourage to Nevada did has been erased 10 times over by this.
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