Investment
Office
P.O.
Box
2749
Sacramento,
CA 95812-2749
Telecommunications
Device for the Deaf - (916) 795-3240
Telephone:
(916) 795-2731
DATE
NAME
FIRM
ADD1
ADD2
Dear
Shareowner of UnitedHealth Group:
I
am
writing to you on behalf of the California Public Employees’ Retirement System
(CalPERS). CalPERS is the largest public pension system in the U.S., with
approximately $240 billion in assets. We manage retirement benefits and health
insurance on behalf of nearly 1.5 million members.
CalPERS
is a significant long-term shareowner of UnitedHealth Group and owns
approximately 6.4 million shares. With UnitedHealth’s Annual Meeting of
Shareowners to be held on May 29, 2007, we are writing to call your attention
to
an important proposal (Proposal 11 on the proxy card) which would request the
Board to amend UnitedHealth’s bylaws to provide shareowner access to the
company’s proxy materials under certain circumstances. Access to the proxy will
enable shareowners to include nominees for election to the board of directors
on
the company’s proxy statement. Effective access to the proxy is of critical
importance to long-term shareowners. CalPERS urges UnitedHealth shareowners
to
vote FOR Shareholder Proposal No. 4 (Proposal 11 on the proxy card) granting
shareowners effective proxy access.
VOTE
FOR SHAREHOLDER PROPOSAL NO. 4
(Proposal
11 on the proxy card)
| Ø |
Shareholder
Proposal No. 4 allows for meaningful yet responsible shareowner
access to
the director nomination process to promote board accountability
and a
culture focused on creating long-term shareowner
value.
|
CalPERS
believes that allowing meaningful shareowner access to the company’s proxy
materials in order to nominate candidates for election to the board of directors
is the most effective mechanism for ensuring director accountability at
UnitedHealth. UnitedHealth shareowners do not currently have the right to
include nominees for election to the board of directors on the company proxy
statement as a means to promote board accountability and a culture focused
on
creating sustainable long-term value. To ensure that long-term shareowners
can
responsibly invoke use of the proxy access provision when they satisfy certain
criteria, our proposal provides that only shareowners that have beneficially
owned 3% or more of UnitedHealth’s outstanding common stock for at least two
years will be eligible to nominate up to two candidates for election to the
Board. (See attached for full text of the proposal.)
California
Public Employees’ Retirement System
Lincoln
Plaza East - 400 Q Street, Suite E4800 - Sacramento, CA
95814
SHAREHOLDER
PROPOSAL NO. 4 - A NON-BINDING SOLUTION
FOR
ENSURING ACCOUNTABILITY
| Ø |
Shareholder
Proposal No. 4 is non-binding and requests the board to amend
UnitedHealth’s bylaws to establish procedures for including shareowner
nominated director candidates in the company’s proxy statement. If
adopted, Shareholder Proposal No. 4 would allow shareowner nominees
to be
included for shareowner consideration along with management nominees
in
board
elections.
|
Today
at
UnitedHealth, only the board is empowered to put a director nominee up for
election on the proxy statement. CalPERS believes that boards that control
their
own membership can lead to a culture characterized by unaccountable and
entrenched directors. It is our experiencebelief
that
such a culture may result in abusive executive compensation practices, fraud,
or
other misconduct - which in turn causes the destruction of shareowner
value.
The
“Wilmer Cutler Report”1
documents the “options backdating” scandal that occurred at UnitedHealth.
According to the report:
| · |
Millions
of option grants at UnitedHealth were “likely backdated” over a
twelve-year period.
|
|
·
|
Option
grants to new hires and to employees receiving promotions were
backdated
“as a matter of policy.”
|
|
·
|
There
were financial conflicts of interest between the former CEO and
the former
Compensation Committee Chair at the time the CEO’s employment agreement
was re-negotiated by the committee
chair.
|
|
·
|
UnitedHealth’s
internal controls related to option grants were
“inadequate.”
|
|
·
|
UnitedHealth’s
senior management failed to ensure that option granting practices
were
appropriate.
|
These
improper option grants led to a financial restatement at UnitedHealth. In a
recent press release, UnitedHealth stated that a $1.526
billion reduction
in
previously reported net earnings “principally reflects additional stock-based
compensation expense and the related tax effects associated with the Company’s
historic stock options practices.”2
_____________
| 1 |
Report
of Wilmer Cutler Pickering Hale and Dorr LLP To The Special Committee
Of
The Board Of Directors Of UnitedHealth Group, Inc (summarized
and
available in its entirety on UnitedHealth’s website at: http://www.unitedhealthgroup.com/news/rel2006/1015SeriesofActions.htm
).
|
|
2
|
The
March 6, 2007 press release may be found on UnitedHealth’s website at
http://www.unitedhealthgroup.com/news/rel2007/0306_financial_restatement.htm
|
Allowing
shareowners the right to nominate directors through the proxy will inform the
Board that (1) this type of conduct is unacceptable to the company’s owners and
(2) director candidates nominated by shareowners should share the proxy with
candidates nominated by the Board. Shareowners should be represented by a board
that is focused on creating sustainable shareowner value while demonstrating
a
culture of holding company management accountable.
VOTE
FOR SHAREHOLDER PROPOSAL NO. 4
(Proposal
11 on the proxy card)
| Ø |
As
one of the largest shareowners of UnitedHealth, CalPERS urges
you to vote
FOR Shareholder Proposal No. 4.
|
We
believe that responsible shareowner access to the director nomination process
is
a vital priority for sustaining a system of corporate governance that fosters
democracy, director accountability and long-term value creation. CalPERS
believes providing shareowners with an effective mechanism to nominate qualified
director nominees is essential to restoring genuine accountability in the
boardroom and fostering a culture that aligns the interests of directors with
those of the owners of a company - its shareowners.
Please
refer to the proxy statement for more information or call The Altman Group,
Inc.
who is assisting us with this effort toll-free at (800) 314-9816 or at (201)
460-1200 if you have any questions or need assistance in voting your
shares.
Sincerely,
Christianna Wood
Senior
Investment Officer, Global Equity
PLEASE
NOTE:
The cost
of this solicitation is being borne entirely by CalPERS and is being done
through the use of one or more of the following forms of communication: mail,
e-mail, and/or telephone communication. CalPERS is not asking for your proxy
card. Please
do not send us your proxy card but return it to the proxy voting agent in the
envelope that was provided to you.
ATTACHMENT
SHAREHOLDER
PROPOSAL
RESOLVED,
the shareholders of UnitedHealth Group, Inc. (the “Company”), request that the
Board amend the Company’s bylaws to add the following to Section
3.03:
Notwithstanding
the above, the corporation shall include in its proxy materials for a meeting
of
shareholders at which directors are to be elected the name, together with the
Disclosure and Statement (both as defined in this section 3.17), of any person
nominated for election to the Board of Directors by a shareholder or group
thereof that satisfies the requirements of this section 3.17 (the “Nominator”),
and allow shareholders to vote with respect to such nominee on the corporation’s
proxy card. Each Nominator may nominate up to two candidates for election at
a
meeting.
A
Nominator must:
(a)
have
beneficially owned 3% or more of the corporation’s outstanding common stock
(“Required Shares”) continuously for at least two years;
(b)
provide written notice received by the Secretary within the time period
specified in the first paragraph of this section containing (i) with respect
to
the nominee, (A) the information required by such section and (B) such nominee’s
consent to being named in the proxy statement and to serving as a director
if
elected; and (ii) with respect to the Nominator, proof of ownership of the
Required Shares; and
(c)
execute an undertaking that it agrees to (i) assume all liability stemming
from
any legal or regulatory violation arising out of the Nominator’s communications
with the corporation’s shareholders, including, without limitation, the
Disclosure and Statement; (ii) to the extent it uses soliciting material other
than the corporation’s proxy materials, comply with all applicable laws and
regulations, including, without limitation, the SEC’s Rule 14a-12.
The
Nominator may furnish a statement, not to exceed 500 words, in support of the
nominee’s candidacy (the “Statement”) at the time the Disclosure is submitted.
The Board of Directors shall adopt a procedure for timely resolving disputes
over whether notice of a nomination was timely given and whether the Disclosure
and Statement comply with this section 3.17 and any applicable SEC
rules.
SUPPORTING
STATEMENT
As
an
indication of the extent of the compensation problems at many public
corporations, President George W. Bush recently said he was “floored” when he
sees “guys making a billion dollars as a CEO of a company.” President Bush also
stated that he hopes that “shareholders should take a good hard look at some of
these companies.”
The
“Wilmer Cutler Report” exposed many compensation-related problems at the Company
including inadequate internal controls, a lack of disclosure regarding financial
relationships between the former CEO and the Chairman of the Compensation
Committee, the improper “repricing” of options and the improper “backdating” of
options. For these reasons, CalPERS is sponsoring this proposal to advise the
Board that shareowners should have a meaningful voice in the election of the
Board of Directors.
Access
to
the proxy for purposes of electing a director nominated by large shareowners
is
the most effective mechanism for ensuring accountability.
Please
vote FOR this proposal.