CalPERS Objects to Anthem-WellPoint Deal

The California Public Employees’ Retirement System, the biggest U.S. pension fund, on Monday objected to Anthem Inc.’s proposed acquisition of WellPoint Health Networks Inc. because it includes “excessive pay packages” for WellPoint executives.

Executives at Thousand Oaks-based WellPoint, which runs Blue Cross of California, may receive compensation packages worth more than $600 million as part of the agreement, the public employees’ investment group known as CalPERS has said, citing state documents. CalPERS will work to persuade other large institutional shareholders to object to the acquisition, officials said.

CalPERS directors also called on Gov. Arnold Schwarzenegger through his Department of Managed Care to hold a public hearing on the merger and to use the department’s regulatory power to prohibit alleged excessive spending on executive compensation.

Opposition to the WellPoint-Anthem merger is the latest example of the alliance between the CalPERS board and state Treasurer Phil Angelides, an expected Democratic candidate for governor in 2006, to use the shareholder clout of state employees’ pension funds to pressure companies to improve corporate governance practices.

Anthem’s acquisition of WellPoint would create the nation’s largest insurer.

Ken Ferber, a spokesman for WellPoint, said CalPERS was overestimating the amount that employees would receive in compensation by tallying both potential severance payments and bonuses for staying.

CalPERS owns less than one-half of a percent of each of the companies’ shares, according to a March regulatory filing.

Separately, Angelides said CalPERS wants to question CACI International Inc. regarding its alleged involvement in prisoner abuse cases at Abu Ghraib prison in Iraq. CalPERS owns shares in CACI.

A representative of the Arlington, Va.-based defense contractor was not available to comment.

The company has denied allegations in a lawsuit that it conspired with U.S. officials to abuse prisoners in Iraq.

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Reuters was used in compiling this report.