NEW YORK: Investors everywhere should applaud the deal struck last week by the UnitedHealth Group to recover nearly $1 billion in pay from former executives involved in the companys option backdating mess.

Not only is the number big and round - by far the largest giveback by U.S. corporate executives ever - but the recovery sets a standard of behavior for other companies and boards when performance pay is later shown to have been based on ephemeral earnings.

UnitedHealth shareholders have suffered. The company restated 12 years of earnings in the amount of $1.5 billion as a result of the backdating and said it had struck a $55 million settlement with the Internal Revenue Service. The stock is about where it was in March 2006 before a Wall Street Journal article first questioned the timing of option grants made to Dr. William McGuire, UnitedHealths longtime chief executive.

So it seems only appropriate that McGuire will cough up options worth $418 million in addition to the almost $200 million in options he has already forfeited. The agreement also bars him from joining the board of a public company for 10 years.

Dont fret for McGuire, though. He still holds options worth around $800 million. In a statement, he said he was happy to have the matter resolved; he neither admitted nor denied the backdating accusations.

Even more significant about this deal is that it will force boards to institute “clawback” provisions in all employment agreements with top officers and then enforce them.

“Every single time another executive agrees to a clawback or another board insists on one - especially if its made public - it just makes it harder for other executives not to agree to them or other boards not to insist on them,” said Michael Melbinger, a partner at Winston Strawn and head of its executive compensation practice.

The UnitedHealth case is also an example of the value of an effective special-litigation committee. Many such committees, convened by boards in response to accusations of impropriety at their companies, often seem most interested in whitewashing questionable actions. They rarely work as hard as the committee at UnitedHealth did to get to the bottom of the mess.

The committee members were Kathleen Blatz, former chief justice of the Supreme Court of Minnesota, and Edward Stringer, a former justice of that court.

Both were unusually eager to get shareholders views on the problems at UnitedHealth, said Chad Johnson, a partner at Bernstein Litowitz Berger Grossmann, one of two law firms that represented nine public pension funds that sued UnitedHealth and 20 of its officers and directors over the backdating.

Indeed, the committees 80-page report said that while UnitedHealth had genuinely tried to resolve weaknesses in option-granting practices and other oversight breaches, the pension fund plaintiffs had provided proposals aimed at keeping the company in the forefront of transparency and accountability. The committee urged UnitedHealth to consider them seriously.

“We have an important governance aspect of this case that is still the subject of negotiation,” said Karl Cambronne, lead counsel at Chestnut Cambronne in Minneapolis.

One aspect of the UnitedHealth settlement and litigation committee report disturbed Brian Foley, an independent compensation consultant in White Plains, New York.

That was the committees forgiving treatment of two UnitedHealth directors and members of the compensation committee who oversaw McGuires option grants and employment agreement. They are Thomas Kean, the former governor of New Jersey, and Mary Mundinger, dean of health policy at Columbia Universitys nursing school.

The litigation committee called their performance on the compensation committee “disappointing,” but decided not to take legal action against them.

“If the directors arent held accountable in some shape or form and arent at least heavily criticized in the special litigation committee report, that is a mixed message,” Foley said. “That you can have a situation this bad, with write-offs and tax impacts and recoveries this big, and the directors still arent liable - what does that say about their accountability?”

Don Nathan, a UnitedHealth spokesman, said that neither Kean nor Mundinger would comment. But Nathan said the board had set up a committee of representatives from four of the companys long-term institutional investors to advise on director candidates and qualifications. That, too, is a step in the right direction; most boards shut out investors on the topic of director nominees.

Even so, that the outcome of the UnitedHealth case is so remarkable is a distressing indication of how far shareholders still have to go to hold executives and directors accountable. Luckily, some are up to the task.

“We think this is a really important case,” said Kevin Lindahl, general counsel for the Fire and Police Pension Association of Colorado, one of the plaintiffs. “We think it is important for major shareholders to stand up against corporate abuse and to improve company governance on behalf of all shareholders.”

Ingersoll-Rand («www.businessweek.com») agrees to acquire Trane («www.businessweek.com») in a $10.1 billion deal, which includes transaction fees and assumption of about $150 million of TT debt. Terms: $36.50 in cash and 0.23 IR share for each TT share, for total value of $47.81 per TT share, based on Dec. 14 close. Assuming a timely consummation of deal, IT anticipates EPS of $4.00 in 2008.

Grant Prideco («www.businessweek.com») agrees to be acquired by National Oilwell Varco («www.businessweek.com»). Terms: GRP holders to get $23.20 in cash, 0.4498 NOV shares for each share held.

Loews («www.businessweek.com») plans to spin off its entire ownership interest in Lorillard, Inc. to holders of its Carolina Group and Loes in a tax free transaction. Lorillard presently a wholly owned subsidiary of LTR, would become a separate publicly traded company.

AON Corp. («www.businessweek.com») agrees to sell its Combined Insurance Company of America and Sterling Life Insurance Co. ACE Limited to Acquire Combined Insurance Co. for $2.4 billion, Munich Re Group to buy Sterling Life Insurance for $352 million. AOC to devote proceeds of these deals to an increase in its share buyback program by $2.6 billion, bringing the total amount to about $2.78 billion.

Marshall & Ilsley («www.businessweek.com») expects that fourth quarter charge-offs may be up to $195 million and loan loss provision may be up to $235 million.

Illinois Tool Works («www.businessweek.com») lowers fourth quarter EPS guidance to $0.82-$0.86, 2007 to $3.32-$3.36. It now expects base revenues to be in range of 2.0%-2.8% for the fourth quarter.

Plains Exploration & Production Company («www.businessweek.com») says the company and certain of its subsidiaries have executed definitive purchase and sale agreements to sell oil and gas properties for approximately $1.75 billion to a subsidiary of Occidental Petroleum and XTO Energy. It raises share repurchase authorization to $1.0 billion.

Amgen («www.businessweek.com») says results from the Phase 3 HALT Breast Cancer 135 study show that denosumab, a fully human monoclonal antibody under investigation as a twice yearly subcutaneous injection, increased bone density worsened by Aromatase Inhibitor (AI) therapy, including in highly cortical areas of the skeleton.

Covidien Ltd. («www.businessweek.com») announces that First Quality Enterprise Inc. will acquire the company’s Retail Products business for about $335 million, subject to certain adjustments provisions.

Amtech Systems («www.businessweek.com») says its Tempress Systems, Inc., has received an additional $8.9 million in orders for diffusion processing systems from the solar cell industry. It says since Oct. 1, 2007, ASYS has received solar orders totaling approximately $27.8 million.

LDK Solar ADS («www.businessweek.com») says its Audit Committee has completed its independent investigation into the recent allegations made by former employee, that company incorrectly reported its inventories of silicon feedstock. Investigation found no material errors in the company’s stated silicon inventory quantities as of Aug. 31, 2007.

After collecting $18 million in property-transfer taxes in April from the Blackstone Group LP on the biggest commercial real estate deal in the city’s history, the San Francisco assessor-recorder’s office has received an additional $11.7 million in connection with the same transaction.

Blackstone, headquartered in New York, made the additional tax payment via a wire transfer on Friday under protest in order to avoid late-payment penalties, Assessor-Recorder Phil Ting said Monday.

Equity Office Properties Trust sold its U.S. portfolio of office buildings in February to Blackstone for a reported $39 billion, the biggest leveraged buyout in U.S. history. Blackstone then began reselling many of the properties, including 10 in San Francisco to Morgan Stanley for $2.5 billion.

Blackstone did not specify its reasons for protesting its latest tax payment, Ting said. “We don’t understand why they don’t want to pay the tax,” he said. “In their letter, (Blackstone) declined to substantiate why they feel they’re exempt.”

As The Chronicle reported in May, Blackstone made a $17.8 million payment in late April based on its sale to Morgan Stanley. At the time, Ting said he sent a demand letter to Stephen Schwarzman, Blackstone’s chief executive, seeking additional unpaid taxes arising from the same transaction.

Blackstone officials in New York could not be reached for comment late Monday.

San Francisco has a sliding real estate-transfer tax that ranges from 0.5 to 0.75 percent of a commercial property’s purchase price, depending on the size of the transaction. The seller or the buyer can pay the tax.

Ting said Monday that the most recent payment covered Blackstone’s purchase from the trust of five well-known office towers in downtown San Francisco. They are One Market St., One Maritime Plaza, One Post St., 150 California St. and 60 Spear St.

Even though Blackstone has already paid a total of about $29.5 million on the 10-building deal, Ting said Monday that his office is seeking more from Blackstone for three other properties that were part of the February transaction: 188 Embarcadero, 201 California St. and Foundry Square at 400 Howard St.

Blackstone, a private-equity firm, said it plans an initial public offering that could occur as soon as next week. The IPO is expected to raise between $3.87 billion and $4.14 billion.