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For the initiation of the proposal reported below, intended to encourage U.S. adaptation of advisory vote processes as a foundation for cooperative communication in the development and reporting of compensation policies, see


Financial Times, April 20, 2007 article


Hermes to push for vote on pay at UnitedHealth

By Jeremy Grant in Washington

Published: April 20 2007 03:00 | Last updated: April 20 2007 03:00


Hermes, one of the largest European pension fund managers, has put forward a proposal requiring a shareholder vote on executive pay at a US company - a move that reflects the increasing activism of foreign shareholders pushing for reform of US corporate governance.

The move comes amid increasing concern in the US over excessive pay to executives.

The US House of Representatives is expected today to vote on a bill put forward by financial services committee chairman Barney Frank that would require a similar non-binding - or "advisory" - shareholder vote on executive pay.

UK-based Hermes plans to introduce its resolution at next month's annual meeting of shareholders of UnitedHealth Group. The healthcare insurance company has been engulfed by a stock options backdating scandal.

William McGuire, its former chairman and chief executive, was paid $8.7m last year, according to an Associated Press calculation of salary disclosures made yesterday in a filing with federal regulators.

Hermes was one of a number of European pension funds that in January wrote to SEC chairman Christopher Cox warning that shareholders' rights needed to be strengthened to maintain confidence in the US equity market.

Hermes said in an SEC filing: "We believe existing US corporate governance arrangements, including SEC rules and stock exchange listing standards, do not give shareholders enough mechanisms to provide input to boards on senior executive compensation."

UnitedHealth said: "Adopting this practice alone could put the company at a competitive disadvantage and negatively affect shareholder value by creating the impression among senior executives that compensation opportunities may be arbitrarily limited or negatively affected by this practice when compared with opportunities at our competitors."

Mark Anson, Hermes' chief executive said: "We are more interested in US companies and it would not be unusual to expect more activity from Hermes in future."

Corporate governance experts said the Hermes move was likely to followed by others. Rich Ferlauto, director of pension and benefit policy at AFSCME, the largest US public service union, said: "Not only is Hermes focused on trying to engage US companies behind the scenes but is doing so through ownership, challenging companies more directly."




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