The California Public Employees' Retirement System said it will fight the proposed $16 billion merger of WellPoint Health Networks and Anthem, citing what it called "egregiously unwarranted" executive compensation that would hurt consumers and compromise shareholder value.
CalPERS, the nation's second-largest public pension fund, owns about 722,000 WellPoint shares, or less than 1% of the company's stock. CalPERS questioned the hundreds of millions of dollars WellPoint's top executives would reap if the merger is completed and said it will try to persuade other major shareholders to help derail the deal.
Shareholders of both insurers are scheduled to vote on the merger June 28.
According to a document made public last week, WellPoint intends to pay 293 executives cash bonuses and severance pay of $147 million to $356 million, depending on who stays and leaves after the merger. The executives also hold $251 million in stock options, which would vest immediately if they were fired or compelled to quit within three years of the deal's closing.
WellPoint has said it expects the total payout to be closer to $200 million, an amount that it said would be more than offset by the $250 million in annual savings the merger is expected to generate through reduced administrative expenses.