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.
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.