U.S. Securities and Exchange Commission
Washington, DC 20549
NOTICE OF EXEMPT SOLICITATION
1. Name of the Registrant:
WELLPOINT, INC.
___________________________________________________________________________
2. Name of the person relying on exemption:
CTW INVESTMENT GROUP
___________________________________________________________________________
3. Address of the person relying on exemption:
1900 L STREET, NW, SUITE 900 WASHINGTON, DC 20036
___________________________________________________________________________
4. Written materials. Attach written materials required to be submitted
pursuant to Rule 14a6(g)(1):
CtW Investment Group
May 3, 2012
Dear fellow WellPoint shareholders:
The CtW Investment Group, alongside a coalition of institutional investors, is
urging shareholders VOTE NO on two nominees to the board of WellPoint because of
political spending, disclosure and governance issues.
Late last week, Institutional Shareholder Services (ISS) issued a report
recommending a vote in favor of WellPoint's incumbent board members in the
election of directors and against the shareholder proposal seeking greater
disclosure and accountability. UNFORTUNATELY, THE CTW INVESTMENT GROUP BELIEVES
ISS'S ANALYSIS IS DEEPLY FLAWED, failing to examine the risks to shareholder
value from WellPoint's political spending and the potential size of the
disclosure gap represented by undisclosed "special assessments" to trade
associations. AS A RESULT, INVESTORS THAT RELY ON ISS MAY UNWITTINGLY GIVE
WELLPOINT THE GREEN LIGHT TO CONTINUE TO PURSUE POTENTIALLY HIGH-RISK,
SURREPTITIOUS POLITICAL SPENDING THAT CAN PLACE LONG-TERM SHAREHOLDER VALUE AT
RISK.
ISS states clearly at the beginning of its analysis that if "supported by fact,"
the coalition's concerns "would indicate the potential for conflicts especially
in light of the company's alleged involvement in the funding of $86 million to
the U.S. Chamber of Commerce." Yet, without giving any meaningful countenance to
the factual points put forward by concerned investors, ISS later concludes in
favor of the board, deploying the proxy advisory industry's equivalent of
"punting" the issue: the oft-used "we will continue to monitor" text.
Unfortunately, it is difficult to monitor payments that go undisclosed.
Moreover, it is potentially reckless to wait another year or more to address an
issue that concerned investors demonstrate has already raised potentially
serious misalignments between shareholders and management in the past, and could
well do so again as the fate of the health care overhaul law and long-term
sustainability of the health industry is debated among lawmakers and other
politicians.
ISS FAILS TO ADDRESS TWO KEY POINTS:
1) the substantial nature of special assessments paid to trade associations and
the gaping holes that this refusal to disclose leaves in current disclosure;
and
2) the misalignment between WellPoint's past political spending and the
long-term interests of shareholders, and the risks that undisclosed funding
could again be misaligned in the current environment.
It is critical that shareholders recognize that special assessments are not, as
the company claims, de minimis, and the risks to shareholders not confined to
what ISS
1900 L Street NW, Suite 900 Washington, DC 20036 - 330 W. 42nd Street, Suite 900
New York, NY 10036
202-721-6060
www.ctwinvestementgroup.com
sees as 'reputational risks' but, instead, more fundamental: the potential
misalignment with long-term value creation, a discussion of which is notably
absent in the ISS report. Paramount is our concern that the company's
contributions were in conflict with its public positions on health care that
WellPoint articulated to investors and the general public, and the interests of
long-term investors. This is hugely problematic and yet receives no attention in
ISS's analysis.
Both failures are on display in ISS's conclusion that our critique is "based on
historical events [the debate on health care reform] that do not appear to have
harmed shareholder value." First, the company's expenditures to defeat health
care reform are the most egregious case we know of surreptitious corporate
spending, which only came to light because of dogged journalism. It is precisely
because the company does not fully disclose its political spending that
investors do not have information on current spending. Second, the debate over
health care reform is hardly a "historical" event that now lives solely in the
past. Whether such spending is taking place currently is particularly important
to investors given the uncertainty over health care reform and the ramifications
to the business if all or parts of the reform law are repealed. Third, nowhere
in ISS's analysis are the risks outlined by the coalition discussed; indeed the
analysis makes no mention of shareholder value in the evaluation of our
concerns, leaving no foundation for ISS's conclusion that shareholder value has
not been harmed.
It is vital to note that ISS prefers to limit the discussion of risks from a
lack of transparency to reputational risk, evidenced by its extensive discussion
of the American Legislative Exchange Council, ALEC, rather than the more
fundamental concern about business (mis)alignment and the potential conflict
between the short-run interests of executives in defeating health reform verses
the long-term interests of shareholders in building a sustainable business. To
be clear, we believe reputational risk is an issue, yet the concerns that
elevated WellPoint's spending to an issue on directors relates to the business
alignment and long-term shareholder value.
ISS's failure to understand the shortcomings of WellPoint's current disclosure
and the potentially serious understating of the company's political activities
becomes clear when ISS recommends against the political disclosure proposal
(Item No. 4), despite a policy bent towards support for such proposals. ISS
claims that WellPoint's '"shareholders are provided with information to enable
them to generally evaluate the company's political contributions . . . .the
risks and benefits of the company's political participations and the company's
management of those risks and benefits." ISS, however, fails to explain how
shareholders can understand what WellPoint is doing in this area when
potentially millions of dollars in undisclosed shareholder funds may be
supporting efforts at odds with shareholders' long-term interests.
CTW INVESTMENT GROUP CONTINUES TO RECOMMEND VOTES AGAINST JULIE HILL AND SUSAN
BAYH
The Governance Committee, as ISS notes, is responsible for managing
director-related conflicts. Given its apparent failure to adequately perform
this role in the past as regards to political spending, and its failure to
establish, as ISS now recommends, an independent committee to oversee political
spending, we continue to recommend investors hold the only long-term member of
the Governance Committee up for election under the classified board structure
responsible - Julie Hill.
We also continue to recommend investors vote against Susan Bayh given the
potential conflicts she embodies both past and present.
For more information, please contact michael.pryce-jones@changetowin.org.
Sincerely,
Richard Clayton
/s/ Richard W. Clayton III
Research Director, CtW Investment Group