Tenet’s Trevor Fet­ter will col­lect $42.3 mil­lion on his way out the door

The Team­sters felt Fet­ter, in par­tic­u­lar, was be­ing over­paid for the com­pany’s stock and earn­ings per­for­mance. De­spite the Team­sters’ op­po­si­tion, share­hold­ers ap­proved the plan.

Modern Healthcare - - NEWS - By Dave Barkholz

Trevor Fet­ter, the out­go­ing CEO of Tenet Health­care, is set to re­ceive a sev­er­ance pack­age of $22.9 mil­lion and $19.4 mil­lion in pen­sion pay­ments when his re­place­ment is found, ac­cord­ing to Tenet fi­nan­cial doc­u­ments.

On Aug. 31, Tenet an­nounced it would re­place Fet­ter af­ter its largest share­holder, Glen­view Cap­i­tal Man­age­ment, re­lin­quished two board seats at the money-los­ing hos­pi­tal gi­ant. Dal­las-based Tenet has come un­der fire from Glen­view, which owns 18% of Tenet, and other in­vestors in light of the pace of its turn­around.

Fet­ter has agreed to stay on un­til March or un­til a suc­ces­sor is named. In the shakeup, Tenet board leader Ron­ald Rit­ten­meyer was ap­pointed ex­ec­u­tive chair­man. Rit­ten­meyer would re­ceive an an­nu­al­ized base salary of $500,000 and $2.3 mil­lion in per­for­mance-based stock op­tions that vest af­ter a year if Tenet’s stock price rises 25% and stays there or rises fur­ther for 30 con­sec­u­tive days.

Fet­ter’s $22.9 mil­lion sev­er­ance pack­age would in­clude cash pay­ments of $10.8 mil­lion and ac­cel­er­ated eq­uity awards val­ued at $8.3 mil­lion, among other pay­outs, doc­u­ments showed.

A Tenet spokesman de­clined to com­ment.

Fet­ter was paid $12.4 mil­lion in 2016, in­clud­ing $1.3 mil­lion in salary, $7.3 mil­lion in stock awards, $1.3 mil­lion in non-eq­uity bonuses, and $2.2 mil­lion in pen­sion and de­ferred com­pen­sa­tion.

The In­ter­na­tional Brother­hood of Team­sters, whose $100 bil­lion pen­sion and ben­e­fit funds hold a siz­able chunk of Tenet shares, asked share­hold­ers at Tenet’s an­nual meet­ing in May to re­ject the com­pany’s ex- ec­u­tive com­pen­sa­tion plan un­der an ad­vi­sory vote known as Say on Pay.

The union felt Fet­ter, in par­tic­u­lar, was be­ing over­paid for the com­pany’s stock and earn­ings per­for­mance. De­spite the Team­sters’ op­po­si­tion, share­hold­ers ap­proved the plan.

Now, Fet­ter’s sev­er­ance is draw­ing their ire.

“This is a clas­sic golden push out the door,” said Michael Pryce-Jones, Team­ster’s se­nior gov­er­nance an­a­lyst. Pryce-Jones said Fet­ter has been hand­somely com­pen­sated over the years, even though the com­pany is un­prof­itable and its com­mon stock, which was nearly $60 per share two years ago, now trades just above $15.

“It’s kind of the al­ter­na­tive world that CEOs are com­pen­sated in,” Pryce-Jones said.

Typ­i­cally, the cash out­lay in sev­er­ance for an ex­ec­u­tive who is ter­mi­nated or leaves at his or her own will is two times base salary plus bonuses, said an ex­ec­u­tive com­pen­sa­tion leader who works in the health­care sec­tor but asked not to be named.

Fet­ter’s $10.8 mil­lion cash sev­er­ance is more than three times that—a “healthy” de­par­ture from in­dus­try norms, the ex­ec­u­tive said. His salary and bonuses are more com­mon when there’s a change of con­trol at a com­pany, the ex­ec­u­tive added.

Fet­ter wasn’t the only Tenet ex­ec­u­tive in the news last week. Two for­mer com­pany ex­ec­u­tives were charged in a pre­vi­ously set­tled fed­eral kick­back case that al­leged Tenet fraud­u­lently billed Ge­or­gia Med­i­caid pro­grams. Al­though Tenet agreed in Oc­to­ber 2016 to pay $513 mil­lion to set­tle crim­i­nal charges and civil claims, the U.S. Jus­tice Depart­ment has added Wil­liam Moore, for­mer CEO of At­lanta Med­i­cal Cen­ter that pre­vi­ously was run by Tenet, and Ed­mundo Cota, ex-pres­i­dent and CEO of Clin­ica de la Mama, to the in­dict­ment. John Hol­land, for­mer Tenet se­nior vice pres­i­dent, was pre­vi­ously in­dicted for his part in the $400 mil­lion fraud scheme.

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