UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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Tenet Healthcare Corporation
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2019 Notice of Annual Meeting and Proxy Statement
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Dear Fellow Shareholders,fellow shareholders,
2018 wasIt has been a foundational year since we entered the pandemic and the last 12 months clearly have been an extraordinary challenge and learning experience. This has brought a marked increase to the pace of change for the Tenet Healthcare Enterprise. We are purposefully getting better at what we do.
Throughout this year, we have driven change by embracing our responsibilities as care providers, while creating a culture of accountability at all levels and across all functions. We have reached far and deep, accelerating progress on a new path forward, improving our quality of careoperations, as well as a need to handle an equally significant increase of information effectively and efficiently coupled with many emotional ups and downs never experienced in our underlying performance.
We believe companies thrive when change becomes ingrained intopast. Our company was at the organizational fabric, creatingfront line across our system experiencing the opportunityfrustrations, fear and the other external and internal pressures that resulted from dealing with what started as an unknown. I am pleased to challengereport that your company took on these challenges directly, struggled through the old way. For Tenet, the result has been an infusion of new ideasearly days, never lost a step in responding — and philosophies designed to meet the demands of our patients, partners and investors. Across the enterprise, we have changed the way we think, how we operate, our approach to leadership and governance, and our engagement efforts with our shareholders and in communities we serve around the country. We have also activated a significant culture reset predicated on accountability and connectivity with our patients and employees in their respective communities. Through these actions, we are positioned for continued success in 2019 and in the years ahead, and I would like to take this opportunity to highlight some of our collective accomplishments.
We delivered strong financial performance in 2018. We materially grew earnings and further diversified EBITDA contributions from our three business segments while expanding margins by 120 basis points, our largest year-over-year improvement since 2009.
We improved the quality of our asset portfolio. We divested non-core and lower performing hospitals and operations while increasing the percentage of our hospital markets with a leading market share position. We purchased the remainder of our ownership interest in USPI well ahead of schedule and continued to deploy capital toward ambulatory acquisitions and development. And, we pursued a strategic review of Conifer to best suit the long-term future of the business, while driving nearly as much EBITDA growth at Conifer in 2018 – in incremental dollars – as we delivered over the prior three years.
We established a more disciplined approach to expense management. We delivered $250 million in cost savings, exceeding our initial target by $100 million. We also announced a new $200 million initiative in 2019, bringing our total expected cost savings to $450 million in a little more than two years.
We launched an innovative, consumer-focused marketing strategy company-wide, brought to life by our own employees and physicians. The common message of our locally-focused campaigns is thattoday we are aCommunity Built on Care. stronger, leaner, and more focused business, driven by an experienced and highly qualified team of professionals. We are distinguished by our unique medical expertise and human touch, delivered by passionate people who are your neighbors and friends and part ofyour community. In addition to speaking directly to
consumers in our markets, we are highlighting the sense of purpose and pride our caregivers deliver and feel personally, regardless of their individual role, in their day-to-day work. This effort has also helped activate a culture of accountability and ownership across the organization, from our care sites back to headquarters.
New leadership is playing a critical role in driving change. Over the course of the year, we added new talent which brought fresh eyes and ideas to our teams, promoted our best people and transitioned top performers into different positions where they could expand their skills and continue to flourish within our network. These changes have created a sense of excitement and challenge to the overall organization, ignitinghad a renewed focuscommitment to operate as a closer and more engaged organization, shedding the truly unnecessary costs and aggressively seeking out effective solutions that had strength and sustainability.
2020 started with positive upward trends in January and February building on driving us forwardsolid momentum from the prior year and seeing the positive impact of our multi-year turnaround work. The virus was in the news, but minimal actionable information was available, so we decided to a new paradigm.pre-purchase additional PPE and review in detail each facilities’ infection control processes. We established our headquarters clinical team to be the single source of truth with daily group calls with the field, and they had the responsibility of monitoring and disseminating both clinical and regulatory information. We added support personnel to this team to ensure we had adequate and skilled personnel dedicated to areas such as HR policies, reimbursement methods directly related to COVID and our government relations team on policies that seemed to be forthcoming daily.
Effective corporate governance practices informed by shareholder perspectives remain a top priority.As with others, we faced challenges never experienced in the history of our company. We continued to regularly engage in dialogue with shareholders and solicit their feedback to better inform decision-making. Followingbelieve the addition of three independent directorstransformation we started in late 2017 played a major role in our ability to respond quickly, pivot immediately and ensure we appointedhad companywide clarity on what steps were needed. As we stated in the last two independent directors, further enrichingyears, we had upgraded many key roles, established processes tightly tied to data-driven metrics and a decision process that was efficient with streamlined accountability and ownership. Our ability to perform under such difficult and constantly evolving circumstances underscores the diversityeffectiveness of the changes we had made, the strength and expertisecommitment of our Board. In 2018, we added General Lloyd J. Austin, III, a recently retired four-star general with significant leadershippeople and risk management capabilitiesthe ability to grasp and an exceptional commitmentrespond to public service. We also added Meghan M. FitzGerald, DrPH, who brings experience across the healthcare spectrum, including corporate experience, policy, innovation, business development and strategy. Additionally, our Board enhanced the Company’s corporate bylaws ensuring shareholders have a strong voice: adding rights for shareholders to call special meetings and adopting proxy access provisions.unknown.
The progress we made last year has put us on better financial and competitive footing. We are now a much healthier company with a sharper focus on execution against clear priorities.
Ronald A. Rittenmeyer
Executive Chairman and CEO |
This last year demonstrated how a clear strategy and actionable and accountable teams will come together successfully amid a tumultuous environment. Not only were we able to continue providing vital healthcare, but we also executed well on multiple strategic initiatives. We did not stray from our stated plans because they were the right ones for our patients, our physicians, our shareholders and our people. We pride ourselves on being accountable – and we were.
Across our network of more than 600 facilities, we are extremely proud that we were able to carry forward a cohesive response while remaining true to the commitments set forth before the virus took hold. Those include supporting our employees, giving back to local and national causes, our approach to leadership and governance, fostering a culture of inclusivity and cultivating programs that mitigate our impact on the environment. They all fit together to create sustainable business across every level.
Solidifying our commitment to the values and goals of ESG (Environmental, Social and Governance), we have formally established a new committee of our Board of Directors consisting of independent directors to focus directly on our company’s increasing efforts in the areas of ESG. We believe this topic is of the utmost importance and deserves special attention by our Board. Unlike many industries, delivery of healthcare has many unique requirements. We believe we can continuously improve over time and have launched in our facilities several engineering efforts to outline opportunities in
sustainability. We also created a Diversity Council and are building Employee Resource Groups to foster, develop and ensure a more sustainable inclusive environment throughout our business. Our Board of Directors, which has been refreshed by over 70%, since the fourth quarter of 2017, represents the commitment we have to a balanced, effective and diverse organization. We will, with the addition of the ESG Committee of our Board and the development of other programs, measure improvements and address opportunities ensuring this commitment is an enduring part of the fabric of the company.
In 2020, our resilience as an organization was tested, and we outperformed, delivered on our commitments and continued building a framework for our future growth and success.This was possible because of our team members and their selfless commitment to our patients, each other and our communities. Together, they have fostered a very strong character for Tenet – and we are incredibly grateful.
In closing, we are also grateful to our shareholders, the communities we serve and the many partners we engage to deliver the care we provide. Our mission is of the highest order, and we approach every day grateful for these points of support and with a determination to provide the best possible care with humility, dignity and professionalism. From our patients, our team, our Board and our many partners, thank you for your confidence and support as we advance our mission.
With gratitude,
Ronald A. Rittenmeyer
Executive Chairman and CEO
TENET HEALTHCARE CORPORATION
1445 Ross Avenue, Suite 1400
Dallas, Texas 75202
(469)893-2200
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Only shareholders of record of our common stock at the close of business on March 12, 2021, are entitled to notice of and to vote at the Annual Meeting. It is important that your shares be represented and voted at the Annual Meeting. You may vote your shares via the Internet, by telephone or by completing and returning a proxy card. Specific voting instructions are set forth in the “General Information Regarding the Annual Meeting and Voting” section of the accompanying Proxy Statement and on the proxy card.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on May 6, 2021 The accompanying Proxy Statement and the Company’s proxy card, as well as our Annual Report on Form 10-K for the year ended December 31, 2020, are available at www.proxyvote.com. As provided above, due to the public health impact of the COVID-19 pandemic, we have adopted a virtual meeting format for our Annual Meeting, conducted via a live audio webcast. You will be able to attend the Annual Meeting online, listen to the meeting live, submit questions and vote your shares electronically during the meeting by visiting www.virtualshareholdermeeting.com/THC2021. We have designed the format of the Annual Meeting to provide shareholders substantially the same rights and opportunities to participate as they would at an in-person meeting. As always, we encourage you to vote your shares prior to the Annual Meeting. 2021 Proxy Statement This Proxy Statement includes certain financial measures not in accordance with generally accepted accounting principles in the United States (GAAP), such as Adjusted EBITDA, Adjusted Free Cash Flow and Adjusted EPS. Definitions of these measures are contained in Appendix A to this Proxy Statement.
Board Refreshment In response to specific shareholder feedback, the Board accelerated its refreshment process in the fall of 2017, recruiting nine independent directors since that time. On November 4, 2020, the Board appointed the Company’s President and Chief Operating Officer, Saum Sutaria, M.D., as a director. Dr. Sutaria’s leadership has been especially pivotal in accelerating the Company’s growth and successfully navigating the many challenges posed by the pandemic. In addition, on January 7, 2021, the Board appointed Admiral Cecil D. Haney, a retired four-star Admiral, as a director. Admiral Haney complements the Board given his leadership and experience, particularly in the areas of cybersecurity and systems planning. Further, on January 22, 2021, following his confirmation by the U.S. Senate as Secretary of Defense, General Lloyd J. Austin III resigned from the Board. We are grateful to General Austin for his service as our Board member. Altogether, these new directors have brought a diversity of viewpoints, approaches and experiences to the Board as it addresses the risks and pursues the long-term strategies in front of the Company. Sound Governance Practices Our Board is committed to sound corporate governance policies that protect the long-term interests of shareholders, promote accountability, and give shareholders a voice. The Board has long maintained many best practices, including annual election of directors by majority standard, a robust annual self-evaluation process, and frequent shareholder engagement. In recent years, the Board has further enhanced the Company’s governance practices. That includes an amendment to our Bylaws in 2018 that provides shareholders with beneficial ownership of 25% of Tenet’s outstanding shares with the right to call a special meeting, as well as an amendment in 2019 that allows for shareholders to nominate directors via proxy access on market standard terms. ESG Committee In 2021, the Board formed an ESG Committee. The ESG Committee’s purpose is to oversee and support the Company’s commitment to social, environmental and other public policy initiatives, including, among other things, climate change impacts, sustainability, and diversity and inclusion. The formation of the ESG Committee and our other recent governance enhancements, driven in large part by shareholder feedback, are intended to ensure the continued alignment of our corporate governance policies and practices with the long-term interests of our business and our shareholders. Active Shareholder Engagement Program Our Board regularly solicits input from investors and governance groups to better inform decision-making and gain insight into shareholder perspectives on a broad range of topics, including corporate governance practices. We value our shareholders’ perspectives on our business and interact with them through a variety of shareholder engagement activities. As we engage with shareholders, feedback is regularly reviewed by our Board.
Director Nominees Election of Directors Nominees for Election to the Board of Directors Tenet’s Board of Directors is elected annually by our shareholders. Our nominees for election include nine independent directors and our Executive Chairman and Chief Executive Officer as well as our President and Chief Operating Officer. The Board has selected the nominees listed below to serve as directors until the 2022 annual meeting, or until their successors are elected or appointed. Each of the nominees listed below, other than Admiral Haney and Dr. Sutaria, were last elected by the Company’s shareholders at the 2020 annual meeting of shareholders. The nominees for director will be elected if the votes cast for the nominee exceed the votes cast against the nominee, with abstentions and broker non-votes not counted either for or against a nominee.
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Other Public Current: IQVIA Holdings Inc. Others in Past Five Years: American International Group, Inc., Avaya Holdings Corp. and IMS Health Holdings, Inc. Career Highlights: Mr. Rittenmeyer was named Executive Chairman of Tenet in August 2017 and Chief Executive Officer in October 2017. He has served on our Board since 2010, including serving as Lead Director before he became Executive Chairman. He previously served as Chairman of the Board and Chief Executive Officer of Millennium Health, LLC, a health solutions company. He served as the Chairman, President and Chief Executive Officer of Expert Global Solutions, Inc., a provider of business process outsourcing services, from 2011 to 2014. From 2005 to 2008, Mr. Rittenmeyer held a number of senior management positions with Electronic Data Systems Corporation, including Chairman and Chief Executive Officer, President, Chief Operating Officer and Executive Vice President, Global Service Delivery. Prior to that, he was a managing director of the Cypress Group, a private equity firm, serving from 2004 to 2005. He served as Chairman, Chief Executive Officer and President of Safety-Kleen Corp. from 2001 to 2004. He formerly served as Chairman of the Federation of American Hospitals’ board of directors. Mr. Rittenmeyer received his Bachelor of Science degree in commerce and economics from Wilkes University and his M.B.A. from Rockhurst University. Skills and Qualifications: Our Board
Director Nominees
Director Nominees
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Director Since: 2017
Director Nominees
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Director Since: 2019 Other Public Current: Johnson & Johnson and Nucor Corporation Others in Past Five Years: None Committee Membership: ESG Governance QCE Career Highlights: Dr. West is a retired Lieutenant General in the U.S. Army, the 44th Surgeon General of the U.S. Army and the former Commanding General of the U.S. Army Medical Command. Previously, she served as Joint Staff Surgeon at the Pentagon, where she acted as chief medical advisor to the Chairman of the Joint Chiefs of Staff and coordinated all related health services issues, including operational medicine, force health protection, and readiness within the military. Dr. West has served in combat deployment as well as in leadership positions in multiple hospitals both in the United States and abroad. She is the recipient of numerous U.S. military awards, including the Distinguished Service Medal, the Defense Superior Service Medal, and the Legion of Merit with three Oak Leaf Clusters. She has served as an independent director on the board of Nucor Corporation since 2019. Dr. West has served as a trustee on the board of the National Recreation Foundation, a non-profit organization dedicated to enhancing the role of recreation as a positive force in improving the quality of life of youth, since 2019. Dr. West is a graduate of the U.S. Military Academy and earned her medical degree from The George Washington University School of Medicine in Washington, D.C. She has completed residencies in both family medicine and dermatology. Skills and Qualifications: The Board values Dr. West’s comprehensive experience in healthcare, including her service as the 44th Surgeon General of the U.S. Army. Her experience in a variety of healthcare leadership positions and clinical background offer the Board valuable perspectives on healthcare delivery, policy, and crisis and risk management. |
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Proposal 1: Election of Directors
Director Nomination and Qualifications
Our Board regularly reviews its composition and is committed to recommending a group of directors who represent a diverse mix of viewpoints, skills, experience and backgrounds that align with the Company’s business and strategic goals. The Nominating and Corporate Governance Committee (Governance Committee) is responsible for nominating individuals, and the entire Board is responsible for selecting those who hold these characteristics to stand for shareholder election at each annual meeting as well as to fill any vacancies on the Board as they arise.
Since late 2017, the Governance Committee has focused its refreshment efforts on identifying candidates to further strengthen the Board’s effectiveness. To date, this process has resulted in the identification and appointment of nine new independent directors (eight of whom are up for election this year) who collectively bring deep healthcare, financial, public sector, operational expertise, cybersecurity, systems planning and crisis management skills that complements the current skillsets and enhances the effectiveness of the overall Board. In addition, each of our directors has the dedication and leadership qualities that enable them to exercise robust oversight of the Company, especially as the Company navigates a transformation amidst the challenges and opportunities in the healthcare industry.
Nomination Process
The Governance Committee considers candidates based on the recommendation of, among others, our Board members and our shareholders. Board members recommended Dr. Sutaria in 2020 and Admiral Haney in 2021 to the Governance Committee. The Governance Committee may also engage professional search firms and other consultants to assist in identifying, evaluating and conducting due diligence on potential candidates. We intend to continue to actively engage with our shareholders regarding Board composition and director qualifications, including considering their input on potential director candidates. Once potential candidates have been identified, they typically meet with each member of the Board and pass a thorough screening process before the Governance Committee makes a final recommendation to the Board. This process involves a rigorous evaluation that assesses attributes beyond specific business skills, including character, diversity and personal and professional integrity.
Shareholders may propose nominees for election in accordance with the terms of our bylaws or recommend candidates for consideration by the Board by writing to the Governance Committee in care of the Corporate Secretary at Tenet Healthcare Corporation, 14201 Dallas Parkway, Dallas, Texas 75254, or by email to boardofdirectors@tenethealth.com. For more detailed information regarding the process by which shareholders may nominate directors, including under our proxy access provisions, please refer to “Other Information—Shareholder Proposals” below and our bylaws. Our bylaws may be found under the “Governance” heading in the “For Investors” section on our website at www.tenethealth.com.
Assessment of Board Composition and Criteria for Board Membership
The Governance Committee evaluates the composition of the Board on an ongoing basis and considers potential nominees to the Board as appropriate. As part of this process, the Governance Committee reviews the composition of the Board as a whole, including the balance of business backgrounds, diversity, qualifications, skillsets and other qualities represented on the Board to ensure the right balance to effectively oversee management. The Governance Committee also reviews updated biographical information for each incumbent director on an annual basis, including information relating to changes in professional status, independence, other professional commitments and public company directorships. In light of our current structure and operations, and in consideration of the evaluation of the Board’s composition, the Governance Committee believes the following criteria best represent the qualities required for service on the Company’s Board:
PROPOSAL 1–ELECTION OF DIRECTORS
Professionalism, dedication, business judgment, integrity and commitment to the Company’s mission | |||||||||
Diversity of personal and occupational backgrounds, including ethnicity, gender, background, experience and viewpoints | Service as the chief executive officer or in other senior leadership positions in a company or major governmental, professional or non-profit organization | ||||||||
Experience in the healthcare industry or other relevant industry experience | Expertise in financial and accounting matters and familiarity with the regulatory and corporate governance requirements applicable to public companies | Government, regulatory and public sector experience | |||||||
Ability and willingness to commit adequate time to Board and committee matters | Degree to which the individual’s skills complement those of other directors and potential nominees | Familiarity with the communities in which we do business |
Director Nomination Process
Our Board regularly reviews its composition and is engaged in an ongoing process to thoughtfully refresh the Board to support the continued evolution of the Company. This process is focused on identifying a diverse mix of viewpoints, skills, experience and backgrounds that align with the Company’s business and strategic goals.
Under the Governance Committee charter and the Company’s Corporate Governance Principles, the Governance Committee is responsible for nominating, and the Board is responsible for selecting, individuals to fill vacancies on the Board and to stand for election at each annual or special meeting. The Governance Committee may engage professional search firms and other consultants to assist in identifying, evaluating and conducting due diligence on potential candidates. The Governance Committee considers candidates based on the recommendation of, among others, our Board members and our shareholders.
Since late 2017, the Governance Committee has focused its refreshment efforts on identifying candidates to further strengthen the Board’s ability to oversee the Company through this time of significant transition. To date, this process has resulted in the identification and appointment of five new independent directors who collectively bring deep healthcare, financial, public sector and operational expertise that complements the current skillsets and enhances the effectiveness of the overall Board.
We intend to continue to actively engage with our shareholders regarding Board composition and director qualifications, including considering their input on potential director candidates. Shareholders may propose nominees for election in accordance with the terms of our bylaws or recommend candidates to the Board for consideration by writing to the Governance Committee in care of the Corporate Secretary at Tenet Healthcare Corporation, 1445 Ross Avenue, Suite 1400, Dallas, Texas 75202, or by email to boardofdirectors@tenethealth.com. You should consult our bylaws for more detailed information regarding the process by which shareholders may nominate directors, including by our newly implemented proxy access provisions. Our bylaws may be found in the “Corporate Governance” section under the “For Investors” tab on our website atwww.tenethealth.com.
Assessment of Board Composition and Criteria for Board Membership
The Governance Committee evaluates the composition of the Board on an ongoing basis and considers potential nominees to the Board as appropriate. As part of this process, the Governance Committee reviews the composition of the Board as a whole, including the balance of business backgrounds, diversity, qualifications, skillsets and other qualities represented on the Board to ensure the right balance to effectively oversee management. In light of our current structure and operations, and in consideration of the evaluation of the Board’s composition, the Governance Committee believes the following criteria best represent the qualities required for service on the Company’s Board:
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The Governance Committee also reviews updated biographical information for each incumbent director on an annual basis, including information relating to changes in professional status, independence, other professional commitments and public company directorships.
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Proposal 1: Election of Directors
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Board Evaluations
The Governance Committee oversees the Board’s annual performance evaluation to determine whether the Board, its committees and individual directors are functioning well in view of their responsibilities and the Company’s business. To ensure that the self-evaluation process is conducted with transparency and rigor, the Board has for many years retained a third party advisor to interview individual directors, compile and summarize their feedback, and facilitate a discussion of the evaluation topics at a special executive session of the Board. This comprehensive and disciplined approach to evaluation, assessment and thoughtful review has proven to be an essential element of maintaining a high performing and collaborative Board with the right mix of directors to properly oversee management and its execution of Company strategy.
The Board completed its most recent self-evaluation discussion in February 2019, focusing its committees and individual directors are functioning well in view of their responsibilities and the Company’s business. To ensure that the self-evaluation process is conducted with transparency and rigor, the Board has for many years retained a third party advisor to interview each director, review their feedback, and facilitate a discussion based on the results at a special executive session of the Board. This comprehensive and disciplined approach to evaluation has proven to be an important element to maintain a high-performing and collaborative Board that can properly address risk management and execution of Company strategy.
On an annual basis, the Board and each committee conduct self-evaluations. The evaluations focus discussions on, among other things, the composition and effectiveness of the Board in light of changes in membership, the effectiveness of Mr. Rittenmeyer and Senator Kerrey in their respective leadership roles, and the performance of each committee and committee chair. The Lead Director, in conjunction with the Governance Committee, also takes an oversight role in the Board performance evaluation process. Directors also provide input on key focus areas for the Board in the upcoming year. The results of the evaluation are reviewed by the Lead Director who reports the results to the Board. As part of the annual performance evaluation process, each committee also compares its performance with the requirements of its charter. As part of the Board’s last annual evaluation, the Board noted, among other things, that its processes and committees were functioning properly, noting healthy levels of debate, collaboration and respect among directors.
Director Nominees’ Qualifications and Experience
Based on the review process described above, the Governance Committee concluded that our eleven director nominees possess the diversity of experience, skills and other characteristics best suited to meet the needs of the Board and the Company in light of our current business and operating environment. The following table highlights several core skills and experiences of our current nominees, in addition to those described in the director biographies outlined beginning on page 5.
Personal Qualities and Diversity. The Governance Committee determined that each nominee has demonstrated a commitment to professionalism and high integrity. In particular, the Governance Committee noted that each nominee has the ability to provide candid and direct feedback as well as effective oversight of the Company’s operations and management on behalf of all shareholders. Additionally, our Board includes a diverse group of individuals of differing ages, genders, ethnicities and backgrounds. Three of our eleven director nominees are women, and in 2019 the Board appointed Tammy Romo and Meg FitzGerald to chair our Audit and Governance committees, respectively.
Special Considerations Regarding Service on Other Boards. Our directors must seek the approval of the Governance Committee prior to serving on another public company’s board. In addition, the Governance Committee limits the number of public boards on which a director may serve in addition to our Board to three, or two in the case of directors currently serving as chief executive officers or in equivalent positions of public companies. All of the Company’s directors are in compliance with these requirements, and Mr. Rittenmeyer serves on among other things, integration of the newest directors, further transitions in the Board’s composition over time, and the performance of each committee and committee chair. In addition, directors undertook a detailed review of recent progress in management succession planning, executive bench strength and talent development. Based on the Board’s annual evaluation, and in accordance with the requirements of the Company’s Corporate Governance Principles, the Board concluded that no changes were necessary in the Board’s leadership or committee structure, including chair assignments. In addition, the Board concluded that its processes and committees were functioning properly, noting healthy levels of debate, collaboration and respect among directors.
Directors’ Qualifications and Experience
Based on its review, the Governance Committee concluded that our ten director nominees possess the diversity of experience, skills and other characteristics best suited to meet the needs of the Board and the Company in light of our current business and operating environment. The following table highlights the core skills and experiences of our current nominees. Each nominee possesses skills and experiences in addition to the ones highlighted below (as noted in the director biographies outlined above).
SKILLS AND EXPERIENCES AUSTIN BIERMAN FISHER FITZGERALD GAINES KANGAS KERREY MARK RITTENMEYER ROMO Executive Leadership Healthcare Industry Accounting and Finance Public Sector Public Company Board Service Cybersecurity and Information Technology
Personal Qualities and Diversity. The Governance Committee determined that each nominee embodies a demonstrated commitment to professionalism and integrity. In particular, the Governance Committee noted that each nominee has demonstrated an ability to provide candid and direct feedback, and to provide oversight of the Company’s operations on behalf of all shareholders. Additionally, our Board currently includes individuals of differing ages, backgrounds, ethnicities and genders. Three of our ten director nominees are women and half of the current Board has a tenure of two years or less.
Special Considerations Regarding Service on Other Boards.Our directors must seek the approval of the Governance Committee prior to serving on another public company’s board. In addition, the Governance Committee limits the number of public boards on which a director may serve in addition to our Board to three, or two in the case of directors currently serving as chief executive officers or in equivalent positions of public companies. All of the Company’s directors are in compliance with these requirements. Mr. Rittenmeyer recently notified American International Group, Inc. (AIG) of his decision not to stand forre-election at AIG’s 2019 Annual Meeting of Shareholders. Following such meeting, Mr. Rittenmeyer will only serve on one other public company board of directors.
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Proposal 1: Election of Directors
Director Independence
Our independence requirements for our Board are set forth in our Corporate Governance Principles, available under the “Governance” heading in the “For Investors” section on our website at www.tenethealth.com. Under our Corporate Governance Principles, at least two thirds of the Board must consist of “independent” directors. The Board will not consider a director to be independent unless the Board affirmatively determines that the director has no material relationship with Tenet and the director otherwise qualifies as independent under the corporate governance standards of the New York Stock Exchange (NYSE). The Board reviews each director’s independence at least annually and has made the affirmative determination that each of our current non-employee directors (Messrs. Kerrey, Bierman, Fisher, Haney, Lynch and Mark and Mses. FitzGerald, Romo and West) has no material relationship with the Company and is independent. In addition, the Board determined that General Austin was independent during the time he served on our Board during 2020 when the Board last assessed his independence. The only two non-independent directors who serve on our Board are our Chief Executive Officer, Mr. Rittenmeyer, and our President and Chief Operating Officer, Dr. Sutaria.
In making its independence determinations, the Board broadly considers all relevant facts and circumstances and focuses on the organizations with which each director has an affiliation. If a director or member of the director’s immediate family has a material relationship with the Company, the Board reviews the interest to determine if it would preclude an independence determination.
The Audit Committee, the Human Resources Committee (HR Committee) and the Governance Committee are comprised exclusively of independent directors as required by the NYSE. In addition, all directors serving on the Audit Committee meet the more stringent independence standards for audit committee members required by the Securities and Exchange Commission (SEC), and all directors serving on the HR Committee meet the more stringent independence standards for compensation committee members required by the NYSE.
PROPOSAL 1–ELECTION OF DIRECTORS
Director Independence
Our independence requirements for our Board are set forth in our Corporate Governance Principles, available in the “Corporate Governance” section under the “For Investors” tab on our website atwww.tenethealth.com. Under our Corporate Governance Principles, at least
In making its independence determinations, the Board broadly considers all relevant facts and circumstances and, in particular, looks closely at the organizations with which each director has an affiliation. If a director or member of the director’s immediate family has a material relationship with the Company, the Board reviews the interest to determine if it would preclude an independence determination.
The Audit Committee, HR Committee and Governance Committee are comprised exclusively of independent directors as required by the NYSE. Also, all directors serving on the Audit Committee meet the more stringent independence standards for audit committee members required by the Securities and Exchange Commission (SEC). In addition, all directors serving on the HR Committee meet the more stringent independence standards for compensation committee members required by the NYSE.
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Commitment to Sound Corporate Governance Policies and Board Practices
Commitment to Sound Corporate Governance Policies and Practices
Tenet is committed to maintaining corporate governance policies and practices that protect the long-term interests of all our shareholders and promote Board and management accountability. Our Board recognizes that this requires us to continually review and refine our corporate governance practices in order to ensure their continued alignment with evolving market practices and the best interests of our Company and shareholders. Some of our key corporate governance policies and practices include:
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Shareholder Rights • Annual election of directors • Majority vote standard • Shareholder right to call special meetings at 25% threshold • Proxy access • One-year limit on | Board
• Highly diverse and experienced Board • Independent Lead Director with clearly defined and robust responsibilities • Commitment to | • Self-evaluation of all directors • Board oversight of • Regular executive sessions of independent directors • Ongoing engagement with shareholders • Increased focus on ESG matters with recently formed ESG Committee |
Our Board has also adopted Corporate Governance Principles that provide the framework for our existing corporate governance policies and practices, which the Board reviews annually. These Corporate Governance Principles address in detail matters such as director independence, director qualifications and responsibilities, director compensation, and director and officer stock ownership and retention guidelines. For more information, please see our Corporate Governance Principles under the “Governance” heading in the “For Investors” section on our website at www.tenethealth.com.
Senator Kerrey has served as our independent Lead Director since October 2017, shortly after Mr. Rittenmeyer became Executive Chairman on August 31, 2017. The Company’s governing documents give the Board the flexibility to determine the appropriate leadership structure for the Company based on our particular circumstances at the time. The Governance Committee regularly reviews the Board’s leadership structure to assess whether to separate or combine the roles of Chairman and Chief Executive Officer based on applicable facts and circumstances at the time. By retaining the flexibility to adjust the Company’s leadership structure, the Board is best able to provide appropriate management and oversight of the Company as well as address any circumstances the Company may face, as no single leadership model is universally or permanently appropriate in all circumstances. The Board believes that this flexibility has served the Company and its shareholders well during recent turnaround efforts and that Mr. Rittenmeyer’s current leadership of both the Board and the management team is effective.
14 | ![]() | ||||||
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Corporate Governance and Board Practices
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Role of Independent Lead Director of the Board
The role of our Lead Director is set forth in our Corporate Governance Principles. Senator Kerrey, as independent Lead Director of the Board, coordinates the activities of the Board and exercises a robust set of duties described below. In addition, Senator Kerrey serves as Chair of the Governance Committee, a role which, combined with his service as Lead Director, enables him to provide oversight of the Company’s corporate governance policies and practices, the director nomination and succession process, and the Board’s self-evaluation process. In his capacity as Lead Director, Senator Kerrey, among other things:
Presides at all meetings at which the Chairman is not present
Chairs executive sessions of independent directors of the Board
Serves as the liaison between the Chairman and independent directors
Role of Independent Lead Director of the Board
The role of our Lead Director is set forth in our Corporate Governance Principles. Senator Kerrey, as independent Lead Director of the Board, coordinates the activities of the Board and exercises a robust set of duties described below. Specifically, in his role as independent Lead Director, Senator Kerrey:
Presides at all meetings at which the Chairman is not present
Chairs executive sessions of independent directors of the Board
Serves as the liaison between the Chairman and independent directors
Reviews and approves information sent to the Board
Reviews and approves Board meeting agendas and schedules
Calls meetings of independent directors if necessary
Participates in consultation and direct communication with shareholders including representing
Advocates on behalf of the Board in meetings with investors, legislators, regulators and other government officials
Serves an oversight role, in conjunction with the Governance Committee, in the Board performance evaluation process
Since assuming the Lead Director role in late 2017,In addition to his formal duties, Senator Kerrey has participated inin-person engagement meetings with a number of our significant shareholders to discuss and seek feedback on various matters regarding the Company’s strategy and governance practices, establishing a direct line of communication between shareholders and independent members of our Board. Senator Kerrey shares the feedback with the full Board so that it may be incorporated into the Board’s decision-making processes.
Board and Committee Organization and Responsibilities
Board Meetings and Attendance
We are governed by our Board. Members of our Board are kept informed of our business through discussions with our Chief Executive Officer and other senior officers, by reviewing materials provided to them and by participating in meetings of the Board and its committees. Directors are also encouraged to attend continuing education courses relevant to their service on the Company’s Board. Significant business decisions are generally considered by the Board as a whole. The Board met 1411 times during 2018.2020. The independent directors of the Board, regularly meetsthe Board and each committee of the Board frequently meet in executive sessions. Mr. Rittenmeyer is considered an employee director and all other directors are considerednon-employee directors.sessions, including at least once during each regularly scheduled Board meeting.
Each incumbent director who served during 2018, other than Mr. Fisher,2020 participated in at least 75% of the aggregate meetings of the Board and the committees on which he or she served during the period he or she served as a director and committee member. Mr. Fisher informed the Board when he was appointed in November 2017 that he had a series of pre-existing commitments during the first quarter of 2018 but that he could attend all but one of the regularly scheduled meetings of the Board and the committees on which he served. However, in the first quarter of 2018, the Board and the committees on which Mr. Fisher serves held an unusually high number of special meetings scheduled on short notice, certain of which conflicted with Mr. Fisher’s pre-existing commitments. The meetings he did not attend were reviewed with him and his concurrence on the outcomes was noted. Given Mr. Fisher’s notification of his preexisting commitments prior to his joining the Board, and the high number of unscheduled meetings in the first quarter of 2018, his absences were approved. During the remaining three quarters of 2018, Mr. Fisher participated in over 75% of all regular and special meetings of the Board and his committees. For the full year of 2018, Mr. Fisher did meet the attendance expectations set forth in our Corporate Governance Principles, which require directors to attend at least 75% of regularly scheduled Board and committee meetings. So far in 2019, Mr. Fisher has attended 100% of the regular and special meetings of the Board and committees on which he serves.
All Board members are encouraged to attend our annual meeting of shareholders. All eight of the10 directors elected at last year’s annual meeting were in attendance at the 20182020 Annual Meeting.
15 |
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Corporate Governance and Board Practices
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Committees
The BoardTenet has delegated certain responsibilities to the followingfour standing committees: Audit Committee, HR Committee, Governance Committee, and Quality, Compliance & Ethics Committee (QCE Committee). Tenet also has one special committee: ESG Committee. The following table identifies the current members of each of our committees.
| Audit* |
Resources |
|
|
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|
| |||||||||||||
James L. Bierman |
| Chair | |||||||||||||
Richard W. Fisher |
|
| Chair | ||||||||||||
Meghan M. FitzGerald |
|
| |||||||||||||
|
| ||||||||||||||
Cecil D. Haney |
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|
|
| |||||||||||||
J. Robert Kerrey | Chair | ||||||||||||||
Christopher S. Lynch |
| ||||||||||||||
Richard J. Mark |
|
| |||||||||||||
Ronald A. Rittenmeyer | |||||||||||||||
Tammy Romo |
|
| |||||||||||||
Saum Sutaria | |||||||||||||||
Nadja Y. West |
* | All members of the Audit Committee have been designated as financially literate within the meaning of the NYSE listing standards. Mr. Fisher, |
Each of the Board’s standing committees operates under a written charter that is reviewed and approved annually by the respective committee. The charters are available for viewing inunder the “Corporate Governance” section under“Governance” heading in the “For Investors” tabsection on our website atwww.tenethealth.com. The Board and each committee may retain independent advisors and consultants, at the Company’s cost, to assist the directors in carrying out their responsibilities.
16 | ![]() |
Corporate Governance and Board Practices
The Audit Committee Membership: Romo (Chair), Austin, Fisher, Lynch, Mark (All Independent)
| Meetings | |||||||
| ||||||||
|
| |||||||
Primary Responsibilities: • Assist the Board in oversight of:
• Establish and maintain policies and procedures for the receipt, retention and treatment of complaints and concerns regarding accounting, internal accounting controls and auditing matters • Authority to select, retain and review the independent registered public accountants qualifications, independence and performance • Oversee the performance of the Company’s chief internal auditor, who reports directly to the Audit Committee | Key Skills and Experience: • Expertise in auditing, accounting andtax-related matters • Preparation or oversight of financial statements • Extensive knowledge of compliance and relevant regulatory issues | |||||||
The ESG Committee
|
| |||||||
• Review and discuss with management the Company’s ESG strategy, initiatives, and policies • Review and monitor the operational, regulatory, and reputational risks and impacts of ESG on the Company and provide insight and guidance with respect to the Company’s management of such risks and impacts • Review and discuss reports from management regarding the Company’s progress toward its key ESG objectives • Provide input and guidance with respect to communications with employees, investors, and other stakeholders, as appropriate, regarding the Company’s position on or approach to ESG matters | Key Skills and Experience: • Experience with governance, social and sustainability matters • Knowledge of the Company’s ESG strategy, initiatives, and policies, including those related to sustainability, diversity and inclusion | |||||||
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17 |
Corporate Governance and Board Practices
The Human Resources Committee Membership: Kerrey (Chair), Austin, Fisher, Lynch, Romo (All Independent)
| Meetings | |||||||
| ||||||||
|
| |||||||
Primary Responsibilities: • Establish general compensation policies for the Company that:
• Oversee the administration of executive compensation programs with responsibility for establishing and interpreting the Company’s compensation policies and approving compensation paid to executive officers • • Review the performance of the Chief Executive Officer and, • Discuss and evaluate, in consultation with the Chief Executive Officer, the performance of other executives • Oversee the Company’s policies and procedures regarding harassment in the workplace and sexual misconduct matters, including reporting systems and treatment of received complaints, and monitor compliance with such policies and applicable law • Provide perspectives to management regarding the Company’s talent management, which may include performance management, succession planning, leadership development, diversity, recruiting, retention and employee training | Key Skills and Experience: • Extensive knowledge of executive compensation best practices • Human capital management • Expertise in evaluating executive performance and determining appropriate compensation programs • Leading cultural change | |||||||
The Nominating and Corporate Governance Committee Membership: FitzGerald (Chair), Bierman, Mark, West (All Independent)
| Meetings | |||||||
| ||||||||
|
| |||||||
Primary Responsibilities: • Identify and evaluate existing and potential corporate governance issues, and make recommendations to the Board concerning our Corporate Governance Principles and other corporate governance matters • Review and recommend individuals qualified to become Board members and recommend to the Board candidates to stand for election orre-election to the Board • Consider amendments to the Company’s articles of incorporation and bylaws with respect to corporate governance and make recommendations to the Board concerning such proposed amendments • Review and make recommendations to the Board regarding Board size, composition and structure • Review and approve proposed | Key Skills and Experience: • Corporate governance expertise • Board succession planning • Public company board service and experience overseeing large organizations | |||||||
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Corporate Governance and Board Practices
The Quality, Compliance & Ethics Committee
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| |||||||
| ||||||||
Primary |
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Responsibilities: • Assist the Board with overseeing and reviewing Tenet’s significant healthcare-related regulatory and compliance issues, including its compliance programs and the status of compliance with applicable laws, regulations and internal procedures • Oversee performance under the Company’s Quality, Compliance & Ethics Program Charter • Receive, and review and consult with management on, periodic reports from the Ethics and Compliance department on all aspects of the compliance program, including efforts in risk assessment, development of policies and procedures, training, auditing and monitoring, and investigations and remediation of compliance matters • Receive and review periodic reports from the Clinical Quality department regarding efforts to advance quality healthcare • Oversee performance under the Company’snon-prosecution agreement, including interacting with the independentco-monitors appointed thereunder • Oversee the performance of the Company’s Chief Compliance Officer, who reports directly to the QCE Committee | Key Skills and Experience: • Experience in establishing and ensuring adherence to quality and compliance controls • Expertise in compliance-related policies and procedures • Knowledge of and commitment to ethical business practices | |||||||
HR Committee Interlocks and Insider Participation
During 2018, directors Austin, Fisher, Gaines, Kangas and Romo served on the HR Committee. No member of the HR Committee was at any time during 20182020 or at any other time an officer or employee of the Company, and no member had any relationship with the Company requiring disclosure as a related-partyrelated person transaction under “Certain Relationships and Related Person Transactions” on page 2021 of this Proxy Statement. None of our executive officers has served on a board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of our Board or HR Committee during 2018.2020.
Role of Board and its Committees in Risk Oversight
Management is primarily responsible for the identification, assessment and management of the various risks that we face. The Board oversees this process as an integral and continuous part of the Board’s oversight of our business. The Board receives regular reports from the heads of our principal businesses and corporate functions that include discussions of the risks involved in their respective areas of responsibility. The Board is routinely informed of developments that could affect our risk profile or other aspects of our business. Among other things, the Board has requested that the Company’s management and its internal and external legal counsel advise it promptly of any material developments
relating to litigation, regulatory proceedings, and investigations and compliance issues. The Board considers the oversight of regulatory and litigation risk to be one of its highest priorities. In addition, the Board has identified the oversight of cybersecurity risks to be one of its priorities and receives regular reports from the Company’s management on the security of the Company’s information technology systems.
The Board’s committees oversee risks related to their respective areas, as further described below. The Board is kept informed of its committees’ risk oversight and other activities primarily through reports of the committee chairs to the full Board. These reports are presented at every regular Board meeting in executive session, as well as at other times when appropriate. As risk-related issues sometimes overlap, certain issues are addressed at the full Board level. In addition, as part of its annual self-evaluation process, the Board discusses and evaluates its ongoing role in enterprise risk oversight.
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19 |
Corporate Governance and Board Practices
Role of Audit Committee in Risk Oversight
Our Audit Committee is primarily responsible for overseeing risk management processes relating to our accounting practices, financial reporting, corporate finance and general business operations. Among other responsibilities, the Audit Committee:
Receives quarterly reports from management on business and operational risks, internal audit reports relating to the integrity of our internal financial reporting controls and procedures, potential loss contingencies resulting from pending or threatened litigation or regulatory proceedings, and investigations and reports made to the Company from our Ethics Action Line or any other sources relating to allegations of financial fraud or other infractions.
Meets regularly with our Chief Executive Officer, Chief Financial Officer, Controller, General Counsel and Chief Compliance Officer, as well as our external and internal auditors, to discuss potential risks and other contingencies relating to our business.
Meets on a quarterly basis to review these topics with selected chief executive officers and/or other senior officers of our major operating units.
Reviews material risk issues in connection with its review of our quarterly and annual filings with the SEC.
Reviews the Company’s cybersecurity program at least annually and receives frequent updates on cybersecurity matters.
Reports and discusses the outcome of its meetings to the full Board, including any other material risks identified by the Audit Committee in the course of its deliberations that require discussion or action by the full Board.
Role of Quality, Compliance & Ethics Committee in Risk Oversight
Our QCE Committee is primarily responsible for overseeing our assessment and management of regulatory and compliance risk. In particular, the QCE Committee:
Oversees our information, procedures and reporting systems to provide reasonable assurance that: (1) our operations comply with applicable laws and regulations, particularly those related to healthcare providers; (2) we, including our directors and employees, act in accordance with appropriate ethical standards; and (3) our subsidiaries’ hospitals and other facilities deliver quality medical care to their patients.
Oversees our Compliance Program, which is governed by our Quality, Compliance & Ethics Program Charter. Our Compliance Program is intended to foster compliance with federal and state laws and regulations applicable to healthcare providers, and receives quarterly reports from our Chief Compliance Officer (who reports directly to the QCE Committee), our Ethics and Compliance Department, and our internal and external legal, regulatory and other officers and advisors.
Oversees the Company’s compliance with itsnon-prosecution agreement, including the Company’s ongoing work with the independentco-monitors appointed pursuant to the terms of the agreement.
Role of Human Resources Committee in Risk Oversight
Our HR Committee is responsible for assessing our compensation policies and practices relative to all our employees, includingnon-executive officers, to determine if the risks arising from these policies and practices are reasonably likely to have a material adverse effect on the Company. In performing its duties, the HR Committee meets at least annually with our management and the HR Committee’s independent compensation consultant to review and discuss potential risks relating to our employee compensation plans and programs. The HR Committee reports to the Board any risks associated with our compensation plans and programs, including recommended actions to mitigate such risks.
The HR Committee has determined that there are no risks arising from our compensation policies and practices that are reasonably likely to have a material adverse effect on the Company. This finding is based upon the HR Committee’s ongoing review of our compensation programs and practices, the mechanisms in our compensation plans and programs intended to reduce the risk of conduct reasonably likely to have a material adverse effect on our company, and an overall risk assessment of such programs. Among other things, the HR Committee has reviewed our pay philosophy, balance of cash and equity compensation, balance of long-term and short-term performance periods in our plans and programs, and our use of performance metrics that encourage management to act in the long-term interest of our shareholders. The HR Committee has also considered our equity grant administration policy, stock ownership guidelines, incentive pay policies on clawbacks and bonus modifiers, as well as our internal financial reporting and regulatory compliance procedures.
Role of ESG Committee in Risk Oversight
Recognizing the importance of ESG matters to the Company and its stakeholders, our Board formed an ESG Committee in February 2021 in order to provide support for the Company’s ongoing efforts in this area. Our ESG Committee, which consists entirely of independent directors, is responsible for overseeing and supporting the Company’s commitment to ESG matters, such as climate change impacts, energy and natural resources conservation, environmental and supply chain sustainability, human rights, diversity and inclusion and other ESG issues that are relevant and material to the Company. In addition to discussing with
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Corporate Governance and Board Practices
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management the Company’s ESG strategy, initiatives, and policies, the Committee monitors the operational, regulatory and reputational risks and impacts of ESG on the Company, and provides input and guidance on communications with employees, investors and other stakeholders regarding ESG. This year we published a detailed ESG report titled “Commitment to our Communities,” which outlines our commitment to the communities we serve and our objectives and progress in the areas of environmental sustainability, social initiatives and governance performance and is available in the “For Investors” section on our website at www.tenethealth.com.*
Policies on Ethics and Conduct
StandardsCode of Conduct
All of our employees, including our Chief Executive Officer, Chief Financial Officer and Controller, are required to abide by Tenet’s policies on business conduct summarized in our StandardsCode of Conduct to ensure that our business is conducted in a legal and ethical manner. The members of our Board of Directors and all of our contractors having functional roles similar to our employees are also required to abide by our StandardsCode of Conduct. Tenet’s policies form the foundation of a comprehensive compliance program that includes compliance with corporate policies and procedures, extensive training, robust auditing and monitoring, an open relationship among colleagues to foster good business conduct, and a high level of integrity. Our policies and procedures cover all major areas of professional conduct, including quality patient care, compliance with all applicable laws and regulations, appropriate use of our assets, protection of patient information, avoidance of conflicts of interest and employment practices.
Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of Tenet’s policies on business conduct. Retaliation against any employee who in good faith seeks advice, raises a concern, reports misconduct, or provides information in an investigation is strictly prohibited. The full text of our StandardsCode of Conduct is published in the “Our Commitment To Compliance” section under the “About Us” tabheading on our website atwww.tenethealth.com. In addition, amendments to the StandardsCode of Conduct and any grant of a waiver from a provision of the StandardsCode of Conduct requiring disclosure under applicable SEC and NYSE rules will be disclosed at the same location as the StandardsCode of Conduct on our website atwww.tenethealth.com.
As part of the program, we provide annual ethics and compliance training sessions to every employee as well as to our Board and certain physicians and contractors.
Quality, Compliance & Ethics Program Charter
We operate our ethics and compliance program pursuant to a Quality, Compliance & Ethics Program Charter, which has been approved by our QCE Committee. The Charter requires all Company employees and many of our contractors to:
Follow our StandardsCode of Conduct.
Participate in annual ethics training and specialized compliance training tailored to the individual’s job duties.
Work with our hospital, corporate and business unit compliance teams to resolve issues of concern.
Contact the Tenet Ethics Action Line at1-800-8ETHICS, via email or through our intranet website, to report any conduct that they believe in good faith to be an actual or apparent violation of Tenet’s policies.
Our Quality, Compliance & Ethics Program Charter may be found in the “Our Commitment To Compliance” section under the “About Us” tabheading on our website atwww.tenethealth.com.
Certain Relationships and Related Person Transactions
Our written StandardsCode of Conduct requirerequires all employees, including our executive officers and members of our Board, to report conflicts of interest and those situations in which there may be the appearance of a conflict of interest. The full text of our StandardsCode of Conduct is published on our website atwww.tenethealth.com, and a description of our policies on ethics and conduct can be found above. In the event that a related person transaction (as defined under the SEC rules) involving Tenet or its subsidiaries is identified, our policy is to require that any such transaction be reviewed and approved by the Governance Committee, which is comprised entirely of independent directors. Under SEC rules, a related person is a director, executive officer, nominee for director, or 5% shareholder of Tenet, and their immediate family members. There were no “related person” transactions that require disclosure under the SEC rules since the beginning of our last completed fiscal year.
* | Information included on our website and in any reports on our website shall not be deemed a part of, and is not incorporated by reference into, this proxy statement. |
2021 PROXY STATEMENT | 21 |
Corporate Governance and Board Practices
Communications with the Board of Directors by Shareholders and Other Interested Parties
Shareholders may communicate with the Board of Directors by email toboardofdirectors@tenethealth.com or by writing to the Board in care of Anthony Shoemaker,the Corporate Secretary, Tenet Healthcare Corporation, 1445 Ross Avenue, Suite 1400,14201 Dallas Parkway, Dallas, Texas 75202.75254. Shareholder communications will be reviewed internally to determine if the shareholder’s concern can best be addressed by referral to a Tenet department, such as Investor Relations. All other communications will be referred to the Corporate Secretary, who will determine if the communication should be brought to the attention of the full Board, the Chairman of the Board or a particular Board committee or Board member.
Other interested parties may make their concerns known to ournon-employee directors by following the procedures for reporting concerns to the Audit Committee set forth in our Corporate Governance Principles, which are available inunder the “Corporate Governance” section under“Governance” heading in the “For Investors” tabsection on our website atwww.tenethealth.com.
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The HR Committee reviews our non-employee director compensation programs each year with the assistance of the HR Committee’s independent compensation consultant. The full Board considers any changes recommended by the HR Committee following its review. The Board has notIn May 2020, the committee chair cash retainers were increased director compensation levels or otherwise made changesfor the Nominating and Corporate Governance Committee and the Quality, Compliance & Ethics Committee, from $15,000 to the program since 2015.$17,500, in order to align with market practices.
Employee directors do not receive any compensation for their service as a director. All 20182020 compensation for our Executive Chairman and Chief Executive Officer, Mr. Rittenmeyer, and our President and Chief Operating Officer, Dr. Sutaria, is shown in the 20182020 Summary Compensation Table on page 47.48.
Each of our non-employee directors donated at least half of their cash fees for the second quarter of 2020 to the Tenet Care Fund, a 501(c)(3) established to assist Company employees who have experienced hardships from the COVID-19 pandemic and other challenges.
Our 20182020 annual compensation program fornon-employee directors was structured as follows:
ANNUAL COMPENSATION ELEMENT |
AMOUNT | ||||
Annual Cash Retainer | $ | 95,000 | |||
Annual Grant of Restricted Stock Units (RSUs) | $ | 175,000 | |||
Annual Committee Chair Cash Retainers: | |||||
• Audit Committee | $ | 25,000 | |||
• Human Resources Committee | $ | 20,000 | |||
• Nominating and Corporate Governance Committee | $ | 15,000 | |||
• Quality, Compliance & Ethics Committee | $ | 15,000 | |||
Annual Retainer for Lead Director orNon-Executive Chair: | |||||
• Cash Fee | $ | 150,000 | |||
• Additional Grant of RSUs | $ | 50,000 |
Annual Compensation Element | Amount | |||
Annual Cash Retainer | $ | 95,000 | ||
Annual Grant of Restricted Stock Units (RSUs) | $ | 175,000 | ||
Annual Committee Chair Cash Retainers: | ||||
• Audit Committee | $ | 25,000 | ||
• Human Resources Committee | $ | 20,000 | ||
• Nominating and Corporate Governance Committee | $ | 17,500 | ||
• Quality, Compliance & Ethics Committee | $ | 17,500 | ||
Annual Retainer for Lead Director or Non-Executive Chair: | ||||
• Cash Fee | $ | 150,000 | ||
• Additional Grant of RSUs | $ | 50,000 |
Non-employee directors also receive $2,000 per committee meeting attended and for Board meetings receive:
no fee for the first seven Board meetings each year; and
for additional meetings, $3,000 perin-person meeting and $1,500 per telephonic meeting attended.
A newly appointed director receives an initial grant of RSUs valued at $65,000 as well asand a prorated annual RSU grant. All annual cash fees are prorated for partial year service. All directorsDirectors are reimbursed for any travel expenses and otherout-of-pocket costs incurred while attending meetings.
2021 PROXY STATEMENT | 23 |
2018Director Compensation
2020 Director Compensation Table
NAME |
FEES EARNED OR ($) |
STOCK AWARDS |
TOTAL | |||||||||||||||||||||||||||
Name | Fees Earned or ($) | Stock Awards ($)(1)(2) | Total ($) | |||||||||||||||||||||||||||
Lloyd J. Austin, III |
|
71,157 |
|
|
227,572 |
(3) |
|
298,729 |
|
|
129,000 |
|
|
175,002 |
|
|
288,627 |
| ||||||||||||
James L. Bierman |
|
140,431 |
|
|
175,015 |
|
|
315,446 |
|
|
133,490 |
|
|
175,002 |
|
|
294,492 |
| ||||||||||||
John P. Byrnes(4) |
|
46,363 |
|
|
-0- |
|
|
46,363 |
| |||||||||||||||||||||
Richard W. Fisher |
|
119,000 |
|
|
175,015 |
|
|
294,015 |
|
|
127,500 |
|
|
175,002 |
|
|
286,627 |
| ||||||||||||
Meghan M. FitzGerald |
|
65,157 |
|
|
227,572 |
(3) |
|
292,729 |
|
|
129,740 |
|
|
175,002 |
|
|
291,992 |
| ||||||||||||
Brenda J. Gaines |
|
163,500 |
|
|
175,015 |
|
|
338,515 |
| |||||||||||||||||||||
Karen M. Garrison(4) |
|
46,363 |
|
|
-0- |
|
|
46,363 |
| |||||||||||||||||||||
Edward A. Kangas |
|
150,500 |
|
|
175,015 |
|
|
325,515 |
| |||||||||||||||||||||
J. Robert Kerrey |
|
295,500 |
|
|
225,010 |
|
|
520,510 |
|
|
292,500 |
|
|
225,009 |
|
|
493,298 |
| ||||||||||||
Christopher S. Lynch |
|
130,500 |
|
|
175,002 |
|
|
284,127 |
| |||||||||||||||||||||
Richard J. Mark |
|
129,000 |
|
|
175,015 |
|
|
304,015 |
|
|
125,000 |
|
|
175,002 |
|
|
297,002 |
| ||||||||||||
Richard R. Pettingill(4) |
|
49,473 |
|
|
-0- |
|
|
49,473 |
| |||||||||||||||||||||
Tammy Romo |
|
138,500 |
|
|
175,015 |
|
|
313,515 |
|
|
155,500 |
|
|
175,002 |
|
|
311,114 |
| ||||||||||||
Peter M. Wilver(4) |
|
48,363 |
|
|
-0- |
|
|
48,363 |
| |||||||||||||||||||||
Nadja Y. West |
|
117,000 |
|
|
175,002 |
|
|
272,320 |
|
(1) | Amounts shown in this column reflect the grant date fair value, computed in accordance with FASB ASC Topic 718, of RSU awards granted under our |
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(2) | The amounts shown in this column reflect annual RSU grants applicable to the |
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Compensation Plans Applicable to Directors
Stock Incentive Plans
Eachnon-employee director receives an annual award under our 2008 Stock Incentive Planstock incentive plan of RSUs that is meant to compensate the director for service on the Board beginning on the date of that year’s annual shareholders meeting and ending on the date of the following year’s annual shareholders meeting. These grants are typically made on the first business day following the annual shareholders meeting and vest immediately on the grant date. Beginning with the 2015 annual grants, aA mandatory post-vest holding period of three years wasis applied to thethese annual RSU awards, and such awards will bewhich are settled in shares of our common stock on the third anniversary of the date of grant (unless deferred under the Special RSU Deferral Plan, discussed below).
On the last tradingfirst or 15th day of any month in(or, if such date is not a trading day, the following date that is a trading day) following the date on which a newnon-employee director is elected to the Board, the director receives a grant of that number of RSUs equal to $65,000 divided by the NYSE closing price per share of our common stock on the date of the grant. Theseone-time awards vest immediately on the grant date and are settled in shares of our common stock within 60 days of the termination of the director’s service on the Board.
Special RSU Deferral Plan
We adopted the Special RSU Deferral Plan to permit directors to elect to defer the settlement of their annual RSU grants under the 2008 Stock Incentive Planour stock incentive plan for a period of five years as provided under the terms of the award agreement. In the event of a change of control of the Company, the RSUs will be settled on the subsequent deferral date irrespective of whether the underlying award agreement would provide for earlier settlement by reason of such change in control. As of the record date, none of our current directors have elected to defer settlement of certain RSU grants pursuant to the terms of the Special RSU Deferral Plan.
2006 Deferred Compensation Plan
Under our 2006 Deferred Compensation Plan (2006 DCP)(DCP), directors and eligible employees may defer all or a portion of their compensation paid during a given calendar year. For directors, compensation is defined as cash compensation from retainers,
24 | ![]() |
Director Compensation
meeting fees and committee fees. Senator Kerrey was the onlynon-employee director who participated in the 2006 DCP in 2018.2020. A more complete description of the 2006 DCP can be found under “Nonqualified Deferred Compensation—2006 Deferred Compensation Plan” beginning on page 54.55.
Director Stock Ownership and Retention Requirements
The Board has adopted stock ownership and retention requirements that require eachnon-employee director with more than one year of service on the Board to own shares of our stock. In addition, eachnon-employee director is required to own shares of our stock with a value equal to five times the annual cash retainer within five years after the date on which the director joins the Board. Directors who have not satisfied their ownership requirements must retain 100% of any “net shares” received upon the exercise of stock options and the vesting of restricted stock or RSUs until such time as the requirements are met. For this purpose, “net shares” means the number of shares received upon exercise of stock options or upon vesting of restricted stock or RSUs less the number of shares sold or deducted to pay the exercise price (in the case of options), withholding taxes and any brokerage commissions. A detailed discussion of these requirements can be found under “Stock Ownership and Retention Requirements” beginning on page 45. As of the record date, all of ournon-employee directors were in compliance with the requirements or within the applicable period to come into compliance.
2021 PROXY STATEMENT | 25 |
Biographical information for the executive officers of the Company is set forth below. Biographical information for Mr. Rittenmeyer and Dr. Sutaria can be found under “Nominees for Election to the Board of Directors” on page 5.
Audrey T. Andrews,Executive Vice President, General Counsel and Corporate Secretary
Ms. Andrews, 54, was appointed Tenet’s General Counsel in January 2013 and Executive Vice President in March 2019. In this capacity, she oversees the legal and government relations functions for Tenet, USPI and Conifer. Ms. Andrews was also appointed Corporate Secretary in March 2020. Ms. Andrews previously held the title of Senior Vice President from January 2013 to February 2019. From July 2008 through December 2012, she served as Senior Vice President and Chief Compliance Officer and, prior to that, served as Vice President and Chief Compliance Officer from November 2006. She joined Tenet in 1998 as hospital operations counsel. Ms. Andrews earned her law degree and her bachelor’s degree in government, both from the University of Texas at Austin. She is a member of the American and Texas Bar Associations and the American Health Lawyers Association.
Paola M. Arbour,Executive Vice President and Chief Information Officer
Ms. Arbour, 57, was appointed Tenet’s Chief Information Officer in May 2018 and Executive Vice President in March 2019. In this capacity, Ms. Arbour oversees the leadership and strategic direction for Tenet’s information technology (IT) systems and identifies opportunities to support the company’s expansive care network through the application of digital technology, data and automation and customer experience. Ms. Arbour previously held the title of Senior Vice President from May 2018 to February 2019. Prior to Tenet, Ms. Arbour served as President at ProV International from November 2017 to April 2018, Vice President Services Global Delivery at ServiceNow from July 2016 to September 2017, and as Vice President of Service Delivery at Dell Services from December 2010 to April 2016. From 1985 to 2009, Ms. Arbour held several leadership roles within IT operations at Electronic Data Systems – both at the company’s headquarters and also in London and Frankfurt. Ms. Arbour earned her bachelor’s degree in telecommunications arts and sciences from Michigan State University.
Daniel J. Cancelmi,Executive Vice President and Chief Financial Officer
Mr. Cancelmi, 58, was appointed Tenet’s Chief Financial Officer in September 2012 and Executive Vice President in March 2019. He previously served as Senior Vice President from April 2009, Principal Accounting Officer from April 2007 and Controller from September 2004. Mr. Cancelmi was a Vice President and Assistant Controller at Tenet from September 1999 until his promotion to Controller. He joined the Company as Chief Financial Officer of Hahnemann University Hospital. Prior to that, he held various positions at PricewaterhouseCoopers, in the Pittsburgh office and in the firm’s National Accounting and SEC office in New York City. Mr. Cancelmi is a certified public accountant licensed in the states of Florida and Texas who received his bachelor’s degree in accounting from Duquesne University in Pittsburgh. He is also a member of the American and Florida Institutes of Certified Public Accountants and the Texas Society of Certified Public Accountants.
Howard B. Hacker,Executive Vice President and Chief Compliance Officer
Mr. Hacker, 49, was appointed Tenet’s Chief Compliance Officer in May 2016 and Executive Vice President in March 2019. In this capacity, he is responsible for overseeing the ethics and compliance programs for the Tenet enterprise, reporting directly to the Quality, Compliance and Ethics Committee of Tenet’s board of directors. Mr. Hacker previously held the title of Senior Vice President from May 2016 to February 2019. Mr. Hacker joined Tenet after more than a decade at Pfizer Inc., where he had served in various legal and compliance leadership positions since May 2004. Prior to Pfizer, Mr. Hacker worked for the law firms of Jones Day and Akin Gump Strauss Hauer & Feld, where he specialized in securities law and mergers and acquisitions. Mr. Hacker earned his law degree from the University of Texas at Austin and his bachelor’s degree in Russian and history from Washington University in St. Louis.
Marie Quintana,Executive Vice President of Communications and Chief Marketing Officer
Ms. Quintana, 64, was appointed Tenet’s Chief Marketing Officer in May 2018 and Executive Vice President of Communications in March 2019. Ms. Quintana previously held the title Senior Vice President, Communicataions from July 2018 to February 2019. Under her leadership, Tenet activated its first integrated national marketing campaign, driving strong results in brand recognition and awareness. She also serves as chair of the Tenet Healthcare Foundation and is a director on the Governing Board of the Detroit Medical Center, which is operated by Tenet. Prior to joining Tenet, Ms. Quintana spent 14 years at PepsiCo where she held the positions of Senior Vice President of Sales and Marketing from March 2005 to April 2012, Vice President of Global IT
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Executive Officers
|
Strategy from July 2003 to March 2005, and Vice President of Technology from October 1998 to July 2003. Ms. Quintana earned her bachelor’s degree from Louisiana State University and her master’s degree from Tulane University. She co-founded the PepsiCo Women of Color Alliance, which was awarded the Catalyst Award in 2007. She is a past founding board member of the Network of Executive Women and previously served on the Board of Catholic Charities of Dallas. She has also been named one of the Top 50 Hispanic Women in Business by Hispanic Business Magazine and one of the Top 50 Women in Grocery by Progressive Grocer. She currently serves on the board of directors for Fetch Rewards, Inc.
27 |
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Securities Ownership of Management
The table below indicatesdiscloses the shares, options and other securities beneficially owned by our directors and director nominees, each of our NEOs, and our current directors and executive officers as a group, as of March 11, 2019.15, 2021 (unless indicated below otherwise). No director or current executive officer has pledged any shares of our common stock.
SHARES BENEFICIALLY OWNED(1) | ||||||||||||||||||||||||||||
NAME | SHARES OF COMMON STOCK(2) | OPTIONS EXERCISABLE WITHIN 60 DAYS | PERCENT OF CLASS | |||||||||||||||||||||||||
Name | Shares Beneficially Owned(1) | |||||||||||||||||||||||||||
Shares of Common Stock(2) | Options March 15, 2021 | Percent of Class | ||||||||||||||||||||||||||
Audrey Andrews |
| 92,282 |
| -0- | * |
|
65,545 |
|
|
56,626 |
|
|
* |
| ||||||||||||||
Lloyd J. Austin, III |
| 7,912 | (3) |
| -0- | * | ||||||||||||||||||||||
Paola Arbour |
|
9,029 |
|
|
-0- |
|
|
* |
| |||||||||||||||||||
James L. Bierman |
| 20,286 | (4) |
| -0- | * |
|
42,242 |
(3) |
|
-0- |
|
|
* |
| |||||||||||||
Daniel J. Cancelmi |
| 255,089 |
| 37,500 | * |
|
362,000 |
|
|
-0- |
|
|
* |
| ||||||||||||||
Eric Evans |
| 44,206 | (5) |
| -0- | * | ||||||||||||||||||||||
Richard W. Fisher |
| 19,869 | (6) |
| -0- | * |
|
41,825 |
(4) |
|
-0- |
|
|
* |
| |||||||||||||
Meghan M. FitzGerald |
| 7,912 | (3) |
| -0- | * |
|
36,021 |
(5) |
|
-0- |
| ||||||||||||||||
Brenda J. Gaines |
| 96,187 | (7) |
| -0- | * | ||||||||||||||||||||||
Edward A. Kangas |
| 91,395 | (8) |
| -0- | * | ||||||||||||||||||||||
Cecil D. Haney |
|
3,057 |
(6) |
|
-0- |
|
|
* |
| |||||||||||||||||||
Sandra R.A. Karrmann |
|
8,309 |
(7) |
|
-0- |
|
|
* |
| |||||||||||||||||||
J. Robert Kerrey |
| 45,200 | (9) |
| -0- | * |
|
75,769 |
(8) |
|
-0- |
|
|
* |
| |||||||||||||
Christopher S. Lynch |
|
22,120 |
(9) |
|
-0- |
|
|
* |
| |||||||||||||||||||
Richard J. Mark |
| 19,869 | (6) |
| -0- | * |
|
41,825 |
(4) |
|
-0- |
|
|
* |
| |||||||||||||
Keith B. Pitts |
| 292,356 |
| -0- | * | |||||||||||||||||||||||
Ronald A. Rittenmeyer |
| 165,857 | (10) |
| 408,526 | * |
|
626,534 |
(10) |
|
119,260 |
(11) |
|
* |
| |||||||||||||
Tammy Romo |
| 34,846 | (11) |
| -0- | * |
|
56,802 |
(12) |
|
-0- |
|
|
* |
| |||||||||||||
Current executive officers and directors as a group (18 persons)
| 1,154,465 | (12) | 446,026 | 1.5% | ||||||||||||||||||||||||
Saumya Sutaria |
|
100,331 |
|
|
-0- |
|
|
* |
| |||||||||||||||||||
Nadja Y. West |
|
19,984 |
(13) |
|
-0- |
|
|
* |
| |||||||||||||||||||
Current executive officers and directors as a group (17 persons) |
|
1,538,936 |
(14) |
|
188,368 |
|
|
1.6 |
% |
* | Less than 1%. |
(1) | Except as indicated, each individual named has sole control as to investment and voting power with respect to the securities owned. |
(2) | As noted below, the totals in this column for eachnon-employee director include RSUs granted under the terms of our stock incentive plans. These RSUs are settled in shares of our common stock either upon termination of service or upon the third anniversary of the date of |
(3) |
|
(4) |
|
(5) | Includes 29,868 RSUs granted under our stock incentive plans. |
(6) | Represents 3,057 RSUs granted under our stock incentive plans. |
(7) | Holdings for |
|
|
Includes |
(11) | Represents 119,260 RSUs granted under our stock incentive plans. These RSUs are scheduled to vest and settle in shares of our common stock on March 31, 2021. |
(12) | Includes 30,706 RSUs granted under our stock incentive plans. |
Includes |
|
|
Includes RSUs granted tonon-employee directors under our stock incentive plans. |
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Securities Ownership
|
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Securities Ownership of Certain Shareholders
Based on reports filed with the SEC, each of the following entities owns more than 5% of our outstanding common stock.stock as of the dates indicated below. We know of no other entity or person that beneficially owns more than 5% of our outstanding common stock.*
NAME AND ADDRESS | NUMBER OF SHARES BENEFICIALLY OWNED | PERCENT OF CLASS AS OF MARCH 11, 2019 | ||||||||||||||||||
Name and Address | Number of Shares Beneficially Owned | Percent of Class as of March 15, 2021 | ||||||||||||||||||
Glenview Capital Management, LLC 767 Fifth Avenue, 44th Floor New York, NY 10153
| 17,942,624 | (1) | 17.4 | % | 16,225,320 | (1) | 15.24 | % | ||||||||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 12,191,094 | (2) | 11.45 | % | ||||||||||||||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355
| 12,122,997 | (2) | 11.8 | % | 11,407,086 | (3) | 10.71 | % | ||||||||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055
| 11,574,378 | (3) | 11.2 | % | ||||||||||||||||
Harris Associates L.P. 111 S. Wacker Drive, Suite 4600 Chicago IL 60606
| 6,209,187 | (4) | 6.0 | % | 7,114,001 | (4) | 6.68 | % | ||||||||||||
Nantahala Capital Management, LLC 19 Old Kings Highway S, Suite 200 Darien, CT 06820
| 5,448,112 | (5) | 5.3 | % |
(1) | Based on a Schedule 13D/A filed with the SEC on |
(2) |
|
Based on a Schedule 13G/A filed with the SEC on January |
Based on a Schedule 13G/A filed with the SEC on February |
(4) | Based on a Schedule 13G/A filed with the SEC on February 12, 2021 by Harris Associates L.P. (Harris), as of December 31, 2020. Harris reported sole voting power with respect to 4,710,340 shares and sole dispositive power with respect to all of the shares indicated above. |
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Our Human Resources Committee (HR Committee) has reviewed and discussed with managementDue to a technical issue, the following Compensation Discussion and Analysis. Based on this review and these discussions, the HR Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be incorporated by reference in the Company’s Annual Report onForm 10-K4 filing reporting one transaction for the year ended December 31, 2018 and included in this Proxy Statement.
Members of the Human Resources Committee
Edward A. Kangas, Chair
Lloyd J. Austin, III
Richard W. Fisher
Brenda J. Gaines
Tammy RomoRobert Kerrey was filed one day late.
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Dear Tenet shareholders:
The Human Resources Committee strives to maintain an executive compensation program that appropriately rewards our leadership team for long-term value creation. We have received significant feedback from our shareholders in recent years that has informed our decision-making as to how we structure and implement our compensation program, and we are encouraged by approval of our say-on-pay proposal last year with more than 97% shareholder support.
The compensation decisions made over the past 18 months reflect the Company’s current period of transition. With a revitalized leadership team focused on implementing operational improvements and driving cultural changes across the enterprise, we have seen substantial progress on important strategic initiatives. Substantial stock price growth since these changes in leadership began in 2018, and thus far in 2019, demonstrates the progress being achieved throughout the Tenet enterprise. And, it is clear there is more work to be done, which is reflected in the below-target payouts under the 2018 Annual Incentive Plan and performance-based portion of our long-term incentives.
Our Committee continues to refine the Company’s executive compensation program to better connect real, delivered pay with the performance of both the Company and the individual executive. Under the AIP, we have implemented new safeguards to more directly target and emphasize individual contributions while ensuring the funding of the incentive pool remains tied directly to our financial performance. These strict and objectively-defined performance elements tightly align with the enterprise shift to a “Culture of Accountability” by differentiating the most critical elements of performance. As you will see in the disclosure that follows, these changes have resulted in modest upward and downward adjustments to AIP payouts for the year in review, sending the appropriate signal that performance matters.
In addition, the Board of Directors has taken key steps to ensure that we have strong leadership continuity through the remainder of Tenet’s transformation. To that end, following significant deliberation, in 2019 the Board proposed, and Ron Rittenmeyer accepted, a roughly one-and-a-half year extension to his anticipated service as Executive Chairman and CEO. The extension and the associated employment arrangement were designed to provide for the successful turnaround at Tenet, at compensation levels that continue to be reasonable as compared to peers and below those of our former CEO. We have also made significant progress in securing our next generation of leadership across the enterprise executive ranks, including the appointment of Dr. Saum Sutaria to the newly created role of Chief Operating Officer. Dr. Sutaria is a recognized senior talent in our industry, and his appointment, coupled with Mr. Rittenmeyer’s leadership, will ensure the Company’s continued successful transition and positioning for our future.
This is an exciting time for Tenet, and the Human Resources Committee recognizes the importance of structuring executive rewards that are aligned with shareholders and incentivize the Company’s leaders to generate sustainable long-term growth. We look forward to continuing to engage in dialogue with our shareholders on these topics.
THE TENET HEALTHCARE CORPORATION HUMAN RESOURCES COMMITTEE
Edward A. Kangas, Chair
|
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This CD&A describes our compensation programs and reviews compensation decisions for the following Named Executive Officers (NEOs) for 2018:2020:
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Ron Rittenmeyer | Executive Chairman and Chief Executive Officer (CEO) | ||
Saum Sutaria | President and Chief Operating Officer | ||
Dan Cancelmi | Executive Vice President and Chief Financial Officer | ||
|
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|
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Audrey Andrews | Executive Vice President and General Counsel | ||
Paola Arbour | Executive Vice President and Chief Information Officer | ||
Sandi Karrmann | Former Executive Vice President and Chief Human Resources Officer(1) |
The
(1) | Ms. Karrmann served as Executive Vice President and Chief Human Resources Officer of the Company until her resignation on October 24, 2020 |
CD&A and Executive Compensation Tables are organized as follows:Table of Contents
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Compensation Discussion & Analysis
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2018: Progress2020: Delivering Quality, Compassionate Care While Responding to COVID-19
In 2020, Tenet faced challenges never experienced in our history. Our ability to perform under such difficult and constantly evolving circumstances underscored the strength of our colleagues across the enterprise as well as the positive impact of our multi-year turnaround, which began under the leadership of our Board and Executive Chairman and Chief Executive Officer (CEO), Ron Rittenmeyer. We implemented a comprehensive and active response to the pandemic, focused on the safety of our personnel and our patients, and steadily improved performance in each operating segment as we moved through the year. We continued to advance top-tier clinical programs to serve growing acute and chronic care needs in our hospitals, while completing a New Path
2018 was a successfultransformational ambulatory transaction and transformational year for Tenet that oriented the Company in a new direction. We delivered strong financialpivoting our business toward higher-growth, lower cost-of-care settings. And, we continued to post an improved level of margin performance while implementing significant,far-reaching changesat Conifer, which provided exceptional support to clients throughout the enterprise. Our efforts in 2018 were focused on fulfilling strategic initiatives developed in late 2017, when the Board appointed Mr. Rittenmeyer as the new CEO, accelerated its process of Board refreshment, and called for operational improvements and a shift in the Company’s culture.
Under Mr. Rittenmeyer’s leadership, in 2018 Tenet reduced costs, enhanced the portfolio of healthcare delivery assets, upgraded talent at all levels, and repositioned the business for stability and long-term growth. Key to these achievements was the energy of the 110,000 employees across the three business segments that comprise Tenet’s diversified healthcare services mission: our Hospital segment operates 65 acute care hospitals, over 160 outpatient centers and other ancillary healthcare businesses to serve communities in diverse markets; United Surgical Partners International (USPI) operates over 330 healthcare facilities, including ambulatory surgery centers, urgent care centers, imaging centers and surgical hospitals, and is the leading provider of ambulatory surgery services in the country; and Conifer Health Solutions (Conifer) provides revenue cycle management services to nearly 750 clients in over 40 states.
2018 Accomplishments
|
|
|
|
|
|
Response to Shareholder Feedback
In recent years, the HR Committee has implemented a series of executive compensation program changes to strengthen the alignment between pay delivery and performance. These changes support Tenet’s turnaround strategy and are also responsive to shareholder feedback from the annual say-on-pay voting and year-round shareholder engagement.
In 2016, the HR Committee overhauled our Long-Term Incentive (LTI) compensation to more tightly connect executive incentives with the Company’s long-term financial goals. These changes included expanding the performance metrics based on shareholder feedback and utilizing longer performance periods, along with new governance practices like expanded clawbacks that apply to all performance-based LTI awards made to our NEOs.pandemic.
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COVID-19 Response We continued to manage | Operational Excellence Our results in this last year underscore the operational discipline we have put into action on an ongoing basis. As the pandemic has continued to evolve in waves, we met each sharp turn with a carefully coordinated response. Our Incident Command Center has served as the hub of our pandemic response to provide continuity across the enterprise and ensure we always had dedicated resources in place to support caregivers and staff in our facilities. | Transformative Acquisition In December 2020, we announced the acquisition of a portfolio of 45 ambulatory surgical centers from SurgCenter Development for approximately $1.1 billion. This transaction supports our ongoing commitment to invest in lower cost of care, consumer friendly facilities that improve healthcare affordability; cements Tenet’s position as the preeminent national musculoskeletal services leader across the care continuum; and enhances Tenet’s overall business mix and earnings profile. | ||||
Commitment to ESG In 2020, we accelerated our commitment to environmental, social and governance (ESG) goals. We supported our employees in need, strengthened our sustainability program, and launched additional diversity and inclusion programs. In 2021, our Board formed an ESG Committee that will further support these efforts going forward. | Improved Financial Position We ensured there was proactive management of liquidity throughout the pandemic by issuing additional notes as well as expanding our revolver debt capacity. We actively and responsibly managed our capital budget across the entire system, and our consistent focus on free cash flow helped deliver excellent results. | Cultivating Talent Our efforts to ensure strong leadership across the enterprise continued to be a top priority in 2020. We attracted external talent to provide outside perspectives and new thinking. We also elevated strong performers by expanding their scope and by transitioning internal leaders to new opportunities within the enterprise that will support their further growth and development. |
In 2017, the Committee increased the percentage of overall LTI compensation for senior officers and weighted it more heavily toward performance-based elements. Further, the Board took meaningful action in response to a disappointing 2017say-on-pay vote of 72.6% approval that reflected shareholder dissatisfaction with certain of the Company’s pay practices. After soliciting and receiving additional shareholder feedback, the Board appointed Mr. Rittenmeyer as the new CEO in 2017 and in 2018 set his target compensation below the median of our peers. Following the implementation of these changes, our 2018say-on-pay proposal received over 97% support from our shareholders.
In addition, for 2018 the HR Committee added a “Gatekeeper” to the Annual Incentive Plan (AIP) for our Hospital, USPI and Conifer businesses. The Gatekeeper, as discussed in more detail on page 34, introduced a threshold level of quality and service performance metrics that our employees closest to care delivery and client services, including Mr. Evans, must meet in order to receive any payout under the AIP. For corporate employees whose roles serve the enterprise more broadly, including all NEOs other than Mr. Evans, the HR Committee simplified the performance metrics to focus on key, enterprise-wide financial results.
For all AIP participants, the HR Committee made another significant change in 2018. To reinforce our “Culture of Accountability” and allow the HR Committee to more accurately target the performance that it wishes to reward or discourage, the amount every participant receives depends in part on a rigorous assessment of individual performance against apre-established framework under a redesigned performance review process. For more information, see “Revised 2018 AIP Structure” and “Culture of Accountability” on page 34.
Chief Executive Officer Compensation
Mr. Rittenmeyer’s compensation package has been designed to effect a successful turnaround at Tenet at reasonable compensation levels consistent with our philosophy of paying for strong performance results. Accordingly, Mr. Rittenmeyer’s compensation arrangement has evolved as he has continued to produce meaningful improvements and drive the Company towards its key strategic objectives. This evolution includes aone-and-a-half year extension approved in early 2019 to provide for a successful turnaround while maintaining annualized compensation levels that are reasonable compared to peers and below those of our former CEO, as described in detail below.
The following graphic annualizes Mr. Rittenmeyer’s target direct compensation for the entire term of his service as CEO through the end of his extended Employment Agreement on June 30, 2021. The HR Committee believes this presentation provides a more holistic view of
Mr. Rittenmeyer’s intended compensation package as compared to the SEC-required disclosure levels shown in the Summary Compensation Table on page 47, where LTI equity awards are reported entirely in the year of grant. When approving Mr. Rittenmeyer’s compensation arrangements, the HR Committee viewed compensation levels from an annualized basis to confirm that his target compensation remained below the median peer CEO level and below the pay level of his predecessor in the role. The HR Committee also considered that granting the awards up front would serve to strongly link Mr. Rittenmeyer’s potential pay delivery to Tenet’s turnaround results during this period. The HR Committee does not intend to make any additional LTI grants, or other forms of compensation, to Mr. Rittenmeyer during the remainder of his term of service with the Company.
Ron Rittenmeyer’s Target Direct Compensation as CEO
(August 31, 2017 to June 30, 2021)
31 |
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Compensation Discussion & Analysis
Our strong relative TSR performance highlights the successful execution of our multi-year turnaround strategy since our change in leadership a little over three years ago. We believe that our three-year TSR, which captures the effect of the intense turnaround effort that began in late 2017, is a more meaningful measure of our longer-term performance than our one-year TSR, which can be significantly impacted by short-term market volatility unrelated to our performance (as occurred at various times during 2020). Despite the challenge and uncertain macroeconomic environment presented during the last year by COVID-19, the achievements highlighted above illustrate the positive impact of our multi-year turnaround as well as our continued momentum in building a framework for our long-term growth and success. Further, our 2021 year-to-date TSR performance (as of March 25, 2021) remains strong and ranks above the 90th percentile of our peer group and the S&P 500.
2020 Compensation Program Highlights
Secured Extension of CEO’s Employment | In February 2020, after considering his extraordinary accomplishments in turning Tenet around and his continued importance in implementing the Company’s long-term strategic goals, the Board extended Mr. Rittenmeyer’s term of service from June 2021 through December 2022 through an amendment to his Employment Agreement that:
• Provided for an award of RSUs, vesting quarterly through December 2022, valued at $10 million to recognize his extended service period | |
Streamlined LTI Program | In February 2020, the HR Committee approved a streamlined and simplified long-term equity compensation program, which further aligns NEO and shareholder interests. The 2020 LTI compensation for executive officers other than Mr. Rittenmeyer and Dr. Sutaria consists entirely of RSUs: • 50% time-based awards vesting ratably over three years • 50% performance-based awards earned over a three-year period based on the achievement of Adjusted EPS and Adjusted Free Cash Flow Less Cash NCI. These performance metrics are established at the start of each year of the three-year performance period subject to a cumulative three-year Relative TSR performance modifier.* | |
Donated Salaries in Response to COVID-19 | Mr. Rittenmeyer donated 100% of his base salary earned from April through June 2020 to the Tenet Care Fund, a 501(c)(3) established to assist Company employees who have experienced hardships from the COVID-19 pandemic and other challenges. Each of our other NEOs donated 20% of their salaries over the same period. The Tenet Care Fund supported over 1,100 of our employees in 2020, with approximately $2,000,000 raised over the year. | |
2020 Annual Incentive Plan Payouts | Our Compensation Committee applied negative discretion after our 2020 annual incentives were earned at 200% of target, based upon our maximum achievement of both performance metrics, Adjusted EBITDA (weighted 70%) and Adjusted Free Cash Flow Less NCI (weighted 30%). As a result of these downward adjustments, corporate performance was deemed achieved at 117% of target and final payouts for our NEOs ranged from 130% to 150% of target payout levels after applying each officer’s individual performance multiplier.** |
2018 Chief Executive Officer Employment Agreement
In March 2018, Tenet entered into an employment agreement (the Employment Agreement) with Mr. Rittenmeyer engaging him to serve as the Company’s CEO for thetwo-year period from March 1, 2018 through February 28, 2020.
In determining the appropriate compensation for Mr. Rittenmeyer, the HR Committee considered Mr. Rittenmeyer’s strong performance during the first six months of his tenure. The Committee set the target for Mr. Rittenmeyer’s annual direct compensation at approximately the 25th percentile of our peers based on the belief that initial compensation levels for an incoming CEO should be set with room for growth and with the expectation that, should the Employment Agreement be amended or extended, future compensation levels would be determined based on actual performance results.
For thetwo-year period from March 1, 2018 through February 28, 2020, the Employment Agreement provides for:
Base Salary: $1,200,000 per year
Annual Incentive Plan: 150% of salary (at target) per year
Long-Term Incentives: $14,000,000 for thetwo-year period (granted 50% in RSUs and 50% in time-vested or “restricted” cash)
Under the terms of the Employment Agreement, Mr. Rittenmeyer’s long-term incentives vest in equal quarterly installments over thetwo-year term, aligning with the transitional nature and compressed timing of the turnaround objectives. In making these LTI grants, the HR Committee believed that two years was too short to set meaningful long-term performance goals, but rather that performance would be fairly reflected by the change in the Company’s stock price over the period. Mr. Rittenmeyer is not covered by Tenet’s Executive Severance Plan.
The HR Committee approved the compensation for Mr. Rittenmeyer under his Employment Agreement, including the RSUs with a grant date fair value of $7,000,000, on February 28, 2018; however, the parties did not execute the Employment Agreement until March 24, 2018. The HR Committee intended for the grant date for Mr. Rittenmeyer’s restricted stock units to be the date of HR Committee approval in February. Instead, the date of execution of the Employment Agreement in March was used to determine the grant date. As a result of using the March grant date, Mr. Rittenmeyer received 288,660 restricted stock units whereas the HR Committee intended Mr. Rittenmeyer to receive the number of units calculated with the February grant date, or 339,806. In June 2018, the HR Committee awarded Mr. Rittenmeyer RSUs equal to the difference between these figures, or 51,146 units.
Extension in 2019
In February 2019, recognizing the considerable improvements Mr. Rittenmeyer had already implemented and the additional progress required in the Company’s turnaround process, the Board of Directors approved an amendment to Mr. Rittenmeyer’s Employment Agreement (the Amendment) that extends his term of service through June 2021.
Mr. Rittenmeyer’s base salary and annual bonus opportunity remain unchanged under the Amendment. In connection with the Amendment, an award of RSUs valued at $16,000,000 and vesting in nine quarterly installments was granted to Mr. Rittenmeyer to further align his interests with those of shareholders over the remainder of his term of service as CEO, and to reward continued turnaround performance reflected by Tenet’s stock price growth rather than setting goals for a short incremental performance period. Since assuming the role of Executive Chairman on August 31, 2017, Tenet’s share price has increased by more than 75% through March 21, 2019, driving an increase in market-capitalization of approximately $1.4 billion over that time period.
The Amendment also extends the duration of thenon-competition andnon-solicitation covenants to which Mr. Rittenmeyer is subject under the Employment Agreement from 12 months following the date of Mr. Rittenmeyer’s termination of employment to two years following such date.
To facilitate a smooth transition and to promote stability in leadership, Mr. Rittenmeyer has agreed to serve in an advisory role to his successor over an additionaltwo-year period following the end of his employment as CEO. Under this advisory arrangement, Mr. Rittenmeyer will receive an annual retainer of $750,000, will remain eligible to participate in the Company’s health and welfare benefits programs, and will remain subject to restrictive covenants no less favorable to the Company than those set forth in the Employment Agreement.
The Board does not intend to approve any further LTI awards or other forms of compensation for Mr. Rittenmeyer during the remainder of his term of service with the Company.
* | See Appendix A for definitions of Adjusted EPS and Adjusted Free Cash Flow which is then less cash distributions paid to NCI as reflected on the Company’s consolidated statements of cash flow. |
** | Ms. Karrmann did not receive a 2020 annual incentive plan payment due to her October 2020 resignation. |
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Compensation Discussion & Analysis
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Our annual Say-on-Pay vote is one of Enterprise-Wide COO Role
The Board maintains a strong leadership succession plan. Overour opportunities to receive feedback from shareholders regarding our executive compensation program, and the past year, several steps have been taken to ensure thatHR Committee takes the result of this vote into account when shaping the compensation program for the Company’s NEOs. Our Company has the appropriate leadership structure and a clear succession processcontinued to receive strong support for our Say-on-Pay proposal every year since 2017, with internal candidates being developed for future key promotions.
90% of votes cast in favor of such proposal at our 2020 Annual Meeting. In November 2018, the Board announced the appointment of Saumya (Saum) Sutaria, M.D., as Chief Operating Officer (COO)light of the Company,continued strong shareholder support, our HR Committee did not make any changes to be effective in January 2019. The appointment created a new position and restructured the Company’s senior leadership. Previously, operational leadership was divided among the three business units, with Mr. Evans serving as Presidentstructure of Hospital Operations. Under the new streamlined structure, Dr. Sutaria as COO has direct responsibility for the Hospital business unit as well as the authority to design and implement enterprise-wide initiatives, particularly with respect to increased integration. This shift in leadership structure aligns with the Company’s broader transformation strategy and leverages Dr. Sutaria’s clinical, operational and advisory experience accumulated over 20 years working in complicated and diverse healthcare systems and related businesses.
Dr. Sutaria most recently servedour executive compensation program as a Senior Partner at McKinsey & Company, where he worked for 18 years providing advisory support for hospitals, healthcare systems, physicians groups, ambulatory care models, integrated delivery, andgovernment-led delivery, while also working with institutional investors in healthcare. Previously, Dr. Sutaria practiced medicine with a focus in internal medicine and cardiology.
Mr. Evans andresult of the Company agreed that his last day of employment with the Company would be December 31, 2018. In connection with his departure, Mr. Evans was eligible to receive benefits consistent with a Qualifying Termination and/or termination without cause under the Company’s Executive Severance Plan and other employee benefit plans, as further described on page 56.
Chief Operating Officer Employment Agreement
In connection with his appointment as COO, Tenet entered into an employment agreement with Dr. Sutaria for an initial three-year term until January 2022, during which he will receive target total direct compensation in the median annual range for comparable positions, consisting of:
Base Salary: $1,000,000 per year
Annual Incentive Plan: 100% of salary (at target) per year
Annual Long-Term Incentives: $4,000,000 in RSUs per year (vesting ratably over three years)
2020 vote. The HR Committee also approved awill continue to consider shareholder feedback, input from our independent compensation consultant and the outcomes of future one-timeSay-on-Pay buyout to Dr. Sutaria valued at $12,000,000, which was a make-wholevotes when assessing our executive compensation programs and policies and making compensation decisions for forfeited and forgone earnings from his previous employer. Thebuy-out was split between $7 million in RSUs and $5 million in restricted cash to provide for employment retention, as it vests in full upon the expiration of the three-year term. LTI awards to Dr. Sutaria are not subject to financial performance goals as part of this initial employment arrangement, which is designed to transition him to a public company compensation program from a private partnership model at his prior employer. The Company’s stock price performance over the period will be reflected in ultimate pay delivery. Dr. Sutaria is subject to certainnon-competition covenants for one year, andnon-solicitation covenants for two years, following termination of his employment. Dr. Sutaria is not covered by Tenet’s Executive Severance Plan, and there were no additional hiring inducements.
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our NEOs.
Compensation Elements Link Pay with Performance
The following table outlines the primary components of our NEOs’ 20182020 compensation packages (other than Mr. Rittenmeyer and Dr. Sutaria, as discussed above):
Base Salary | • Fixed cash compensation set annually
• Based on the scope and complexity of the role | • Attracts and retains talented executives with competitive fixed pay | |||
Annual Incentive Plan | •
• and reflects individual performance | • Motivates and rewards executives for meeting
• Challenging, objective performance metrics | |||
Long-Term Incentive Compensation ![]() | |||||
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Based RSUs
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| • Awards cliff vest
• | • Establishing goals for each year of the three-year performance period provides the Company with flexibility to • Relative TSR modifier applied over the full vesting period strengthens long-term shareholder alignment and motivates our executives to achieve long-term share price appreciation | |||
Time-Based RSUs
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• Encourages retention and subject to forfeiture in the event |
* | See Appendix A for definitions of Adjusted EPS and Adjusted Free Cash Flow which is then less cash distributions paid to NCI as reflected on the Company’s consolidated statements of cash flow. |
2021 PROXY STATEMENT | 33 |
Compensation Discussion & Analysis
Best Practices Support Strong Compensation Governance
We maintain the following best practices to ensure our governance of executive compensation reflects ourpay-for-performance philosophy and aligns the interests of our executives and shareholders.
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Ø No excise taxgross-ups onchange-in-control | ||
Ø Directors and executive officers cannot hedge or | ||
Ø No excessive perquisites | ||
Ø No repricing of underwater stock options | ||
Ø No single-trigger equity acceleration on a | ||
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Compensation Discussion & Analysis
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DETAILED DESCRIPTION AND ANALYSISDetailed Description and Analysis
20182020 Compensation Decisions
Base salary provides our NEOs with a fixed base annual income and helps us attract and retain key executive talent.high-performing executives. The HR Committee approves the base salary of NEOs annually based on its assessment ofsets NEO salaries each NEO’syear considering individual performance reviews, internal pay equity considerations, the scope and experience level, internal equitability considerations,complexity of the executive’s role and a reviewan assessment of peer group and market survey data provided by our independent compensation consultant. None of our NEOs receivedIn addition to the increase in Mr. Rittenmeyer’s base salary increasesas part of his 2020 Employment Agreement extension described above, in 2018.February 2020, the HR Committee approved a 4.9% increase in Mr. Cancelmi’s base salary in recognition of his strong performance and to better align with competitive market practices. The HR Committee determined that the base salaries for all other NEOs would remain unchanged for 2020.
As discussed above, to help Company employees facing adversity during the COVID-19 pandemic, Mr. Rittenmeyer donated 100% of his base salary earned from April through June 2020 to the Tenet Care Fund, and each of the other NEOs donated 20% of their salaries to the Tenet Care Fund over the same period.
NAMED EXECUTIVE OFFICER | 2018 SALARY | INCREASE FROM 2017 | ||||||||
Ron Rittenmeyer | $ | 1,200,000 | (1) |
| N/A | |||||
Dan Cancelmi | $ | 618,000 |
| 0.0 | % | |||||
Keith Pitts | $ | 925,000 |
| 0.0 | % | |||||
J. Eric Evans | $ | 700,000 |
| 0.0 | % | |||||
Audrey Andrews | $ | 550,000 |
| 0.0 | % |
Named Executive Officer | 2020 (As of December 31, 2020) | |
Ron Rittenmeyer | $1,500,000 | |
Saum Sutaria | $1,000,000 | |
Dan Cancelmi | $ 650,000 | |
Audrey Andrews | $ 550,000 | |
Paola Arbour | $ 500,000 | |
Sandi Karrmann(1) | $ 500,000 |
(1) |
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Performance-Based Annual Incentive Plan
Our AIP provides annual cash incentives to our executives that drive financial, operational and individual performance. The AIPprogram is designed to rewardmotivate executives to meet objectives that matter to our employees for performance against short-term financial, qualityinvestors and service goals selected by our HR Committee to drive long-term growth. It is broad-based and, for most of the approximately 5,600 employees who participate across each ofalign with the Company’s business units, it is our principal means for linking pay to performance.
Each yearlong-term strategy. To that end, the HR Committee sets performance goals acrossselects financial and operational metrics relatedthat our executives directly influence with challenging targets so that, in order to the financial performance ofpay out, the Company and operational objectivesmust meet the goals communicated to shareholders. The Annual Incentive Plan also includes an individual performance component to focus directly on the contributions of each business unit, as well as individualNEO and to reflect performance goals. Each metric has a carefully calibrated threshold, target, and maximum performance level that is scored from 0% (at or below the threshold) to 200% (at or above the maximum) of target. Once the outcome of each metric has been determined, the result is a fixed funding pool from which individual payouts are determined.
The HR Committee maintains discretion to adjust AIP outcomes positively or negatively for individuals or business units depending on a variety ofqualitative factors including results that do not meet expectations, unanticipated market events, and extraordinary or disappointing individual performance. Specifically, the HR Committee reduces AIP payments for failure to comply with the Company’s standards of conduct or in response to other negative quality, safety or compliance events.
In addition, AIP awards are subject to recoupment provisions where the Board may require reimbursement to the Company of awards in the event of a material restatement of our financial results caused by the recipient’s fraud or in other circumstances involving material violationslike leadership, integrity, promotion of Company policy or misconduct that cause substantial harm to the Company.values, and a positive influence on Company culture.
2021 PROXY STATEMENT | 35 |
Compensation Discussion & Analysis
20182020 Target Annual Incentive Award Levels for Named Executive Officers
In 2018,2020, the HR Committee approved the following target bonus award levels for each NEO:
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NEO, target award levels have remained unchanged since 2016, except for Mr. Rittenmeyer, whose target award level was first set at the time the HR Committee approved his comprehensive pay package in early 2018.
Revised 2018 AIP Structure
Historically, our AIP measured rigorous, objective performance metrics across financial, quality and service dimensions that track the Company’s strategy, with specific metrics adapted for each business unit. Each metric was weighted differently and then combined into a single “score” onnone of which the AIP was based. While the HR Committee maintained discretion to adjust payouts, the scorecard did not specifically incorporate the results of individual performance reviews, so most participants would receive the calculated level of payout. In 2018, the Company revamped its approach to talent development and individual performance reviews.
“Culture of Accountability”
To further emphasize our newly implemented “Culture of Accountability,” the results of thorough annual assessments became a component of AIP scoring for the first time in 2018. The scorecard payout is now adjusted by a multiplier based on each participant’s individual performance rating, with the ratings calibrated across the entire Company to ensure the AIP funding pool remains fixed.
The individual performance reviews strengthen the AIP program by introducing the ability to target more directly the performance that the HR Committee desires to reward or discourage. The reviews help build a productive workplace culture that can be unified across different business units and further reinforce the behaviors that lead to long-term success. Moreover, they refine the level at which the HR Committee can reward extraordinary performance or incentivize better performance going forward.
Individuals are rated across a number of dimensions in two categories:Results, or the “what,” andPeople, or the “how.”
The Results category incorporates factors including a participant’s ability to meet financial, operational and process goals, execute plans aligned with the Company’s focus, provide customer service, innovate and work independently.
The People category measures traits such as reinforcing the Company culture, leading by example, treating others with respect, and displaying honesty and courage.
Individuals are given a rating in each category ranging from 1 to 5, with 1 representing unsatisfactory performance and 5 representing a top performer. The ratings under the Results and People categories are averaged to produce a single metric that, when calibrated across the Company, produced the distribution shownwere increased relative to the right.
2018 Individual Performance Company-Wide Rating Distribution
Gatekeeper forNon-Enterprise Employees
Last year, the HR Committee determined that a revised structure would better focus Hospital, USPI and Conifer participants on the operational goals that directly impact the experiences of patients and customers in the communities we serve. Rather than joining these metrics with financial performance results—where strong growth could overcome quality and service outcomes that did not meet expectations—the HR Committee implemented a “Gatekeeper” so that the AIP would not pay out if employees did not adequately meet operational objectives.
Under the Gatekeeper, achievement of all quality and service goals applicable to a particular business unit are scored first. Financial measures are scored separately. If a participant does not meet at least 50% of the target performance in the Gatekeeper, he or she does not receive an AIP bonus regardless of financial results. The Gatekeeper thus incentivizes operational leaders to prioritize long-term drivers of growth like operational excellence and patient loyalty.
For “Enterprise” employees, including all of the NEOs other than Mr. Evans, whose roles support all three business units but are further removed from healthcare delivery, the HR Committee determined that clear, enterprise-wide measures of financial performance would best motivate business results and foster a unified mentality. Consequently, the Gatekeeper does not apply to Enterprise employees. Instead, the creation of the Enterprise AIP funding pool is dependent on the financial success of the consolidated enterprise.prior year.
| to Base Salary |
Ron Rittenmeyer |
| 150 | % | ||
Saum Sutaria | 100 | % | |||
Dan Cancelmi | 100 | % | |||
Audrey Andrews | 75 | % | |||
Paola Arbour | 75 | % | |||
Sandi Karrmann | 75 | % |
2018 Enterprise2020 AIP Performance Metrics and Results
Four of our 2018 NEOs—Messrs. Rittenmeyer, Cancelmi and Pitts and Ms. Andrews—earnedFunding for the 2020 AIP bonuses from the funding pool created under the Enterprise scorecard. This scorecard measuredwas based on the Company’s total annual Adjusted EBITDA (60% of the scorecard)(weighted 70%) and Adjusted Free Cash Flow Less Cash Payments to Noncontrolling Interests (Adjusted Free Cash Flow Less Cash NCI) (30%(weighted 30%). Achievement onPayout of these metrics is scored basedcan range from 0% to 200% depending on the degree to which the metric meets predetermined target goals set by the HR Committee based on the Company’s business plan and external guidance. The remaining 10% of the Enterprise funding pool was set aside for individual performance assessments.performance.
The HR Committee selectedcontinued to use Adjusted EBITDA as athe most significant metric because it is the primary measure used by financial analysts and investors use it to measurejudge the Company’s financial performance and, as a result, management incentives are aligned with the goals of investors.performance. The HR Committee selected Adjusted Free Cash Flow less Cash NCI as a metric because it measurescaptures the Company’s ability to sustainably generate cash that can be used for purposes that are important to financial analysts and investors,the Company’s long-term strategic goals, including acquisitions, investing in joint ventures, or repurchasing outstanding equity or debt securities, oras well as other general corporate purposes. Furthermore, the HR Committee believes that free cash flow generation is an important determinant in long-term shareholder value creation because it allows the Company to fund growth without raising additional debt and can also be used to retire existing indebtedness, both of which enhance long-term shareholder value. Given the HR Committee’s view on the importance of Adjusted Free Cash Flow less Cash NCI to both short-term and long-term value creation for shareholders, the HR Committee decided to usecontinue using it in both the 2020 AIP and LTI programs.
The HR Committee, on the recommendation of management, determined that it was appropriate to exercise negative discretion to reduce the AIP funding pool from 200% to 117% in order to offset favorability in our overall financial performance resulting from the COVID-19 pandemic, including grants and other benefits the Company received under the CARES Act, that was unrelated to management’s actions. The adjusted payout level reflects the Company’s projected performance before the impact of the COVID-19 pandemic.
METRIC
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THRESHOLD
| TARGET
| MAXIMUM
| ACTUAL
| PERCENTAGE
| CALCULATED
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Adjusted EBITDA | $ | 2.392 billion | $ | 2.525 billion | $ | 2.659 billion | $ | 2.560 billion |
| 125.9 | % | 75.5 | ||||||||||||||||||
Adjusted FCF Less Cash NCI(2) | $ | 353 million | $ | 503 million | $ | 653 million | $ | 312 million |
| 0.0 | % | 0.0 | ||||||||||||||||||
Individual Performance |
| Target(3) |
| 100 | % | 10.0 | ||||||||||||||||||||||||
Enterprise Score |
| 85.5 | ||||||||||||||||||||||||||||
Negative Discretionary Adjustment |
| (10.0%) | ||||||||||||||||||||||||||||
Final Funding Level |
| 76.9% of Target |
Metric | Threshold Level | Target Level | Maximum Level | Actual Performance | Percentage of Target | Calculated Payout | ||||||||||||||||||||||||||||
Adjusted EBITDA(1) |
$ |
2.650 billion |
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2.825 billion |
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$ |
3.050 billion |
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3.146 billion |
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200 |
% |
140 |
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Adjusted FCF less NCI(2) | $ | 390 million | $ | 480 million | $ | 570 million | $ | 2,914 million | 200 | % | 60 | |||||||||||||||||||||||
Initial Funding Pool |
| 200% | ||||||||||||||||||||||||||||||||
Negative Discretionary Adjustment |
| (83%) | ||||||||||||||||||||||||||||||||
Final Funding Pool |
| 117% of Target |
(1) | See Appendix A for definition |
(2) | Adjusted Free Cash Flow (see Appendix A for |
Individual Performance Modifiers
After completion of the fiscal year, the HR Committee undertakes a robust individual performance review for our executive officers. These reviews allow the HR Committee to incorporate into the AIP program certain quantitative and qualitative elements tailored specifically to each executive’s role and circumstances. These reviews also allow the HR Committee to take into consideration factors such as integrity, promotion of Company values, and a positive influence on Company culture, which
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Compensation Discussion & Analysis
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2018 Hospital
further the Company’s business objectives and strategies. The result is an individual performance multiplier applied to the calculated AIP Performance
Mr. Evans earned hisamount that can range from 0% to 150%. The ratings are calibrated across the entire Company to ensure the AIP bonus from the funding pool created underremains fixed.
For the Hospital GatekeeperCEO, the HR Committee gathers feedback from select members of management as well as a CEO self-evaluation and scorecard. The Gatekeeper measureddiscusses the following quality and service metrics: a composite of over a dozen hospital quality measures with target set at national average (30% of Gatekeeper); the average star rating assigned by the Centers for Medicare and Medicaid Services with target set at national average (10%); the results of internal patient satisfaction surveys with target set at approximately four percentage points above 2017’s results (25%); and employee turnover with target set at national average (20%). The remaining 15%performance of the Gatekeeper was set aside for individual performance assessments. Altogether, the Hospital Gatekeeper achieved 84.5% of target.
Like the Enterprise scorecard, the Hospital scorecard measured Adjusted EBITDA (65% of scorecard) and Adjusted Free Cash Flow Less Cash NCI (15%)CEO with the same target levels. It also included measures for inpatient admissions with target set at 1.0% growth relative to 2017 (10%) and outpatient visits with target set at 1.2% growth relative to 2017 (10%). The Hospital scorecard achieved 85.5% of target and, when combined with the outcomeother independent members of the Gatekeeper, resultedBoard in executive session. For reviews of other executive officers, the CEO provides the HR Committee a calculated Hospital AIP score of 72.3% of target.detailed evaluation and recommendation based in part on a self-assessment completed by each executive officer.
Negative Discretionary Adjustment to Enterprise and Hospital Funding Pools
2021 PROXY STATEMENT | 37 |
Compensation Discussion & Analysis
The HR Committee applied the following performance modifiers for our NEOs based on the recommendationmaterial factors provided below. Ms. Karrmann did not receive a 2020 AIP Payout in light of management, determined that it was appropriate to reduce the total AIP funding pools for Enterprise and Hospital employees by 10% and 20%, respectively. This downward adjustment reflected the Company’s failure to meet certain performance expectations, particularly in the third and fourth quarters of 2018 when the Company lowered its earnings guidance, driven in large part by underperformance of the Hospital Operations segment. The discretionary reductions resulted in final funding of the Enterprise AIP funding pool at 76.9% of target and the Hospital AIP funding pool at 57.7%.her October 2020 resignation.
Named Executive Officer | Individual
Multiplier | Performance Review Summary |
Mr. Rittenmeyer |
| • Focused first and foremost on quality and safety, led a cohesive and coordinated enterprise-wide response to the pandemic while delivering strong financial and operational results in a turbulent year. • Repositioned the Company’s growth trajectory by advancing key strategic objectives like the transformative acquisition of 45 ambulatory surgery centers. • Strengthened the Company’s commitment to elevating its people, fostering an inclusive culture, ensuring effective governance and realigning on purpose. | ||
Dr. Sutaria | 150% | • Leadership has been especially pivotal in accelerating our growth and performance, reassuring our ongoing resilience during the pandemic, and bringing to bear expanded offerings for patients notwithstanding the tremendous challenges we all faced in 2020. • Continued to drive changes in business unit leadership to strengthen organizational roots and position our best people to expand their skills and continue to positively impact the enterprise. • Appointed to the Company’s Board of Directors in November 2020. | ||
Mr. Cancelmi | 140% | • Instrumental in leading our finance team through the pandemic with equal commitment to diligent review of various governmental orders and grants and improved quality of our ongoing operational processes. • Restructured the balance sheet and reinforced investor confidence while ensuring transparency. • Championed talent upgrades for key leadership roles in finance team. | ||
Ms. Andrews | 130% | • Successfully navigated the pandemic related rules that changed frequently and covered all legal issues. • Leadership and support to the compliance team that allowed us to meet key priorities notwithstanding the impact of COVID-19. • Significant contributions to streamlining USPI’s structure and legal processes to align with enterprise goals. | ||
Ms. Arbour | 130% | • Quickly led transition to successfully relocate our headquarters, satellite offices and Global Business Center (GBC) employees to a remote working environment within a short period. • Improved process and successfully worked with third parties to meet cybersecurity protection goals. • Adjusted capital expenditures while partnering with teams in the field on the right enterprise priorities and creating a true service culture. |
Individual Performance Adjustments
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As described above, in 2018 the HR Committee introduced a robust individual performance component to the AIP to align with our “Culture of Accountability,” and to more directly reflect performance that the HR Committee desires to reward or discourage. Under this new structure, the HR Committee adjusted individual payouts with a multiplier based on the final rating obtained from each NEO’s performance review. The multiplier ranges from 0% for a rating of 1 to a potential 150% for a rating of 5. For any given rating other than 1, the multiplier can range within a specified narrow band.
Compensation Discussion & Analysis
The HR Committee made the following performance adjustments for our NEOs based on the material factors provided below:
Mr. Rittenmeyer received an individual performance adjustment of 130% based on a rating of 4.5. This rating was determined by the HR Committee based on strong results that Mr. Rittenmeyer delivered in a year of significant transformation. Operational and financial performance has greatly improved in a short period of time, and Mr. Rittenmeyer has provided the vision behind the “Culture of Accountability” driving results across the enterprise. The HR Committee also considered that under Mr. Rittenmeyer’s leadership, the organization has been reshaped, stabilized and is well-positioned for continued success in 2019 and beyond.
Mr. Cancelmi received an individual performance adjustment of 120% based on a rating of 4. This rating was determined based on the sound financial performance delivered under Mr. Cancelmi’s leadership in 2018. Adjusted EBITDA results were strong and Tenet delivered significant cost reductions by restructuring throughout the organization, streamlining processes and speeding decision-making. Through improved performance, debt retirement and refinancing, Tenet also reduced its leverage and increased financial flexibility, while investing to increase USPI ownership to 95%.
Mr. Pitts received an individual performance adjustment of 100% (no change) based on a rating of 3. This rating was determined based on the positive outcomes that Mr. Pitts and his team were able to produce in 2018. He and his team executed on an accretive divestiture program and guided our exploration of strategic alternatives for Conifer. Mr. Pitts also played an integral role in the successful early acquisition of our minority partner’s remaining interest in USPI.
Mr. Evans received an individual performance adjustment of 90% based on a rating of 2.5. This rating was determined in consideration of the fact that Hospital Operations results were mixed in 2018. While focus on quality and patient satisfaction had positive results, overall performance continued to fall short of expectations. A decision was made to restructure senior leadership at the end of 2018 and create the position Chief Operating Officer in January 2019 with enterprise-wide authority.
Ms. Andrews received an individual performance adjustment of 125% based on a rating of 4.5. This rating was determined based on Ms. Andrews’ significant contributions to the transition of leadership and shift in culture in 2018. She and her team also delivered strong results across the enterprise, and she made organizational changes to further streamline legal processes and reduce outside counsel spend. In addition to her contributions leading the Law department, the HR Committee considered the fact that Ms. Andrews also assumed responsibility for Government Relations in 2018.
The table below shows target and actual AIP awards earned by each NEO for 2018.2020.
NAMED EXECUTIVE OFFICER
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INDIVIDUAL
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Named Executive Officer | Target AIP Payout | Calculated AIP Payout | Individual Performance Multiplier | 2020 Actual AIP Payout | |||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer | $ | 1,800,000 | $ | 1,384,200 |
| 130 | % | $ | 1,799,460 |
| 99.97 | % |
$ |
2,250,000 |
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2,632,500 |
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150 |
% |
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Saum Sutaria | $ | 1,000,000 | $ | 1,170,000 |
| 150 | % | $ | 1,755,000 | ||||||||||||||||||||||||||||||||||||||
Dan Cancelmi | $ | 618,000 | $ | 475,242 |
| 120 | % | $ | 570,290 |
| 92.28 | % | $ | 650,000 | $ | 760,500 |
| 140 | % | $ | 1,064,700 | ||||||||||||||||||||||||||
Keith Pitts | $ | 925,000 | $ | 711,325 |
| 100 | % | $ | 711,325 |
| 76.90 | % | |||||||||||||||||||||||||||||||||||
J. Eric Evans | $ | 700,000 | $ | 403,900 |
| 90 | % | $ | 363,510 |
| 51.93 | % | |||||||||||||||||||||||||||||||||||
Audrey Andrews | $ | 412,500 | $ | 317,213 |
| 125 | % | $ | 396,516 |
| 96.13 | % | $ | 412,500 | $ | 482,625 |
| 130 | % | $ | 627,413 | ||||||||||||||||||||||||||
Paola Arbour | $ | 375,000 | $ | 438,750 |
| 130 | % | $ | 570,375 | ||||||||||||||||||||||||||||||||||||||
Sandi Karrmann(1) | $ | 375,000 |
| N/A |
| N/A |
| N/A | |||||||||||||||||||||||||||||||||||||||
(1) | As a result of her separation, Ms. Karrmann was not eligible to receive an AIP payout. |
Pandemic Special Bonuses
The HR Committee periodically approves additional “off-cycle” awards to key employees, including NEOs, in connection with promotions, recruitment and retention efforts, succession planning, or significant accomplishments or achievements. The Committee approved one-time cash bonuses of $500,000 and $250,000 to Dr. Sutaria and Mr. Cancelmi, respectively, to reward them for their special efforts during the pandemic in 2020. In particular, the Committee recognized Dr. Sutaria’s extraordinary achievements partnering with our hospitals and other providers to respond quickly and effectively to COVID-19 and Mr. Cancelmi’s success in maintaining the Company’s financial performance and liquidity during the most challenging periods of the year.
Long-Term Incentive Compensation
The HR Committee restructuredundertook a holistic review of our executive compensation program design in 2020 and determined that changes to the LTI design were appropriate to further encourage sustained value creation for shareholders and simplify our equity compensation structure. The LTI design changes primarily addressed the compensation of executive officers other than Mr. Rittenmeyer, whose LTI compensation awardsis described above under “2020 Compensation Program Highlights”, and Dr. Sutaria, who entered into an employment agreement with the Company when he joined in 2016 with a number2019 that provides for an annual grant of significant changes designed$4,000,000 of time-based RSUs vesting ratably over three years. In 2020, the Committee awarded Dr. Sutaria performance-based RSUs valued at $1,000,000 in acknowledgement of his critical role in the Company’s future success and to betterfurther align our executives’his long-term incentives with the long-term goalsthose of the Company,Company’s shareholders.
Beginning in 2020, LTI compensation for executive officers other than Mr. Rittenmeyer and theDr. Sutaria moved to entirely in RSUs, comprised of 50% time-based awards vesting ratably over three years and 50% performance-based awards earned over a three-year period. The HR Committee has continued to refine our LTI design each year since.believes that a simplified equity-only program provides stronger alignment of management’s incentives with shareholder interests. In response to specific shareholder feedback thatits review, the HR Committee establish longer performance periodsconsidered peer group and reconsider performance metrics,other market data, emerging best practices, the Committee began makingavailability of shares under Company plans and the retention value of LTI awards in 2016 with cumulative three-year performance periods that were subject to a variety of performance metrics connected to the Company’s long-term strategies. For more information on the LTI awards granted in 2016, see “Results of2016-18 LTI Awards” on page 38 below.compensation.
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Compensation Discussion & Analysis
The HR Committee continues to review our LTI award structure and performance metrics to ensure that the program best promotes long-term company performance and appropriately aligns the economic interests of our NEOs with those of our shareholders. After reviewing our LTI compensation practices and the 2017 awards, the HR Committee determined that the structure and metrics remained appropriate for 2018 and provided helpful continuity. Our 2018 LTI awards are summarized below.
Long-Term Incentive Compensation
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| Year 1 | Year 2 | Year 3 | |||||
Performance-Based RSUs (50%) |
• Based on Adjusted FCF less Cash NCI and Adjusted EPS, with goals set annually on current conditions and business strategy to a tranche of three overlapping cycles with threshold (0%), target (100%), and max (200%)
• Subject to Relative TSR modifier based on performance over the entire performance period (+/- 25% based on cumulative performance versus direct peers)
| Three-year performance period with one-year goals set annually | ||||||
33.3%
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33.3%
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33.3%
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Time-Based RSUs |
• Restricted stock unit that is solely subject to service-based vesting or forfeiture conditions
• Awards directly align executive and shareholder interests while encouraging retention throughout the vesting cycle
| Vest ratably over three years | ||||||
33.3%
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33.3%
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33.3%
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Adjusted Earnings Per Share | • Key metric for our shareholders because our Adjusted Earnings drives share price performance
• Measures the Company’sper-share profitability, excluding certain gains and
losses | |
Adjusted Free Cash Flow Less NCI | • Sustained cash flow generation allows the Company to fund objectives important to the Company’s long-term strategy without raising additional debt
• Measures the Company’s ability to | |
Relative Total Shareholder Return | • Comparing the Company’s share price performance to its direct competitors rewards management’s ability to deliver above-market returns to long-term shareholders
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2018 LTI Grant Values for Named Executive Officers
Two-thirds of the total target LTI award isat-risk and requires achievement of rigorous performance goals over a three-year period before value is received. The following table summarizes the total target grant value of LTI awards granted to each of our NEOs in February 2018:
NAMED EXECUTIVEOFFICER | PERFORMANCE CASH(1) | PERFORMANCE STOCK OPTIONS(2) | TIME-BASED RSUS(3) | TOTAL 2018 LTI GRANT VALUE | ||||||||||||||||
Dan Cancelmi | $ | 766,667 | $ | 766,674 | $ | 766,670 | $ | 2,300,011 | ||||||||||||
Keith Pitts | $ | 1,300,000 | $ | 1,300,006 | $ | 1,300,004 | $ | 3,900,010 | ||||||||||||
J. Eric Evans | $ | 833,334 | $ | 833,340 | $ | 833,352 | $ | 2,500,026 | ||||||||||||
Audrey Andrews | $ | 500,000 | $ | 500,008 | $ | 500,003 | $ | 1,500,011 |
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Rigor of Performance Goals
In establishing target, threshold and maximum performance levels for our performance-based cash awards, the HR Committee considers annual and longer-term growth rates that the Company discloses to shareholders, as well as the consensus of analyst estimates and business-planning projections. The HR Committee sets the target amounts at demanding levels that require NEOs to achieve significant improvement each year of the performance period. Evidenceperiod, and beginning with the 2020 awards, the target amounts are established at the beginning of each one-year performance period to ensure that the goals remain relevant and challenging as the overall three-year performance period progresses. For the Relative TSR modifier, the Company placing first among the direct peer group results in a 25% increase, and the Company placing fourth among the direct peer group results in a 25% decrease, with no adjustments for placing second or third among the direct peer group.
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Compensation Discussion & Analysis
2020 LTI Grant Values for Named Executive Officers
The following table summarizes the total target grant value of LTI awards granted in February 2020 to each of our NEOs participating in our 2020 LTI program. LTI Compensation for Mr. Rittenmeyer is described above under “2020 Compensation Program Highlights.”
Named Executive Officer | Performance- Based RSUs(1)(2) | Time-Based RSUS(2) | Total 2020 LTI Grant Value | |||||||||
Saum Sutaria | $ | 1,000,022 | $ | 4,000,003 | $ | 5,000,025 | ||||||
Dan Cancelmi | $ | 1,250,027 | $ | 1,250,027 | $ | 2,500,054 | ||||||
Audrey Andrews | $ | 750,016 | $ | 750,016 | $ | 1,500,032 | ||||||
Paola Arbour | $ | 450,026 | $ | 450,026 | $ | 900,052 | ||||||
Sandi Karrmann(3) | $ | 487,501 | $ | 487,501 | $ | 975,002 |
(1) | Assumes target level performance. |
(2) | Value is based on the NYSE closing price per share of our common stock on the date of grant (February 26, 2020: $27.80). |
(3) | Ms. Karrmann forfeited her 2020 LTI awards upon her resignation. |
The Company will disclose its achievement against the applicable performance metrics for the 2020 Performance-Based RSUs following completion of the HR Committee’s highly rigorous approach to goal-setting is apparent in the below-target payout under the 2016 annual LTI awards as discussed below.three-year performance period.
Consistent with the practices of many other public companies, the Company has concluded thatpre-disclosure of specific long-term financial performance goals could cause competitive harm to the Company and may be interpreted as guidance by some shareholders. As has been Tenet’s practice, specific goals will be disclosed after the respective performance period is completed and the information is no longer sensitive from a competitive perspective.
Results of2016-18 2018 LTI Awards
The redesignedperformance cash LTI awards first granted in March 20162018 had a performance period of three years with performance measured across fourthree equally weighted performance metrics as set forth in the table below (achievement at target on any metric would result in 25.0%33.3% of the total payout). FourTwo of our 2018 NEOs—2020 NEOs — Ms. Andrews and Messrs.Mr. Cancelmi Evans and Pitts—— received these grants, which vested in March 2019February 2021 following the HR Committee’s certification of the Company’s achievement under the performance metrics. Although Ms. Karrmann was granted a 2018 performance cash LTI award, it was forfeited on her October 2020 departure.
ThreeWhen considering the Company’s Adjusted Free Cash Flow Less Cash NCI (Adjusted Free Cash Flow) performance over the three-year performance period, the HR Committee, on the recommendation of management, excluded certain federal payments and tax deferrals that the four performance metricsCompany received under the CARES Act. Specifically, the HR Committee excluded Medicare advance payments that the Company expects to be required to repay in addition to payroll tax deferrals for fiscal year 2020. The negative discretion reduced the Company’s Adjusted Free Cash Flow to $2.012 billion, resulting in a below-target payout of 10.73 for the 2016 LTI awards weremetric. Including such funds would have resulted in Adjusted Free Cash Flow of $3.679 billion, well above the same as the 2018 LTI award performance metrics. The performance metrics for the 2016 LTI awards also included Adjusted Return on Invested Capital (ROIC), which measures capital efficiency and management’s ability to generate economic returns on capital investments and acquisitions.maximum payout.
The following table shows the Company’s results under each of the applicable performance metrics measured over the three-year period ended December 31, 2018.2020.
2016-18 LTI PERFORMANCE METRIC | THRESHOLD PERFORMANCE | TARGET PERFORMANCE | ACTUAL PERFORMANCE | PAYOUT | |||||||||||||||||||||||||||||||||
2018 LTI Performance Metric | Threshold | Target | Maximum | Actual Performance | Calculated Payout | ||||||||||||||||||||||||||||||||
Adjusted Earnings per Share | $5.87 | $6.52 | $3.71 | 0.00% | $ | 6.82 | $ | 8.02 | $ | 9.22 | $ | 12.55 | 66.67 | ||||||||||||||||||||||||
Adjusted Free Cash Flow less Cash NCI | $1.358 billion | $1.509 billion | $839 million | 0.00% | |||||||||||||||||||||||||||||||||
Adjusted return on invested capital | 4.91% | 5.46% | 5.23% | 17.20% | |||||||||||||||||||||||||||||||||
Adjusted Free Cash Flow less NCI | $ | 1.978 billion | $ | 2.327 billion | $ | 2.676 billion | $ | 2.012 billion | 10.73 | ||||||||||||||||||||||||||||
Relative total shareholder return | 4th | 3rd | 3rd | 25.00% | 4 | th | 3 | rd | 1 | st | 1 | st | 66.67 | ||||||||||||||||||||||||
Total Pay Delivery | Total Pay Delivery | 42.20% of Target | Total Pay Delivery |
| 144.06% of Target |
Results of 2014 Performance LTIAdditional Awards for Ms. Karrmann
In August 2014,February 2020, Ms. Karrmann executed a cash bonus agreement pursuant to which she received $944,045 in connection with the HR Committee made awards of performance RSUs to certain senior officers.One-third of these RSUs vest on attainment of performance criteria based on the Company’s compound annual growth rate (CAGR) of Adjusted EBITDA over the three-year period ended December 31, 2018 as compared to the Company’s Adjusted EBITDA for the year ended December 31, 2015. The number of shares received with respect to this award could range from 0% to 200%termination of the target level, depending onUSPI Holding Company, Inc. 2015 Stock Incentive Plan in which she participated. The cash bonus agreement provided for a full release of claims in favor of the degree to which the targetCompany, USPI Holdings Company, Inc. and their respective affiliates.
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performance goals were achieved. The threshold performance for Adjusted EBITDA CAGR from 2015 to 2018 was 1%, with target at1%-3% and maximum at greater than 3%. Actual performance was above the maximum at 3.89% CAGR, resulting in a payout of 200%. Ms. Andrews and Messrs. Cancelmi, Evans and Pitts received these grants, which remain subject to a service-based vesting requirement and will vest in August 2019 subject to continued employment.
Chief Executive Officer Compensation
Mr. Rittenmeyer’s compensation package has been designed to effect a successful turnaround at Tenet at reasonable compensation levels consistent with our philosophy of paying for strong performance results. Accordingly, Mr. Rittenmeyer’s compensation arrangement has evolved as he has continued to produce meaningful improvements and drive the Company towards its key strategic objectives. This evolution includes aone-and-a-half year extension approved in early 2019 to provide for a successful turnaround while maintaining annualized compensation levels that are reasonable compared to peers and below those of our former CEO, as described in detail below.
The following graphic annualizes Mr. Rittenmeyer’s target direct compensation for the entire term of his service as CEO through the end of his extended Employment Agreement on June 30, 2021. The HR Committee believes this presentation provides a more holistic view of
Mr. Rittenmeyer’s intended compensation package as compared to the SEC-required disclosure levels shown in the Summary Compensation Table on page 47, where LTI equity awards are reported entirely in the year of grant. When approving Mr. Rittenmeyer’s compensation arrangements, the HR Committee viewed compensation levels from an annualized basis to confirm that his target compensation remained below the median peer CEO level and below the pay level of his predecessor in the role. The HR Committee also considered that granting the awards up front would serve to strongly link Mr. Rittenmeyer’s potential pay delivery to Tenet’s turnaround results during this period. The HR Committee does not intend to make any additional LTI grants, or other forms of compensation, to Mr. Rittenmeyer during the remainder of his term of service with the Company.
Ron Rittenmeyer’s Target Direct Compensation as CEO
(August 31, 2017 to June 30, 2021)
2018 Chief Executive Officer Employment Agreement
In March 2018, Tenet entered into the Employment Agreement with Mr. Rittenmeyer engaging him to serve as the Company’s CEO for thetwo-year period from March 1, 2018 through February 28, 2020.
In determining the appropriate compensation for Mr. Rittenmeyer, the HR Committee considered Mr. Rittenmeyer’s strong performance during the first six months of his tenure. The Committee set the target for Mr. Rittenmeyer’s annual direct compensation at approximately the 25th percentile of our peers based on the belief that initial compensation levels for an incoming CEO should be set with room for growth and with the expectation that, should the Employment Agreement be amended or extended, future compensation levels would be determined based on actual performance results.
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Compensation Discussion & Analysis | ||
For thetwo-year period from March 1, 2018 through
In addition, in February 28, 2020, the Employment Agreement provides for:
Base Salary: $1,200,000 per year
Annual Incentive Plan: 150%Ms. Karrmann was granted a cash-based long-term incentive award of salary (at target) per year
Long-Term Incentives: $14,000,000 for thetwo-year period (granted 50%$5,000,000, which was scheduled to vest in RSUs and 50% in time-vested or “restricted” cash)
Under the terms20% increments on each of the Employment Agreement, Mr. Rittenmeyer’s long-term incentives vest in equal quarterly installments over thetwo-year term, aligning with the transitional naturefirst, second and compressed timingthird anniversaries of the turnaround objectives. In making these LTI grants, the HR Committee believed that two years was too short to set meaningful long-term performance goals, but rather that performance would be fairly reflected by the change in the Company’s stock price over the period. Mr. Rittenmeyer is not covered by Tenet’s Executive Severance Plan.
The HR Committee approved the compensation for Mr. Rittenmeyer under his Employment Agreement, including the RSUs with a grant date fair value of $7,000,000, on February 28, 2018; however, the parties did not execute the Employment Agreement until March 24, 2018. The HR Committee intended for the grant date for Mr. Rittenmeyer’s restricted stock unitsand 40% on the fourth anniversary, in each case, subject to be the date of HR Committee approval in February. Instead, the date of execution of the Employment Agreement in March was used to determine the grant date. As a result of using the March grant date, Mr. Rittenmeyer received 288,660 restricted stock units whereas the HR Committee intended Mr. Rittenmeyer to receive the number of units calculated with the February grant date, or 339,806. In June 2018, the HR Committee awarded Mr. Rittenmeyer RSUs equal to the difference between these figures, or 51,146 units.
Extension in 2019
In February 2019, recognizing the considerable improvements Mr. Rittenmeyer had already implemented and the additional progress required in the Company’s turnaround process, the Board of Directors approved an amendment to Mr. Rittenmeyer’s Employment Agreement that extends his term of serviceher continued employment through June 2021.
Mr. Rittenmeyer’s base salary and annual bonus opportunity remain unchanged under the Amendment. In connection with the Amendment, ansuch vesting dates. This award of RSUs valued at $16,000,000 and vesting in nine quarterly installments was granted to Mr. Rittenmeyer to further align his interests with thosein recognition of shareholders overher strong performance at the remainder of his term of service as CEO,Company and to reward continued turnaround performance reflected by Tenet’s stock price growth rather than setting goals for a short incremental performance period. Since assuming the role of Executive Chairman on August 31, 2017, Tenet’s share price has increased by more than 75% through March 21, 2019, driving an increase in market-capitalization of approximately $1.4 billion over that time period.
The Amendment also extends the duration of thenon-competition andnon-solicitation covenants to which Mr. Rittenmeyer is subject under the Employment Agreement from 12 months following the date of Mr. Rittenmeyer’s termination of employment to two years following such date.
To facilitate a smooth transition and to promote stability in leadership, Mr. Rittenmeyer has agreed to serve in an advisory role to his successor over an additionaltwo-year period following the end of his employment as CEO. Under this advisory arrangement, Mr. Rittenmeyer will receive an annual retainer of $750,000, will remain eligible to participate in the Company’s health and welfare benefits programs, and will remain subject to restrictive covenants no less favorable to the Company than those set forth in the Employment Agreement.
The Board does not intend to approve any further LTI awards or other forms of compensation for Mr. Rittenmeyer during the remainder of his term of service with the Company.
Creation of Enterprise-Wide COO Role
The Board maintains a strong leadership succession plan. Over the past year, several steps have been taken to ensure that the Company has the appropriate leadership structure and a clear succession process with internal candidates being developed for future key promotions.
In November 2018, the Board announced the appointment of Saumya (Saum) Sutaria, M.D., as Chief Operating Officer (COO) of the Company, to be effective in January 2019. The appointment created a new position and restructured the Company’s senior leadership. Previously, operational leadership was divided among the three business units, with Mr. Evans serving as President of Hospital Operations. Under the new streamlined structure, Dr. Sutaria as COO has direct responsibility for the Hospital business unit as well as the authority to design and implement enterprise-wide initiatives, particularly with respect to increased integration. This shift in leadership structure aligns with the Company’s broader transformation strategy and leverages Dr. Sutaria’s clinical, operational and advisory experience accumulated over 20 years working in complicated and diverse healthcare systems and related businesses.
Dr. Sutaria most recently served as a Senior Partner at McKinsey & Company, where he worked for 18 years providing advisory support for hospitals, healthcare systems, physicians groups, ambulatory care models, integrated delivery, andgovernment-led delivery, while also working with institutional investors in healthcare. Previously, Dr. Sutaria practiced medicine with a focus in internal medicine and cardiology.
Mr. Evans and the Company agreed that his last day of employment with the Company would be December 31, 2018. In connection with his departure, Mr. Evans was eligible to receive benefits consistent with a Qualifying Termination and/or termination without cause under the Company’s Executive Severance Plan and other employee benefit plans, as further described on page 56.
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Chief Operating Officer Employment Agreementencourage her long-term retention.
In connection with his appointment as COO, Tenet entered into an employment agreement with Dr. Sutaria for an initial three-year term until January 2022, during which he will receive target total direct compensationher separation in October 2020, Ms. Karrmann forfeited the median annual range for comparable positions, consisting of:
Base Salary: $1,000,000 per year
Annual Incentive Plan: 100% of salary (at target) per year
Annual Long-Term Incentives: $4,000,000 in RSUs per year (vesting ratably over three years)
The HR Committee also approved aone-time buyout to Dr. Sutaria valued at $12,000,000, which was a make-whole for forfeited and forgone earnings from his previous employer. Thebuy-out was split between $7 million in RSUs and $5 million in restricted cash to provide for employment retention, as it vests in full upon the expirationentirety of the three-year term. LTI awards to Dr. Sutaria are not subject to financial performance goals as part of this initial employment arrangement, which is designed to transition him to a public company compensation program from a private partnership model at his prior employer. The Company’s stock price performance over the period will be reflected in ultimate pay delivery. Dr. Sutaria is subject to certainnon-competition covenants for one year, andnon-solicitation covenants for two years, following termination of his employment. Dr. Sutaria is not covered by Tenet’s Executive Severance Plan, and there were no additional hiring inducements.cash-based long-term incentive award.
Role of the Human Resources Committee
The HR Committee is comprised entirely of independent directors and makes all compensation decisions regarding our NEOs. The HR Committee considers input from (i) the other independent members of our Board of Directors, (ii) the Company’s shareholders and (iii) its independent compensation consultant. In the case of NEOs other than the CEO, the HR Committee also considers input and recommendations from the CEO. The HR Committee’s decisions regarding compensation of our NEOs are made outside the presence of these officers. The HR Committee is also responsible for approving our executive compensation program and general compensation policies, all new or materially amended broad-based compensation plans and the performance measures used in our executive compensation programs.
Independent Compensation Consultant
The HR Committee has retained Frederic W. Cook & Co. (the “Consultant”) as its independent consultant to assist the Committee with its duties. In 2018,2020, the Consultant participated in or provided input with respect to all meetings of the HR Committee and regularly communicated with the Committee Chair, andwho also serves as the Lead Director. This year, the Consultant’s services included:
Providing market data, industry trends and competitive analysis relative to our peers;peers.
Advising on the key elements of our executive compensation plans and policies;policies.
Reviewing our compensation peer group and suggesting changes, if warranted; andwarranted.
Advising on the adjustments to the 2020 LTI program.
Providing recommendations on the structure and competitiveness of compensation for our CEO and COO.
Subject to the approval of the HR Committee, the Consultant meets with members of management to review management’s proposed compensation recommendations to the Committee, discuss compensation trends and best practices, and review Company compensation data. Any material information provided to management by the Consultant is disclosed to the HR Committee.
To safeguard the independence of the Consultant:
The HR Committee retains the Consultant, determines the terms and conditions of the Consultant’s engagement and has the sole authority to approve the Consultant’s fees and other retention terms or to terminate the engagement;engagement.
The Consultant reports directly to the HR Committee and has direct access to the Committee Chair during and between meetings; andmeetings.
The Consultant provides no services to the Company or management, except as related to executing the provisions of the HR Committee Charter, and with the knowledge and approval of the HR Committee Chair.
The HR Committee has assessed the independence of the Consultant pursuant to SEC and NYSE rules and concluded that no conflict of interest exists in connection with the Consultant’s service as an independent advisor to the Committee.
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Performance Review ProcessBenchmarking Against Peer Companies
Each year the HR Committee reviews market compensation practices to evaluate the performancecompetitiveness of the CEOCompany’s pay levels and program design. Given the small number of publicly held healthcare providers and competition with the other independent members of the Board in executive session. This review is based on the performance evaluations of the CEO by the independent Board members, as well as other data provided tonot-for-profit companies, the HR Committee including the CEO’s self-evaluation and feedback provided by selected members of management. For performance reviews of other NEOs, the CEO provides the HR Committee a detailed evaluation based in partrelies on a self-assessment completed by each NEO to review prior year performance as measured against personal, pre-established goals. For a summary of the material factors addressed in each NEO’s performance review, see page 36.
Benchmarking Against Peer Companies
In setting compensation for our NEOs, the HR Committee typically reviews comparative compensation data derived from the companies that comprise our peer group, as well as market survey data provided to us by the Consultant. The HR Committee believes it is appropriate to evaluate the compensation of the NEOs against a blend of peer group and market survey data given the small number of publicly held healthcare services companies comparable in size to Tenet and the fact that hospital companies comprise only a small portion of the publicly held healthcare service companies. We describe each of these data sources in more detail below.
survey market practices. The HR Committee seeks to compensate our NEOs at competitive compensation levels relative to ouruses the peer group when targetto assess whether executive officer pay levels ofare aligned with Company performance are meton a relative basis and considers the “market median” to be a helpful benchmark in setting compensation levels for our NEOs.executive officers.
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Compensation Discussion & Analysis
20182020 Peer Group
The changing healthcare landscape, including consolidation among health care providers, leftCompany currently has only four other similarly sizedthree direct competitors that are publicly traded “direct” competitors engaged primarily in the operation of acute care hospitals at the beginning of 2018:traded: Community Health Systems, Inc., HCA Healthcare, Inc., LifePoint Health, Inc. and Universal Health Services, Inc. (collectively, the “Direct Peers”). While these four Direct Peers were includedAs a result, in our peer group for 2018, in November 2018, LifePoint Health, Inc. went private in connection with a merger, leaving only three. To create a sufficiently large peer group of public companies with whom Tenet competes for talent,August 2019 the HR Committee followed an objective selection process that looked to related industry segments that approximatedwith companies approximating Tenet in revenues, market-capitalization, enterprise value and number of employees. In consultationemployees to ensure we retained a sufficiently large and appropriate peer group. The selection process yielded 15 companies with similar business complexity. As compared to the Consultant, for 2017 the HR Committee established2019 peer group, based on the objective selection process, below to determine its peer group. For 2018, the HR Committee determined it was appropriate to follow the same process again, resulting in the same 17 companies that operate across healthcare services, facilitiesremove Aetna, Cigna, Envision Healthcare and equipment, as well as managed care.
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Step 2: Add companies in the following GICSsub-industry segments identified as peers by at least two of the four direct peers:
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(198 additional companies added)
Step 3: Remove companies with:
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(184 companies removed)
Step 4: Review potential peers for relevance to Tenet:
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(1 company removed)
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Using the criteria set forth above, the HR Committee established the following peer group for 2018 compensation decisions:Kindred Healthcare and add Encompass Heath, Molina Healthcare and Select Medical.
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Community Health Systems |
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•HCA Healthcare |
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•Universal Health Services | Additional Peers • Baxter International • Becton, Dickinson and Company •Boston Scientific • DaVita • Encompass Health • Genesis Healthcare | • Humana •LabCorp | ||
| •Quest Diagnostics | |||
| •Stryker | |||
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The following chart illustrates Tenet’s size compared to the 2018 peer group median of revenues, enterprise value and number of employees, using data provided to the HR Committee by the Consultant in November 2017.
The following chart illustrates Tenet’s size compared to the 2020 peer group median of revenues, enterprise value and number of employees, using data provided to the HR Committee by the Consultant in August 2019. |
Market Survey Data
For 20182020 compensation decisions, the HR Committee reviewed additional compensation data from the following third-party general-industry survey sources:
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| $10 billion to $25 billion | |
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| $10 billion to $20 billion | |
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The Consultant compiles data from these surveys relating to the compensation levels received for each position held by a NEOTenet executive officers against the compensation levels received by executives holding similar positions at other companies. The Consultant then presents the data to the HR Committee in aggregated form. In benchmarking compensation levels againstform, and the survey data, the HR Committee considers only the aggregated survey data provided by the Consultant. The identity of the companies comprising the survey data is not disclosed to, or considered by, the HR Committee in its decision-making process. The HR Committee members do not consider the identity of the companies comprising the survey data to be material for this purpose.
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Compensation Discussion & Analysis
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Other Compensation, Benefits and Considerations
Perquisites for our NEOs are limited and generally represent an immaterial element of our executive compensation program. They largely consist of life insurance premiums, Company contributions to retirement programs available to other senior officers, and personal use of Company aircraft.
Upon the recommendation of an independent, third-party security study, the Company also provides Mr. Rittenmeyer a car and personal security driver that he primarily uses for commuting and local business travel. The HR Committee does not consider these security costs as personal benefits because they serve a business purpose arising from his employment as CEO. However, the Company is required to disclose the unreimbursed incremental costs associated with the personal use of the Company-provided car, including commuting expenses, andas well as the personal security driver. TheseThe amounts of these services were made available to Mr. Rittenmeyer beginning in October 2018, and the related amounts are disclosed in the 2018 Summary Compensation Table on page 47.
48. The security study also recommended Mr. Rittenmeyer use Company aircraft for both business and personal use.use to ensure his safety. Our aircraft usage policy requires Mr. Rittenmeyer to reimburse us for any personal use of the corporate aircraft above 75 hours per year and allows Mr. Rittenmeyer to approve limited personal use of Company aircraft by certain other Company executives. In 2018,2020, Mr. Rittenmeyer’s personal use of the corporate aircraft totaled approximately eight11 hours. The unreimbursed incremental cost of his and other NEO’s use is disclosed in the 2018 Summary Compensation Table on page 47.48.
The Company does not provide taxgross-ups to NEOs except to Mr. Rittenmeyer exclusively to cover personal income tax obligations due to imputed income for use of a Company-provided car for security purposes. We do not provide our NEOs with any other significant perquisites.
The Tenet Executive Severance Plan (ESP) is applicableapplies to certain of our NEOs and certainin addition to other senior managers and officers of the Company, including hospital chief executive officers.Company. The ESP provides cash severance and other benefits that vary by position level, consistent with market practice. ESP participants do not receivegross-ups gross ups of excise taxes that may be incurred upon a change of control.
Each of the NEOs, other than Mr. Rittenmeyer participatesand Dr. Sutaria, participated in the ESP.ESP in 2020. The severance periods for the Company’s NEOs under the ESP were determined by the HR Committee based on (1) past company practice, (2) competitive data provided by the Consultant regarding the severance periods in place for executives ofsimilar-sized companies and other healthcare peers, and (3) the HR Committee’s analysis of the financial impact of various severance compensation scenarios on each of these executives and the Company.
Provisions in the ESP and related severance agreements regardingnon-competition, confidentiality,non-disparagement andnon-solicitation as a condition of receipt of severance benefits under the ESP remain in effect for at least the period during which the severed executive is entitled to receive severance payments.
A more detailed description of the ESP is contained in “Potential Payments Upon Termination or Change of Control” beginning on page 55.56.
Supplemental Executive Retirement PlanPrograms
TheCertain of our NEOs participate in our frozen Supplemental Executive Retirement Plan (SERP) provides certain current and former officers with retirement benefits in the form of lifetime annuity payments. The benefit amount is based on the officer’s years of service, age and earnings. Benefit amounts received under the SERP are reduced (offset) by any benefit received under the Tenet, our Executive Retirement Account described below.
Our SERP has been in place since 1984, but was closed(ERA) and our Sixth Amended and Restated Tenet 2006 Deferred Compensation Plan (Deferred Compensation Plan, or DCP). These programs are designed to new participants in 2014. The SERP was continued for existing participants, which includes Messrs. Cancelmi and Pitts, and Ms. Andrews. As of December 31, 2018, only nineprovide retirement benefits to participating management-level employees, whose retirement benefits under our tax-qualified programs are otherwise limited under provisions of the Company participated in the SERP.Internal Revenue Code. Additional information regarding benefit calculations and other terms of the SERPthese programs is provided in the narrative discussion following the 20182020 Pension Benefits Table on page 53. Messrs. Rittenmeyer53 and Evans do not participate in the SERP.
Executive Retirement Account
We established the Tenet Executive Retirement Account (ERA) in order to attract and retain certain members of Company management, particularly those who were not eligible to participate in the SERP. The Company makes an annual contribution to the ERA each year on behalf of each participant in an amount equal to a specified percentage of the participant’s base salary. Such contributions accrue earnings credits. Upon a qualifying termination, participants are entitled to a retirement benefit equal to the vested balance of their ERA account. Upon
|
| ||
becoming eligible to participate in the SERP, a participant’s ERA account balance is frozen and such participant is no longer eligible to receive contributions or earnings credits under the ERA. Such individual, however, may continue to accrue years of vesting service under the ERA.
Mr. Rittenmeyer began participating in the ERA in 2018, and Mr. Evans was a participant in the ERA until his departure in 2018. Mr. Cancelmi and Ms. Andrews began participating in the ERA prior to becoming eligible to participate in our SERP. Upon a qualifying termination of employment, Mr. Cancelmi and Ms. Andrews will receive their vested balances under the ERA and will also be entitled to receive their applicable benefit under the SERP, but such SERP benefit will be reduced (offset) by any benefit received under the ERA. Mr. Pitts does not participate in the ERA.
Deferred Compensation Plan
Under our Fifth Amended and Restated Tenet 2006 Deferred Compensation Plan (2006 DCP), our NEOs and other eligible management employees may defer a portion of their base salary and annual incentive compensation that would otherwise be paid during a given calendar year. We make employer matching contributions to the 2006 DCP for employee participants in an amount equal to 50% of participant supplemental deferrals not to exceed 6% of compensation. The purpose of our 2006 DCP is to enable highly paid employees to defer the taxable receipt of a portion of their income, and to provide these employees with the matching contribution they would have received under our 401(k) Plan if Internal Revenue Code limits applicable to such plan did not apply.
Each of the NEOs is eligible to participate in the 2006 DCP. Additional details regarding our deferred compensation plans are set out under “Nonqualified Deferred Compensation” beginning on page 54.55.
Our NEOs participate in the Company’s broad-based programs generally available to all employees, including our 401(k) Retirement Savings Plan, health and dental and various other insurance plans, including disability and life insurance. Also, in connection with the SERP, we provide additional life insurance and accidental death and dismemberment insurance as described under “Potential Payments Upon Termination or Change of Control—Death, Disability and Retirement” beginning on page 56.57. These benefits are consistent with providing a total pay program that is sufficiently competitive with our peer companies so as to attract and retain highly qualified personnel.
44 | ![]() |
Compensation Discussion & Analysis
Section 162(m) of the Internal Revenue Code (Section 162(m)) generally disallows a tax deduction to public companies for compensation in excess of $1,000,000 paid to certain “covered employees” in any single year. Prior to 2018, the HR Committee generally sought to structure our performance-based compensation elements in a manner intended, but not guaranteed, to qualify as “performance-based” for purposes of satisfying the conditions of an exemption to this limit on deductibility. For taxable years beginning after December 31, 2017, the Tax Cut and Jobs Act repealed this exemption from Section 162(m)’s deduction limit for all but certain grandfathered compensation arrangements that were in effect as of November 2, 2017. Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and related regulations including the scope of relief for grandfathered arrangements, no assurance can be given that compensation awarded or paid in prior years and intended by the HR Committee to satisfy the requirements for deductibility under Section 162(m) will in fact be fully tax deductible. Notwithstanding the repeal of the “performance-based” compensation deduction pursuant to Section 162(m), the Company intendshas continued to continue subjectingsubject a significant portion of the incentive compensation payable to our NEOs to the achievement of one or more performance metrics specified by the HR Committee.
Compensation Governance Practices
Stock Ownership and Retention Requirements
The Board has adopted stock ownership and stock retention requirements for ournon-employee directors and all Company officers with the title of Senior Vice President and above, to further align such individual’s economic interests with those of our shareholders. The ownership requirements must be met within five years from the date on which an individual becomes a director or senior officer. If, during or after such five-year period, a senior officer, is promoted to a position that requires a higher stock ownership multiple than the position previously held, the senior officer will be granted an additionalwith two-year period to meetextensions in the increased multiple.
|
| ||
event of a promotion.
Each senior officer is required to own shares of our stock with a value equal to the following multiplesmultiple of his or her base salary:
|
| |
Chief Executive Officer | 6x | |
President or Chief Operating Officer | 4x | |
Executive Vice Presidents | 2x | |
Senior Vice Presidents | 1x |
Shares counted toward the stock ownership requirements include: (i) shares of common stock held of record or in a brokerage account by the individual or his or her spouse; (ii) unvested restricted stock or RSUs; and (iii) stock units credited under deferred compensation plans. Outstanding stock options do not count toward satisfaction of the ownership requirements.
If a director or senior officer does not meet the applicable ownership requirements, he or she must retain 100% of any “net shares” received upon the exercise of stock options and the vesting of restricted stock or RSUs until such time as the requirements are met. For this purpose, “net shares” means the number of shares received upon exercise of stock options or upon vesting of restricted stock or RSUs less the number of shares sold or deducted to pay the exercise price (in the case of options), withholding taxes and any brokerage commissions.
Mr. Rittenmeyer is within the initial compliance period, and all otherAll NEOs thatwho are current employees of the Company are in compliancecomply with these requirements. All senior officers are required to certify that they are in compliance with these guidelines prior to executing a sale of the Company’s common stock.
Equity Grant Timing and Stock Option Exercise Prices
Historically, we have made annual equity awards to the NEOs and other employees during the first quarter of the year in connection with annual executive compensation decisions. In accordance with the terms of our equity plans, the grant date of these awards is the date the HR Committee approves the grant, which usually occurs at a meeting scheduled more than one year in advance.
We occasionally may grant equity awards, including stock options, to newly hired employees, employees who have been promoted, to officer-level positions, or for special recognition, retention or other purposes outside of the annual grant process. For equity grants awarded outside of the annual grant process cycle, the grant date generally is the last tradingfirst or 15th day of the month offollowing hire or approval (or, if such date is not a trading day, the approval of the promotion or retention award. Mr. Rittenmeyer was the only NEO to receive any such special award in 2018, as described above.following date that is a trading day). The exercise price for all stock options is the NYSE closing
2021 PROXY STATEMENT | 45 |
Compensation Discussion & Analysis
price per share of our common stock on the date of grant or on the immediately preceding trading day if the date of grant is not a trading day. HR Committee approval is required in all cases where the recipient of the equity grant is ana NEO or other senior officer.
Prohibition on Hedging or Pledging Our Stock
Our insider trading policy prohibits any director, NEO or any other officer or employee subject to its terms (approximately 7060 people) from entering into short sales, or derivative transactions or any other similar transactions designed to hedge their economic exposure toor offset, any decrease in the market value of our stock.stock, whether directly or indirectly. In addition, these directors, officers and employees are prohibited from pledging our stock, including through holding our stock in margin accounts. Our Code of Conduct prohibit all employees from engaging in any market transaction that could put their personal gain in conflict with the Company or its shareholders, including trading in options, warrants, puts, calls or similar derivative interests in Company securities.
All awards under our AIP, including for NEOs, are subject to clawback and forfeiture provisions under which the Board may require forfeiture or reimbursement to the Company of a cash bonus in the event of a material restatement of our financial results caused by the recipient’s fraud or in other circumstances involving material violations of Company policy, fraud or misconduct that cause substantial harm to the Company even in the absence of a restatement of financial statements. In addition, performance-based LTI awards made to our NEOs in 2016 and later years are subject to clawback if, within three years following the end of the performance period, the Company materially restates its financial results with respect to the performance period and the recipient’s fraud or misconduct caused or partially caused the need for the restatement.
46 | ![]() |
|
|
Human Resources Committee Report
Our Human Resources Committee (HR Committee) has reviewed and discussed with management the Compensation Discussion and Analysis above. Based on this review and these discussions, the HR Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, and included in this Proxy Statement.
Members of the Human Resources Committee
J. Robert Kerrey, Chair
Richard W. Fisher
Christopher S. Lynch
Richard J. Mark
Tammy Romo
2021 PROXY STATEMENT | 47 |
The following table summarizes the compensation infor the years ended December 31, 2018, 20172020, 2019 and 20162018 for our NEOs for 2018. Mr. Rittenmeyer was not2020. Dr. Sutaria and Ms. Arbour became NEOs for the first time in 2019, and Ms. Karrmann became an NEO prior to 2017.for the first time in 2020.
20182020 Summary Compensation Table
NAME AND
| YEAR
| SALARY
| BONUS
| STOCK
| OPTION
| NON-EQUITY
|
CHANGE IN
| ALL OTHER
| TOTAL
| ||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer | 2018 | 1,513,846 | 2,625,000 | 8,716,976 | (8) | -0- | 1,799,460 | -0- | 328,739 | 14,984,021 | |||||||||||||||||||||||||||||||||||
Executive Chairman and | 2017 | 914,615 | -0- | 225,001 | 2,300,001 | -0- | -0- | 212,163 | 3,651,781 | ||||||||||||||||||||||||||||||||||||
Chief Executive Officer
| |||||||||||||||||||||||||||||||||||||||||||||
Dan Cancelmi Chief Financial Officer | 2018 | 618,000 | -0- | 766,670 | 766,674 | 570,290 | 292,830 | 12,080 | 3,026,544 | ||||||||||||||||||||||||||||||||||||
2017 | 618,000 | 323,832 | 766,683 | 766,596 | 108,768 | 807,670 | 11,885 | 3,403,434 | |||||||||||||||||||||||||||||||||||||
2016 | 618,000 | -0- | 1,865,374 | -0- | 415,914 | 1,199,116 | 11,804 | 4,110,208 | |||||||||||||||||||||||||||||||||||||
Keith Pitts Vice Chairman | 2018 | 925,000 | -0- | 1,300,004 | 1,300,006 | 711,325 | 9,435,392 | (9) | 12,660 | 13,684,387 | |||||||||||||||||||||||||||||||||||
2017 | 925,000 | 300,000 | 1,300,017 | 1,299,879 | 162,800 | 596,745 | 33,632 | 4,618,073 | |||||||||||||||||||||||||||||||||||||
2016 | 925,000 | -0- | 3,163,004 | -0- | 622,525 | 664,903 | 16,742 | 5,392,173 | |||||||||||||||||||||||||||||||||||||
J. Eric Evans Former President of Hospital Operations | 2018 | 700,000 | -0- | 833,352 | 833,340 | 363,510 | -0- | 213,920 | 2,944,122 | ||||||||||||||||||||||||||||||||||||
2017 | 686,539 | 357,368 | 833,338 | 833,256 | 123,625 | -0- | 176,314 | 3,010,440 | |||||||||||||||||||||||||||||||||||||
2016 | 626,538 | -0- | 1,424,360 | -0- | 430,848 | -0- | 148,600 | 2,630,346 | |||||||||||||||||||||||||||||||||||||
Audrey Andrews EVP and General Counsel | 2018 | 550,000 | -0- | 500,003 | 500,008 | 396,516 | 342,367 | 11,935 | 2,300,829 | ||||||||||||||||||||||||||||||||||||
2017 | 543,269 | 250,000 | 500,007 | 499,954 | 72,600 | 800,171 | 11,763 | 2,677,764 | |||||||||||||||||||||||||||||||||||||
2016 | 515,375 | -0- | 1,216,560 | -0- | 264,994 | 793,748 | 11,703 | 2,802,380 |
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(3) | Change in ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer Executive Chairman and Chief Executive Officer | 2020 | 1,444,615 | 875,000 | 10,000,021 | (6) | -0- | 3,948,750 | -0- | 407,143 | 16,675,529 | |||||||||||||||||||||||||||||||||||
2019 | 1,200,000 | 3,500,000 | 16,000,021 | -0- | 3,223,800 | -0- | 364,839 | 24,288,660 | |||||||||||||||||||||||||||||||||||||
2018 | 1,513,846 | 2,625,000 | 8,716,976 | -0- | 1,799,460 | -0- | 328,739 | 14,984,021 | |||||||||||||||||||||||||||||||||||||
Saum Sutaria President and Chief Operating Officer | 2020 | 1,000,000 | 500,000 | 5,000,025 | -0- | 1,755,000 | -0- | 325,634 | 8,580,659 | ||||||||||||||||||||||||||||||||||||
| 2019
|
| 961,539 | -0- | 11,000,016 | -0- | 1,731,300 | -0- | 258,569 | 13,951,423 | |||||||||||||||||||||||||||||||||||
Dan Cancelmi EVP and Chief Financial Officer | 2020 | 641,385 | 250,000 | 2,500,054 | -0- | 2,169,160 | 1,620,368 | 39,529 | 7,220,496 | ||||||||||||||||||||||||||||||||||||
2019 | 618,000 | -0- | 766,694 | 766,674 | 1,433,502 | 1,546,506 | 12,292 | 5,143,667 | |||||||||||||||||||||||||||||||||||||
2018 | 618,000 | -0- | 766,670 | 766,674 | 570,290 | 292,830 | 12,080 | 3,026,544 | |||||||||||||||||||||||||||||||||||||
Audrey Andrews EVP and General Counsel | 2020 | 550,000 | -0- | 1,500,032 | -0- | 1,347,713 | 1,207,934 | 8,671 | 4,614,350 | ||||||||||||||||||||||||||||||||||||
2019 | 550,000 | -0- | 500,004 | 500,012 | 899,754 | 1,175,079 | 12,113 | 3,636,962 | |||||||||||||||||||||||||||||||||||||
2018 | 550,000 | -0- | 500,003 | 500,008 | 396,516 | 342,367 | 11,935 | 2,300,829 | |||||||||||||||||||||||||||||||||||||
Paola Arbour EVP and Chief Information Officer | 2020 | 500,000 | -0- | 900,052 | -0- | 570,375 | -0- | 125,459 | 2,095,886 | ||||||||||||||||||||||||||||||||||||
2019 | 500,000 | -0- | 266,690 | 266,674 | 559,688 | -0- | 108,400 | 1,701,452 | |||||||||||||||||||||||||||||||||||||
Sandi Karrmann Former EVP and Chief Human Resources Officer | 2020 | 423,077 | 944,045 | (7) | 975,002 | -0- | -0- | -0- | 131,133 | 2,478,257 |
(1) |
|
For Mr. Rittenmeyer, the |
Values in this column for |
|
This column reflects cash awards earned under our AIP for performance in the relevant year. In addition, for 2020, this amount reflects the following payouts of our 2018 performance cash LTI awards for Ms. Andrews: $720,300 and Mr. Cancelmi: $1,022,272, which were paid in early 2021 based on performance from January 1, 2018 through December 31, 2020 as discussed further on page 41. |
|
![]() |
Executive Compensation Tables
|
|
| ||
Amounts shown in this column for |
RITTENMEYER
| CANCELMI
| PITTS
| EVANS
| ANDREWS
| |||||||||||||||||||||||||||||||||||||||||||||
Rittenmeyer | Sutaria | Cancelmi | Andrews | Arbour | Karrmann | ||||||||||||||||||||||||||||||||||||||||||||
Premiums for long-term disability and survivor benefit life insurance | -0- | $ | 3,830 | $ | 4,185 | -0- | $ | 3,685 |
| 128 |
|
| 145 |
|
| 124 |
|
| 121 |
|
| 118 |
|
| 118 |
| |||||||||||||||||||||||
Matching contributions under our 401(k) Retirement Savings Plan | -0- | $ | 8,250 | $ | 8,250 | $ | 8,250 | $ | 8,250 |
| -0- |
|
| 8,550 |
|
| 8,550 |
|
| 8,550 |
|
| 8,550 |
|
| 8,550 |
| ||||||||||||||||||||||
Matching contributions under our 2006 DCP | -0- | -0- | -0- | 20,670 | -0- |
| -0- |
|
| 66,939 |
|
| -0- |
|
| -0- |
|
| 16,791 |
|
| 22,465 |
| ||||||||||||||||||||||||||
Company contributions under our ERA | $ | 300,000 | -0- | -0- | $ | 140,000 | -0- |
| 375,000 |
|
| 250,000 |
|
| -0- |
|
| -0- |
|
| 100,000 |
|
| 100,000 |
| ||||||||||||||||||||||||
Personal use of company aircraft* | $ | 21,213 | -0- | $ | 225 | -0- | -0- |
| 24,918 |
|
| -0- |
|
| 30,855 |
|
| -0- |
|
| -0- |
|
| -0- |
| ||||||||||||||||||||||||
Personal use of Company car and driver provided for security reasons** | $ | 7,526 | -0- | -0- | -0- | -0- |
| 11,702 |
|
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
| |||||||||||||||||||||||||
Payments made to Mr. Evans in connection with separation*** | -0- | -0- | -0- | $ | 45,000 | -0- | |||||||||||||||||||||||||||||||||||||||||||
Total | $ | 328,739 | $ | 12,080 | $ | 12,660 | $ | 213,920 | $ | 11,935 |
| 407,143 |
|
| 325,634 |
|
| 39,529 |
|
| 8,671 |
|
| 125,459 |
|
| 131,133 |
|
* | Amounts shown in this row represent the incremental costs associated with the personal use of our aircraft. Incremental costs include fuel costs, landing and parking fees, customs and handling charges, per hour accruals for maintenance service plans, passenger catering and ground transportation, crew travel expenses and other trip-related variable costs (including fees for contract crew members and the use of our fractional jet interest). Because our aircraft are used primarily for business travel, incremental costs exclude fixed costs that do not change based on usage, such as pilots’ salaries, aircraft purchase or lease costs, fractional jet interest management fees, home-base hangar costs and certain maintenance fees. |
** | For business-related security reasons, |
|
|
|
|
| |||
49 |
Executive Compensation Tables
Grants of Plan-Based Awards During 20182020
The following table sets forth information concerning grants of equity and performance cash awards made in 20182020 under our stock incentive plan and grants of cash that potentially could have been earned in 20182020 under our AIP.
NAME
| AWARD
| GRANT
|
ESTIMATED FUTURE PAYOUTS |
ESTIMATED FUTURE PAYOUTS |
ALL
| EXERCISE ($/SH)
| GRANT ($)(2)
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
THRESHOLD
| TARGET
| MAXIMUM
| THRESHOLD
| TARGET
| MAXIMUM
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer | AIP | 0 | 1,800,000 | 3,600,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 3/29/18 | 288,660 | 24.25 | 7,000,005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 6/29/18 | 51,146 | (3) | 33.57 | 1,716,971 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Award Type(1) | Grant Date |
Estimated Future Payouts |
|
Estimated Future Payouts | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant of ($)(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) |
| Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer | AIP |
| 0 |
|
| 2,250,000 |
|
| 4,500,000 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/26/20 |
| 359,713 |
|
| 10,000,021 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Saum Sutaria | AIP |
| 0 |
|
| 1,000,000 |
|
| 2,000,000 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/26/20 |
| 143,885 |
|
| 4,000,003 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/26/20 | 0 |
| 35,972 |
| 80,937 |
|
| 1,000,022 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dan Cancelmi | AIP | 0 | 618,000 | 1,236,000 | AIP |
| 0 |
|
| 650,000 |
|
| 1,300,000 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PCASH | 2/28/18 | 255,555 | 766,666 | 1,533,332 | 766,666 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/28/18 | 37,217 | 766,670 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSO | 2/28/18 | 0 | 86,826 | 86,826 | 20.60 | 766,674 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Keith Pitts | AIP | 0 | 925,000 | 1,850,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PCASH | 2/28/18 | 433,333 | 1,300,000 | 2,600,000 | 1,300,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/28/18 | 63,107 | 1,300,004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSO | 2/28/18 | 0 | 147,226 | 147,226 | 20.60 | 1,300,006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. Eric Evans | AIP | 0 | 700,000 | 1,400,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PCASH | 2/28/18 | 277,778 | 833,333 | 1,666,666 | 833,333 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/28/18 | 40,454 | 833,352 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSO | 2/28/18 | 0 | 94,376 | 94,376 | 833,340 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dan Cancelmi | RSU | 2/26/20 |
| 44,965 |
|
| 1,250,027 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/26/20 | 0 |
| 44,965 |
|
| 101,171 |
| 1,250,027 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AIP | 0 | 412,500 | 825,000 | AIP |
| 0 |
|
| 412,500 |
|
| 825,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PCASH | 2/28/18 | 166,667 | 500,000 | 1,000,000 | 500,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/28/18 | 24,272 | 500,003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PSO | 2/28/18 | 0 | 56,626 | 56,626 | 20.60 | 500,008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Audrey Andrews | RSU | 2/26/20 |
| 26,979 |
|
| 750,016 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/26/20 | 0 |
| 26,979 |
|
| 60,703 |
| 750,016 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AIP |
| 0 |
|
| 375,000 |
|
| 750,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paola Arbour | RSU | 2/26/20 |
| 16,188 |
|
| 450,026 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/26/20 | 0 |
| 16,188 |
|
| 36,423 |
| 450,026 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AIP |
| 0 |
|
| 375,000 |
|
| 750,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sandi Karrmann | RSU | 2/26/20 |
| 17,536 |
|
| 487,501 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/26/20 | 0 |
| 17,536 |
|
| 39.456 |
|
| 487,501 |
|
(1) | AIP Awards. Awards designated “AIP” are awards that our NEOs might have earned during |
|
Time-Based Restricted Stock Unit Awards. Awards designated “RSU” reflect time-based restricted stock unit awards under our 2008 Stock Incentive Plan. The RSUs granted to Mr. Rittenmeyer on February |
Performance-Based Restricted Stock |
(2) | We calculate the grant date fair value of restricted stock units based on the NYSE closing price per share of our common stock on the date of grant, which was |
![]() |
|
Executive Compensation Tables
| ||
|
|
|
| ||
The following table sets forth information as of December 31, 20182020 with respect to outstanding equity awards granted to each of the NEOs. Where applicable, the numbers of securities and values in this table and throughout this Proxy Statement have been adjusted for the reverse stock split effective October 11, 2012.
Outstanding Equity Awards at 20182020 FiscalYear-End Table
OPTION AWARDS(1) | STOCK AWARDS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NAME | GRANT DATE | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) EXERCISABLE(1) | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) UNEXERCISABLE | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF SECURITIES UNDERLYING UNEXERCISED UNEARNED OPTIONS | OPTION EXERCISE PRICE ($) | OPTION EXPIRATION DATE | NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED (#) | MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED ($)(2) | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED (#) | EQUITY OF SHARES, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that have not Vested (#) | Market Value of Shares or Units of Stock that have not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#) | Equity of Shares, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer | 9/29/17 | 408,526 | 16.43 | 9/29/22 |
| 2/27/19 |
|
| 125,816 | (3) |
| 5,023,833 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/20 |
|
| 261,610 | (4) |
| 10,446,087 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total values | $ | 15,469,920 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Saum Sutaria |
| 1/31/19 |
|
| 318,327 | (5) |
| 12,710,797 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/27/19 |
|
| 94,362 | (6) |
| 3,767,875 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/29/18 | 180,414 | (3) | 3,092,296 |
| 2/26/20 |
|
| 143,885 | (6) |
| 5,745,329 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6/29/18 | 36,534 | (3) | 626,193 |
| 2/26/20 |
|
| 35,972 | (7) | $ | 1,436,362 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total values | 3,718,489 | $ | 22,224,001 |
| $ | 1,436,362 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dan Cancelmi | 9/28/12 | 37,500 | 25.08 | 9/28/22 |
| 9/28/12 |
|
| 37,500 |
|
| 25.08 |
|
| 9/28/22 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/25/14 | 16,694 | (4) | 286,135 |
| 3/1/17 |
|
| 89,976 |
| 18.99 |
|
| 3/1/27 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/25/14 | 56,713 | (5) | 972,061 |
| 2/28/18 |
|
| 86,826 |
|
| 20.60 |
|
| 2/28/28 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/10/16 | 12,027 | (6) | 206,143 |
| 2/28/18 |
|
| 12,406 | (6) |
| 495,372 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/10/16 | 15,225 | (7) | 260,962 |
| 2/27/19 |
|
| 61,383 |
|
| 28.26 |
|
| 2/27/29 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/1/17 | 89,976 | 18.99 | 3/1/27 |
| 2/27/19 |
|
| 18,087 | (6) |
| 722,214 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/1/17 | 26,916 | (6) | 461,340 |
| 2/26/20 |
|
| 44,965 | (6) | $ | 1,795,452 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/18 | 86,826 | 20.60 | 2/28/28 |
| 2/26/20 |
|
| 44,965 | (7) | $ | 1,795,452 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/18 | 37,217 | (6) | 637,899 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total values | $ | 2,824,540 | $ | 3,013,038 |
| $ | 1,795,452 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Keith Pitts | 8/25/14 | 16,694 | (4) | 286,135 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/25/14 | 56,713 | (5) | 972,061 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/10/16 | 20,393 | (6) | 349,536 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/10/16 | 25,817 | (7) | 442,498 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/1/17 | 152,568 | 18.99 | 3/1/27 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/1/17 | 45,639 | (6) | 782,252 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/18 | 147,226 | 20.60 | 2/28/28 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/18 | 63,107 | (6) | 1,081,654 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total values | $ | 3,914,136 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. Eric Evans | 8/25/14 | 1,333 | (4) | 22,848 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/25/14 | 4,531 | (5) | 77,661 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/10/16 | 2,615 | (6) | 44,821 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/10/16 | 3,311 | (7) | 56,751 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/31/16 | 5,762 | (6) | 98,761 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/31/16 | 7,294 | (7) | 125,017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/1/17 | 97,800 | 18.99 | 3/1/27 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/1/17 | 29,256 | (6) | 501,448 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/18 | 94,376 | 20.60 | 2/28/28 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/18 | 40,454 | (6) | 693,382 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total values | $ | 1,620,689 |
51 |
|
Executive Compensation Tables | ||
OPTION AWARDS(1) | STOCK AWARDS | |||||||||||||||||||||||||||||||||||||||
NAME | GRANT DATE | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) EXERCISABLE(1) | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) UNEXERCISABLE | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF SECURITIES UNDERLYING UNEXERCISED UNEARNED OPTIONS | OPTION EXERCISE PRICE ($) | OPTION EXPIRATION DATE | NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED (#) | MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED ($)(2) | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED (#) | EQUITY OF SHARES, | ||||||||||||||||||||||||||||||
Audrey Andrews | 8/25/14 | 11,129 | (4) | 190,751 | ||||||||||||||||||||||||||||||||||||
8/25/14 | 37,809 | (5) | 648,046 | |||||||||||||||||||||||||||||||||||||
3/10/16 | 7,844 | (6) | 134,446 | |||||||||||||||||||||||||||||||||||||
3/10/16 | 9,930 | (7) | 170,194 | |||||||||||||||||||||||||||||||||||||
3/1/17 | 58,680 | 18.99 | 3/1/27 | |||||||||||||||||||||||||||||||||||||
3/1/17 | 17,554 | (6) | 300,876 | |||||||||||||||||||||||||||||||||||||
2/28/18 | 56,626 | 20.60 | 2/28/28 | |||||||||||||||||||||||||||||||||||||
2/28/18 | 24,272 | (6) | 416,022 | |||||||||||||||||||||||||||||||||||||
Total values | $ | 1,860,335 |
Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that have not Vested (#) | Market Value of Shares or Units of Stock that have not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#) | Equity of Shares, | |||||||||||||||||||||||||||
Audrey Andrews |
| 2/28/18 |
|
| 56,626 |
|
| 20.60 |
|
| 2/28/28 |
| ||||||||||||||||||||||||
| 2/28/18 |
|
| 8,091 | (6) |
| 323,074 |
| ||||||||||||||||||||||||||||
| 2/27/19 |
|
| 40,033 |
|
| 28.26 |
|
| 2/27/29 |
| |||||||||||||||||||||||||
| 2/27/19 |
|
| 11,796 | (6) |
| 471,014 |
| ||||||||||||||||||||||||||||
| 2/26/20 |
|
| 26,979 | (6) | $ | 1,077,271 |
| ||||||||||||||||||||||||||||
| 2/26/20 |
|
| 26,979 | (7) | $ | 1,077,271 |
| ||||||||||||||||||||||||||||
Total values | $ | 1,871,359 |
|
| 1,077,271 | |||||||||||||||||||||||||||||||
Paola Arbour |
| 5/31/18 |
|
| 17,205 |
|
| 35.43 |
|
| 5/31/28 |
| ||||||||||||||||||||||||
| 5/31/18 |
|
| 2,509 | (6) | $ | 100,184 |
| ||||||||||||||||||||||||||||
| 2/27/19 |
|
| 21,351 |
|
| 28.26 |
|
| 2/27/29 |
| |||||||||||||||||||||||||
| 2/27/19 |
|
| 6,292 | (6) | $ | 251,240 |
| ||||||||||||||||||||||||||||
| 16,188 | (6) | $ | 646,387 |
| |||||||||||||||||||||||||||||||
| 16,188 | (7) | $ | 646,387 |
| |||||||||||||||||||||||||||||||
Total values | $ | 997,811 |
| $ | 646,387 | |||||||||||||||||||||||||||||||
Sandi Karrmann(8) |
(1) | All options have a term of 10 |
(2) | Based on the NYSE closing price of |
(3) | These time-based restrict stock units vest quarterly in equal installments ending on |
(4) | These time-based restricted stock units vest quarterly in equal installments ending on December 31, 2022. |
(5) | These time-based restricted stock units vest on |
|
(6) | These time-based restricted stock units vest in equal installments on each of the first three anniversaries of the date of grant. |
(7) |
|
(8) | Ms. Karrmann forfeited her outstanding unvested equity awards in connection with her separation. |
52 | ![]() |
Executive Compensation Tables
Option Exercises and Stock Vested
The following table sets forth certain information regarding stock options exercised and restricted stock unit awards exercised and vested respectively, during 20182020 for the NEOs.
20182020 Option Exercises and Stock Vested Table
OPTION AWARDS |
STOCK AWARDS | |||||||||||||||||||||||||||||||||||||||
NAME |
NUMBER OF SHARES |
VALUE REALIZED |
NUMBER OF SHARES |
VALUE REALIZED | ||||||||||||||||||||||||||||||||||||
| Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting | ||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer |
|
-0- |
|
|
-0- |
|
|
127,580 |
|
|
4,013,183 |
|
| 408,526 |
| 9,628,958 |
| 409,664 |
| 10,251,274 | ||||||||||||||||||||
Saum Sutaria |
| 0 |
| 0 |
| 47,181 |
| 1,261,620 | ||||||||||||||||||||||||||||||||
Dan Cancelmi |
|
-0- |
|
|
-0- |
|
|
46,754 |
|
|
984,163 |
|
| 0 |
| 0 |
| 34,907 |
| 921,516 | ||||||||||||||||||||
Keith Pitts |
|
-0- |
|
|
-0- |
|
|
77,049 |
|
|
1,625,815 |
| ||||||||||||||||||||||||||||
J. Eric Evans |
|
-0- |
|
|
-0- |
|
|
26,475 |
|
|
588,515 |
| ||||||||||||||||||||||||||||
Audrey Andrews |
|
-0- |
|
|
-0- |
|
|
29,190 |
|
|
616,747 |
|
| 58,680 |
| 1,295,842 |
| 22,765 |
| 600,977 | ||||||||||||||||||||
Paola Arbour |
| 0 |
| 0 |
| 5,654 |
| 138,693 | ||||||||||||||||||||||||||||||||
Sandi Karrmann |
| 0 |
| 0 |
| 3,145 |
| 84,097 |
(1) |
|
(2) | Calculated by multiplying the number of shares vested by the market price of common stock on the vesting date. The values shown do not represent proceeds |
|
| ||
The following table sets forth information as of December 31, 20182020 with respect to our SERP, which provides for payments or other benefits in connection with the retirement of the following participating NEOs. Messrs. Rittenmeyer and Evans do not participate in the SERP.
20182020 Pension Benefits Table
NAME |
PLAN NAME |
NUMBER OF YEARS |
PRESENT VALUE BENEFIT |
PAYMENTS DURING LAST FISCAL YEAR ($) | ||||||||||||||||||||||||||||||||||||
Name | Plan Name | Number of Years Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2)(3) | Payments During Last Fiscal Year ($) | ||||||||||||||||||||||||||||||||||||
Dan Cancelmi |
|
SERP |
|
|
20 |
|
|
6,875,826 |
(4) |
|
-0- |
| SERP | 20 | 10,042,700 | (4) | -0- | |||||||||||||||||||||||
Keith Pitts |
|
SERP |
|
|
19 |
|
|
11,909,110 |
|
|
-0- |
| ||||||||||||||||||||||||||||
Audrey Andrews |
|
SERP |
|
|
20 |
|
|
4,219,476 |
(4) |
|
-0- |
| SERP | 20 | 6,602,489 | (4) | -0- |
(1) |
|
(2) | Computed as of December 31, |
(3) | Determined using the benefit formula, age and service credits, and final average earnings as of December 31, |
(4) | The amount shown is the present value of the full accumulated benefit amount under the SERP; however, the amount received under the SERP upon retirement will be |
Supplemental Executive Retirement Plan
Messrs.Mr. Cancelmi and Pitts, and Ms. Andrews are participants in our SERP, which provides certain executives with supplemental retirement benefits in the form of retirement payments for life, generally commencing on the first day of the month following an executive’s retirement from Tenet after reaching age 62, subject to thesix-month delay applicable to key employees under Section 409A of the Internal Revenue
2021 PROXY STATEMENT | 53 |
Executive Compensation Tables
Code of 1986 (Section 409A). At retirement, the annual benefit (paid on a monthly basis) to a participant will be a product of four factors:
and annual cash bonus under our AIP) for any consecutive
10 years preceding retirement | X | Years of credited services | X | Vesting
factor |
| X |
|
|
|
(to offset certain other retirement benefits) |
|
The monthly SERP benefit is reduced in the event of a participant’s early retirement (age 55 with 10 years of service) or termination of employment prior to age 62 by 3.0%3% for each year that employment termination occurs before age 62 (max(subject to a maximum reduction of 21%). Monthly SERP benefits are further reduced by an additional 3% each year if benefits begin to be paid prior to age 62. Unreduced retirement benefits under the SERP are available for participants who terminate on or after age 62.
In the event of a change of control, participants will be deemed fully vestedvest in their SERP benefits without regard to their actual years of service, and their SERP benefits will be calculated based on all of their years of service with the Company (i.e., the partial credit for service prior to enrollment in the SERP will not apply) and no early retirement or payment reduction will apply. SERP benefits payable in the event of a termination of employment within two years following a change of control event described in Section 409A will commence on the first day of the month following the participant’s termination of employment, subject to thesix-month delay applicable to key employees under Section 409A. Otherwise, any SERP benefits payable following a change of control will be paid at normal retirement or early retirement as described above.
|
| ||
None of our NEOs has received credited service under the SERP for years not worked for the Company or its acquired entities, however:
however, the ESP, which was adopted in 2006, would provide each NEO with continued accrual of age and service credit under the SERP during his or her “severance period.” The SERP and ESP have been amended to eliminate these accruals during the severance period for employees that became SERP participants after August 3, 2011, including Mr. Pitts.2011.
In recognition of Mr. Pitts’ significant tenure and experience at Vanguard, and to incentivize and retain Mr. Pitts to join the Company following the acquisition of Vanguard, the Company entered into a letter agreement with Mr. Pitts on June 21, 2013 pursuant to which we agreed that Mr. Pitts would be credited under our SERP with his tenure at Vanguard following his completion of five years of service with the Company. In October 2018, Mr. Pitts met the five-year service requirement agreed upon in 2013, and as a result Mr. Pitts has been credited with 19 years of service under the SERP. In approving the conditional credit for Vanguard service, the HR Committee took into account:
54 | ![]() |
Executive Compensation Tables
|
|
|
During their employment, SERP participants are provided a life insurance and an accidental death benefit for the designated beneficiary of each participant and a disability insurance policy for the benefit of each participant.
Nonqualified Deferred Compensation
The following table sets forth information as of December 31, 20182020 with respect to our deferred compensation plans.
20182020 Nonqualified Deferred Compensation Table
NAME |
PLAN |
EXECUTIVE |
REGISTRANT |
AGGREGATE |
AGGREGATE |
AGGREGATE | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Plan Name(1) | Executive Contributions in Last Fiscal Year ($)(2) | Registrant Contributions in Last Fiscal Year ($)(3) | Aggregate Earnings in Last Fiscal Year ($)(4) | Aggregate Withdrawals/ Distributions ($) | Aggregate ($)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer |
|
2006 DCP |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
| DCP |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- | ||||||||||||||||||||||||||||||
Ron Rittenmeyer |
| ERA |
| -0- |
| 375,000 |
| 12,502 |
| -0- |
| 982,956 | ||||||||||||||||||||||||||||||||||||||||||||||||
| DCP |
| 133,878 |
| 66,939 |
| 1,855 |
| -0- |
| 202,672 | |||||||||||||||||||||||||||||||||||||||||||||||||
|
ERA |
|
|
-0- |
|
|
300,000 |
|
|
5,562 |
|
|
-0- |
|
| 298,382
|
|
| ERA |
| -0- |
| 250,000 |
| 5,889 |
| -0- |
| 509,131 | |||||||||||||||||||||||||||||||
Dan Cancelmi |
|
2006 DCP |
|
|
-0- |
|
|
-0- |
|
| 4,256
|
|
|
-0- |
|
|
221,064 |
|
| DCP |
| -0- |
| -0- |
| 112,053 |
| -0- |
| 397,125 | ||||||||||||||||||||||||||||||
|
ERA |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
|
69,502 |
|
| ERA |
| -0- |
| -0- |
| -0- |
| -0- |
| 69,502 | |||||||||||||||||||||||||||||||
Keith Pitts |
|
2006 DCP |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
|
-0- |
| ||||||||||||||||||||||||||||||||||||||||||
J. Eric Evans |
|
2006 DCP |
|
| 41,340
|
|
| 20,670
|
|
| 6,825
|
|
|
-0- |
|
|
273,928 |
| ||||||||||||||||||||||||||||||||||||||||||
|
ERA |
|
|
-0- |
|
|
140,000 |
|
|
(50,228 |
) |
|
-0- |
|
|
576,163 |
| |||||||||||||||||||||||||||||||||||||||||||
Audrey Andrews |
|
2006 DCP |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
| DCP |
| -0- |
| -0- |
| -0- |
| -0- |
| -0- | ||||||||||||||||||||||||||||||
|
ERA |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
|
55,858 |
|
| ERA |
| -0- |
| -0- |
| -0- |
| -0- |
| 55,858 | |||||||||||||||||||||||||||||||
Paola Arbour |
| DCP |
| -0- |
| 33,581 |
| 16,791 |
| 9,912 |
| 60,285 | ||||||||||||||||||||||||||||||||||||||||||||||||
| ERA |
| -0- |
| 100,000 |
| 4,090 |
| -0- |
| 310,328 | |||||||||||||||||||||||||||||||||||||||||||||||||
Sandi Karrmann |
| DCP |
| 82,576 |
| 22,465 |
| 66,725 |
| -0- |
| 328,946 | ||||||||||||||||||||||||||||||||||||||||||||||||
| ERA |
| -0- |
| 100,000 |
| 3,346 |
| -0- |
| 105,808 |
(1) | More information about our deferred compensation plans appears below. |
(2) | Included in the amounts represented in the |
(3) | Included in the amounts represented in the |
(4) | These amounts are not included in the |
(5) | The fiscalyear-end balance reported for the |
2006 Deferred Compensation Plan
We maintain the Fourth Amended and Restated Tenet 2006 Deferred Compensation Plan (2006 DCP), a Section 409A compliant plan. All of our Named Executive Officers andnon-employee directors are eligible to participate in the 2006 DCP; however, Messrs. Rittenmeyer and Pitts,our Deferred Compensation Plan. Dr. Sutaria, Mr. Cancelmi, Ms. Arbour and Ms. Andrews, do not currently participateKarrmann participated in this plan.plan in 2020.
|
| ||
Employee participantsParticipants are permitted to elect up to sixdefer various types of elective deferral contributionscovered compensation (“Deferral Contributions”) to the 2006 DCP.Deferred Compensation Plan. We make an employer matching contribution to the 2006 DCP equal to 50% of an employee’s base compensation and/or bonus deferrals, in each case, with match deferrals not to exceed 6% of compensation. In addition, we may elect to make a discretionary contribution to the 2006 DCP with respect to any participant. We did not elect to make any discretionary contributions to the 2006 DCP during 2018. All elective deferrals and employer contributions made to the 2006 DCPDeferred Compensation Plan are fully vested when made and are credited to a separate bookkeeping account on behalf of each participant.made.
Amounts deferred under the 2006 DCPDeferred Compensation Plan will generally be distributed, as directed by the participant, upon either termination of service or the occurrence of a specified date. Matching and discretionary contributions are distributed upon termination of service. Distributions may be made in cash or in shares of our common stock and may be made in the form of a lump sum payment or annual installments over aone- to15-year period, as elected by the participant. Any amounts that are payable from the 2006 DCPDeferred Compensation Plan upon a termination of employment are subject to thesix-month delay applicable to key employees under Section 409A.
Participants may request, no more frequently than daily, that any of the following investment crediting rates be applied to amounts credited to their 2006 DCPDeferred Compensation Plan accounts: (i) an annual rate of interest equal to 120% of the applicable federal long-term(10-year) interest rate (which generated an annual return for 20182020 of 3.59%1.66%); (ii) a rate of return based on one or more benchmark mutual funds, which are the same funds as those offered under our 401(k) Plan; or (iii) a rate of return based on the
2021 PROXY STATEMENT | 55 |
Executive Compensation Tables
performance of our common stock, designated as stock units that are payable in shares of our common stock. Amounts that are deemed to be invested in stock units may not be transferred out of stock units and will be paid in shares of our common stock.
Executive Retirement Account
We maintain the Executive Retirement Account (ERA) in order to provide additional deferred compensation benefits to members of the Company’s senior management who are not eligible to participate in the SERP, which includes Mr. Rittenmeyer, Dr. Sutaria, Ms. Arbour and included Mr. Evans prior to his departure.Ms. Karrmann. Mr. Cancelmi and Ms. Andrews began participating in the ERA prior to becoming eligible to participate in the SERP but are no longer actively participating in the ERA. Mr. Evans actively participated in the ERA until his departure from the Company on December 31, 2018. For active participants in the ERA, the Company makes an annual contribution to the ERA on the participants’ behalf in an amount equal to a specified percentage of their respective base salaries. Such contributions accrue earnings credits for so long as the participant is actively participating in the ERA. Participants may request, no more frequently than monthly, that any of the investment crediting rates described above with regard toregarding the 2006 Deferred Compensation Plan be applied to amounts credited to their ERA accounts. Participants are not vested in any portion of their account until reaching age 55 (with five years of service), at which point vesting occurs according to a schedule. Participants become fully vested in their ERA account at age 60 with five years of service or at age 62 regardless of years of service or upon death, disability or a change of control. Upon a qualifying termination, vesting is determined based on years of service and participants are entitled to a retirement benefit equal to the vested balance of their ERA account.
Upon becoming participants in the SERP, Mr. Cancelmi’s and Ms. Andrews’ participation in the ERA and their account balances were frozen and no additional contributions or earnings credits will be made, though the account balances continue to accrue years of vesting service. Upon a qualifying termination of employment, Mr. Cancelmi and Ms. Andrews will receive their vested balances under the ERA and will also be entitled to receive their applicable benefit under the SERP, but such SERP benefit will be reduced (offset)offset by the benefit received under the ERA.
Potential Payments Upon Termination or Change of Control
The information below describes and quantifies certain compensation that would be paid under existing plans and arrangements if an NEO’s employment had terminated on December 31, 2018.2020. These amounts are calculated given the NEO’s compensation and service levels as of that date and, as applicable, are based on the NYSE closing price of $17.14$39.93 per share of our common stock on December 30, 2018.31, 2020. These benefits are in addition to benefits available generally to our salaried employees, such as distributions under our 401(k) Plan, disability benefits and accrued vacation pay. An NEO’s benefits under our 2006 Deferred Compensation Plan will generally be distributed in connection with his or her termination of employment or the occurrence of a specified date. Benefits under the SERP and ERA are generally paid on early or normal retirement.
Due to the number of factors that affect the nature and amount of any benefits paid upon the occurrence of any of the events discussed below, any actual amounts paid may be different. Factors that could affect these amounts include the timing of the event, the Company’s stock price and the executive’s age.
|
| ||
Mr. Rittenmeyer’s Employment Agreement Benefits
Upon certain terminations of Mr. Rittenmeyer’s employment with the Company by the Company without “cause” or by Mr. Rittenmeyer for “good reason” (each as defined in the Employment Agreement), his Employment Agreement provides that Mr. Rittenmeyer will be entitled to receive, subject to his execution of a release of claims in favor of the Company, (1) accrued but unpaid base salary through the date of termination, (2) reimbursement for unreimbursed business expenses incurred through the termination date, (3) payment of any earned but unpaid AIP bonus for the year prior to the year in which the termination of employment occurs, (4)(2) a lump sum payment equal to the amount of base salary that remains payable through the conclusion of the term of the Employment Agreement, (5)which is currently set to expire on December 31, 2022, (3) apro-rata AIP bonus for the year in which the termination of employment occurs, (6)(4) a lump sum payment equal to the AIP bonus Mr. Rittenmeyer would have had the opportunity to earn for the remainder of the term of the Employment Agreement, with such lump sum based on actual performance for the performance period in which Mr. Rittenmeyer’s employment occurs, and target performance for any remaining performance period thereafter during the term of the Employment Agreement, (7)(5) accelerated vesting and settlement of all outstanding unvested restricted stock units, and restricted cash, and (8)(6) continued coverage under the Company’s health and welfare plans through the end of the Term. In addition, upon a termination as a result of death or disability, Mr. Rittenmeyer would be entitled to items (1), (3), and (5) described above. The severance and other post-termination benefits provided to Mr. Rittenmeyer recognize our commitment to atwo-yearhis full employment term, and offer Mr. Rittenmeyer protection through a period of transition, without providing Mr. Rittenmeyer any additional or supplemental termination packages or change in control-related benefits.
56 | ![]() |
Executive Compensation Tables
Pursuant to the Employment Agreement, Mr. Rittenmeyer is bound by perpetual confidentiality andnon-disparagement covenants. The Employment Agreement also containsnon-competition andnon-solicitation covenants that apply for the duration of Mr. Rittenmeyer’s employment with the Company and for one yeartwo years thereafter.
Payments uponTo facilitate a smooth transition and to promote stability in leadership, Mr. Evans’ Departure
As discussed under “CreationRittenmeyer has also agreed to serve in an advisory role to his successor over an additional two-year period following the end of Enterprise-Wide COO Role” on page 31,his employment. Under this advisory arrangement, which will take effect when his term of service ends, Mr. Evans’ last day at the Company was December 31, 2018. In connection with his departure, Mr. Evans wasRittenmeyer will receive an annual retainer of $750,000, will remain eligible to receive benefits consistent with a“non-cause” termination (as defined below) under our ESP. The actual payments and benefits provided to Mr. Evansparticipate in connection with his termination included (i) a severance payment of $3,500,000, payable ratably over 2.5 years following the date of termination, along with continuedCompany’s health and welfare benefits for that period (at a costprograms, and will remain subject to restrictive covenants no less favorable to the Company than those set forth in the Employment Agreement.
Dr. Sutaria’s Employment Agreement Benefits
Upon termination of Dr. Sutaria’s employment with the Company “without cause” or Dr. Sutaria’s resignation with “good reason” (in each case as defined in his employment agreement), his employment agreement provides that Dr. Sutaria will be entitled to receive, subject to his execution of a release of claims in favor of the Company, (1) payment of any earned but unpaid AIP bonus for the year prior to the year in which the termination of employment occurs, (2) two and one-half times the sum of base salary plus target AIP bonus paid over two and one-half year period following the termination date (or, if such termination is prior to the second anniversary of a “change of control” (as defined in the Company’s Executive Severance Plan), three times the sum of base salary plus target AIP bonus paid in single lump-sum), (3) accelerated vesting of all outstanding unvested restricted stock units and his $5,000,000 restricted cash award (which was a make-whole award intended to replace the value forfeited and forgone earnings from his previous employer and will otherwise vest and be paid on January 6, 2022), and (4) continued coverage under the Company’s health and welfare plans during the two and one-half year period following the termination date (or three-year period if such termination is prior to the second anniversary of a change of control). Upon Dr. Sutaria’s termination due to death or disability, he is entitled to items (1) and (3) described above as well as a pro-rata AIP bonus for the year in which the termination of employment occurs.
In the event Dr. Sutaria elects not to exceed $41,450) andrenew his employment agreement after its three-year term, Dr. Sutaria is entitled to receive, subject to his execution of aone-time payment release of an additional $45,000claims in lieufavor of continued ERA participation, and(ii) pro-rata vesting of his outstanding time-based RSUs andthe Company, continued vesting of aall outstanding unvested restricted stock units during the two and pro-rataone-half portionyear period following expiration of the term as if Dr. Sutaria had remained employed by Company.
Pursuant to the terms of his performance-basedemployment agreement, Dr. Sutaria is bound by perpetual confidentiality and non-disparagement covenants. His employment agreement also contains employee non-solicitation covenants that apply for the duration of Dr. Sutaria’s employment with the Company and for two years thereafter, and a noncompetition covenant that applies with respect to two of the Company’s primary competitors for the duration of Dr. Sutaria’s employment with the Company and for one year thereafter
Payments upon Ms. Karrmann’s Departure
Ms. Karrmann separated from the Company on October 24, 2020. In connection with her departure, Ms. Karrmann did not receive any payments or benefits. All of her outstanding equity awards (which will vest, if at all, based on actual performance atthat were unvested were forfeited upon her departure, as was $201,230 of her unvested balance under the end of the performance period).ERA.
Death, Disability and Retirement
Upon the death of an NEO, hisretirement on or her survivors would receive payments from our insurance carriers under life insurance and accidental death and dismemberment policies. For SERP participants, we provide coverage under each policy in an amount up to two times an NEO’s salary, not to exceed $550,000 per policy (i.e., we pay up to $1,100,000), with excess coverage elected by the executive at his or her expense. As of December 31, 2018, the survivors of the NEOs would receive the following lump sum cash payments: Mr. Cancelmi, $3,505,000; Mr. Pitts, $2,575,000; and Ms. Andrews, $3,851,000. In addition, under the SERP, the surviving spouse ofafter age 62, a deceased NEO would receive monthly payments equal to 50% of the retirement benefits that would have been payable to the executive.
Upon total and permanent disability, an NEO would receive a cash payment from our insurance carrier, payable on a monthly basis until the executive reaches age 65, not to exceed $25,000 per month.
Upon retirement, an NEO would receive apro-rata bonus earned under the AIP for the year that includes the date of retirement.
Other than Mr. Rittenmeyer’s and Dr. Sutaria’s awards as discussed above, pursuant to the terms of the award agreements under the 2008 and 2019 Stock Incentive Plan,Plans, if an NEO dies, becomes totally and permanently disabled or, in the case of stock options, retires, unvested options and restricted stock units will vest in full. If the options or restricted stock units are subject to performance criteria, however, then for awards granted prior to 2020, vesting is subject to the satisfaction of such performance criteria, and, if termination occurs prior to the end of the performance period, the awards will be subject topro-rata vesting and settlement if and when the performance criteria are satisfied, based on the period of time employed during the performance period. For awards granted on or after 2020, such awards vest immediately on a pro-rata basis based on the performance achieved for completed performance measurement periods and at target level for any incomplete performance measurement periods.
2021 PROXY STATEMENT | 57 |
Executive Compensation Tables
The table set forth below reflects the estimated aggregate amount of payments and other benefits each NEO other than Mr. EvansMs. Karrmann would receivehave received upon termination of employment due to death, disability or retirement assuming thatif such terminations occurred as of December 31, 2018.2020. As of December 31, 2018, Messrs.2020, Mr. Cancelmi and Pitts areis considered retirement-eligible for purposes of the SERP or accelerated equity vesting.
|
| ||
20182020 Death, Disability and Retirement Table
NAME |
TERMINATION |
SERP/ ($)(1) |
ACCELERATED |
PERFORMANCE |
TOTAL ($) | ||||||||||||||||||||
Ron Rittenmeyer(3) |
Death |
|
298,382 |
|
|
3,718,437 |
|
|
4,375,000 |
|
|
8,391,820 |
| ||||||||||||
Disability |
|
298,382 |
|
|
3,718,437 |
|
|
4,375,000 |
|
|
8,391,820 |
| |||||||||||||
Retirement |
|
298,382 |
|
|
-0- |
|
|
-0- |
|
|
298,382 |
| |||||||||||||
Dan Cancelmi |
Death |
|
3,779,069 |
|
|
2,618,409 |
|
|
766,667 |
|
|
7,164,145 |
| ||||||||||||
Disability |
|
5,762,111 |
|
|
2,618,409 |
|
|
766,667 |
|
|
9,147,187 |
| |||||||||||||
Retirement |
|
6,668,763 |
|
|
-0- |
|
|
-0- |
|
|
6,668,763 |
| |||||||||||||
Keith Pitts |
Death |
|
5,597,521 |
|
|
3,564,623 |
|
|
1,300,000 |
|
|
10,462,144 |
| ||||||||||||
Disability |
|
9,886,597 |
|
|
3,564,623 |
|
|
1,300,000 |
|
|
14,751,220 |
| |||||||||||||
Retirement |
|
11,923,277 |
|
|
-0- |
|
|
-0- |
|
|
11,923,277 |
| |||||||||||||
Audrey Andrews |
Death |
|
2,756,899 |
|
|
1,725,912 |
|
|
500,000 |
|
|
4,982,812 |
| ||||||||||||
Disability |
|
3,560,555 |
|
|
1,725,912 |
|
|
500,000 |
|
|
5,786,467 |
| |||||||||||||
Retirement |
|
-0- |
|
|
-0- |
|
|
-0- |
|
|
-0- |
|
Name | Termination Scenario | SERP/ERA ($)(1) | Accelerated Equity Awards ($)(2) | Performance Cash ($) | Total ($) | |||||||||||||
Ron Rittenmeyer | Death |
| 982,956 |
|
| 15,469,920 |
|
| -0- |
|
| 16,452,876 |
| |||||
Disability |
| 982,956 |
|
| 15,469,920 |
|
| -0- |
|
| 16,452,876 |
| ||||||
Retirement |
| 982,956 |
|
| -0- |
|
| -0- |
|
| 982,956 |
| ||||||
Saum Sutaria | Death |
| -0- |
|
| 23,660,362 |
|
| 5,000,000 |
|
| 28,660,362 |
| |||||
Disability |
| -0- |
|
| 23,660,362 |
|
| 5,000,000 |
|
| 28,660,362 |
| ||||||
Retirement |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
| ||||||
Dan Cancelmi | Death |
| 4,658,740 |
|
| 7,203,177 |
|
| 1,277,777 |
|
| 13,139,694 |
| |||||
Disability |
| 8,702,293 |
|
| 7,203,177 |
|
| 1,277,777 |
|
| 17,183,247 |
| ||||||
Retirement |
| 9,489,904 |
|
| -0- |
|
| -0- |
|
| 9,489,904 |
| ||||||
Audrey Andrews | Death |
| 3,428,656 |
|
| 4,508,001 |
|
| 833,333 |
|
| 8,769,990 |
| |||||
Disability |
| 5,766,277 |
|
| 4,508,001 |
|
| 833,333 |
|
| 11,107,611 |
| ||||||
Retirement |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
| ||||||
Paola Arbour | Death |
| -0- |
|
| 1,970,786 |
|
| 444,445 |
|
| 2,415,231 |
| |||||
Disability |
| -0- |
|
| 1,970,786 |
|
| 444,445 |
|
| 2,415,231 |
| ||||||
Retirement |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
|
(1) | Represents the present value of the benefit payable under the SERP in each of the named scenarios based on each NEO’s years of service to the Company as of the date of death, disability or retirement and using the executive’s highest average monthly earnings (base salary and annual cash bonus under our AIP) over a60-consecutive month period during the final 120 months of employment. Further, in the case of death and disability, the prior service credit percentage described under “Supplemental Executive Retirement Plan” on page |
(2) | Unvested performance-based restricted stock unit awards and performance cash LTI awards are reported as vesting at target levels. Amounts reflected are based on the NYSE closing price of |
|
Non-Cause Termination/No Change of Control
Subject to the terms of the ESP and applicable equity plans and award agreements, and with respect to the ESP, further subject to signing a severance agreement containing restrictive covenants as well as a release, each ofMr. Cancelmi, Ms. Andrews and Messrs. Cancelmi and Pitts isMs. Arbour are entitled to the following severance payments and other benefits if his or her employment is terminated without cause, or by the executive for good reason (a“non-cause” termination), outside the context of a change of control of the Company:
Severance pay (base salary plus target bonus) during the “severance period” which is two and a half years for Messrs.Mr. Cancelmi and Pitts, and one and a half years for Ms. Andrews;Andrews and Ms. Arbour.
Lump sumpro-rata bonus earned under the AIP for the year that includes the date of termination;termination.
Continued coverage during the severance period under medical, dental, vision, life and long-term care benefit programs, provided that the executive continues to pay his or her portion of the cost of such coverages as in effect upon termination, and reduced to the extent that the Named Executive OfficerNEO receives comparable benefits through other employment during the severance period;period.
Outplacement services not to exceed $25,000;$25,000.
Pursuant to the terms of the ESP, the NEOs will forfeit anynon-vested outstanding equity awards at termination to the extent the underlying equity award agreements do not otherwise provide for acceleration of vesting. Time-vested restricted stock unit awards and stock options vest upon anon-cause termination. Likewise, subject to satisfaction of the performance criteria, performance-based restricted stock unit awards and performance-based stock options vest upon anon-cause termination (with proration for any performance period not completed as of termination with respect to performance-based restricted stock unit awards);
58 | ![]() |
Executive Compensation Tables
awards and stock options vest upon a non-cause termination. Likewise, subject to satisfaction of the performance criteria, performance-based restricted stock unit awards and performance-based stock options vest upon a non-cause termination (with proration for any performance period not completed as of termination with respect to performance-based restricted stock unit awards). |
Performance cash awards are subject to the same treatment as performance-based restricted stock unit awards with respect to any performance period not completed as of termination (any(i.e., any previously “banked” amounts shall also be payable); and.
|
| ||
Age and service credit under the SERP during the severance period, for employees who became participants in the SERP prior to August 3, 2011.
The table set forth below reflects the estimated aggregate amount of payments and other benefits (not including reimbursable legal fees, if any, to obtain benefits under the ESP and certain reimbursable excise taxes, if any, incurred by the participant under Section 409A) each NEO would receive other than Mr. EvansMs. Karrmann upon anon-cause termination unrelated to any change of control assuming that terminations occurred as of December 31, 2018.2020.
NAME |
CASH |
HEALTH |
OUTPLACEMENT |
ADDITIONAL |
PERFORMANCE |
ACCELERATED |
EXCISE TAX |
TOTAL | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Cash Severance ($)(1) | Health and Welfare Benefits ($)(2) | Outplacement Services ($) | Additional SERP/ ERA Benefit ($)(3) | Performance Cash ($) | Accelerated Equity Awards ($)(4) | Excise Tax Reimbursements ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer |
|
3,500,000 |
|
|
12,323 |
|
|
-0- |
|
|
-0- |
|
|
4,375,000 |
|
|
3,718,437 |
|
|
Not a benefit |
|
11,605,760 |
| 7,500,000 |
|
| 29,013 |
|
| -0- |
|
| -0- |
|
| -0- |
|
| 15,469,920 |
|
| Not a benefit |
|
| 22,998,933 |
| ||||||||||||||||
Saum Sutaria |
| 5,000,000 |
|
| 51,101 |
|
| -0- |
|
| -0- |
|
| 5,000,000 |
|
| 23,660,362 |
|
| 33,711,463 |
| |||||||||||||||||||||||||||||||||||||||||
Dan Cancelmi |
|
3,090,000 |
|
|
40,910 |
|
|
25,000 |
|
|
1,146,036 |
|
|
766,667 |
|
|
2,618,409 |
|
7,687,021 |
| 3,250,000 |
|
| 49,862 |
|
| 25,000 |
|
| 1,581,689 |
|
| 1,277,777 |
|
| 7,203,177 |
|
| 13,387,505 |
| ||||||||||||||||||||||
Keith Pitts |
|
4,625,000 |
|
|
27,978 |
|
|
25,000 |
|
|
-0- |
|
|
1,300,002 |
|
|
3,564,623 |
|
9,542,603 | |||||||||||||||||||||||||||||||||||||||||||
Audrey Andrews |
|
1,443,750 |
|
|
24,842 |
|
|
25,000 |
|
|
-0- |
|
|
500,000 |
|
|
1,725,912 |
|
|
Not a benefit |
|
3,719,505 |
| 1,443,750 |
|
| 29,706 |
|
| 25,000 |
|
| 1,419,013 |
|
| 833,333 |
|
| 4,508,001 |
|
| 8,258,803 |
| |||||||||||||||||||
Paola Arbour |
| 1,312,500 |
|
| 20,022 |
|
| 25,000 |
|
| -0- |
|
| 444,445 |
|
| 1,970,786 |
|
| Not a benefit |
|
| 3,772,753 |
|
(1) | Severance is paid on abi-weekly basis at termination, subject to certain amounts being delayed for asix-month period in compliance with Section 409A. Severance pay will be reduced for any SERP benefits that become payable during the severance period. For employees who became participants in the SERP prior to August 3, 2011, at the end of the severance period, the NEO’s SERP benefits will be adjusted to reflect the additional age and service credit provided under the ESP during the severance period. The NEO’s severance pay will not be considered in calculating his or her final average earnings under the SERP. |
(2) | Represents the aggregate incremental cost of providing medical, dental, life insurance, and accidental death and dismemberment benefits to the executive at active employee rates. “Incremental cost” is comprised of our contributions to the premium cost for these benefits and our cost of paying benefits under our self-funded plans. |
(3) | Represents the present value of the additional benefit payable under the SERP |
(4) | Unvested performance-based restricted stock unit and performance cash LTI awards are reported as vesting at target |
Non-Cause Termination/Change of Control
Subject to the terms of the ESP and applicable equity plans and award agreements, each of the NEOs (other than Mr. Rittenmeyer and Dr. Sutaria, whose separation benefits are described above) is entitled to the following severance payments and other benefits if his or her employment is terminated without cause, or by the executive for good reason (a“non-cause” termination), during the period beginning six months prior to a change of control and ending 24 months following the occurrence of a change in control (the “protection period”):
The same benefits to which the executive would be entitled with respect to anon-cause termination outside the context of a change of control, provided that the “severance period” is three years for Messrs.Mr. Cancelmi and Pitts, and two years for Ms. Andrews.Andrews and Ms. Arbour. If the termination occurs within the six months prior to a change of control that results from the liquidation or dissolution of the Company, however, then the severance period applicable tonon-cause terminations outside the context of a change of control will apply; andapply.
Equity awards under our stock incentive plans that have not vested and are not assumed or exchanged for substitute equity by the successor to the Company will accelerate and become vested upon a change of control irrespective of whether the Named Executive OfficerNEO terminates employment. Equity awards under our stock incentive plans that have not vested and are assumed or substituted by the successor to the Company will accelerate and become vested upon anon-cause termination in connection with a change of control; performance-based restricted stock units and performance-based stock options will vest subject to the satisfaction of performance criteria (with proration for any performance period not completed as of termination).
2021 PROXY STATEMENT | 59 |
Executive Compensation Tables
In 2012, the Company amended the ESP to eliminate all reimbursements andgross-ups gross ups with respect to golden parachute excise taxes. Pursuant to the ESP, if any payment or other benefit to which an executive is entitled under the ESP or otherwise will become subject to the
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excise tax imposed by Section 4999 of the Internal Revenue Code, then the executive’s payments and benefits shall be either (i) provided to the executive in full, or (ii) provided to the executive as to such lesser extent which would result in no portion of such payments and benefits being subject to the excise tax, whichever of the amounts results in the receipt by the executive, on anafter-tax basis, of the greatest amount of benefits.
The table set forth below reflects the estimated aggregate amount of payments and other benefits (not including reimbursable legal fees, if any, to obtain benefits under the ESP and certain reimbursable excise taxes, if any, incurred by the participant under Section 409A) each NEO other than Mr. EvansMs. Karrmann would receive upon anon-cause termination related to any change of control assuming that terminations occurred as of December 31, 2018.2020.
NAME |
CASH SEVERANCE ($)(1) |
HEALTH AND WELFARE BENEFITS ($)(2) |
OUTPLACEMENT SERVICES ($) |
ADDITIONAL SERP/ERA BENEFIT ($)(3) |
PERFORMANCE CASH |
ACCELERATED EQUITY |
ESP AVOIDANCE |
EXCISE TAX REIMBURSE- MENTS |
TOTAL ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Cash Severance ($)(1) | Health and Welfare Benefits ($)(2) | Outplacement Services ($) | Additional SERP/ Benefit ($)(3) | Performance Cash | Accelerated Equity | Excise Tax Reimbursements | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer |
|
3,500,000 |
|
|
12,323 |
|
|
-0- |
|
|
-0- |
|
|
4,375,000 |
|
|
3,718,437 |
|
|
-0- |
|
|
Not a benefit |
|
11,605,760 |
| 7,500,000 |
|
| 29,013 |
|
| -0- |
|
| -0- |
|
| -0- |
|
| 15,469,920 |
|
| Not a benefit |
|
| 22,998,933 |
| |||||||||||||||||
Saum Sutaria |
| 6,000,000 |
|
| 61,322 |
|
| -0- |
|
| -0- |
|
| 5,000,000 |
|
| 23,660,362 |
|
| 34,721,684 |
| |||||||||||||||||||||||||||||||||||||||||||||
Dan Cancelmi |
|
3,708,000 |
|
|
49,091 |
|
|
25,000 |
|
|
3,054,721 |
|
|
1,533,333 |
|
|
2,824,535 |
|
|
(1,220,743 |
) |
9,973,937 |
| 3,900,000 |
|
| 59,835 |
|
| 25,000 |
|
| 2,173,999 |
|
| 1,533,333 |
|
| 7,203,177 |
|
| 14,289,451 |
| |||||||||||||||||||||||
Keith Pitts |
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5,550,000 |
|
|
33,574 |
|
|
25,000 |
|
|
768,839 |
|
|
2,600,006 |
|
|
3,914,142 |
|
|
-0- |
|
12,891,560 | ||||||||||||||||||||||||||||||||||||||||||||
Audrey Andrews |
|
1,925,000 |
|
|
33,123 |
|
|
25,000 |
|
|
5,828,317 |
|
|
1,000,000 |
|
|
1,860,341 |
|
|
-0- |
|
|
Not a benefit |
|
10,671,781 |
| 1,925,000 |
|
| 39,608 |
|
| 25,000 |
|
| 4,913,214 |
|
| 1,000,000 |
|
| 4,508,001 |
|
| 12,410,823 |
| ||||||||||||||||||||
Paola Arbour |
| 1,750,000 |
|
| 26,697 |
|
| 25,000 |
|
| -0- |
|
| 533,334 |
|
| 1,970,786 |
|
| Not a benefit |
|
| 4,305,817 |
|
(1) | In the case of anon-cause termination that occurs during the six months preceding a change of control, severance pay will be paid in the same manner as a termination that is not related to a change in control. In the case of anon-cause termination that occurs within two years following a change of control, severance pay under the ESP will generally be made to the NEO in a lump sum at termination, subject to anysix-month delay required by Section 409A. |
(2) | Represents the aggregate incremental cost of providing medical, dental, life insurance, and accidental death and dismemberment benefits to the executive at active employee rates. “Incremental cost” is comprised of our contributions to the premium cost for these benefits and our cost of paying benefits under our self-funded plans. |
(3) | Represents the present value of the SERP benefit payable in the event of anon-cause termination related to a change of control of the Company in excess of the present value of the SERP benefit payable in the event of anon-cause termination unrelated to a change in control, which is presented in the “Additional SERP/ERA Benefit” column of the table on page 58. The additional SERP benefit amounts would include age and service credits for the NEOs that would accrue during their applicable severance periods, for employees who became participants in the SERP prior to August 3, 2011, and would be based on: (i) the deemed full vesting of the NEOs in their SERP benefits without regard to their actual years of service; (ii) all of their years of service to the Company and using the executive’s highest average monthly earnings (base salary and annual cash bonus under our AIP) over a60-month period of the final 120 months of employment; and (iii) the immediate commencement of SERP benefits without any reduction in benefits for early commencement. |
In the event of a change of control of the Company without termination of employment, the additional retirement benefits payable under the SERP to the NEOs would be as follows: Mr. Cancelmi, $3,855,466; Mr. Pitts, $783,006; and Ms. Andrews, $3,079,028. These amounts have been calculated as described above in this footnote, but without the accrual of additional age and service credits during the severance period. These amounts differ from the additional SERP benefits payable by reason of a termination following a change of control because in anon-termination scenario (i) the benefit cutback provisions of the ESP for the avoidance of golden parachute excise taxes are not applicable and (ii) benefits under the SERP do not commence until retirement. These amounts do not include those benefits shown in the 2018 Pension Benefits Table on page 53 and those benefits would also be payable upon retirement.
Present value calculations use the assumptions discussed in footnote 3 to the 2018 Pension Benefits Table on page 53.
In the event of a change of control of the Company without termination of employment, the additional retirement benefits payable under the SERP to the NEOs would be as follows: Mr. Cancelmi, $3,011,936; and Ms. Andrews, $3,775,590. These amounts have been calculated as described above in this footnote, but without the accrual of additional age and service credits during the severance period. These amounts differ from the additional SERP benefits payable by reason of a termination following a change of control because in a non-termination scenario (i) the benefit cutback provisions of the ESP for the avoidance of golden parachute excise taxes are not applicable and (ii) benefits under the SERP do not commence until retirement. These amounts do not include those benefits shown in the 2020 Pension Benefits Table on page 53 and those benefits would also be payable upon retirement. |
Present value calculations use the assumptions discussed in footnote 3 to the 2020 Pension Benefits Table on page 53. |
(4) | Amounts reflected have been calculated using the NYSE closing price of |
(5) | Represents a reduction in otherwise payable ESP benefits in an amount sufficient to avoid an application of the golden parachute excise tax. |
Definitions:
“Cause” under our deferred compensation plans, ESP, SERP, AIP and stock incentive plans is defined as (a) when used in connection with a qualifying termination triggering benefits outside the context of a change of control, an executive’s: (i) dishonesty, (ii) fraud, (iii) willful misconduct, (iv) breach of fiduciary duty, (v) conflict of interest, (vi) commission of a felony, (vii) material failure or refusal to perform his job duties in accordance with Company policies, (viii) a material violation of Company policy that causes harm to the Company or an affiliate, or (ix) other wrongful conduct of a similar nature and degree; (b) when used in connection with a qualifying termination triggering benefits in the context of a change of control: (i) any intentional act or misconduct materially injurious to the Company or any affiliate, financial or otherwise, including, but not limited to, misappropriation or fraud, embezzlement or conversion by the executive of the Company’s or any affiliate’s
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property in connection with the executive’s employment with the Company or an affiliate, (ii) any willful act or omission constituting a material breach by the executive of a fiduciary duty, (iii) a final,non-appealable order in a proceeding before a court of competent jurisdiction or a final order in an administrative proceeding finding that the executive committed any willful misconduct or criminal activity (excluding minor traffic violations or other minor offenses), which commission is materially inimical to the interests of the Company or any affiliate, whether for his personal benefit or in connection with his duties for the Company or an affiliate, (iv) the conviction (or plea of no contest) of the executive for any felony, (v) material failure or refusal to perform his job duties in
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Executive Compensation Tables
accordance with Company policies (other than resulting from the executive’s disability as defined by Company policies), or (vi) a material violation of Company policy that causes material harm to the Company or an affiliate.
A “change of control” under our deferred compensation plans, ESP, SERP, AIP and stock incentive plans will have occurred if: (i) any one person, or more than one person acting as a group, acquires, directly or indirectly, whether in a single transaction or a series of related transactions, more than 50% of the total fair market value or voting power of our stock (including stock held prior to such acquisition); (ii) any one person, or more than one person acting as a group, acquires, directly or indirectly, during a12-month period ending on the date of the most recent acquisition by such person or persons, 35% or more of the total voting power of our stock (not considering stock owned by such person or group prior to such12-month period); (iii) a majority of the members of the Board are replaced during any12-month period by directors whose appointment or election is not endorsed by a majority of our Board prior to such election; (iv) a sale, exchange, lease, disposition or other transfer of all or substantially all of the assets of the Company; or (v) there occurs a liquidation or dissolution of the Company that is approved by a majority of the Company’s shareholders. This definition of change of control complies with Section 409A except for item (v) (i.e., items (i), (ii), (iii) and (iv) are described in Section 409A).
“Good Reason” under our ESP, SERP, AIP and stock incentive plans is defined as: (a) in the case of a voluntary termination of employment by an executive preceding or more than two years following a change of control: (i) a material diminution in the executive’s job authority, responsibilities or duties, (ii) a material diminution of the executive’s base salary, (iii) an involuntary and material change in the geographic location of the workplace at which the executive must perform services, or (iv) any other action or inaction that constitutes a material breach by the employer or a successor of the agreement under which the executive provides services; (b) in the case of a voluntary termination of employment by an executive upon or within two years following a change of control: (i) a material downward change in job functions, duties, or responsibilities which reduces the rank or position of the executive, (ii) a reduction in the executive’s annual base salary, (iii) a reduction in the aggregate value of the executive’s annual base salary and AIP target bonus opportunity, (iv) a material reduction in the executive’s retirement or supplemental retirement benefits, (v) an involuntary and material change in the geographic location of the workplace at which the executive must perform services, or (vi) any other action or inaction that constitutes a material breach by the employer or a successor of the agreement under which the executive provides services.
The 20182020 annual total compensation of the median compensated of all our employees, other than Ron Rittenmeyer, our Executive Chairman and CEO, was $54,064;$54,501; Mr. Rittenmeyer’s 20182020 annual total compensation was $14,984,022;$16,675,529; and the ratio of these amounts was approximately277-to-1. 1 to 306.
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules. For purposes of calculating the amount of compensation paid to our median employee during 2020, we identified this median compensated employee using total gross wages (i.e., all amounts paid before any taxes, deductions or other payroll withholding) earned during calendar year 2019 for all employees who were employed for all of 2020, and we used the annualized value of total gross wages earned during calendar year 2020 for all employees who were hired during 2020 and were employed as of December 31, 2020, but did not serve a full year with the Company (including employees who were furloughed for a portion of 2020). We identified our employee population as of December 31, 2020, based on our payroll and employment records. As permitted by SEC rules, we excluded approximately 1,700 employees located in the Philippines, who in the aggregate represented approximately 1.5% of our approximately 110,000 employees as of December 31, 2020.
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules. For purposes of calculating the amount of compensation paid to our median employee during 2018, we used the same median compensated employee that we identified in 2017 after we concluded that there had been no change in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure. In 2017, we identified this median compensated employee using total gross wages (i.e., all amounts paid before any taxes, deductions or other payroll withholding) earned during calendar year 2017 for all employees who were employed for all of 2017, and we used the annualized value of total gross wages earned during calendar year 2017 for all employees who were hired during 2017 and were employed as of December 31, 2017, but did not serve a full year with the Company. We identified our employee population as of December 31, 2017 based on our payroll and employment records. As permitted by SEC rules, we excluded 1,914 employees located in the United Kingdom, who in the aggregate represented approximately 1.5% of our 125,820 employees as of December 31, 2017.
| 61 |
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Securities Authorized for Issuance
Under Equity Compensation Plans
We currently grant stock options and restricted stock units under our 20082019 Stock Incentive Plan, as amended.Plan. All options were granted with an exercise price equal to the NYSE closing price per share of our common stock on the date of grant. Most of our restricted stock unit or stock option grants to senior officers vest over a three-year period (either ratable or cliff-vest), although certain awards may contain different vesting periods. Restricted stock units granted to Mr. Rittenmeyer vest in equal quarterly installments as provided in his Employment Agreement. Options expire within a period of no more than 10 years from the date of grant.
The following table summarizes certain information with respect to our equity compensation plans pursuant to which rights remain outstanding as of December 31, 2018.2020.
Equity Compensation Plan Information
PLAN CATEGORY | NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS (A) | WEIGHTED- AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS (B)(1) |
NUMBER OF REMAINING FUTURE ISSUANCE UNDER EQUITY SECURITIES | |||||||||||||||||||
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (A) | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (B)(1) | Number of (C) | |||||||||||||||||||
Equity compensation plans approved by security holders |
| 2,262,743 |
| $ | 19.12 |
| 7,363,038(2) |
| 912,531 | (2) | $ | 22.51 |
|
| 8,798,750 | (3) | ||||||
Equity compensation plans not approved by security holders(3) |
| 64,265 |
|
| N/A |
| -0- | |||||||||||||||
Equity compensation plans not approved by security holders(4) |
| 57,693 |
|
| -0- |
|
| -0- |
| |||||||||||||
Total |
| 2,327,008 |
| $ | 19.12 |
| 7,363,038 |
| 970,224 |
| $ | 22.51 |
|
| 8,798,750 |
|
(1) | The weighted average exercise price does not |
(2) | Includes |
All shares available under the |
(3) | Includes shares subject to outstanding stock options and time-based restricted stock units and the number of shares subject to the maximum amount of outstanding performance-based stock units. |
(4) | Consists of deferred compensation invested in |
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Proposal 2-Advisory Vote to Approve Executive Compensation
We are asking shareholders to vote on an advisory resolution to approve the Company’s executive compensation as reported in this Proxy Statement. As described in the “Compensation Discussion and Analysis” section of this Proxy Statement beginning on page 26,30, we have designed our executive compensation program to align the interests of our NEOs with shareholders. Our compensation programs are designed to reward our NEOs for the achievement of short-term and long-term performance goals.
We urge you to read the “Compensation Discussion and Analysis,” which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the 20182020 Summary Compensation Table and other related compensation tables and narrative, appearing on pages 4748 through 60,61, which provide detailed information on the compensation of our NEOs. The HR Committee and the Board believe that the policies and procedures articulated in “Compensation Discussion and Analysis” are effective in achieving the goals of our executive compensation program and that the compensation of our NEOs reported in this Proxy Statement reflects and supports these compensation policies and procedures.
In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (Exchange Act), we are asking shareholders to vote in favor of the following advisory resolution at the Annual Meeting:
“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Named Executive Officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 20192021 Annual Meeting of Shareholders.”
This resolution, commonly referred to as a“say-on-pay” resolution, will be considered to have been approved by shareholders on an advisory basis if the votes cast for approval exceed the votes cast against approval. This advisory resolution is not binding on the Board. Althoughnon-binding, the Board and the HR Committee will review and consider the voting results when making future decisions regarding our executive compensation program. Unless the Board modifies its policy of holding an advisorysay-on-pay vote on an annual basis, the next advisorysay-on-pay vote will be held at our 20202022 Annual Meeting of Shareholders.
Unless marked to the contrary, proxies will be voted “FOR” the approval of the advisory resolution to approve the Company’s executive compensation.
The Board recommends that
shareholdersyou vote “FOR”“FOR” the approval of the advisory resolution to approve executive compensation.
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Executive Summary of Proposal and Selected Plan Information
Introduction
Our Board, on the recommendation of the HR Committee, is asking shareholders to approve the Tenet Healthcare 2019 Stock Incentive Plan (the Plan) to assist us in attracting and retaining talented employees andnon-employee directors who are expected to contribute to the Company’s success and to achieve financial and strategic objectives that will benefit the Company and its shareholders through the grant of awards under the Plan, including equity-based awards that will enable them to share in the ownership of the Company.
On March 18, 2019, the HR Committee approved the Plan, subject to the approval of our shareholders. The Plan will supersede the Sixth Amended and Restated Tenet Healthcare 2008 Stock Incentive Plan (the 2008 Plan), which is the only plan under which equity-based compensation may currently be awarded to our employees andnon-employee directors. Awards currently outstanding under the 2008 Plan will remain outstanding under the 2008 Plan in accordance with its terms.
If the Plan is approved by our shareholders at the Annual Meeting, the Plan will become effective on May 2, 2019 (the Effective Date), and no further awards will be made under the 2008 Plan. If our shareholders approve the Plan, we intend to file, pursuant to the Securities Act of 1933, a registration statement on FormS-8 to register the shares available for delivery under the Plan. If our shareholders do not approve the Plan, the 2008 Plan will remain in effect in its current form, subject to its expiration date. However, there will be insufficient shares available under the 2008 Plan to make annual awards and to provide grants to new hires in the coming years. In this event, the HR Committee would be required to revise its compensation philosophy and formulate other cash-based programs to attract, retain, and compensate key employees andnon-employee directors.
Approval of this proposal requires approval by holders of a majority of the shares represented in person or by proxy and entitled to vote at the Annual Meeting. Abstentions will be treated as votes against this proposal. If you are a street name stockholder and you do not provide your brokerage firm with voting instructions, your brokerage firm may not cast votes with respect to the shares that you beneficially own. These brokernon-votes will have no effect on the vote.
Proposed Share Reserve
The Plan reserves for issuance an aggregate of 4,000,000 shares of our common stockplusthe number of shares of our common stock that remain available for awards under the 2008 Plan on the Effective Dateplusany shares of our common stock subject to outstanding awards under the 2008 Plan on the Effective Date that are forfeited, are cancelled, expire, or are settled in cash.
If any award granted under the Plan is forfeited, cancelled or expires, or if an award is settled in cash, shares of our common stock subject to such award will be made available for future grant under the Plan. In addition, if shares issuable upon vesting or settlement of an award (other than an award of options or stock appreciation rights (SARS)) granted under the Plan or under the 2008 Plan are tendered to or withheld by the company in payment of taxes required to be withheld in respect of such award, such shares will be made available for future grants under the Plan.
Fungible Share Counting
Any shares that are subject to awards of options or SARs shall be counted against the proposed share reserve as one (1) share for every one (1) share issued and any shares that are subject to awards other than options or SARs shall be counted against this limit as 1.65 shares for every one (1) share issued.
Similarly, any shares that again become available for awards under the Plan shall be added to the proposed share reserve as (i) one (1) share for every one (1) share subject to options or SARs and (ii) as 1.65 shares for every one (1) share subject to awards other than options or SARs.
Impact on Dilution and Fully-Diluted Overhang
Our Board recognizes the impact of dilution on our shareholders and has evaluated this share request carefully in the context of the need to attract, motivate, retain and ensure that our leadership team and key employees are focused on our strategic priorities.
The total fully-diluted overhang as of March 7, 2019, assuming that the entire share reserve is granted in stock options or SARs, would be 7.05%, and the total fully-diluted overhang, assuming the share reserve is granted in full-value awards only, would be 6.24%. The Company’s historical practice has been to grant a combination of stock options and full-value awards, resulting in potential overhang between these two levels. In this context, fully-diluted overhang is calculated as the sum of grants outstanding and shares available for future awards (numerator) divided by the sum of the numerator and the basic common shares outstanding, with all data effective as of March 7, 2019.
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Our Board believes that the proposed share reserve represents a reasonable amount of potential equity dilution to accommodate our long-term strategic and growth priorities.
Expected Duration of the Share Reserve
We currently expect that the share reserve under the Plan, if this proposal is approved by our shareholders, will be sufficient for awards for approximately 3 years. Expectations regarding future share usage could be impacted by a number of factors such as award type mix; hiring and promotion activity at the executive level; the rate at which shares are returned to the Plan’s reserve under permitted addbacks; the future performance of our stock price; the consequences of acquiring other companies; and other factors. While we believe that the assumptions we used are reasonable, future share usage may differ from current expectations.
Governance Highlights
The Plan incorporates numerous governance best practices, including:
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Date of Plan Expiration
The Plan will terminate on March 18, 2029, unless terminated earlier by the Board. Termination of the Plan shall not affect the terms or conditions of any award granted prior to termination.
Share Usage
The following table sets forth information regarding stock-settled, time-vested equity awards granted and performance-based, stock-settled equity awards earned over each of the last three fiscal years. These awards were all made under the 2008 Plan:
2018 | 2017 | 2016 | 3-YEAR AVERAGE SHARE USAGE RATE | |||||||||||||
Stock Options/SARs Granted | 635,196 | 1,396,307 | 0 | |||||||||||||
Stock-Settled Time-Vested Restricted Shares/Units Granted | 819,382 | 872,969 | 1,151,886 | |||||||||||||
Stock-Settled Performance-Based Stock Units Granted | 6,068 | 12,903 | 474,443 | |||||||||||||
Weighted-Average Basic Common Shares Outstanding | 102,110,000 | 100,592,000 | 99,321,000 | |||||||||||||
Share Usage Rate | 1.37 | % | 2.10 | % | 1.64 | % | 1.70 | % |
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Overhang as of March 7, 2019
The following table sets forth certain information as of March 7, 2019, unless otherwise noted, with respect to the Company’s existing equity compensation plans:
Stock Options/SARs Outstanding | 2,485,594 | |||
Weighted-Average Exercise Price of Outstanding Stock Options/SARs | $ | 19.94 | ||
Weighted-Average Remaining Term of Outstanding Stock Options/SARS | 6.84 years | |||
Total Stock-Settled Full-Value Awards Outstanding | 2,879,826 | |||
Shares Available for Grant under the 2008 Plan | 2,405,955 | |||
Basic common shares outstanding as of the record date (March 11, 2019) | 102,932,280 |
Plan Summary
A summary of the Plan is set forth below. The summary is qualified by, and subject to, the actual provisions of the Plan, a copy of which is attached as Appendix B. The meaning of capitalized terms not defined in this summary can be found in the “Definitions” section of the Plan.
Administration. The Plan will be administered by the HR Committee, which is composed entirely of independent directors. The HR Committee selects the individuals eligible to participate in the Plan, the types of Awards granted, the time(s) at which Awards may be granted and the number of shares of our common stock (Shares) to be covered by each Award granted. The HR Committee also has the authority to interpret and administer the Plan, to determine the terms and conditions of Awards and to make all other determinations relating to the Plan that it deems necessary or desirable for the administration of the Plan. The HR Committee may also delegate various functions to executive officers.
Eligibility. Eligible participants under the Plan include all of our directors and employees as selected by the HR Committee. Approximately 838 persons currently participate in the Plan. The numbers of employees andnon-employee directors eligible to be granted awards under the Plan as of March 11, 2019 were approximately 771 and 9, respectively.
Shares Available under the Plan. The aggregate number of shares authorized for issuance under the Plan shall be equal to the sum of (i) 4,000,000 Shares, plus (ii) the number of Shares remaining available under the 2008 Plan as of the Effective Date, plus (iii) any Shares subject to outstanding awards under the 2008 Plan that on or after the Effective Date are forfeited, are cancelled, expire, or are settled in cash. Any Shares that are subject to Awards of Options or Stock Appreciation Rights shall be counted against this limit as one (1) Share for every one (1) Share issued and any Shares that are subject to Awards other than Options or Stock Appreciation Rights shall be counted against this limit as 1.65 Shares for every one (1) Share issued.
If (i) any Shares subject to an Award are forfeited, cancelled or expire or (ii) an Award is settled for cash (in whole or in part), the Shares subject to such Award shall, to the extent of such forfeiture, cancellation, expiration or cash settlement, remain available for issuance under the Plan. In the event that withholding tax liabilities arising from an Award other than an Option or Stock Appreciation Right or, after the Effective Date, an award other than an option or stock appreciation right under the 2008 Plan are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, the Shares so tendered or withheld shall be added to the Shares available for Awards under the Plan; provided, however, that Shares that again become available for issuance under the Plan pursuant to the preceding clause shall not increase the numbers of shares that may be granted under the Plan in connection with “incentive stock options”. Any Shares that again become available for Awards under the Plan shall be added to the share reserve limit as (i) one (1) Share for every one (1) Share subject to Options or Stock Appreciation Rights granted under the Plan or options or stock appreciation rights granted under the 2008 Plan, and (ii) as 1.65 Shares for every one (1) Share subject to Awards other than Options or Stock Appreciation Rights granted under the Plan or awards other than options or stock appreciation rights granted under the 2008 Plan.
Notwithstanding anything to the contrary contained herein, the following Shares shall not again be available for Awards under the Plan: (A) Shares tendered by the Participant or withheld by the Company in payment of the purchase price of an Option, (B) Shares tendered by the Participant or withheld by the Company to satisfy any tax withholding obligation with respect to an Option or Stock Appreciation Right, (C) Shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right on exercise thereof, and (D) Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options.
Dividends; Dividend Equivalents. If an award provides for a right to dividends or dividend equivalents, any dividends or dividend equivalents will be subject to the same vesting requirements as the underlying award and will only be paid at the time those vesting requirements are satisfied. In no event will dividends or dividend equivalents be paid with respect to options or stock appreciation rights under the Plan.
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Awards under the Plan. Awards that may be granted under the Plan include Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards and Other Share-Based Awards and any other right, interest or option relating to shares of the Company or cash granted pursuant to the Plan. Each Award granted under the Plan is evidenced by a written Award Agreement in a form, and containing such terms and conditions, as the HR Committee determines. While Awards typically are granted to selected eligible participants once a year, the HR Committee may grant Awards to any eligible participant at any time. The Board must determine thenon-employee directors to whom Awards may be granted, the time at which such Awards may be granted and the number of shares subject to such Awards. The HR Committee may delegate to management the authority to grant Awards to employees who are not executive officers or directors.
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The exercise price for Shares purchasable under an Option will not be less than 100% of the Fair Market Value of the Shares on the date of grant. Options may be exercised during a term not to exceed 10 years from the date of grant. The HR Committee will determine the period over which Options will vest and become exercisable. The HR Committee may permit participants to use Shares they own to pay the exercise price and may provide that the Shares to be issued upon an Option’s exercise will be in the form of Restricted Stock or other similar securities.
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Upon the exercise of a Stock Appreciation Right, the holder will have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise (or such amount less than the Fair Market Value as the HR Committee determines at any time during a specified period before the date of exercise) over (ii) the grant price of the Stock Appreciation Right on the date of grant, which, except as provided in the Plan with respect to substitute shares or share adjustments, will not be less than the Fair Market Value of one Share on such date of grant of the Stock Appreciation Right. The HR Committee may determine, in its sole discretion, whether payment of a Stock Appreciation Right will be made in cash, in whole Shares, or any combination thereof.
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Unless otherwise provided in the applicable Award Agreement, beginning on the date of the grant of Restricted Stock, the Participant will become a shareholder of the Company with respect to all Shares subject to the Award Agreement and will have all of the rights of a shareholder, including the right to vote such Shares and the right to receive distributions made with respect to such Shares. A Participant receiving Restricted Stock Units will not possess voting rights with respect to such Award. Generally, Shares or any other property (other than cash) distributed as a dividend or otherwise with respect to any unvested Awards of Restricted Stock or Restricted Stock Units will be subject to the same restrictions as the Award itself. The certificates representing a grant of Restricted Stock will remain in the physical custody of the Company until such Restricted Stock has vested and any other restrictions are removed or expire.
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Performance Criteria. The HRAudit Committee may determine that the lapsing of restrictions with respect to an Award, and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more performance goals established by the HR Committee, which shall be based on the attainment of specified levels of one or any combination of performance objectives and criteria, each as may be calculated or measured in the manner determined by the HR Committee (Performance Criteria). Such Performance Criteria may include (without limitation): basic or diluted earnings per Share; cash flow; economic value added; income, which may include, without limitation, net income, operating income, volume measures (e.g., admissions or visits) and expense control measures, and which and may be calculated or measured before or after income taxes, including or excluding interest, depreciation and amortization, minority interests, extraordinary items and other materialnon-recurringReport items, discontinued operations, the cumulative effect of changes in accounting policies and the effects of any tax law changes; quality of service and/or patient care, including, without limitation, patient, physician and/or employee satisfaction objectives; business performance or return measures (consisting of market share, debt reduction, return on assets, capital, equity, or sales); the price of the Company’s common or preferred stock (including, but not limited to, growth measures and total shareholder return); or any other criterion that the HR Committee may determine, in its sole discretion, is appropriate.
The Performance Criteria may be determined on an absolute or relative basis, may be based solely by reference to the Company’s performance or the performance of an Affiliate, division, business segment or business unit of the Company, or based upon the relative performance of other companies or indices or upon comparisons of any of the indicators of performance relative to other companies or indices. In the event of (i) a change in corporate capitalization, a corporate transaction or a complete or partial corporate liquidation, (ii) a natural disaster or other significant unforeseen event that materially impacts the operation of the Company, (iii) any extraordinary, unusual ornon-recurring gain or loss or other event, (iv) any material change in tax laws or accounting policies or practices affecting the Company and/or the Performance Criteria, or (v) any other event(s) or item(s) determined by the HR Committee, the HR Committee may make adjustments to the Performance Criteria so as to neutralize the effect of the event on the applicable Award.
Effect of Termination of Employment. The HR Committee will determine and set forth in each Award Agreement whether any Awards will, as applicable, continue to be exercisable and the terms of such exercise, or cease to be subject to restrictions and the timing of when such restrictions will lapse, on and after the date that a participant ceases to be employed by or to provide services to us (including as a director), whether by reason of death, disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant’s employment or services will be determined by the HR Committee, which determination will be final.
Non-Employee Director Limits. The aggregate dollar value of Awards granted under the Plan during a calendar year to anon-employee director, taken together with any cash fees paid during such calendar year to such director, in respect of the director’s service as a member of the Board during such year (including service as a member or chair of any committees of the Board), may not exceed $650,000. This limitation increases to $850,000 in any calendar year in which anon-employee director serves as Chairman of the Board or Lead Director.
Adjustment Provisions. Awards may be adjusted in the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split,spin-off or similar transaction or other change in corporate structure affecting the Shares or the value thereof.
Change in Control. In addition, in the event of a Change in Control, the treatment of outstanding Awards granted to employees generally depends on whether: (i) the successor company assumes or substitutes the applicable Award, in which case such Awards will generally continue to be outstanding pursuant to their terms; and/or (ii) the participant incurs a Qualifying Termination, in which case such outstanding Awards will become immediately vested and exercisable or transferable, depending on the type of Award. If the successor company does not assume or substitute the applicable Award, such Award will become immediately vested and exercisable or transferable, depending on the type of Award, as of the date of the Change in Control irrespective of whether the participant incurs a Qualifying Termination.
In addition, the HR Committee may make other determinations, as described in the Plan, regarding the effect of a Change in Control on Awards.
Transferability of Awards. Generally, Awards granted under the Plan are not transferable other than (i) by will or the laws of descent and distribution, or (ii) pursuant to a qualified domestic relations order. The HR Committee in its discretion may permit other transfers of Awards pursuant to the terms of the Plan. For the avoidance of doubt, in no event will any Award be transferrable by a Participant in exchange for value.
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Amendment and Termination of the Plan. The Plan will terminate on March 18, 2029 except with respect to Awards then outstanding. The HR Committee has the authority to alter, amend, suspend or terminate the Plan at any time, provided, however, that the HR Committee must obtain prior shareholder approval amend the Plan to (i) increase the number of Shares that may be the subject of Awards under the Plan, (ii) expand the types of Awards available under the Plan, (iii) materially expand the class of persons eligible to participate in the Plan, (iv) amend any provision of the Plan regarding changes in the exercise price of Options and Stock Appreciation Rights, (v) increase the maximum permissible term of any Option or the maximum permissible term of a Stock Appreciation Right, or (vi) increase the limitations on the size of grants to individual participants ornon-employee directors described above.
Certain Federal Income Tax Consequences
The following is a general description of the U.S. federal income tax consequences to participants and the Company relating to Awards. This discussion does not purport to cover all tax consequences relating to the Awards. Also, our ability to obtain a deduction for future payments under the Plan could be limited by Code Section 162(m), which limits the deductibility of compensation paid to certain covered employees in excess of $1,000,000 in any year or by the “golden parachute rules” of Section 280G of the Code, which prevent the deductibility of certain “excess parachute payments” made in connection with a change of control of the employer corporation. The tax treatment may also vary depending on the participant’s particular situation and may, therefore, be subject to special rules not discussed below.
A participant who receives Options or Stock Appreciation Rights generally will not recognize any income, nor will the Company be entitled to any tax deduction, in the year of the grant. At the time that a nonqualified stock option or Stock Appreciation Right is exercised, the participant will recognize ordinary income in an amount equal to the excess of (a) the Fair Market Value of the Shares purchased (or subject to a Stock Appreciation Right) over (b) the exercise price of the Option for such Shares (or the price stated in a Stock Appreciation Right). We generally will be entitled to a tax deduction in an amount equal to the amount includible in the income of the participant in the taxable year in which the participant is required to recognize the income. A participant who disposes of Shares received upon the exercise of a nonqualified stock option will recognize capital gain (or loss) in an amount equal to the difference between (a) the amount realized on the disposition of the Shares, and (b) the Fair Market Value of the Shares on the date on which the Option was exercised. The capital gain (or loss) will be considered long-term if the Shares received upon exercise of the nonqualified stock option are held for more than one year after the Option was exercised. We are not entitled to any deduction for federal income tax purposes upon a participant’s disposition of stock received upon the exercise of an Option (other than, in the circumstances described below, an incentive stock option).
A participant will recognize no income for federal income tax purposes upon the grant or the exercise of an incentive stock option, provided that the exercise occurs during employment or within three months after termination, other than in the case of disability. If the Shares acquired upon the exercise are held for a minimum of both (a) two years from the date of grant and (b) one year from the date of exercise, then any gain or loss recognized by the participant on the sale of such Shares will be treated as a long-term capital gain or loss, and the Company will not be entitled to any deduction for federal income tax purposes. If the Shares acquired are not held for these minimum periods, then the participant will be required to recognize ordinary income in the year of the disposition to the extent that the Fair Market Value of the Shares on the date of disposition exceeds the exercise price for the shares. We generally will be entitled to a deduction for federal income tax purposes equal to the amount the participant is required to recognize as ordinary income.
A participant who receives Awards payable in cash or Restricted Stock, Restricted Stock Units or Performance Awards payable in stock, will not recognize income for federal income tax purposes until the Awards are settled. At that time, the participant will recognize ordinary income on the amount of cash received or, for Awards delivered in Shares, the excess of (a) the Fair Market Value of the Shares on the settlement date over (b) the amount, if any, paid for the Shares. We generally will be entitled to take a tax deduction in an amount equal to the ordinary income recognized by the participant.
An employee participant will be subject to withholding for federal and, if applicable, state and local, income taxes at the time the participant recognizes income under the rules described above with respect to Shares or cash received. As such, we will have the right to make all payments or distributions to a participant net of any taxes required to be paid at such time. We will have the right to withhold from wages or other amounts otherwise payable such withholding taxes as may be required by law, to otherwise require the participant to pay such withholding taxes or to take such other action as may be necessary to satisfy such withholding obligations.Non-employee directors are not subject to withholding by us and must make their own arrangements for satisfying any tax obligations they may have in connection with the grant or exercise of an Award under the Plan.
Code Section 409A imposes an additional 20% tax and interest on an individual receiving nonqualified deferred compensation, as defined in Section 409A, under a plan that fails to satisfy certain requirements. Awards made pursuant to the Plan are designed to comply with the requirements of Section 409A to the extent such Awards are not exempt from coverage. However, if the Plan fails to comply with Section 409A in operation, a participant could be subject to the additional taxes and interest and may, in certain cases, be required to file an amended tax return for prior tax years with respect to such taxes and interest.
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New Plan Benefits
As described above, the selection of officers, employees andnon-employee directors who will receive awards under the Plan and the size and types of awards will be determined by the HR Committee in its discretion. Therefore, the amount of any future awards under the Plan, if approved by the shareholders, is not yet determinable and it is not possible to predict the benefits or amounts that will be received by, or allocated to, particular individuals or groups of employees. Please see the Grants of Plan-Based Awards During 2018 table on page 49 for information on awards granted in 2018 under the 2008 Plan to certain of our executive officers.
Shareholder Approval
This proposal will be approved under the our bylaws and NYSE rules (which contain separate approval requirements with respect to this proposal) if a majority of the votes cast are in favor of the proposal. Abstentions and brokernon-votes will be counted for purposes of determining the presence or absence of a quorum, but will not change the number of votes cast for or against the proposal. However, for purposes of approval under NYSE rules, abstentions are treated as votes cast, and, therefore, will have the same effect as an “against” vote. Unless marked to the contrary, proxies will be voted FOR the approval of the Tenet Healthcare 2019 Stock Incentive Plan.
The Board recommends that shareholders vote “FOR” the approval of the Tenet Healthcare 2019 Stock Incentive Plan.
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The Audit Committee is comprised of the five members named below. Under the Company’s Corporate Governance Principles, each member of the Audit Committee must be an independent director, as defined by the NYSE rules and the rules of the SEC. Each current member of the Audit Committee is independent under those criteria. In addition, the Board has determined that Ms. Gaines, Mr. Fisher, Mr. Lynch and Ms. Romo are each an Audit Committee financial expert, as defined by SEC rules, and that all fivefour Audit Committee members are financially literate, as required by NYSE rules. Ms. GainesRomo serves as Chair of the Audit Committee.
The Audit Committee, on behalf of the Board, oversees the Company’s financial reporting process, including review of (i) the Company’s guidelines and policies with respect to risk assessment and risk management related to financial reporting and disclosure controls and procedures, (ii) the major financial and enterprise risk exposures of the Company and (iii) the steps management has taken to monitor and control such exposures. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management and the Company’s independent registered public accountants for the year ended December 31, 2018,2020, Deloitte & Touche LLP (Deloitte), each Quarterly Report on Form10-Q filed during 20182020 (Forms10-Q), as well as the audited consolidated financial statements and the footnotes thereto in the Company’s Annual Report on Form10-K for the year ended December 31, 20182020 (Form10-K), before the Forms10-Q and Form10-K were filed with the SEC. The Audit Committee discussed with management the quality, not just the acceptability, of the Company’s accounting principles, the reasonableness of significant estimates and judgments, and the degree and quality of disclosures in the financial statements prior to the time the respective Forms10-Q and Form10-K were filed with the SEC. The Audit Committee also reviewed with management and Deloitte each press release concerning earnings prior to its release.
The Company’s independent registered public accountants are responsible for expressing an opinion on the Company’s audited consolidated financial statements and the fair presentation, in all material respects, of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. The Audit Committee reviewed and discussed with Deloitte its judgments as to the quality, not just the acceptability, of the Company’s accounting principles, the critical audit matters (“CAMs”) addressed in the audit and the relevant financial statement accounts or disclosures that relate to each CAM, and such other matters as are required to be discussed by the Audit Committee with the Company’s independent registered public accountants under the standards of the Public Company Accounting Oversight Board (PCAOB). Deloitte has expressed an opinion in its Report of Independent Registered Public Accounting Firm that the Company’s 20182020 audited consolidated financial statements conform to accounting principles generally accepted in the United States of America.
During 2018,2020, the Audit Committee was provided updates on, monitored and discussed with management the status of the Company’s compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. In addition, the Audit Committee reviewed management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 20182020 and approved the inclusion of management’s report on such assessment in the Form10-K. Deloitte has audited and also expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018.2020.
The Audit Committee also discussed with Deloitte its independence from management and the Company, and received the written disclosures and the letter from Deloitte required by PCAOB Ethics and Independence Rule 3526 (Communication with Audit Committees Concerning Independence). In concluding that Deloitte is independent, the Audit Committee considered, among other factors, whether thenon-audit services provided by Deloitte (as described below) were compatible with the firm’s independence. The Audit Committee also retained Deloitte and made it clear to Deloitte that they report directly to the Audit Committee and not to management.
The Audit Committee discussed with the Company’s internal auditors and Deloitte the overall scopes and plans for their respective audits. The Audit Committee met separately at various meetings in executive session with each of the internal auditors and Deloitte to discuss, among other matters, the results of their audits, their evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the Company’s 20182020 audited consolidated financial statements be included in the Form10-K and filed with the SEC.
In evaluating and selecting the Company’s independent registered public accounting firm, the Audit Committee considers, among other things, historical and recent performance of the current independent audit firm, external data on audit quality and performance, including PCAOB reports, industry experience, audit fee revenues, firm capabilities and audit approach, and the independence and tenure of the audit firm. The Audit Committee has engaged Deloitte to serve as our independent registered public accountants for the year ending December 31, 2019.2021. For further information concerning this engagement, see “Proposal 4—3—Ratification of the Selection of Independent Registered Public Accountants.”
Members of the Audit Committee
Brenda J. Gaines,Tammy Romo, Chair
Lloyd. J. Austin
Richard W. Fisher
Cecil D. Haney
Christopher S. Lynch
Richard J. Mark
Tammy Romo
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Audit Committee Report
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Independent Registered Public Accounting Firm Fees
Year Ended December 31, 2018 | Year Ended December 31, 2017 |
Year Ended December 31, 2020 |
Year Ended December 31, 2019 | |||||||||||||||||
Audit fees(1) | $ | 4,832,600 | $ | 4,746,326 | $ | 4,706,122 | $ | 4,843,370 | ||||||||||||
Audit-related fees(2) |
| 3,579,148 |
| 4,013,270 |
| 2,982,235 |
| 2,550,965 | ||||||||||||
Tax fees(3) |
| 31,100 |
| 32,408 |
| 761,775 |
| 58,238 | ||||||||||||
All other fees(4) |
| — |
| — |
| 582,147 |
| 1,456,765 |
(1) | Audit fees include professional fees for the audit of our annual consolidated financial statements and the review of our quarterly financial statements. These amounts also include fees related to the audit of internal control over financial reporting performed pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. |
(2) | Audit-related fees include fees for assurance and related services reasonably related to audits and reviews. These consisted principally of fees for audits of certain of our subsidiaries and partnerships, financial statements of employee benefit plans, and fees related to comfort letters, consents and reviews of filings with the SEC. |
(3) | Tax fees in |
(4) | All other fees consist of fees for various advisory services. |
How We Control and Oversee theNon-Audit Services Provided by Deloitte
The Audit Committee has retained Deloitte (along with other accounting firms) to providenon-audit services. We understand the need for Deloitte to maintain objectivity and independence as the auditor of our financial statements and our internal control over financial reporting. Accordingly, the Audit Committee has established the following processes and procedures related tonon-audit services.
• | We Restrict TheNon-Audit Services That Deloitte Can Provide. To minimize relationships that could appear to impair the objectivity of Deloitte, the Audit Committee has restricted the types ofnon-audit services that Deloitte may provide to us. |
• | We HavePre-Approval Processes ForNon-Audit Services. The Audit Committee has adopted policies and procedures topre-approve all audit andnon-audit services provided to us by our independent registered public accountants, in accordance with any applicable law, rules or regulations. The Audit Committeepre-approved all fees presented in the table above. |
The Audit Committee has adopted policies and procedures forpre-approving allnon-audit services that Deloitte performs for us. Specifically, the Audit Committee haspre-approved the use of Deloitte for detailed, specific types of services related to: tax compliance, planning and consultations; acquisition/disposition services, including due diligence; attestation and agreed upon procedures; consultations regarding accounting and reporting matters; and reviews and consultations on internal control and other related services. The Audit Committee has set a specific annual limit on the amount ofnon-audit services (tax services and all other) that the Company can obtain from Deloitte (for 2018,2020, this limit was $8.8approximately $7.8 million). The chair of the Audit Committee is authorized topre-approve any audit ornon-audit service on behalf of the Audit Committee, provided these decisions are presented to the full Audit Committee at its next regularly scheduled meeting.
We Have Hiring Restrictions for Deloitte Employees
The Audit Committee has adopted restrictions on our hiring of any Deloitte partner, managing director, manager, staff member, advising member of the department of professional practice, reviewing actuary, reviewing tax professional and any other individuals responsible for providing audit assurance on any aspect of Deloitte’s audit and review of our financial statements.
We Rotate Key Audit Partners and Periodically Consider Audit Firm Rotation
The Audit Committee assures that key Deloitte partners assigned to our audit are rotated as required at least every five years, and the Audit Committee and its chair actively participate in selecting each new lead engagement partner. To help ensure continuing auditor independence, the Audit Committee also periodically considers whether there should be a regular rotation of the independent registered public accountants.
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Proposal 3-Ratification of the Selection of Independent Registered Public Accountants
The Audit Committee is directly responsible for the appointment, compensation (including fee negotiations), retention and oversight of the Company’s independent registered public accounting firm (including the lead audit partner) retained to audit the Company’s financial statements. The Audit Committee has selected Deloitte & Touche LLP to serve as our independent registered public accountants for the year ending December 31, 2019.2021. Deloitte has been retained as the Company’s independent auditor since 2007. The Audit Committee annually evaluates Deloitte’s independence and performance, including an evaluation of the effectiveness of the lead audit partner and other engagement leaders, and determines whether to retain Deloitte or consider other audit firms. Factors considered by the Audit Committee in making its determination on appointment include:
the performance of Deloitte in prior years, including the quality and extent of Deloitte’s communications with the Audit Committee and the results of a management survey of Deloitte’s performance,
Deloitte’s independence and processes for maintaining independence, including review ofnon-audit fees and services provided,
external data on audit quality and performance, including the results of the most recent internal quality control review or Public Company Accounting Oversight Board inspection,
the performance of key members of the audit engagement team, and
Deloitte’s approach to resolving significant accounting and auditing matters, including consultation with the firm’s national office, as well as its reputation for integrity and competence in the fields of accounting and auditing.
Based on this evaluation, the members of the Audit Committee believe that the continued retention of Deloitte to serve as the Company’s independent auditor is in the best interests of the Company and its shareholders. Deloitte is familiar with our operations, and the Audit Committee is satisfied with Deloitte’s reputation in the auditing field, its personnel, its professional qualifications and its independence.
The Audit Committee is responsible for the audit fee negotiations associated with the retention of Deloitte.
Deloitte representatives will attend the Annual Meeting and respond to questions where appropriate. Such representatives may make a statement at the Annual Meeting should they so desire.
Shareholder Approval
Although ratification is not required by our bylaws or otherwise, the Board is submitting the selection of the independent registered public accountants for shareholder ratification as a matter of good corporate governance. Ratification of the selection of the independent registered public accountants by the shareholders requires that the votes cast in favor of ratification exceed the votes cast opposing ratification. If a favorable vote is not obtained, the Audit Committee may reconsider the selection of Deloitte. Even if the selection is ratified, the Audit Committee, in its discretion, may select different independent auditors if it subsequently determines that such a change would be in the best interest of the Company and its shareholders. Unless marked to the contrary, proxies will be voted “FOR” the ratification of the selection of Deloitte as our independent registered public accountants.
The Board recommends that
shareholdersyou vote “FOR”“FOR” the ratification of the selection of Deloitte & Touche LLP as our independent registered public accountants.accountants for the year ending December 31, 2021.
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General Information Regarding the Annual Meeting and Voting
The Board of Tenet is requesting your proxy for use at the Annual Meeting of Shareholders to be held online through an audio webcast at Tenet Corporate Headquarters, 1445 Ross Avenue, Suite 1400, Dallas, Texaswww.virtualshareholdermeeting.com/THC2021 at 8:00 a.m. Central Time on Thursday, May 2, 2019,6, 2021, and any postponements or adjournments of the meeting, for the purposes set forth in the Notice of Annual Meeting of Shareholders.
Notice of Internet Availability of Proxy Materials
Under SEC rules, we have elected to make our proxy materials available to our shareholders over the Internet rather than mailing paper copies of those materials to each shareholder (unless otherwise requested). On or about March 22, 2019,26, 2021, we mailed to our shareholders and also made available online at www.proxyvote.com a Notice of Internet Availability of Proxy Materials (Notice) directing shareholders to a website where they can access this Proxy Statement and our Annual Report on Form10-K for the year ended December 31, 20182020, and view detailed instructions on how to vote via the Internet or by telephone.
If you received the Notice only and would like to receive a paper copy of the proxy materials, please follow the instructions printed on the Notice to request that a paper copy be mailed to you. Shareholders who do not receive the Notice will receive a paper or electronic copy of our proxy materials. This Proxy Statement and related proxy materials are being mailed or made available to shareholders on or about March 22, 2019.26, 2021.
Who Can Vote
Only shareholders of record of our common stock at the close of business on March 11, 2019,12, 2021, the record date for the Annual Meeting, are entitled to receive this notice and to vote their shares at the Annual Meeting. As of that date, there were 102,932,280106,471,229 shares of our common stock outstanding. Most of our shareholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
Shareholder of Record. If your shares of our common stock are registered directly in your name with our transfer agent, Computershare, you are considered the shareholder of record with respect to those shares and a Notice (or, if requested, printed proxy materials) is being sent to you directly by the Company. As the shareholder of record, you have the right to grant your voting proxy directly to us or to vote in person online at the Annual Meeting.
Beneficial Owner. If your shares are held in a brokerage account or by another nominee, you are considered to be the beneficial owner of shares held in street name, and a Notice (or, if requested, printed proxy materials with a voting instruction card) is being forwarded to you by your broker, bank or other nominee. As the beneficial owner of the shares, you have the right to direct your broker, bank or other nominee how to vote and are also invited to attend the Annual Meeting. If you are a beneficial owner whose shares are held in street name, you are not the shareholder of recordMeeting online and you may not vote your shares in person atduring the Annual Meeting unless you obtain a legal proxy giving you the right to vote your shares at the Annual Meeting from the broker, bank or other nominee that holds your shares in street name.Meeting. If your shares are held in street name, your broker, bank or other nominee has enclosed or provided voting instructions for you to use in directing the broker, bank or other nominee how to vote your shares.
Each share of common stock is entitled to one vote on each matter properly brought before the Annual Meeting.
How to Cast Your Vote
You may vote in one of the following ways:
By Internet. You may vote on the Internet using the website noted on your Notice or proxy card.
2021 PROXY STATEMENT | 67 |
General Information Regarding the Annual Meeting and Voting
By Telephone. You may vote by calling the toll-free telephone number noted on your Notice or proxy card. Voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded.
By Mail. If you received a paper copy of the proxy card or voting instruction form by mail and choose to vote by mail, please mark your proxy card, date and sign it, and promptly return it in the postage-paid envelope provided with this proxy statement.
In Person atOnline During the Annual Meeting. YouWhile we encourage shareholders to vote prior to the meeting, you may vote in person by attendingonline during the Annual Meeting. If you are a beneficial owner whose shares are held in street name (which meansYou will need the 16-digit control number included on your shares are registered in the name of your broker, bankproxy card or other nominee), you must also obtain a legal proxy from your broker, bank or other nominee to vote in person and submit the proxy along with your ballot at the meeting.voting instructions card. Each shareholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf.
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Shares must be voted either in person, on the Internet, by telephone or by completing and returning a proxy card.
If your proxy is properly completed, the shares it represents will be voted at the meeting as you instructed. If you submit your properly executed proxy, but do not provide instructions, your proxy will be voted in accordance with the Board’s recommendations as set forth in this Proxy Statement.
If your shares of our common stock are held by a broker in street name, under the rules of the NYSE, your broker may vote your shares only on certain“routine” matters if you do not provide your broker with voting instructions. The ratification of the selection of our independent registered public accountants is considered a routine matter upon which brokerage firms may vote on behalf of their clients if no voting instructions are provided. A “brokernon-vote” occurs when a broker holding your shares in street name does not vote on a particular matter because you did not provide the broker voting instructions and the broker lacks discretionary voting authority to vote the shares because the matter isnon-routine. Thenon-routine matters on the agenda for this year’s Annual Meeting include the election of directors and an advisory approval of the Company’s executive compensation and the approval of the Tenet Healthcare 2019 Stock Incentive Plan.compensation.
Revoking Your Proxy
You have the right to revoke your proxy at any time before it is voted by (1) filing a written notice with our Corporate Secretary, (2) delivering a new proxy bearing a later date, (3) granting a later proxy through telephone or Internet voting, or (4) attending the Annual Meeting virtually and voting in person.online during the Annual Meeting.
Vote Required
The presence, in person or by proxy, of the persons entitled to vote a majority of the voting shares at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting. Abstentions and brokernon-votes will be counted for purposes of determining the presence or absence of a quorum. There are different vote requirements for the various proposals:
The teneleven nominees for director will be elected if the votes cast for the nominee exceed the votes cast against the nominee, with abstentions and brokernon-votes not counted either for or against a nominee (and therefore having no effect on the election).
Unless you direct otherwise through your proxy voting instructions, the persons named as proxies will vote all proxies received “for” the election of each nominee named in this section. If any director nominee is unable or unwilling to serve as a nominee at the time of the Annual Meeting, the persons named as proxies may vote for a substitute nominee chosen by the present Board to fill the vacancy. In the alternative, the persons named as proxies may vote just for the remaining nominees, leaving a vacancy that may be filled at a later date by the Board, or the Board may reduce its size. We have no reason to believe that any of the nominees will be unwilling or unable to serve if elected as a director.
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Our bylaws require that, to be elected, a director nominee must receive a majority of the votes cast in uncontested elections (i.e., the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee). If a nominee is notre-elected, Nevada law provides that the incumbent director would continue to serve on the Board until his or her successor is elected or the director resigns. However, under our Corporate Governance Principles, any incumbent director who receives, in an uncontested election of directors, a greater number of votes cast “against” his or her election than votes “for” his or her election must submit his or her resignation offer to the Board. In that situation, our Governance Committee would make a recommendation to the Board about whether to accept or reject the resignation
General Information Regarding the Annual Meeting and Voting
Proxies cannot be voted for a greater number of persons than the number of nominees named in this Proxy Statement.
The following items of business will be approved if the votes cast for the proposal exceed those cast against the proposal, with abstentions not counted either for or against these proposals (and therefore having no effect on the approval of the proposals) advisory approval of the Company’s executive compensation (Proposal 2); and ratification of the selection of independent registered public accountants (Proposal 3).
Brokernon-votes will have no effect on Proposal 2
Attending the Annual Meeting and Asking Questions
You will be able to attend the Annual Meeting We encourage you Shareholders may submit written questions once logged into the virtual platform. Questions pertinent to meeting matters will be answered during the question and answer portion of the Costs of Solicitation We will pay for the cost of proxy solicitations on behalf of the Board. We have engaged Innisfree M&A Incorporated to assist in our proxy solicitations. We will pay Innisfree an amount not to exceed $25,000 in fees for its proxy solicitation services and reimburse it for its reasonableout-of-pocket expenses. In addition to solicitation by mail by Innisfree, proxies may be solicited personally or by telephone, fax or email by our directors, officers and other employees. Proxy materials also may be distributed to the beneficial owners of our stock by brokers, custodians and other parties, and we will reimburse such parties for their reasonableout-of-pocket and clerical expenses.
General Information Regarding the Annual Meeting and Voting Householding of Shareholder Materials We may send a single Notice or set of proxy materials and other shareholder communications to any address shared by two or more shareholders. This process is called “householding.” This reduces duplicate mailings, saves printing and postage costs and conserves natural resources. We will deliver promptly upon written or oral request a separate copy of the proxy materials to shareholders at a shared address to which a single copy of the documents was delivered. To receive a separate copy, to stop receiving multiple copies sent to shareholders of record sharing an address, or to enroll in householding: Shareholder of Record. If you are a shareholder of record, please submit your request by telephone at(800) 579-1639, by email atsendmaterial@proxyvote.com or by mail to Tenet Healthcare Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Beneficial Owner. If you are a beneficial owner, please submit your request to your broker, bank or other nominee.
Shareholder Proposals Shareholder Proposals Submitted Pursuant to SEC Rule14a-8 for Inclusion in Next Year’s Proxy Statement. To be considered for inclusion in next year’s proxy statement, shareholder proposals submitted in accordance with the SEC’s Rule14a-8 must be received at our principal executive offices no later than the close of business (5:00 p.m. Central Time) on November Director Nominations for Inclusion in Next Year’s Proxy Statement (Proxy Access). We have adopted proxy access, whereby a shareholder (or a group of up to 20 shareholders) who has held at least 3% of our outstanding stock for three years or more may nominate a director and have that nominee included in our proxy materials, provided that the shareholder and nominee satisfy the requirements specified in our bylaws. Any shareholder who wishes to use these procedures to nominate a candidate for election to the Board for inclusion in our proxy statement relating to the Other Shareholder Business for Presentation at Next Year’s Annual Meeting. Our bylaws require that any shareholder wishing to nominate a candidate for director or to propose other business at the next annual meeting (other than proposals submitted pursuant to the SEC’s Rule
Incorporation by Reference The information contained above under the captions “Audit Committee Report” and “Human Resources Committee Report” shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor will such information be incorporated by reference into any future filing except to the extent that the Company incorporates it by reference into such filing. Annual Report on Form10-K We will provide to shareholders by mail, without charge, a copy of our Annual Report on Form10-K. To request a copy of the Annual Report on Form10-K, you should write to Tenet Healthcare Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
Appendix A: Non-GAAP Financial Measures Adjusted EBITDA, Adjusted EBITDA, anon-GAAP measure, is defined by the Company as net income available (loss attributable) to Tenet Healthcare Corporation common shareholders before (1) the cumulative effect of changes in accounting principle, (2) net loss attributable (income available) to noncontrolling interests, (3) income (loss) from discontinued operations, net of tax (4) income tax benefit (expense), (5) gain (loss) from early extinguishment of debt, (6) othernon-operating income (expense), net, (7) interest expense, (8) litigation and investigation (costs) benefit, net of insurance recoveries, (9) net gains (losses) on sales, consolidation and deconsolidation of facilities, (10) impairment and restructuring charges and acquisition-related costs, (11) depreciation and amortization and (12) income (loss) from divested operations and closed Adjusted Free Cash Flow, anon-GAAP measure, is defined by the Company as (1) Adjusted net cash provided by (used in) operating activities from continuing operations, less (2) purchases of property and equipment from continuing operations. Adjusted net cash provided by (used in) operating activities, anon-GAAP measure, is defined by the Company as cash provided by (used in) operating activities prior to (1) payments for restructuring charges, acquisition-related costs and litigation costs and settlements, and (2) net cash provided by (used in) operating activities from discontinued operations. Adjusted diluted earnings (loss) per share from continuing operations (Adjusted EPS), a non-GAAP measure, is defined by the Company as Adjusted net income available (loss attributable) from continuing operations to Tenet Healthcare Corporation common shareholders, divided by the weighted average primary or diluted shares outstanding in the reporting period. Adjusted net income available (loss attributable) from continuing operations to Tenet Healthcare Corporation common shareholders, a non-GAAP measure, is defined by the Company as net income available (loss attributable) to Tenet Healthcare Corporation common shareholders before (1) income (loss) from discontinued operations, (2) gain (loss) from early extinguishment of debt, (3) litigation and investigation (costs) benefits, net of reinsurance recoveries, (4) net gains (losses) on sales, consolidation and deconsolidation of facilities, (5) impairment and restructuring charges and acquisition-related costs, (6) income (loss) from divested and closed businesses and (7) the associated impact of these items on taxes and noncontrolling interests. Litigation and investigation costs do not include ordinary course of business malpractice and other litigation and related expenses. The Company believes the foregoingnon-GAAP measures are useful to shareholders and analysts because they present additional information on the Company’s financial performance. Shareholders, analysts, Company management and the Company’s Board of Directors utilize thesenon-GAAP measures, in addition to GAAP measures, to track the Company’s financial and operating performance and compare the Company’s performance to its peer companies, which utilize similarnon-GAAP measures in their The Company believes that Adjusted EBITDA is a useful measure, in part, because certain shareholders and analysts use both historical and projected Adjusted EBITDA, in addition to other GAAP andnon-GAAP measures, as factors in determining the estimated fair value of shares of the Company’s common stock. Company management also regularly reviews the Adjusted EBITDA performance for each operating segment. The Company does not use Adjusted EBITDA to measure liquidity, but instead to measure operating performance. The Company uses, and believes shareholders and analysts use, Adjusted Free Cash Flow as a supplemental measure to analyze cash flows generated from operations because the Company believes it is useful to shareholders in evaluating
Appendix A: Non-GAAP Financial Measures Thesenon-GAAP measures may not be comparable to similarly titled measures reported by other companies. Because these measures exclude many items that are included in our financial statements, they do not provide a complete measure of
Tenet Health TENET HEALTHCARE CORPORATION Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice |