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Note: The proposal for advisory voting on compensation referenced in the article below was submitted by Hermes Equity Ownership Services, and had been offered at the December 2006 Forum meeting as an example for U.S. adaptation of advisory voting practices.

For additional information about the Forum's project relating to the development of a model for advisory voting on executive compensation policies, see

Advisory Voting


St. Paul Pioneer Press, May 30, 2007 article



Shareholders warn insurer

UnitedHealth defeats 'say on pay' proposals, but resolutions do get significant support

Pioneer Press

Article Last Updated: 05/29/2007 09:40:52 PM CDT

UnitedHealth Group shareholders on Tuesday voted down proposals by investor groups aimed at giving more voice to shareholders on executive compensation and board nominees. Company-backed proposals, meanwhile, won broad support.

Although the investor-sponsored resolutions were defeated, they did capture a significant percentage of the votes.

A proposal by the California pension fund Calpers to allow shareholders more say in electing board members received 42 percent, which is among the highest percentages of any shareholder proposal around the country this year.

Calpers proposal asked the company to allow stockholders who have held at least 3 percent of the company's stock for over two years to nominate two directors to management's election ballots.

The meeting, held at the Minneapolis Convention Center, was almost sedate compared with last year's shareholders' meeting, when the Minnetonka-based health-insurance giant was in the beginning stages of a scandal over the backdating of stock options.

"This is a huge message loud and clear to UnitedHealth," said Clark McKinley, a Calpers spokesman. "We are hopeful they will take note of it." The vote was supported by the California State Teachers' Retirement System, which also joined Calpers in backing a similar proxy-access proposal at Hewlett Packard in March that received 39 percent.

Another that sought an advisory vote for shareholders on executive compensation at UnitedHealth received 39 percent.

One that sought to align the vesting of a portion of equity grants to executives with performance goals received 41 percent. A proposal to rein in special retirement benefits for executives sought by the Massachusetts Laborers' Pension Fund gained 29 percent of the vote.

That percentage is slightly lower than the votes in favor at other companies where the proposal has been put forward, said Richard Metcalf, director of corporate affairs for Laborers' International Union, who spoke at the meeting on behalf of the Massachusetts pension fund. He attributed the lower figure to the number of corporate-governance policy changes UnitedHealth has put in place over the year.

UnitedHealth's board recommended votes against all four of the investor proposals. While the resolutions ultimately were defeated, investors did approve company-designed proposals aimed at increasing the board's accountability to shareholders.

"Everyone at UnitedHealth Group is gratified by the strong shareholder support for the company and the solid progress we have achieved in the past year in corporate governance," Richard Burke, UnitedHealth's chairman of the board, said in a statement.

Under those proposals, shareholders agreed to require a majority vote for election of directors as opposed to a plurality vote that had been required in the past and provide for an annual election of all directors. They also agreed to eliminate supermajority provisions for the removal of directors and other business combinations.

At last year's meeting, about 350 shareholders jammed into a wide commons area at the company's headquarters, many to grill former Chairman and Chief Executive William McGuire about the backdating issue. To get in, shareholders had to first pass through metal detectors. Security guards searched bags. Reporters were instructed not to talk to shareholders and were corralled into an out of the way room until the meeting began. After an independent law firm disclosed in October that it had found evidence of stock-option backdating, McGuire stepped down. Backdating occurs when stock-option grant dates are altered retroactively to coincide with advantageous stock prices. Regulatory and criminal investigations into the scandal are ongoing.

This year, about 65 people attended the annual meeting with about half of those being UnitedHealth Group employees. They listened to investor groups speak on behalf of their proposals and to a quick overview of company strategy from Chief Executive Stephen Hemsley.

Shareholders also voted to re-elect to the board of directors: William Ballard, Burke, who remains chairman, and Hemsley, and approved the appointment of Robert Darretta, retired vice chairman and chief financial officer of Johnson Johnson, who is a new director.

Julie Forster can be reached at or 651-228-5189.



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