(WASHINGTON) – Leading independent proxy advisor Institutional Shareholder Services (ISS) is opposing Tenet Healthcare Corp.’s (NYSE: THC) “Say on Pay” report because its redesigned 2016 long-term incentive program is undermined by lack of disclosure of relevant financial goals as wells as the Board of Directors decision to revert back to a $9 million target for incentive pay despite continuing losses to shareholder value. The negative recommendation sets up the specter of an investor revolt at the annual meeting on May 4 in Dallas, Texas.
The recommendation comes on the heels of the Teamsters Union call to fellow investors to reject Tenet’s executive pay as practices take a turn for the worse in the face of arresting share performance and costly legal trouble s.
In a letter to shareholders, General Secretary-Treasurer Ken Hall blasted Tenet’s Board for walking-back touted reforms to its pay practices, undertaken in the wake of a poor Say-on-Pay vote in 2015, where nearly 18 percent of the shares were cast against the executive pay plan. Despite a 40 percent fall in the stock price over the past 12 months, and a recent half billion dollar legal settlement, new equity awards indicate pay will return to previous elevated levels while a poorly structured option award heralds potential windfall profits, the letter noted.
“It seemed as if the board had found religion on pay last year, but recent decisions shatter that illusion,” Hall said. “Directors are moving the goalposts to meet pay targets for the executives. This is clearly not in the best interest of shareholders.”
In its April letter to investors, Hall described how Tenet’s executive pay, in particular the 2017 option grant, is not an effective incentive for performance.
“The new option award is contingent on the achievement of a 25 percent increase in the stock price anytime over a three-year period,” Hall wrote. “For a stock that has given up more than 70 percent since September 2014, and has suffered significant volatility amid the uncertainty over health care reform, it is not clear this award is a particularly efficient or effective means of incentivizing and rewarding executive decision-making. Even more concerning is the fact that the award represents less than a 5 percent price hurdle to where the stock was trading just two days prior to the award.
“Tenet’s Board of Directors has given investors plenty to worry that their interests are not a priority when it comes to setting executive compensation. Shareholders need to send the Board a loud and clear message through their vote against the company’s Say-on-Pay proposal that this is unacceptable and changes need to be made.”
Founded in 1903, the International Brotherhood of Teamsters represents 1.4 million hardworking men and women throughout the United States, Canada and Puerto Rico. Visit www.teamster.org for more information. Follow us on Twitter @Teamsters and “like” us on Facebook at www.facebook.com/teamsters.