September 20, 2005

Executive Compensation as a Political Football

Last week, California State Treasurer Phil Angelides called for the state’s two big pension funds – CalPERS and CalSTRS – to oppose the proposed acquisition of Pacificare by UnitedHealth Group unless certain payments to executives were rescinded. Angelides (who recently announced he is running for California Governor) claims that $315 million in payouts to the top tier of management is excessive. I agree that it sounds excessive – but some of this amount reflects acceleration of vesting of stock options (in which case perhaps the option grants were excessive but not the severance arrangements – without knowing more, my hunch is that both were more than enough as I intimated in this article).

Even though no Form S-4 has yet been filed, a regulatory hearing was held last week by the Department of Managed Health Care – but the Department doesn’t have the authority to regulate executive compensation levels. The transaction will also require approvals from the U.S. and California Departments of Justice, the California Department of Insurance and nine other states, including Texas, Nevada and Colorado.

The Treasurer’s move does illustrate the fact that executive pay can become a political football – particularly when it involves a controversial industry such as health care. The transaction will have an effect on about 3.5 million California enrollees. Thanks to Keith Bishop for helping to sort this one out!

At our “2nd Annual Executive Compensation Conference,” you will hear what investors are feeling – and planning – regarding compensation practices from Pat McGurn of ISS, Greg Taxin of Glass Lewis and Paul Hodgson of The Corporate Library during the panel, “The Institutional Investors’ New Focus on Executive Compensation: What It Means For You.”

WKSI Transcript is Posted!

We have posted the transcript of our popular webcast: “Drilling Down: Doing a WKSI Offering After the ’33 Act Reform.”

Winning Strategies in Auctions

Don’t forget tomorrow’s webcast on – “Winning Strategies in Auctions” – featuring Mark Gordon of Wachtell Lipton, Eileen Nugent of Skadden Arps, John Grossbauer of Potter Anderson – and for the banker’s perspective, Jill Goodman of Lazard. Learn steps to reduce the impact of the “Winner’s Curse” and more, including analysis of the recent Toys ‘R Us decision.

More on the Most Bizarre Registration Statement of All-Time

Following up on last week’s blog about the bogus Apollo Publication Corp. registration statement, one member asked how EDGAR accepted the filing if there wasn’t a filing fee? This question presumed the prankster wasn’t willing to pay something for the publicity the scheme has generated.

I believe that a fee – albeit a small one – was paid through Mellon for this filing. David Copenhafer of Bowne explains that the SEC Staff double checks to ensure that the system-approved fee is what was actually due, and that was one of the things that triggered the SEC’s identification of a problem in this case.

David notes this “filer” went to a lot of trouble to light up EDGAR functions. He took a quick look at the HTML of the filing and thinks the fraudster made an effort to see what was possible and how things work within the EDGAR system. So this might be the handicraft of a fraudster with “skills.” [Finally saw Napoleon Dynamite – my favorite scene is where Pedro and Napoleon are conspiring to blend their “skills” in Pedro’s pursuit of the class presidency.]