UnitedHealth Stock Options Criticized

The California Public Employees’ Retirement System said UnitedHealth Group Inc. must immediately explain $2.4 billion in stock options granted to top executives.

CalPERS sent a letter to UnitedHealth demanding a meeting before shareholders of the No. 2 health-insurance company in the U.S. are set to vote May 2. CalPERS may withhold proxy votes for Chief Executive William McGuire, who will receive $1.6 billion in options, and for members of the board’s compensation committee, fund spokesman Clark McKinley said.

“We’re leaning that way right now,” McKinley said Tuesday. CalPERS has 6.5 million UnitedHealth shares.

Minnesota Atty. Gen. Mike Hatch on April 19 joined a lawsuit alleging Minnetonka, Minn.-based UnitedHealth backdated stock options granted to senior executives, allowing them to purchase shares at lower prices than fair market value. The Securities and Exchange Commission also has made inquiries into compensation at UnitedHealth

“These stock option grants are an insult and add injury in a market of skyrocketing healthcare costs in America, and as the third-largest healthcare purchaser, we find this intolerable and unsustainable,” CalPERS President Rob Feckner said in the letter.

Shares of UnitedHealth fell 80 cents to $49.36.

Mark Lindsay, a UnitedHealth spokesman, said McGuire held so much in stock option value because of the “extraordinary” increase in the company’s share prices in the last 15 years. Lindsay said the company would welcome a meeting with CalPERS.