☐ | Preliminary Proxy Statement | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
☒ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material under Rule 14a-12 |
☒ | No fee required. |
☐ | Fee paid previously with preliminary materials. | |||
☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and0-11. | |||
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TenetHealth2022NOTICE OF ANNUAL MEETINGAND PROXY STATEMENTA COMMUNITY BUILT ON ICARE I
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Dear Fellow Shareholders,
We are pleasedIn 2022, Tenet delivered a solid financial performance, continuing to report thatdemonstrate disciplined management and strong operational execution to drive long-term value for our shareholders. Our team effectively navigated a dynamic operating environment with further COVID related disruptions and inflationary pressures. Our consistent operating performance and deleveraging over the last several years has increased our ability to generate stronger free cash flow. Underpinning this is a steadfast commitment to excellence in 2021, we improved performance, grew earnings, enhanced cash flow,compliance and continued to grow our mix of high margin ambulatory care. The results demonstrate a continued positive trajectory despite the hurdles of COVID 19quality and other external pressures. It solidifies us as an action-oriented company that has grown earnings and improved margins consistently and is strategically positioned for continued growth and returns further stabilizing and strengthening your company. We are pleased to have the opportunity to share some details about this progress, as well as the steps we continue to take to support a positive trajectory.
The primary drivers of our success in 2021 were set into action four years ago as part of an ambitious transformation plan. We remained steadfast in these key fundamental changes that enabled us to perform on a more consistent and sustainable basissafety as we faced unknown challengescontinually enhance services in our communities.
We finished 2022 strong with COVID-19 and other variables throughout 2021. The foundation we have been building allowed the enterprise to maintain a clear and unobstructed vision as it addressed the pandemic while continuing to execute the transformational blueprint.
The enterprise, overall, significantly exceededfourth quarter results consistent or above the expectations of the market, as well as our own expectations allowing us to raise Adjusted EBITDA Outlook a recordwe set for all three times during the year.business segments. This was driven by increased volumes and excellent cost management. We also produced significantdelivered strong cash flow in 2021, consistent2022, congruent with the increasing value of the key parts of our business.
While these performance statistics are very important, Most importantly, we equally viewed the strategic vision as a guide for our forward steps. We remained focused on the transformation of Tenet into mucha high-performing, diversified healthcare services company. We continued to expand our industry-leading ambulatory surgery business and increased our higher acuity, specialty care services.
Tenet is well-positioned to continue executing our strategic focus that was set into action several years ago as part of a transformative strategy. Let me provide some highlights.
USPI remains a distinctive, industry-leading ambulatory surgery platform that we continue to scale. In 2022, USPI maintained its track-record for delivering 4 to 6% annual, same-facility revenue growth, a testament to higher acuity growth. For example, total joint cases grew by over 13% in 2022 relative to 2021. USPI’s M&A engine, under the Tenet umbrella, continues to be an industry-leading differentiator, with 45 centers added to the portfolio in 2022. We intend to invest approximately $250 million in ambulatory M&A and de novo center development each year, and we have a robust pipeline to support that level of investment.
The hospital portfolio demonstrates consistency in performance and continues to transform. In 2022,our operators effectively managed contract labor costs while balancing access to care and improving clinical quality and patient safety metrics. We have real-time, data-driven management systems that continue to enable operational excellence. We continue to enhance high-acuity clinical programs by continuing to invest in cardiovascular, neurosciences, surgical services, NICU and trauma across markets. Additionally, we opened a new 100-bed, state-of-the-art hospital in Fort Mill, South Carolina.
Conifer maintains favorable performance and expands its commercial pipeline. In 2022, Conifer maintained a nearly 28% Adjusted EBITDA margin while also growing third-party customer revenue by 10%. This was supported by Conifer’s performance on cash collections, coding quality, and other key metrics for its clients. We continue to optimize the efficiency and effectiveness of Conifer’s revenue cycle management services through automation and offshoring. Additionally, we continue to see increasing sales activity from our reinvestment in Conifer’s commercial capabilities.
Tenet continues to foster an ecosystem of physicians with a shared commitment to excellence. We continue to attract and retain a network of locally, regionally, and nationally recognized physicians who share our commitment to compliance, quality and safety, and patient experience. In 2022, we welcomed more than 200 new physicians across medical and surgical specialties to our employed physician group. USPI also continued to increase the number of physician partners, as well as overall active medical staff.
Tenet continues to embrace a hospital company, ensuringdiverse workforce that represents the communities we serve. We have continued to invest in our workforce with increased and competitive pay, bonus programs, and incremental benefits. Senior administrative and clinical leaders, including physician leaders, across our portfolio are engaged in retention and recruitment efforts which are yielding positive results. Nursing hires increased in 2022 over 2021. Additionally, both nurse turnover and overall turnover continued to improve throughout 2022. We remain steadfast in our goal of building a more balanced and sustainable economic engine while continuing to provide the most effective and efficient offering tohigh-caliber, diverse workforce that represents the communities we serve with lower cost ambulatory options. We significantly scaled USPI even further by acquiring ownership interests in 86 ambulatory surgery centers from SurgCenter Development (SCD) and have the exclusive optionare committed to partner with SCD on the future development of at least 50 de novo centers over a period of five years. This complements additional ambulatory strategic joint ventures with leading physicianscaring for patients.
Environmental, Social, and health systems thatGovernance (ESG) continues to be purpose-driven. We continue to form a strong and growing core of USPI. We expect strong returns from these high-caliber investments.
Our hospital segment, which we have appropriately trimmed over the last 4 years, remains a leader in acute care driving very strong performance in 2021, with nearly all markets exceedingadvance our expectations for the year. We generated high patient acuity from investments in clinical technology and service line enhancements. Our operators maintained very effective cost management while confronting difficult COVID-related staffing challenges, making real-time adjustments using our analytics platform. We furthered efforts to enhance access to care, including construction projects for new hospitals and medical campuses based on data driven decisions in growth markets and service lines that are needed in these communities. Importantly, we purposely expanded our ecosystem of high-quality physicians across neurosciences, cardiovascular, musculoskeletal and other surgical services. Our hospital segment has transformed from average performance to a strong contributor in the enterprise.
Our multi-year turnaround at Conifer has resulted in significant margin improvement of over 1,000 basis points since 2017. We continued to build on our progress with revamped commercialization efforts, new sales talent and technology, a focus on point solutions services and efficiencies through our Global Business Center. Based on ongoing shareholder value creation opportunities and improved business fundamentals, we announced on March 1, 2022, that we will no longer pursue a spinoff of Conifer. We believe that building on our progress with Conifer as a part of Tenet will provide greater returns for our shareholders.
Looking ahead, we are focused on the continued execution at the tactical and strategic levels to continue delivery of additional value to our shareholders. This is centered around five principles:
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We believe that we can only achieve our objectives with a high-performance culture. We remain committed to empowering our people, regardless of their role or tenure, to engage in improving our operations with measurable results. And equally ensuring we continue to evolve in offering nurses a vibrant and growing clinical environment to do their work and develop their own skills and competencies.
We recognize the need to be purpose-driven in making a positive impact that complements our operational responsibilities built on an overarching goal to create a better, more sustainable path for future generations. We advanced our agenda as it relates to programs that support the key tenets of environmental, socialESG, with focus and Board oversight. In 2022, we advanced our diversity recruitment and hiring approach, continued to deploy enterprise-wide inclusive culture training, progressed hospital energy management programs, and maintained strong corporate governance (ESG)policies and formed a new Board level oversight committee specificpractices to protect the long-term interests of our expanded commitment to the principles embedded in ESG to help meet our goals.shareholders. Our 20222023 ESG report will capture real life profilesshare details of the steps we are taking to foster a diverse and inclusive culture, strengthen the health of our communities, protect the planet, lead with integrity, and apply sound governance. While we have made strong improvements in our Social and Governance areas, including a stronger refreshed and diverse Board of Directors in the last several years, we acknowledge that, while we are not major contributors to environmental risk, we are still actively shaping priorities to improve even further. We are balancingbalance the needs of our patients with the goals of improved climate sustainability, lead with integrity, and working onapply sound governance.
Leadership remains committed to a high-performance culture. In 2022, we lost our former Executive Chairman, Ron Rittenmeyer. As many of you know, Ron was deeply committed to Tenet and ensured a seamless management transition which was largely completed in late 2021. We have assembled a high-performing leadership team that will continue to drive strategic priorities and the common ground between them ensuringculture of quality, safety and compliance.
I am enthusiastic about the trajectory of our new facilities meet improved standards in this area while we develop programs to improve our existing operations. Our commitment to improvement and progress remains critical to our continued future success.
The Tenet Healthcare of 2021 reflects a stronger, resilient enterprise, that is energized by the opportunities ahead. Wewell-positioned businesses. I would like to express ourextend my sincere gratitude to all our physicians, caregivers, whose resolve and commitment define Tenet as an organization. And we equally appreciatestaff for their unwavering commitment. I continue to be inspired by the people I meet who have found their calling to provide innovative and compassionate care for our communities. I am grateful for the support of our shareholders our communities, and our partners as we continue to fulfill our mission. We are proud to serve you.
Respectfully,
Saum Sutaria, M.D. Chief Executive Tenet Healthcare |
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TENET HEALTHCARE CORPORATION
14201 Dallas Parkway
Dallas, Texas 75254
(469) 893-2200
Notice of Annual Meeting of Shareholders to be held on Friday,Thursday, May 6, 202225, 2023
March 25, 2022April 14, 2023
To our Shareholders:
Our 20222023 Annual Meeting of Shareholders (the “Annual Meeting”) will be held on May 6, 2022,25, 2023, at 8:00 a.m. Central Time. You will be able to attend and participate in the Annual Meeting by registering at www.proxydocs.com/THC. After you complete your registration, you will receive further instructions via email, including a unique link that will provide you access to the Annual Meeting, where you will be able to listen to the meeting live, submit questions and vote. Our Annual Meeting is being held for the following purposes:
1. | To elect the |
2. | To vote, on an advisory basis, to approve the Company’s executive compensation. |
3. | To vote, on an advisory basis, on the frequency of future advisory votes to approve the |
4. | To ratify the selection of Deloitte & Touche LLP as our independent registered public accountants for the year ending December 31, |
5. | To vote on a shareholder proposal requesting a report on patients’ right to access abortion in emergencies, if properly presented at the meeting. |
We will also consider and take action on any other business that properly comes before the meeting or any adjournment or postponement of the meeting.
Only shareholders of record of our common stock at the close of business on March 11, 202228, 2023 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.
Thomas W. Arnst |
Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary |
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Shareholders to be held on May 6, 202225, 2023
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, 2021,2022, are available at www.proxydocs.com/THC.
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 registering at www.proxydocs.com/THC. We have designed the format of the Annual Meeting to provide shareholders with 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.
2022 Proxy Statement
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Proxy Statement Summary | 1 | |||
Proposal 1 - Election of Directors | ||||
Corporate Governance and Board Practices | ||||
Commitment to Sound Corporate Governance Policies and Practices | ||||
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Communications with the Board of Directors by Shareholders and Other Interested Parties | 26 | |||
Director Compensation | 27 | |||
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Executive Officers | 30 | |||
Securities Ownership | 31 | |||
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Compensation Discussion and Analysis | 33 | |||
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Human Resources Committee Report |
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.
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Below are highlights of certain information in this Proxy Statement. Please refer to the complete Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 20212022 before you vote.
20222023 ANNUAL MEETING OF SHAREHOLDERS
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Date and Time:
at 8:00 a.m. Central Time
| Place: Online by registering at www.proxydocs.com/THC
| Record Date: March
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Information:
The Notice of Internet Availability, this Proxy Statement and related proxy materials are being mailed or made available to shareholders on or about March 25, 2022.April 14, 2023. Copies of this Proxy Statement, the Company’s proxy card and our Annual Report on Form 10-K for the year ended December 31, 2022 are available at www.proxydocs.com/THC.
VOTING MATTERS AND BOARD RECOMMENDATIONS
Proposals | Board’s Recommendation | Page | ||||||||||
Proposal |
| Board’s Recommendation | Page | |||||||||
1 |
Election of Eleven Director Nominees |
Vote FOR Each Nominee |
7 |
Election of Ten Director Nominees |
Vote FOR Each Nominee |
6 | ||||||
2 |
Advisory Approval of the Company’s Executive Compensation |
Vote FOR |
69 |
Advisory Approval of the Company’s Executive Compensation |
Vote FOR |
71 | ||||||
3 |
Approval of the First Amendment to the Tenet Healthcare 2019 Stock Incentive Plan |
Vote FOR |
70 |
Advisory Approval of the Frequency of Future Advisory Votes to Approve the Company’s Executive Compensation |
Vote ONE YEAR |
72 | ||||||
4 |
Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accountants for the Year Ending December 31, 2022 |
Vote FOR |
81 |
Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accountants for the Year Ending December 31, 2023 |
Vote FOR |
75 | ||||||
5 |
Shareholder Proposal on Requesting a Report on Patients’ Right to Access Abortion in Emergencies |
Vote AGAINST |
76 |
1 |
Proxy Statement Summary
Business Overview
Tenet is a diversified healthcare services company focused on our mission to provide quality, compassionate care in the communities we serve. At December 31, 2021,2022, Tenet had approximately 101,000102,400 employees delivering and supporting care through our three business segments — Hospital Operations and other, Ambulatory Care and Conifer. We operate an expansive network across the country, with 6061 hospitals and approximately 550over 575 other healthcare facilities, including surgical hospitals, ambulatory surgery centers, imaging centers, off-campus emergency departments and micro-hospitals. Through our subsidiary United Surgical Partners International, Inc. (USPI), Tenet operates a leading ambulatory surgery platform that includes partnerships with over 50 prominent health systems.system partners. In addition, our Conifer Health Solutions, LLC subsidiary provides comprehensive end-to-end and focused-point business process services, including hospital and physician revenue cycle management, patient communications and engagement support, and value-based care solutions, to hospitals, health systems, physician practices, employers and other clients.
All data presented is as of or for the year ended December 31, 2021, as applicable; number of USPI ASCs and surgical hospitals includes 15 facilities in development at year-end.
Strategic Transformation
Since the end of 2017, Tenet has significantly transformed its business. We have strengthened our governance and leadership, and we reinvigorated the operating performance of each of our business segments. In addition, we have fostered a strong company culture that is more focused on executing our mission in alignment with our core values of compliance, quality and safety, compassion and inclusivity. These values allow us to best meet the unique needs of the communities we serve.
Operational improvements include the development and application of sharper real-time analytics, and the repositioning of our hospital portfolio to focus more on highly complex, highly acute care while concentrating capital deployment on our fast-growing, less capital-intensive ambulatory surgery business. Our goal is to continue to increase the percentage of Adjusted EBITDA provided by our ambulatory surgical business.
Through these changes, we have become a more diversified and resilient enterprise with a renewed focus on enhancing shareholder value.
Proxy Statement Summary
Repositioned Care Delivery Portfolio
A critical element of our strategy remains the ongoing transformation of our care delivery offerings. We continue to invest strategically in USPI, establishing new ownership positions in approximately 16045 ambulatory surgery centers between December 2020 and the end of 2021. This included two transformative transactions with SurgCenter Development and other high-quality deals with health systems, physicians and other partners.
in 2022. We also continue our strategic deployment of capital to enhance high-acuity hospital services. Our efforts include capacity expansion, new construction in high-growth, attractive locations and investments in innovation.
Across our hospitals, USPI and our physician practices,comprehensive network of facilities, we are focused on introducing new services at a lower cost and offering patients excellent service in the most clinically appropriate setting.
The evolution of our care delivery locations since 2017 reflects our strategy to invest strategically in USPI. Our focus is on markets where we can provide a strong value to payers and consumers.
Strong Long-Term Performance
Note: Includes acute care hospitals and USPI surgical facilities we operate, as well as de novo and other facilities in which we have an ownership interest from the recently completed SCD transaction
Proxy Statement Summary
Our Resilience Through COVID-19
As COVID-19 continued to evolve in 2021, our company remained on the front lines, responding to surges, treating patients in need of care and managing through the effects of the pandemic. Our continuing transformation has played a major role in our ability to respond effectively, pivot immediately and provide companywide clarity on necessary actions. Our ability to perform under difficult and constantly evolving circumstances underscores the strength and commitment of our people and our resilience in managing through the unknown.
Our pandemic protocols are informed by CDC’s evolving recommendations and available scientific data to break the chain of transmission. As an enterprise, we have maintained a constant, clear stream of communication organized by our Incident Command Center and supported by real-time data across our facilities. Led by top clinicians, our infection prevention experts and emergency management professionals, our Incident Command Center has served as the hub of our response effort. This includes close coordination with every hospital and care facility and thoughtful calibration of strategy. The Incident Command Center also works to bring operators and support staff together to help ensure consistency in applying CDC guidelines, while providing a channel to share best practices, quickly triage issues and address emerging matters.
Continuing the Delivery of Vital Healthcare
Every day, but especially during this challenging time, our team members have led by example and done what they have been called upon and trained to do – with honor and professionalism.
Proxy Statement Summary
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Governance HighlightsOverview of Director Nominees
Name and Occupation | Age | Director Since | Independent | Other Public Boards | Committee Memberships | |||||||||||||
AC | ESG | HR | NCG | QCE | ||||||||||||||
J. Robert Kerrey Chairman, Tenet Healthcare; Managing Director, Allen & Company; Former U.S. Senator | 79 | 2012* | Yes | Chair | ✓ | |||||||||||||
James L. Bierman Former President and CEO, Owens & Minor, Inc. | 70 | 2017 | Yes | 2 | ✓ | Chair | ||||||||||||
Richard W. Fisher Former President and CEO, Federal Reserve Bank of Dallas | 74 | 2017 | Yes | 1 | ✓ | Chair | ✓ | |||||||||||
Meghan M. FitzGerald Adjunct Professor, Columbia University | 52 | 2018 | Yes | 1 | ✓ | Chair | ✓ | |||||||||||
Cecil D. Haney Admiral, U.S. Navy (Ret.) and Former Commander of U.S. Strategic Command and U.S. Pacific Fleet | 67 | 2021 | Yes | 1 | ✓ | ✓ | ||||||||||||
Christopher S. Lynch Former National Partner in Charge of the Financial Services practice at KPMG, LLC | 65 | 2019 | Yes | 1 | ✓ | ✓ | ||||||||||||
Richard J. Mark Former Chairman and President, Ameren Illinois Company | 67 | 2017 | Yes | ✓ | ✓ | ✓ | ||||||||||||
Tammy Romo Executive Vice President and CFO, Southwest Airlines Co. | 60 | 2015 | Yes | Chair | ✓ | |||||||||||||
Saumya Sutaria, M.D. CEO, Tenet Healthcare | 50 | 2020 | No | |||||||||||||||
Nadja Y. West, M.D. Lieutenant General, U.S. Army (Ret.) and 44th Surgeon General of the U.S. Army | 62 | 2019 | Yes | 2 | ✓ | ✓ | ✓ |
AC: Audit Committee ESG: Environmental, Social and Governance Committee |
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QCE: Quality, Compliance & Ethics Committee ✓ = Member |
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Board Refreshment
In response to specific shareholder feedback, the Board accelerated its refreshment process in the fall of 2017, recruiting eight independent directors since that time. On November 4, 2020, the Board appointed the Company’s then-President and Chief Operating Officer, and current Chief Executive 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 with his leadership and experience, particularly in the areas of cybersecurity and systems planning. These new directors have brought a diversity of viewpoints, approaches and experiences to the Board as it addresses risks and supports the Company’s long-term strategies.
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 active shareholder engagement. In recent years, the Board has further enhanced the Company’s governance practices, including amending our bylaws in 2018 to provide 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 Environmental, Social and Governance (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 continue to align 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.
Proxy Statement Summary
Director Nominees’ Experience and Diversity
Having an independent Board Characteristicsis a core element of our governance philosophy. Under our Corporate Governance Principles, at least two-thirds of the Board must consist of independent directors. Of our 10 Board nominees, 9 are independent in accordance with the requirements set forth in our Corporate Governance Principles. Moreover, our Board believes that having a diverse mix of directors with complementary qualifications, expertise and attributes is essential to meeting its oversight responsibility. The following highlights the core skills and experience of our Board nominees:
ESG at Tenet
ESG Framework
We are a community built on care. As healthcare providers, we care for patients during some of the most important moments in their lives. While many elements of ESG are inherently part of our fabric, our behaviors demonstrate that supporting ESG is also a decision to act and advocate for the best interests of our communities, planet and society as a whole.
We recognize that our business and social purposes are inextricably linked. We believe our people, our operations, our facilities management and our governance must align properly to generate sustainable business practices for the betterment of all stakeholders we serve. While our responsibility lies, first and foremost, with the delivery of excellent medical care that is safe and compassionate, we equally embrace our commitment to protecting the environment and fostering an inclusive culture.
We continue to refine our approach to the areas that we believe are in the best interests of our stakeholders and our business, while seeking ongoing improvement in the following ESG priority areas:
Environmental | ||
● | Energy and natural resources conservation | |
● | Environmental and supply chain sustainability | |
● | Waste management | |
● | Climate change | |
impacts |
Social | ||
● | Diversity and inclusion | |
● | Access to quality care and clinical innovation | |
● | Community support | |
● | Employee engagement | |
● | Employee health, safety and well-being | |
● | Personal and | |
professional growth |
Governance | ||
● | Sound governance practices | |
● | Board diversity | |
● | Accountability | |
● | Ethics and | |
● | Active shareholder | |
engagement |
ESG Highlights
Included below are highlights of our ESG programs and practices.
2023 PROXY STATEMENT | 23 |
Corporate Governance and Board Practices
Our Environment
OUR ENVIRONMENT | •Improving our impact on the environment through dedicated programs we are implementing | |||||
We believe that our focus on environmental sustainability, with the objective of reducing costs and improving sustainability of our operations, provides a strategic benefit. We continue to advance plans to create further efficiencies in our operations and reduce our emissions.
We conducted an enterprise-wide environmental materiality assessment in 2022 to identify and evaluate potential environmental issues that could affect our business and/or our stakeholders. We plan to utilize the findings from the environmental materiality assessment to better inform our ESG strategy. The outputs of our materiality assessment will help us address top priorities across our value chain.
We are continuing to actively shape priorities and elevate our efforts in sustainability, including:
• | taking steps to measure the Company’s carbon footprint and identify reduction opportunities; |
• | accelerating the pace of LED lighting conversions across our hospitals; |
• | increasing our focus on sustainable design for new construction; |
• | continuing to partner with HealthTrust, our national group purchasing organization, to increase the sustainability of our supply chain; |
• | working to help ensure sustainability strategies are consistent with other organizations in the sector; |
• | expanding our integrated waste management program and streamlining methods for electronic waste disposal; and |
• | promoting sustainability awareness across the enterprise through communications and engagement. |
Our Communities
OUR COMMUNITIES | •Providing quality healthcare in a culturally sensitive manner while supporting causes that matter to our communities | |||||
Our care sites nationwide are focused on making positive impacts in their local communities in different ways. Our philanthropic efforts are primarily centered around strengthening the health of our communities. Our efforts to give back to our neighbors reflect our mission. Last year, we supported programs that, among other things, advanced education for underrepresented groups, fought hunger and promoted healthcare awareness.
24 |
Corporate Governance and Board Practices
Our People
OUR PEOPLE | •Supporting our people through career advancement opportunities and a culture that embraces diversity and inclusion | |||||
In general, we seek to attract, develop and retain an engaged workforce, cultivate a high-performance culture that embraces data-driven decision-making, and improve talent management processes to promote diversity and inclusion. To that end, we offer:
• | a competitive range of compensation and benefit programs designed to reward performance and promote well-being; |
• | opportunities for continuing education and advancement through a broad range of clinical training and leadership development experiences, including in-person and online courses and mentoring opportunities; |
• | a supportive, inclusive and patient-centered culture aligned with our values and based on respect for others; |
• | company-sponsored efforts encouraging and recognizing volunteerism and community service; and |
• | a code of conduct that promotes integrity, accountability and transparency, among other high ethical standards. |
Our diversity and inclusion (D&I) efforts prioritize the following:
• | a workforce and talent pipeline that reflects the communities we serve; |
• | a leadership team that is comprised of and elevates underrepresented groups; |
• | training, education and engagement to proactively address the best ways to nurture an inclusive and diverse culture; and |
• | a top-down, bottom-up approach to ensure active involvement from leadership and employees across the enterprise. |
Governance
OUR GOVERNANCE | •Operating our Company effectively across all elements | |||||
We believe our ESG efforts are most effective when embraced by leadership and activated by employees across the enterprise. In 2021, the Board formed an ESG Committee with a primary purpose to oversee and support our commitment to environmental, social and governance initiatives. Tenet’s ESG Committee consists entirely of independent directors and provides input and guidance to help establish the Company’s overall approach to ESG matters.
Tenet is committed to maintaining corporate governance policies and practices that protect the long-term interests of our shareholders and promote Board and management accountability. Our Board recognizes that this requires us to continually review and refine our corporate governance to align with evolving market practices and the best interests of our Company and shareholders. The corporate governance practices designed and implemented by the Board also help us operate effectively while remaining true to our mission.
Additional information regarding our approach to and progress in connection with ESG matters can be found in our most recent ESG Report, which is available under the “Financials, SEC Filings & ESG” section on our website at www.tenethealth.com.*.
2023 PROXY STATEMENT | 25 |
Corporate Governance and Board Practices
Policies on Ethics and Conduct
Code 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 Code of Conduct and conduct our business 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 Code 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 Code of Conduct is published in the “Our Commitment To Compliance” section under the “About” heading on our website at www.tenethealth.com*. In addition, amendments to the Code of Conduct and any grant of a waiver from a provision of the Code of Conduct requiring disclosure under applicable SEC and NYSE rules will be disclosed at the same location as the Code of Conduct on our website at www.tenethealth.com*.
As part of the program, we provide compliance training at least annually to every employee, as well as to our Board and certain physicians and contractors.
Quality, Compliance and Ethics Program Charter
We operate our ethics and compliance program pursuant to a Quality, Compliance and 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 Code 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 at 1-800-8ETHICS, 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 and Ethics Program Charter may be found in the “Our Commitment To Compliance” section under the “About” heading on our website at www.tenethealth.com*.
Certain Relationships and Related Person Transactions
Our written Code of Conduct requires 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 Code of Conduct is published on our website at www.tenethealth.com*, and a description of our policies on ethics and conduct can be found above. In the event that Tenet or its subsidiaries is a participant in a transaction in which any director, executive officer, holder of more than 5% of our outstanding shares or any immediate family member of any of these persons has a direct or indirect material interest, our policy is to require that any such transaction be reviewed and approved by the Governance Committee, which is composed entirely of independent directors. There were no “related person” transactions that require disclosure under the SEC rules since the beginning of our last completed fiscal year.
Communications with the Board of Directors by Shareholders and Other Interested Parties
Shareholders and interested parties may communicate with the Board of Directors, including our Chairman, by email to boardofdirectors@tenethealth.com or by writing to the Board in care of the Corporate Secretary, Tenet Healthcare Corporation, 14201 Dallas Parkway, Dallas, Texas 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 our non-employee directors by following the procedures for reporting concerns to the Audit Committee set forth in our Corporate Governance Principles, which are available under the “Governance” heading in the “Investors” section on our website at www.tenethealth.com*.
26 |
Director Compensation
The HR Committee reviews our non-employee director compensation programs each year with the assistance of the HR Committee’s independent compensation consultant. The Board considers any changes recommended by the HR Committee following its review. Following this review, in May 2022, the annual cash retainer paid to non-employee directors was increased from $95,000 to $100,000 and the value of Restricted Stock Units (RSUs) granted annually to non-employee directors was increased from $190,000 to $200,000.
Employee directors do not receive any compensation for their service as a director. All 2022 compensation for our Chief Executive Officer, Dr. Sutaria, and our former Executive Chairman, Mr. Rittenmeyer, is shown in the 2022 Summary Compensation Table on page 50.
Our 2022 annual compensation program for non-employee directors was structured as follows:
Annual Compensation Element | Amount | |||
Annual Cash Retainer | $ | 100,000 | ||
Annual Grant of RSUs | $ | 200,000 | ||
Annual Committee Chair Cash Retainers: |
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|
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• Audit Committee | $ | 25,000 | ||
• Human Resources Committee | $ | 20,000 | ||
• Nominating and Corporate Governance Committee | $ | 17,500 | ||
• Quality, Compliance & Ethics Committee | $ | 17,500 | ||
• ESG Committee | $ | 17,500 | ||
Annual Retainer for Lead Director or Non-Executive Chair: |
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|
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• 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 per in-person meeting and $1,500 per telephonic meeting attended. |
A newly appointed director receives a prorated annual RSU grant. All annual cash fees are prorated for partial year service. Directors are reimbursed for any travel expenses and other out-of-pocket costs incurred while attending meetings.
In addition to our annual director compensation program, in connection with his appointment as Chairman of the Board, Senator Kerrey was granted a one-time additional grant of RSUs in November 2022 with a grant date fair value of approximately $300,000 that will vest on December 31, 2023, subject to his continued service through such date.
2023 PROXY STATEMENT | 27 |
Director Compensation
2022 Director Compensation Table
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2)(3) | Total ($) | ||||||||||||
J. Robert Kerrey | 283,750 | 550,031 | 833,781 | ||||||||||||
James L. Bierman | 131,250 | 200,041 | 331,291 | ||||||||||||
Richard W. Fisher | 145,250 | 200,041 | 345,291 | ||||||||||||
Meghan M. FitzGerald | 135,250 | 200,041 | 335,291 | ||||||||||||
Cecil D. Haney | 121,750 | 200,041 | 321,791 | ||||||||||||
Christopher S. Lynch | 125,750 | 200,041 | 325,791 | ||||||||||||
Richard J. Mark | 129,750 | 200,041 | 329,791 | ||||||||||||
Tammy Romo | 150,750 | 200,041 | 350,791 | ||||||||||||
Nadja Y. West, M.D. | 117,750 | 200,041 | 317,791 |
(1) | Amounts shown in this column reflect the grant date fair value, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, of RSU awards granted under our stock incentive plan. Assumptions used in the calculation of these amounts are discussed in the footnotes below and/or in Note 10 to our consolidated financial statements for the year ended December 31, 2022 included in our Annual Report on Form 10-K. |
(2) | Annual RSU grants applicable to the 2022-2023 board service year valued at approximately $200,000 (or $250,000 for Senator Kerrey). We calculated the grant date fair value of the annual RSUs based on the NYSE closing price per share of our common stock on the date of grant, adjusted for a discount for illiquidity of approximately 26.5% to reflect the mandatory post-vest holding period applicable to the 2022 annual awards. On May 9, 2022, based on the NYSE closing price of $70.95 per share of our common stock (adjusted as described in the preceding sentence), each non-employee director then serving was granted 3,836 RSUs under the program, and Senator Kerrey was granted an additional 958 RSUs in respect of his service as Lead Director. We calculated the grant date fair value of the 7,325 RSUs granted to Senator Kerrey on November 3, 2022 based on the NYSE closing price of $40.96 per share of common stock (without any liquidity discount). |
(3) | All equity awards then held by our non-employee directors were fully vested as of December 31, 2022, other than 7,325 unvested RSUs held by Senator Kerrey that will vest on December 31, 2023, subject to his continued service. |
Compensation Plans Applicable to Directors
Stock Incentive Plans
Each non-employee director receives an annual award under our 2019 Stock 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. A mandatory post-vest holding period of three years is applied to these annual RSU awards, which 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).
Special RSU Deferral Plan
We adopted the Special RSU Deferral Plan to permit directors to defer the settlement of their annual RSU grants under our 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, Richard Mark was the only director who elected to defer settlement of RSU grants pursuant to the terms of the Special RSU Deferral Plan.
2006 Deferred Compensation Plan
Under our 2006 Deferred Compensation Plan (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, meeting fees and committee fees. Senator Kerrey was the only non-employee director who participated in the DCP in 2022. A more complete description of the DCP can be found under “Nonqualified Deferred Compensation—Deferred Compensation Plan” beginning on page 58.
28 |
Director Compensation
Director Stock Ownership and Retention Requirements
The Board has adopted stock ownership and retention requirements that require each non-employee director with more than one year of service on the Board to own shares of our stock. In addition, each non-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 47. As of the record date, all of our non-employee directors were in compliance with the requirements or within the applicable period to come into compliance.
2023 PROXY STATEMENT | 29 |
Executive Officers
Biographical information for the executive officers of the Company is set forth below. Biographical information for Dr. Sutaria can be found under “Nominees for Election to the Board of Directors” beginning on page 6.
Paola M. Arbour,Executive Vice President and Chief Information Officer Ms. Arbour, 59, 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, a technology consulting firm, from November 2017 to April 2018, Vice President Services Global Delivery at ServiceNow, a software company, 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. In July 2021, Ms. Arbour was appointed to the board of directors of Texas Capital Bancshares, Inc. Ms. Arbour earned her bachelor’s degree in telecommunications arts and sciences from Michigan State University. |
Thomas W. Arnst,Executive Vice President, Chief Administrative Officer, General Counsel and CorporateSecretary Mr. Arnst, 60, serves as Tenet’s Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary, where he leads enterprise Human Resources, Legal and Government Relations. He also serves as Chief Risk Officer. Prior to assuming these roles, Mr. Arnst served as Chief Administrative Officer, General Counsel and Corporate Secretary of our Conifer subsidiary. He has more than 30 years of experience working in leadership roles across healthcare, outsourcing and financial services, among other industries. Before joining Conifer in 2018, Mr. Arnst served as Chief Administrative Officer at Millennium Health. Previous positions also include Executive Vice President, Chief Administrative Officer, General Counsel, Head of Global Human Resources and Corporate Secretary at Expert Global Solutions. During his career, Mr. Arnst has also held executive leadership positions at Safety-Kleen, AmeriServe, RailTex and Ryder. He is a graduate of the University of Miami, where he received his Juris Doctor and his Master of Laws. He obtained his Bachelor of Business Administration degree in Finance from Florida Atlantic University. |
Daniel J. Cancelmi,Executive Vice President and Chief Financial Officer Mr. Cancelmi, 60, 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. |
Lisa Y. Foo,Executive Vice President, Commercial Operations Ms. Foo, 32, was appointed Tenet’s Executive Vice President, Commercial Operations in March 2022. In this capacity, Ms. Foo leads several enterprise functions including strategy, business development, marketing, data and analytics, and procurement. She previously served as Vice President, Chief Commercial and Strategy Officer from April 2019 to March 2022. Prior to that, Ms. Foo held various positions at McKinsey & Company, a global management consulting firm, including Associate Partner from 2017 to 2019 in the San Francisco office. She earned her Bachelor of Science in Biological Engineering from Massachusetts Institute of Technology. |
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Securities Ownership
Securities Ownership of Management
The table below discloses the shares, options and other securities beneficially owned by our directors and director nominees, each of our named executive officers (NEOs), and our current directors and executive officers as a group, as of March 7, 2023 (unless indicated below otherwise). No director or current executive officer has pledged any shares of our common stock.
Name | Shares Beneficially Owned(1) | |||||||||||
Shares of Common Stock(2) | Options Exercisable Within 60 Days of March 7, 2023 | Percent of Class as of March 7, 2023 | ||||||||||
Paola Arbour | 33,006 | 38,556 | * | |||||||||
Thomas W. Arnst | 21,178 | -0- | * | |||||||||
James L. Bierman | 50,038 | (3) | -0- | * | ||||||||
Daniel J. Cancelmi | 454,543 | 61,383 | * | |||||||||
Richard W. Fisher | 24,545 | (4) | -0- | * | ||||||||
Meghan M. FitzGerald | 31,587 | (5) | -0- | * | ||||||||
Lisa Foo | 12,224 | -0- | * | |||||||||
Cecil D. Haney | 10,853 | (6) | -0- | * | ||||||||
J. Robert Kerrey | 56,123 | (7) | -0- | * | ||||||||
Christopher S. Lynch | 29,916 | (8) | -0- | * | ||||||||
Richard J. Mark | 43,621 | (4) | -0- | * | ||||||||
Ronald A. Rittenmeyer | 533,081 | (9) | -0- | * | ||||||||
Tammy Romo | 57,598 | (10) | -0- | * | ||||||||
Saumya Sutaria, M.D. | 399,836 | -0- | * | |||||||||
Nadja Y. West, M.D. | 27,780 | (11) | -0- | * | ||||||||
Current executive officers and directors as a group (14 persons)(12) | 1,252,848 | (13) | 99,939 | 1.3 | % |
* | 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 each non-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 grant. |
(3) | Includes 23,487 RSUs granted under our stock incentive plans. |
(4) | Includes 23,545 RSUs granted under our stock incentive plans. |
(5) | Includes 20,770 RSUs granted under our stock incentive plans. |
(6) | Includes 10,853 RSUs granted under our stock incentive plans. |
(7) | Includes 31,442 RSUs granted under our stock incentive plans. |
(8) | Includes 21,938 RSUs granted under our stock incentive plans. |
(9) | The information is as of October 1, 2022, the date of Mr. Rittenmeyer’s resignation due to personal health reasons. Includes 15,000 shares held by Mr. Rittenmeyer’s spouse. |
(10) | Includes 20,246 RSUs granted under our stock incentive plans. |
(11) | Includes 21,501 RSUs granted under our stock incentive plans. |
(12) | Does not include securities owned by Mr. Rittenmeyer, who resigned effective October 1, 2022. |
(13) | Includes RSUs granted to non-employee directors under our stock incentive plans. |
2023 PROXY STATEMENT | 31 |
Securities Ownership
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 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 7, 2023 | ||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 11,498,067 | (1) | 11.02 | % | ||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 | 11,304,003 | (2) | 10.83 | % | ||||
Glenview Capital Management, LLC 767 Fifth Avenue, 44th Floor New York, NY 10153 | 8,896,111 | (3) | 8.53 | % | ||||
Harris Associates L.P. 111 S. Wacker Drive, Suite 4600 Chicago IL 60606 | 5,463,374 | (4) | 5.24 | % |
(1) | Based on a Schedule 13G/A filed with the SEC on March 8, 2023 by BlackRock, Inc., on behalf of itself and its named subsidiaries and affiliates (collectively, “BlackRock”), as of February 28, 2023. BlackRock reported sole voting power with respect to 11,163,024 of the shares indicated above and sole dispositive power with respect to all of the shares indicated above. |
(2) | Based on a Schedule 13G/A filed with the SEC on February 9, 2023 by The Vanguard Group, Inc., on behalf of itself and its named subsidiaries and affiliates (collectively, “Vanguard”), as of December 31, 2022. Vanguard reported sole voting power with respect to 0 of the shares indicated above, shared voting power with respect to 50,310 of the shares indicated above, sole dispositive power with respect to 11,149,102 of the shares indicated above and shared dispositive power with respect to 154,901 of the shares indicated above. |
(3) | Based on a Schedule 13D/A filed with the SEC on February 14, 2023 by Glenview Capital Management, LLC and its named subsidiaries and affiliates (collectively, “Glenview”), and Lawrence M. Robbins, as of December 31, 2022, and additional information available to the Company as described in this footnote. Glenview Capital Management, LLC serves as an investment manager to various Glenview funds, and Mr. Robbins is the Chief Executive Officer of Glenview Capital Management. Glenview and Mr. Robbins reported shared voting and investment power with respect to all of the shares indicated above. |
(4) | Based on a Schedule 13G/A filed with the SEC on February 14, 2023 by Harris Associates L.P. (“Harris”), as of December 31, 2022. Harris reported sole voting power with respect to 2,836,239 shares and sole dispositive power with respect to all of the shares indicated above. |
32 |
Compensation Discussion & Analysis
This Compensation Discussion and Analysis (CD&A) describes our executive compensation programs, our process for determining executive compensation and the compensation paid to the following NEOs for 2022:
Named Executive Officer | Title | |
Saum Sutaria | Chief Executive Officer | |
Dan Cancelmi | Executive Vice President and Chief Financial Officer | |
Tom Arnst | Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary | |
Lisa Foo | Executive Vice President, Commercial Operations(1) | |
Paola Arbour | Executive Vice President and Chief Information Officer | |
Ron Rittenmeyer | Former Executive Chairman(2) |
(1) | Ms. Foo was promoted to Executive Vice President, Commercial Operations effective March 1, 2022. |
(2) | Mr. Rittenmeyer resigned as Executive Chairman and a member of our Board due to personal health reasons effective October 1, 2022. |
CD&A Table of Contents
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2022: Advancing our Strategy and Mission to Expand Quality, Compassionate Care | 34 | |||
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2023 PROXY STATEMENT | 33 |
Compensation Discussion & Analysis
Overview
2022: Advancing our Strategy and Mission to Expand Quality, Compassionate Care
In 2022, Tenet delivered solid operational results in the face of a dynamic and challenging environment. As the nation emerges from the COVID-19 pandemic, stresses on the workforce and the supply chain continue to evolve. Our strong operational execution during 2022 underscores the resolve of our colleagues across the enterprise and our focus on providing quality, compassionate care to the communities we serve. We continued to expand our Ambulatory Care segment through ongoing organic growth, accretive M&A and de novo development. We continue to enhance high acuity services across our acute care facilities, including cardiovascular, neurosciences, surgical services, trauma, and women’s health. At Conifer, we increased revenue over 2021 revenue and delivered strong margins by maximizing opportunities through automation and improving the effectiveness and efficiency of Conifer’s services.
Operational Excellence Our results in 2022 demonstrate our focus on operational excellence. We advanced our high acuity strategy in the hospital business, leveraging data and analytics to manage labor costs. We continue to drive operational efficiency across the portfolio and deliver attractive margins across each of our businesses. | Financial Performance We delivered solid results across our portfolio in 2022, notwithstanding a challenging industry environment with unprecedented increases in contract labor costs and continued pressures from COVID spikes. Adjusted EBITDA margins remained strong due to our operational focus and effective execution. | Expanded Ambulatory Care We acquired 45 ambulatory care centers, highlighted by the acquisition of 22 centers associated with United Urology Group and the opening of de novo centers through a continued focus on business development. Additionally, we now own the full 100% interest in USPI’s voting stock by acquiring Baylor Scott and White’s interest during 2022. | ||||
Refinanced and Retired Debt During the year ended December 31, 2022, we retired approximately $2.6 billion aggregate principal amount of certain of our senior unsecured notes and senior secured first lien notes. These notes were retired using proceeds from the June 2022 sale of $2.0 billion aggregate principal amount of 6.125% senior secured notes due 2030 and cash on hand. These transactions reduced future annual cash interest expense payments by approximately $60 million. | Commitment to ESG We furthered our commitment to environmental, social, and governance (ESG) values and goals in 2022. The goal of our ESG initiatives is to create a better, more sustainable path for future generations. In 2022, we conducted our enterprise-wide environmental materiality assessment to identify and evaluate potential environmental issues that could affect our business and/or our stakeholders. We also continued the implementation of our hospital energy management program and enhanced access to high acuity specialty care in our communities. | Talent Development Talent development remains a critical aspect of our focused strategy. We attracted external talent to provide outside perspectives and new thinking. Additionally, we continued to train and grow our existing talent base through a variety of programs designed to promote strong performance, provide greater opportunities, and grow our business. Our commitment to underrepresented populations to further our objective of fostering an engaging culture that represent the markets we serve continues. 55% of newly hired employees in 2022 self-identified as racially or ethnically diverse. |
34 |
Compensation Discussion & Analysis
2022 Compensation Program Highlights
2022 Annual Incentive Plan Payouts | In February 2023, the HR Committee approved final payouts under our 2022 Annual Incentive Plan, with corporate performance achieved at 80% of target, and final payouts for our NEOs ranging from 88% to 104% of target payout levels after applying each officer’s individual performance multiplier. | |
2022 LTI Program Awards | In February 2022, the HR Committee approved 2022 Long-Term Incentive (LTI) awards for executive officers comprised of the following restricted stock units (“RSUs”): • 50% time-based awards vesting ratably over three years, and • 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 total shareholder return (“Relative TSR”) performance modifier. | |
2020 Performance- Based RSUs | In February 2023, the HR Committee certified final achievement of the 2020 performance-based RSUs granted to the NEOs (other than Mr. Rittenmeyer and Mr. Arnst), with such awards earned at 159.7% of target as a result of exceeding the maximum target for each applicable performance goal for 2020 and 2021, exceeding the targeted Adjusted EPS goal for 2022 and below threshold achievement for the Adjusted Free Cash Flow Less Cash NCI goal for 2022. The HR Committee also certified final achievement of Mr. Arnst’s 2020 performance-based RSUs, which were based on Conifer performance for the first year of the performance period and Tenet performance for the final two years of the performance period, with such awards earned at 127.3% of target. The payout was a result of exceeding the target for the Conifer EBITDA goal for 2020, exceeding the threshold for the Conifer Total Revenue and Conifer Cash Collection goals for 2020, exceeding the maximum target for each applicable performance goal for 2021, exceeding the targeted Adjusted EPS goal for 2022 and below threshold achievement for the Adjusted Free Cash Flow Less Cash NCI goal for 2022. |
* | 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. |
2022 Say-on-Pay Vote
Our annual Say-on-Pay vote is one of our opportunities to receive feedback from shareholders regarding our executive compensation program, and the HR Committee takes the result of this vote into account when shaping the compensation program for the Company’s NEOs. At our 2022 Annual Meeting, the Say-on-Pay proposal received over 96% support, demonstrating increased, strong support for our executive compensation program. In light of this continued shareholder support, our HR Committee did not make any changes to the structure of our executive compensation program as a result of the 2022 vote. The HR Committee will continue to consider shareholder feedback, input from our independent compensation consultant and the outcomes of future Say-on-Pay votes when assessing our executive compensation programs and policies and making compensation decisions for our NEOs.
2023 PROXY STATEMENT | 35 |
Compensation Discussion & Analysis
Compensation Elements Link Pay with Performance
The following table outlines the primary components of our NEOs’ 2022 compensation packages:
Element | Description | Purpose | ||
Base Salary | • Fixed cash compensation set annually • Based on market data, individual performance, internal pay equity and the scope and complexity of the officer’s role | • Attracts and retains talented executives with competitive fixed pay | ||
Annual Incentive Plan | • Compensation tied to achievement of annual performance goals • Target award amounts increase with executive’s level of influence on business outcomes and reflect individual performance and internal equity | • Motivates and rewards executives for meeting or exceeding annual goals that drive long-term growth • Challenging, objective performance metrics set annually based on the Company’s business plans | ||
Long-Term Incentive Compensation | ||||
Performance- | • Performance-based RSUs cliff vest after a three-year performance period based one-half on adjusted earnings per share (EPS)* and one-half on adjusted free cash flow (FCF) minus cash distributions paid to noncontrolling interests (NCI)*; these goals are established at the beginning of each year within the three-year performance period • Relative TSR modifier is measured over the full three-year performance period and may reduce or increase earned payouts by 25% | • Establishing goals for each year of the three-year performance period provides the Company with flexibility, particularly in the current unpredictable macroeconomic environment, to ensure goals remain relevant and challenging throughout the performance period and avoids awards that have weakened retentive value in the event of a single year of below threshold performance or windfall value in the event of a single year of superior performance • Applying the Relative TSR modifier over the full performance period strengthens long-term shareholder alignment and motivates our executives to achieve long-term share price appreciation | ||
Time-Based RSUs | • Time-based RSUs vest ratably over three years based on continued service** | • Aligns economic interests of executives and shareholders through equity ownership • Provides strong retentive value |
* | 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. |
** | Mr. Rittenmeyer’s time-based RSUs generally vested ratably in 11 quarterly installments; however, his unvested outstanding awards accelerated upon his termination as a result of disability in October 2022. |
36 |
Compensation Discussion & Analysis
Best Practices Support Strong Compensation Governance
We maintain the following best practices to ensure our governance of executive compensation reflects our pay-for-performance philosophy and aligns the interests of our executives and shareholders.
What We Do | ||||||
Actively engage with investors | Emphasize pay-for-performance | |||||
Maintain meaningful stock ownership and retention requirements for executives and non-employee directors | Include clawback provisions for all performance-based | |||||
Conduct an annual compensation risk assessment | Provide double-trigger change-in-control severance and LTI acceleration | |||||
Cap payouts under the annual incentive plans and performance-based RSU awards | Retain an independent compensation consultant |
What We Don’t Do | ||||||
Ø | No excise tax gross-ups on change-in-control | Ø | Directors and executive officers cannot hedge or | |||
Ø | No excessive perquisites | Ø | No backdating stock option grants or repricing of | |||
Ø | No single-trigger equity acceleration on a change-in-control | Ø | No current dividend payments on unvested equity awards | |||
2023 PROXY STATEMENT | 37 |
Compensation Discussion & Analysis
Detailed Description and Analysis
2022 Compensation Decisions
Base Salary
Base salary provides our NEOs with a fixed base annual income and helps us attract and retain high-performing executives. The HR Committee sets NEO salaries each year considering individual performance reviews, internal pay equity considerations, the scope and complexity of the executive’s role and an assessment of peer group and market survey data provided by our independent compensation consultant. Dr. Sutaria’s base salary increase of $300,000 and the $50,000 increases for Mr. Arnst and Ms. Arbour reflected a market-based adjustment based on the HR Committee’s review of survey and peer group information. Mr. Cancelmi received a base salary increase of $49,950 to recognize his strong performance and better align his pay with competitive market practices. Ms. Foo received a $100,000 base salary increase in connection with her promotion and increased responsibilities.
Named Executive Officer | 2022 Annual Base Salary (as of December 31, 2022) | |
Saum Sutaria | $1,500,000 | |
Dan Cancelmi | $ 750,000 | |
Tom Arnst | $ 650,000 | |
Lisa Foo | $ 650,000 | |
Paola Arbour | $ 550,000 | |
Ron Rittenmeyer | $1,500,000 |
Annual Incentive Plan
Our Annual Incentive Plan (AIP) provides annual cash incentives to our executives that drive financial, operational and individual performance. The program is designed to motivate executives to meet objectives that matter to our investors and align with the Company’s long-term strategy. To that end, the HR Committee selects financial and operational metrics that our executives directly influence with challenging targets so that, in order to pay out, the Company must meet the goals communicated to shareholders. The AIP also includes (i) an individual performance component to focus directly on the contributions of each NEO and to reflect performance on qualitative factors like leadership, integrity, promotion of Company values, and positively influencing Company culture and (ii) a quality and compliance multiplier to promote a culture of quality and compliance by rewarding or penalizing executives for clinical events, adherence to policies and procedures and audit results. Final individual payouts under the AIP are determined as follows:
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Compensation Discussion & Analysis
2022 Target Annual Incentive Award Levels for Named Executive Officers
In 2022, the HR Committee approved the following target bonus award levels for each NEO. Dr. Sutaria’s target bonus increased to 150% to better align with competitive market practices, and Ms. Foo’s target bonus was increased to 75% in connection with her promotion. The target bonuses for the other NEOs remained consistent with 2021 target bonuses.
Named Executive Officer | Target Award Relative to Base Salary | ||||
Saum Sutaria | 150 | % | |||
Dan Cancelmi | 100 | % | |||
Tom Arnst | 75 | % | |||
Lisa Foo | 75 | % | |||
Paola Arbour | 75 | % | |||
Ron Rittenmeyer | 150 | % |
2022 AIP Performance Metrics and Results
Funding for the 2022 AIP pool was based on the Company’s total annual Adjusted EBITDA (weighted 70%) and Adjusted Free Cash Flow Less Cash Payments to Noncontrolling Interests (Adjusted FCF Less NCI) (weighted 30%). Payout of each of these metrics can range from 0% to 200% depending on performance.
The HR Committee continued to use Adjusted EBITDA as the most significant metric because it is the primary measure used by financial analysts and investors to judge the Company’s financial performance. The HR Committee also continued to use Adjusted Free Cash Flow less NCI as a metric because it captures the Company’s ability to sustainably generate cash that can be used for the Company’s long-term strategic goals, including acquisitions, investing in joint ventures, or repurchasing outstanding equity or debt securities, as well as other general corporate purposes. Furthermore, free cash flow generation 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 importance of Adjusted Free Cash Flow less NCI to both short-term and long-term value creation for shareholders, the HR Committee decided to continue using it in both the 2022 AIP and LTI programs.
The Adjusted EBITDA and Adjusted Free Cash Flow Less NCI threshold, target and maximum levels and actual performance, as well as the final funding pool are set forth below:
Metric | Threshold Level | Target Level | Maximum Level | Actual Performance | Percentage of Target | Calculated Payout | ||||||||||||||||
Adjusted EBITDA(1) | $ | 3.375 billion | $ | 3.475 billion | $ | 3.575 billion | $ | 3.469 billion | 93.8 | % | 65.7% | |||||||||||
Adjusted FCF less NCI(2) | $ | 65 million | $ | 145 million | $ | 225 million | $ | 109 million | 55.3 | % | 16.6% | |||||||||||
Calculated Funding Pool |
| 82.3% of Target | ||||||||||||||||||||
Final Funding Pool(3) |
| 80% of Target |
(1) | See Appendix A for definition of Adjusted EBITDA. |
(2) | Adjusted Free Cash Flow (see Appendix A for definition) minus cash distributions paid to NCI reflected on the Company’s consolidated statements of cash flow and actual performance reflects adjustments made at the discretion of the HR Committee after considering certain items that impacted cash flows in 2022. |
(3) | Following management’s recommendation to reduce the funding pool, the HR Committee approved the final funding pool at 80% of target. |
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 further the Company’s business objectives and strategies. The result is an individual performance multiplier applied to the calculated AIP amount that can range from 0% to 150%. The ratings are calibrated across the entire Company to ensure the AIP funding pool remains fixed.
2023 PROXY STATEMENT | 39 |
Compensation Discussion & Analysis
For the CEO, the HR Committee gathers feedback from select members of management and discusses the performance of the officer with the other independent members of the Board in executive session. For reviews of other executive officers, the CEO provides the HR Committee a detailed evaluation and recommendation based in part on a self-assessment completed by each executive officer.
The HR Committee applied a performance multiplier of 130% for Mr. Rittenmeyer and the following performance modifiers for our other NEOs based on the material factors provided below.
Named Executive Officer | Individual Performance Multiplier | Performance Review Summary | ||||||
ı | Dr. Sutaria | 130% | • Advanced key strategic objectives as part of the Company’s continuing transformative growth strategy started several years ago • Lead strong financial and operating performance through disciplined management and strong operational execution • Continued to strengthen the Company’s leadership team, as well as its commitment to diversity and an inclusive culture, to drive a high-performance culture committed to quality, safety and compliance | |||||
Mr. Cancelmi | 130% | • Enhanced our liquidity and capital structure by retiring or refinancing approximately $2.6 billion of debt with a lower interest rate, and eliminating any noteworthy debt maturities until Q3-2024 • Lead focused financial discipline and execution that helped drive Adjusted EBITDA margin improvement over 2021 despite a highly inflationary environment • Strengthened the enterprise-wide finance organization with external and internal talent for key leadership roles, and continued the successful transition of various finance functions to our Global Business Center (GBC) in Manila, Philippines • Championed the implementation and launch of a new enterprise payroll and human resources cloud-based information technology system | ||||||
Mr. Arnst | 130% | • Continued to lead and strengthen our legal and human resources teams to drive performance as enterprise-wide Chief Administrative Officer and General Counsel • Driving the continued streamlining of our legal and human resources functions as part of our continuing enterprise service delivery model and external spend reductions • Leading the continuing shift of service functions to our GBC with over 3,000 roles successfully transitioned as of December 31, 2022, as well as positioning the GBC for continued future success • Championed the implementation and launch of a new enterprise payroll and human resources cloud-based information technology system | ||||||
Ms. Foo | 130% | • Enhanced the strategy and growth teams across the company with talent upgrades, implementation of best practices and development of focused, market-based strategies within care delivery markets to enable continued growth in higher acuity hospital and ambulatory surgery services • Provided leadership in strategic capital deployment, physician engagement and capacity management to support continued volume recovery and sustained acuity improvement across the hospital portfolio • Continued to advance enterprise procurement initiatives in support of the company’s efficiency agenda and enhanced enterprise data & analytics capabilities to further data-driven and predictive management tools |
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Compensation Discussion & Analysis
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Oversees our Compliance Program, which is governed by our Quality, Compliance and 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.
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, including non-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 requirements, 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 is a special committee of the Board consisting 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 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 it provides input and guidance on communications with employees, investors and other stakeholders regarding ESG. This year we will publish our second annual ESG report, 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 “Investors” section on our website at www.tenethealth.com.*
Corporate Governance and Board Practices
ESG Milestones
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Corporate Governance and Board Practices
Named Executive Officer | Individual Performance Multiplier | Performance Review Summary | ||||||||||||
ESG Guiding Principles
As a company that brings quality care to people every day, Tenet recognizes that our business and social purposes are inextricably linked. Tenet’s ESG program is focused on the business and societal impact of ESG. We believe our people, our operations, our facilities management and our governance must align properly to generate sustainable business practices for the betterment of all stakeholders we serve. While our responsibility lies, first and foremost, with the delivery of excellent medical care that is safe and compassionate, we equally embrace our commitment to cultivate a sustainable environment and an inclusive culture.
Our Mission
Our mission is to provide quality, compassionate care in the communities we serve. Our Vision is to consistently deliver the right care, in the right place, at the right time and to be a premier organization to work, where patient care and saving lives remain our focus. Our Values define who we are, what we stand for and what we CARE about – Compassion and respect for others and each other, supporting our communities and advocating for our patients; Acting with integrity and the highest ethical standards, always; Results delivered through accountability and transparency; and Embracing inclusiveness for all people in our workplace and the communities we serve.
Policies on Ethics and Conduct
Code 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 Code of Conduct and conduct our business 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 Code 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 Code of Conduct is published in the “Our Commitment To Compliance” section under the “About Us” heading on our website at www.tenethealth.com. In addition, amendments to the Code of Conduct and any grant of a waiver from a provision of the Code of Conduct requiring disclosure under applicable SEC and NYSE rules will be disclosed at the same location as the Code of Conduct on our website at www.tenethealth.com.
As part of the program, we provide compliance training at least annually to every employee as well as to our Board and certain physicians and contractors.
Corporate Governance and Board Practices
Quality, Compliance and Ethics Program Charter
We operate our ethics and compliance program pursuant to a Quality, Compliance and 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 Code 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 at 1-800-8ETHICS, 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 and Ethics Program Charter may be found in the “Our Commitment To Compliance” section under the “About Us” heading on our website at www.tenethealth.com*.
Certain Relationships and Related Person Transactions
Our written Code of Conduct requires 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 Code of Conduct is published on our website at www.tenethealth.com, and a description of our policies on ethics and conduct can be found above. In the event that Tenet or its subsidiaries is a participant in a transaction in which any director, executive officer, holder of more than 5% of our outstanding shares or any immediate family member of any of these persons has a direct or indirect material interest, our policy is to require that any such transaction be reviewed and approved by the Governance Committee, which is composed entirely of independent directors. There were no “related person” transactions that require disclosure under the SEC rules since the beginning of our last completed fiscal year.
Communications with the Board of Directors by Shareholders and Other Interested Parties
Shareholders may communicate with the Board of Directors by email to boardofdirectors@tenethealth.com or by writing to the Board in care of the Corporate Secretary, Tenet Healthcare Corporation, 14201 Dallas Parkway, Dallas, Texas 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 our non-employee directors by following the procedures for reporting concerns to the Audit Committee set forth in our Corporate Governance Principles, which are available under the “Governance” heading in the “Investors” section on our website at www.tenethealth.com.
The HR Committee reviews our non-employee director compensation programs each year with the assistance of the HR Committee’s independent compensation consultant. The Board considers any changes recommended by the HR Committee following its review. In May 2021, the value of Restricted Stock Units (RSUs) granted annually to non-employee directors was increased from $175,000 to $190,000 and the initial grant of RSUs to newly appointed directors valued at $65,000 was eliminated in order to align with market practices.
Employee directors do not receive any compensation for their service as a director. All 2021 compensation for our Executive Chairman and former CEO, Mr. Rittenmeyer, and our Chief Executive Officer, Dr. Sutaria, is shown in the 2021 Summary Compensation Table on page 52.Ms. Arbour
Our 2021 annual compensation program for non-employee directors was structured as follows:
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Annual Compensation Element | Amount | |||
Annual Cash Retainer | $ | 95,000 | ||
Annual Grant of RSUs | $ | 190,000 | ||
Annual Committee Chair Cash Retainers: |
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• Audit Committee | $ | 25,000 | ||
• Human Resources Committee | $ | 20,000 | ||
• Nominating and Corporate Governance Committee | $ | 17,500 | ||
• Quality, Compliance and Ethics Committee | $ | 17,500 | ||
• ESG Committee | $ | 17,500 | ||
Annual Retainer for Lead Director or Non-Executive Chair: |
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• Cash Fee | $ | 150,000 | ||
• Additional Grant of RSUs | $ | 50,000 |
Non-employee directors also receive $2,000 per committee meeting attended• Advanced clinical innovations supporting hospital transfers, bed management and for Board meetings receive:
no fee forEmergency Room improvements; standardized patient management platform with Electronic Medical Record integration; modernized imaging services and capabilities with migration to the first seven Board meetings each year;cloud
• Drove automation of technology spend, savings, and
for additional meetings, $3,000 per in-person meeting forecasting accuracy across the enterprise and $1,500 per telephonic meeting attended.
A newly appointed director receivesat a prorated annual RSU grant. All annual cash fees are prorated for partial year service. Directors are reimbursed for any travel expenseshospital level
• Transformed legacy HR and other out-of-pocket costs incurredPayroll to cloud based SAAS platform across the enterprise; successfully negotiated and launched the transition to a new IT services outsourcer
• Achieved significant financial performance through productivity initiatives inclusive of supplier negotiations to reduce overall cost to deliver
• Successfully and swiftly restored services to enterprise while attending meetings.increasing infrastructure resilience after a cybersecurity incident
Quality and Compliance Modifiers
In addition, following the completion of the fiscal year the HR Committee reviews (i) negative hospital events that occurred during the fiscal year, such as any patterns of serious safety events and multiple condition level deficiencies during surveys, noncompliance resulting in immediate jeopardy, “needs improvement” or “unsatisfactory” audit ratings, and (ii) positive compliance and quality events such as optimal internal audit results, optimal clinical compliance scorecard audit results and Centers for Medicare & Medicaid Services zero citation surveys. Following its review of 2022 quality and compliance performance, the HR Committee determined that no modification (positive or negative) would apply to the AIP awards for 2022 for the NEOs.
2022 AIP Payouts
The table below shows target and actual AIP awards earned by each NEO for 2022. Mr. Rittenmeyer’s target and actual AIP award for 2022 shown below have been pro-rated through his termination date, as provided for under the terms of the Rittenmeyer Agreement described under “Mr. Rittenmeyer’s Disability Benefits” below.
Named Executive Officer | Target AIP Payout | Calculated AIP Payout | Individual Performance Multiplier | Quality & Compliance Modifier | 2022 Actual AIP Payout | |||||||||||||||
Saum Sutaria | $ | 2,250,000 | $ | 1,800,000 | 130 | % | No modification | $ | 2,340,000 | |||||||||||
Dan Cancelmi | $ | 750,000 | $ | 600,000 | 130 | % | No modification | $ | 780,000 | |||||||||||
Tom Arnst | $ | 487,500 | $ | 390,000 | 130 | % | No modification | $ | 507,000 | |||||||||||
Lisa Foo | $ | 487,500 | $ | 390,000 | 130 | % | No modification | $ | 507,000 | |||||||||||
Paola Arbour | $ | 412,500 | $ | 330,000 | 110 | % | No modification | $ | 363,000 | |||||||||||
Ron Rittenmeyer | $ | 1,682,877 | $ | 1,346,302 | 130 | % | No modification | $ | 1,750,192 |
Long-Term Incentive Compensation
2022 LTI Awards
In 2022, LTI compensation for executive officers was granted entirely in RSUs, comprised of 50% time-based awards vesting ratably over three years (or, for Mr. Rittenmeyer, ratably over 11 quarters) and 50% performance-based awards earned over a three-year performance period, consistent with the simplifications made to the Company’s LTI program in 2020. The HR Committee believes that this program provides alignment of management’s incentives with shareholder interests and encourages sustained value creation for shareholders.
Director Compensation
2021 Director Compensation Table
Name | Fees Earned or ($) | Stock Awards ($)(1)(2) | Total ($) | |||||||||
Lloyd J. Austin, III(3) | 5,806 | — | 5,806 | |||||||||
James L. Bierman | 130,000 | 190,045 | 320,045 | |||||||||
Richard W. Fisher | 135,250 | 190,045 | 325,295 | |||||||||
Meghan M. FitzGerald | 134,000 | 190,045 | 324,045 | |||||||||
Cecil D. Haney | 116,653 | 312,132 | (4) | 428,785 | ||||||||
J. Robert Kerrey | 286,500 | 240,004 | 526,504 | |||||||||
Christopher S. Lynch | 124,500 | 190,045 | 314,545 | |||||||||
Richard J. Mark | 126,500 | 190,045 | 316,545 | |||||||||
Tammy Romo | 149,500 | 190,045 | 339,545 | |||||||||
Nadja Y. West | 116,500 | 190,045 | 306,545 |
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Compensation Plans Applicable to Directors
Stock Incentive Plans
Each non-employee director receives an annual award under our stock 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. A mandatory post-vest holding period of three years is applied to these annual RSU awards, which 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).
Prior to May 2021, on the first or 15th day of any month (or, if such date is not a trading day, the following date that is a trading day) following the date on which a new non-employee director is elected to the Board, the director received 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. These one-time awards vested 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 defer the settlement of their annual RSU grants under our 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 RSU grants pursuant to the terms of the Special RSU Deferral Plan.
Director Compensation
Compensation Discussion & Analysis
Long-Term Incentive Compensation
2006 Deferred Compensation Plan
Under our 2006 Deferred Compensation Plan (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, meeting fees and committee fees. Senator Kerrey was the only non-employee director who participated in the DCP in 2021. A more complete description of the DCP can be found under “Nonqualified Deferred Compensation—Deferred Compensation Plan” beginning on page 59.
Director Stock Ownership and Retention Requirements
The Board has adopted stock ownership and retention requirements that require each non-employee director with more than one year of service on the Board to own shares of our stock. In addition, each non-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 49. As of the record date, all of our non-employee directors were in compliance with the requirements or within the applicable period to come into compliance.
Executive OfficersPerformance-Based RSUs
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 7.
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Securities Ownership of Management
The table below discloses the shares, options and other securities beneficially owned by our directors and director nominees, each of our named executive officers (NEO), and our current directors and executive officers as a group, as of March 1, 2022 (unless indicated below otherwise). No director or current executive officer has pledged any shares of our common stock.
Name | Shares Beneficially Owned (1) | |||||||||||
Shares of Common Stock(2) | Options March 1, 2022 | Percent of Class | ||||||||||
Audrey Andrews(3) | 9,031 | 40,033 | * | |||||||||
Paola Arbour | 8,568 | 38,556 | * | |||||||||
Thomas W. Arnst | 8,742 | -0- | * | |||||||||
James L. Bierman | 46,202 | (4) | -0- | * | ||||||||
Daniel J. Cancelmi | 381,815 | 61,383 | * | |||||||||
Richard W. Fisher | 37,965 | (5) | -0- | * | ||||||||
Meghan M. FitzGerald | 27,751 | (6) | -0- | * | ||||||||
Cecil D. Haney | 7,017 | (7) | -0- | * | ||||||||
J. Robert Kerrey | 80,770 | (8) | -0- | * | ||||||||
Christopher S. Lynch | 26,080 | (9) | -0- | * | ||||||||
Richard J. Mark | 45,785 | (5) | -0- | * | ||||||||
Ronald A. Rittenmeyer | 601,218 | (10) | 56,353 | (11) | * | |||||||
Tammy Romo | 60,762 | (12) | -0- | * | ||||||||
Saumya Sutaria | 323,375 | -0- | * | |||||||||
Nadja Y. West | 23,944 | (13) | -0- | * | ||||||||
Current executive officers and directors as a group (15 persons)(14) | 1,683,214 | (15) | 156,292 | 1.7 | % |
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Securities Ownership
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 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 1, 2022 | ||||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 12,068,110 | (1) | 11.06 | % | ||||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 | 10,855,165 | (2) | 9.95 | % | ||||||
Glenview Capital Management, LLC 767 Fifth Avenue, 44th Floor New York, NY 10153 | 7,327,108 | (3) | 6.71 | % | ||||||
Harris Associates L.P. 111 S. Wacker Drive, Suite 4600 Chicago IL 60606 | 6,000,495 | (4) | 5.50 | % | ||||||
Invesco Ltd. 1555 Peachtree Street NE, Suite 1800 Atlanta, GA 30309 | 5,553,758 | (5) | 5.09 | % |
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Compensation Discussion & Analysis
This Compensation Discussion and Analysis (CD&A) describes our executive compensation programs, our process for determining executive compensation and the compensation paid to the following NEOs for 2021:
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Compensation Discussion & Analysis
2021: Delivering Quality, Compassionate Care While Responding to COVID-19
In 2021, the ongoing COVID-19 pandemic significantly impacted, and it continues to affect, all three segments of our business, as well as our patients, communities and employees. As a provider of healthcare services, we are acutely affected by the public health and economic effects of the pandemic. Our solid financial performance under such difficult and constantly evolving circumstances underscored the strength of our colleagues across the enterprise and our dedication to operational excellence. We advanced top-tier clinical programs to serve growing acute and chronic care needs in our hospitals while continuing to implement a comprehensive and active response to the pandemic focused on the safety of our personnel and patients. We also expanded our Ambulatory Care segment through a significant acquisition, as well as organic growth, construction of new outpatient centers and strategic partnerships. In addition, we continued to post strong margin performance at Conifer, which has provided consistent support to clients throughout the pandemic.
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Compensation Discussion & Analysis
Our strong absolute and 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 one-year and annualized three-year TSR capture the effect of the intense turnaround effort that began in late 2017. Despite the challenge and uncertain macroeconomic environment presented during the pandemic, 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.
2021 Compensation Program Highlights
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Compensation Discussion & Analysis
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Our annual Say-on-Pay vote is one of our opportunities to receive feedback from shareholders regarding our executive compensation program, and the HR Committee takes the result of this vote into account when shaping the compensation program for the Company’s NEOs. At our 2021 Annual Meeting, the Say-on-Pay proposal received over 94% support, demonstrating increased, strong support for our executive compensation program. In light of this continued shareholder support, our HR Committee did not make any changes to the structure of our executive compensation program as a result of the 2021 vote. The HR Committee will continue to consider shareholder feedback, input from our independent compensation consultant and the outcomes of future Say-on-Pay votes when assessing our executive compensation programs and policies and making compensation decisions for our NEOs.
Compensation Discussion & Analysis
Compensation Elements Link Pay with Performance
The following table outlines the primary components of our NEOs’ 2021 compensation packages (other than with respect to LTI compensation for Mr. Rittenmeyer, Dr. Sutaria and Ms. Andrews):
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Compensation Discussion & Analysis
Best Practices Support Strong Compensation Governance
We maintain the following best practices to ensure our governance of executive compensation reflects our pay-for-performance philosophy and aligns the interests of our executives and shareholders.
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Compensation Discussion & Analysis
Detailed Description and Analysis
In furtherance of the Company’s long-term succession plan, on September 1, 2021, Dr. Sutaria succeeded Mr. Rittenmeyer as our Chief Executive Officer, with Mr. Rittenmeyer continuing as our Executive Chairman. In connection with the transition, on August 31, 2021, we entered into amended and restated employment agreements with each of Mr. Rittenmeyer and Dr. Sutaria, which replaced their existing agreements.
2021 Rittenmeyer Agreement
Mr. Rittenmeyer’s amended and restated employment agreement (the “2021 Rittenmeyer Agreement”) provided that Mr. Rittenmeyer would serve as our Executive Chairman through December 31, 2022 (subsequently extended to December 31, 2023), and as an advisor to the Board and the CEO thereafter through December 31, 2024 (subsequently extended to December 31, 2025), subject to earlier termination in accordance with the terms of the agreement. While serving as Executive Chairman, the 2021 Rittenmeyer Agreement provides for an annual base salary of $1,500,000 and a target annual incentive bonus under the Annual Incentive Plan (AIP) of no less than 150% of Mr. Rittenmeyer’s base salary. While serving as an advisor to the Board and the CEO, Mr. Rittenmeyer will receive an annual retainer of $750,000. Under the 2021 Rittenmeyer Agreement, Mr. Rittenmeyer also will be eligible to receive a $5 million retention bonus, subject to his continued employment through December 31, 2024.
The 2021 Rittenmeyer Agreement includes severance payments and benefits in the event of a qualifying termination, as described in further detail on page 60.
On February 25, 2022, the 2021 Rittenmeyer Agreement was further amended to extend the term of the agreement through December 31, 2025, subject to earlier termination in accordance with the terms of the agreement. This amendment extends the date through which Mr. Rittenmeyer will serve as Executive Chairman from December 31, 2022 to December 31, 2023, and then provides that, between January 1, 2024 and December 31, 2025, Mr. Rittenmeyer will serve as an advisor to the CEO and the board. During this advisory period, in addition to the other compensation provided for in the 2021 Rittenmeyer Agreement, Mr. Rittenmeyer will be eligible to receive a target annual incentive bonus under the AIP of no less than 100% of his base salary.
2021 Sutaria Agreement
Dr. Sutaria’s amended and restated employment agreement (the “2021 Sutaria Agreement”) provides for an initial term commencing on September 1, 2021 and concluding December 31, 2025, which will be automatically extended for successive one-year terms unless either party provides advance notice of their intention not to renew and subject to earlier termination in accordance with the terms of the agreement. The 2021 Sutaria Agreement provides for an annual base salary of $1,200,000 and a target annual incentive bonus under the AIP of no less than 125% of Dr. Sutaria’s base salary. Dr. Sutaria is also entitled to an annual Company contribution to the Company’s ERA (a non-qualified deferred compensation plan described further on page 60) of no less than $250,000. Beginning in 2022, Dr. Sutaria will also receive annual awards of equity and other LTI awards, which will vest on the same basis as equity and other LTI awards granted to similarly situated executives of the Company.
The 2021 Sutaria Agreement includes severance payments and benefits in the event of a qualifying termination, as described in further detail on page 61.
Promotion LTI Awards
In connection with Dr. Sutaria’s promotion to CEO, the Board awarded a supplemental grant of RSUs under our 2019 Stock Incentive Plan with a September 1, 2021 grant date fair value equal to $8,000,000. One-half of these promotion RSUs are subject to time-based vesting and will vest in full on August 31, 2025. The remaining one-half are performance-based and will vest between 0% and 200% of target based on achievement of annual Adjusted FCF less Cash NCI and Adjusted EPS, performancewith goals established by the Committee at the beginning of each year for the performance period commencing on January 1, 2021set annually to reflect current conditions and ending on June 30, 2025 (with such goals weighted 12.5% for 2021, 25% for 2022, 25% for 2023, 25% for 2024,business strategy with threshold (0%), target (100%), and 12.5% for 2025). Any earned performance-based RSUs are then subjectmax (200%)
• Subject to a Relative TSR modifier based on performance over the entire performance period (+/- 25% based on cumulative performance versus direct peers).
Time-Based RSUs
(50%)
• Solely subject to service-based vesting and forfeiture conditions
• Awards directly align executive and shareholder interests while encouraging retention throughout the three-year ratable vesting cycle
Compensation Discussion & Analysis
Base salary provides our NEOs with a fixed base annual income and helps us attract and retain high-performing executives. The HR Committee sets NEO salaries each year considering individual performance reviews, internal pay equity considerations, the scope and complexity of the executive’s role and an assessment of peer group and market survey data provided by our independent compensation consultant. In addition to the increase in Dr. Sutaria’s base salary as part of his leadership growth and promotion to CEO, Mr. Cancelmi received a base salary increase of approximately 7.7% to recognize his strong performance and better align his pay with competitive market practices. Mr. Arnst also received a $150,000 base salary increase in March 2021 in connection with his promotion to the Chief Administrative Officer role and assumption of additional responsibilities. The HR Committee determined that the base salaries for all other NEOs would remain unchanged for 2021.
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Our AIP provides annual cash incentives to our executives that drive financial, operational and individual performance. The program is designed to motivate executives to meet objectives that matter to our investors and align with the Company’s long-term strategy. To that end, the HR Committee selects financial and operational metrics that our executives directly influence with challenging targets so that, in order to pay out, the Company must meet the goals communicated to shareholders. The AIP also includes an individual performance component to focus directly on the contributions of each NEO and to reflect performance on qualitative factors like leadership, integrity, promotion of Company values, and a positive influence on Company culture. Final individual payouts under the AIP are determined as follows:
Compensation Discussion & Analysis
Performance Metrics | Rationale and Description | |||||||
2021 Target Annual Incentive Award LevelsAdjusted Earnings Per Share
• Key metric for Named Executive Officers
In 2021, the HR Committee approved the following target bonus award levels for each NEO, none of which were increased relative to the prior year other than Dr. Sutaria’s increase in connection with his leadership growth and promotion to CEO pursuant to the 2021 Sutaria Agreement as described on page 39.our shareholders because our Adjusted EPS drives share price performance
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2021 AIP Performance Metrics and Results
Funding for the 2021 AIP pool was based on• Measures the Company’s total annual Adjusted EBITDA (weighted 70%)per share profitability, excluding certain gains and losses
Adjusted Free Cash Flow Less Cash Payments to Noncontrolling Interests (Adjusted Free Cash Flow Less NCI) (weighted 30%). Payout of these metrics can range from 0% to 200% depending on performance.NCI
The HR Committee continued to use Adjusted EBITDA as the most significant metric because it is the primary measure used by financial analysts and investors to judge the Company’s financial performance. The HR Committee also continued to use Adjusted Free Cash Flow less NCI as a metric because it captures the Company’s ability to sustainably generate cash that can be used for the Company’s long-term strategic goals, including acquisitions, investing in joint ventures, or repurchasing outstanding equity or debt securities, as well as other general corporate purposes. Furthermore, free• Sustained cash flow generation allows the Company to fund growthobjectives important to the Company’s long-term strategy without raising additional debt and
• Measures the Company’s ability to generate cash flows from operations that can also be used for acquisitions, capital expenditures or repaying debt
Relative Total Shareholder
Return
• Comparing the Company’s share price performance to retire existing indebtedness, both of which enhanceits direct competitors rewards management’s ability to deliver above-market returns to long-term shareholder value. Given the importance of Adjusted Free Cash Flow less NCI to both short-term and long-term value creation for shareholders the HR Committee decided to continue using it in both the 2021 AIP and LTI programs.
The Adjusted EBITDA and Adjusted Free Cash Flow Less NCI threshold, target and maximum levels and actual performance, as well as the final funding pool are set forth below:
Metric | Threshold Level | Target Level | Maximum Level | Actual Performance | Percentage of Target | Calculated Payout | ||||||||||||||||||||||||||||
Adjusted EBITDA(1) |
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2.75 billion |
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3.0 billion |
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3.1 billion |
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3.483 billion |
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Adjusted FCF less NCI(2) | $ | 65 million | $ | 155 million | $ | 245 million | $ | 640 million | 200 | % | 60% | |||||||||||||||||||||||
Final Funding Pool |
| 200% of Target |
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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 further• Measures the Company’s business objectivesshareholder return against its three direct publicly traded competitors: Community Health Systems, HCA Healthcare and strategies. The result is an individual performanceUniversal Health Services
• Three-year TSR multiplier applied to the calculated AIP amount that can range from 0%full three-year performance period and measured relative to 150%. The ratings are calibrated across the entire Company to ensure the AIP funding pool remains fixed.
For each of the Executive Chairmanthree direct competitors, with +25% for ranking first, no change for second or third, and the CEO, the HR Committee gathers feedback from select members of management and discusses the performance of the officer with the other independent members of the Board in executive session. For reviews of other executive officers, the Executive Chairman and the CEO provide the HR Committee a detailed evaluation and recommendation based in part on a self-assessment completed by each executive officer.-25% for fourth
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Compensation Discussion & Analysis
The HR Committee applied the following performance modifiers for our NEOs based on the material factors provided below.
Compensation Discussion & Analysis
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Compensation Discussion & Analysis
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2022 LTI Grant Values for Named Executive Officers
The following table summarizes the total target grant value of LTI awards granted in February 2022 to each of our NEOs participating in our 2022 LTI program.
Named Executive Officer | Performance- Based RSUs(1)(2) | Time-Based RSUs(2) | Total 2022 LTI Grant Value | ||||||||||||
Saum Sutaria | $ | 5,000,068 | $ | 5,000,068 | $ | 10,000,136 | |||||||||
Dan Cancelmi | $ | 1,500,036 | $ | 1,500,036 | $ | 3,000,072 | |||||||||
Tom Arnst | $ | 1,000,077 | $ | 1,000,077 | $ | 2,000,154 | |||||||||
Lisa Foo | $ | 500,038 | $ | 500,038 | $ | 1,000,076 | |||||||||
Paola Arbour | $ | 500,038 | $ | 500,038 | $ | 1,000,076 | |||||||||
Ron Rittenmeyer | $ | 4,250,010 | $ | 4,250,010 | $ | 8,500,020 |
(1) | Assumes target level performance for the full performance-based RSU grant, which includes portions of the award for which there is not a grant date fair value for purposes of Accounting Standards Codification (ASC) Topic 718 as the applicable performance conditions had not yet been established. |
(2) |
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The Company will disclose its achievement against the applicable performance metrics for the 2022 Performance-Based RSUs following completion of the three-year performance period.
Results of 2020 LTI Awards
The performance-based RSUs granted in February 2020 were divided into three equal one-year tranches, with performance in each year measured based on Adjusted Earnings per Share performance (weighted 50%) and Adjusted Free Cash Flow Less NCI performance (weighted 50%), with a modifier based on relative TSR measured over the full three-year performance period that adjusts the total payout by +/- 25%. All of our 2022 NEOs, other than Mr. Rittenmeyer and Mr. Arnst, received these grants, which vested in February 2023 following the HR Committee’s certification of the Company’s achievement under the performance metrics.
The following table shows the Company’s results under the 2020 performance-based RSUs over the three-year performance period ended December 31, 2022.
Performance Factor | Threshold (0%) | FY 2020 Target (100%) | Maximum (200%) | Threshold (0%) | FY 2021 Target (100%) | Maximum (200%) | Threshold (0%) | FY 2022 Target (100%) | Maximum (200%) | |||||||||||||||||||||||||
Adjusted EPS | $2.69 | $3.02 | $3.35 | $2.51 | $4.17 | $4.81 | $5.86 | $6.45 | $7.05 | |||||||||||||||||||||||||
Result |
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Adjusted FCF Less NCI | $393M | $483M | $573M | $35M | $155M | $245M | $65M | $145M | $225M | |||||||||||||||||||||||||
Result |
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Result |
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| 79% |
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Relative TSR Modifier | (+25% for 1st / -25% for 4th) | |||||||||||||||||||||||||||||||||
Result | 2nd Place – 0% modifier | |||||||||||||||||||||||||||||||||
Final Result |
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| 159.7% |
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The performance-based RSUs granted in February 2020 to Mr. Arnst were divided into three equal one-year tranches, with performance in each year measured based on Conifer EBITDA (weighted 45%), Conifer Total Revenue (weighted 30%) and Conifer Cash Collections (weighted 25%). In light of Mr. Arnst’s provision of services to Tenet as a whole, rather than only to Conifer, in 2021, the HR Committee determined that it would be appropriate to provide that the performance goals for 2021 and 2022 under Mr. Arnst’s performance-based RSUs would be determined based on the Company-wide Adjusted Earnings per
Compensation Discussion & Analysis
Long-Term Incentive Compensation
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Compensation Discussion & Analysis
2023 PROXY STATEMENT | 43 | ||||||||||||
Compensation Discussion & Analysis
Share (weighted 50%) and Adjusted Free Cash Flow Less NCI (weighted 50%) performance measures, subject to the relative TSR modifier, each as described above with respect to the performance-based PSUs held by our other NEOs. In addition, the threshold payout percentage for 2021 and 2022 was decreased to 0%, with the maximum payout percentage for 2021 and 2022 increased to 200%, consistent with the terms applicable to the performance-based RSUs described above.
The following table shows the results of Mr. Arnst’s 2020 performance-based RSUs over the three-year performance period ended December 31, 2022.
| FY 2020 Conifer | FY 2021 (Tenet) | FY 2022 (Tenet) | |||||||||||||||||||||||||
Performance Factor | Threshold (50%) | Target (100%) | Maximum (150%) | Threshold (0%) | Target (100%) | Maximum (200%) | Threshold (0%) | Target (100%) | Maximum (200%) | |||||||||||||||||||
Conifer EBITDA(1) | $281M | $351M | $421M | See Above | | See Above | ||||||||||||||||||||||
Result | $367M | |||||||||||||||||||||||||||
Conifer Total Revenue(2) | $1,046M | $1,308M | $1,569M | |||||||||||||||||||||||||
Result | $1,306M | |||||||||||||||||||||||||||
Conifer Cash Collection(3) | 101% | 102% | 104% | |||||||||||||||||||||||||
Result | 101.8% | |||||||||||||||||||||||||||
Result | 102.8% | 200% | 79% | |||||||||||||||||||||||||
Relative TSR Modifier |
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Result | 2nd Place – 0% modifier | |||||||||||||||||||||||||||
Final Result |
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(1) | Conifer EBITDA is the revenue minus expenses, excluding interest, taxes, depreciation and amortization of the Conifer entities. |
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The Compensation Process
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 these 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, as well as generally overseeing our talent management processes and our anti-harassment policies and procedures.
Independent Compensation Consultant
The HR Committee engaged Meridian Compensation Partners, LLC (the “Consultant”) during 2022 as its independent compensation consultant to assist the Committee with its duties. The Consultant participated in or provided input with respect to all meetings of the HR Committee and regularly communicated with the HR Committee Chair, who also serves as our Board Chairman. This year, the Consultant’s services included:
• | Providing market data, industry trends and competitive analysis relative to our peers; |
• | Advising on the key elements of our executive compensation plans and policies; |
• | Reviewing our compensation peer group and suggesting changes, if warranted; |
• | Advising on the parameters for the |
• | Providing recommendations on the structure and competitiveness of compensation for our CEO and former Executive |
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 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 Consultants was disclosed to the HR Committee.
To safeguard the independence of the Consultants:
44 |
Compensation Discussion & Analysis
To safeguard the independence of the Consultant:
• | The HR Committee retains the |
• | The |
• | The
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The HR Committee has assessed the independence of the Consultant engaged during 2022 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.
Benchmarking Against Peer Companies
Each year the HR Committee reviews market compensation practices to evaluate the competitiveness of the Company’s pay levels and program design. Given the small number of publicly held healthcare providers and competition with not-for-profit companies, the HR Committee relies on a blend of peer group and market survey data to survey market practices. The HR Committee uses the peer group to assess whether executive officer pay levels are aligned with Company performance on a relative basis and considers the “market median” to be a helpful benchmark in setting compensation levels for our executive officers.
2022 Peer Group
The Company currently has only three direct competitors that are publicly traded: Community Health Systems, Inc., HCA Healthcare, Inc. and Universal Health Services, Inc. As a result, in August 2021, in consultation with the Consultant’s service as an independent advisor to the Committee.
Benchmarking Against Peer Companies
Each year the HR Committee reviews market compensation practices to evaluate the competitiveness of the Company’s pay levels and program design. Given the small number of publicly held healthcare providers and competition with not-for-profit companies, the HR Committee relies on a blend of peer group and market survey data to survey market practices. The HR Committee uses the peer group to assess whether executive officer pay levels are aligned with Company performance on a relative basis and considers the “market median” to be a helpful benchmark in setting compensation levels for our executive officers.
2021 Peer Group
The Company currently has only three direct competitors that are publicly traded: Community Health Systems, Inc., HCA Healthcare, Inc. and Universal Health Services, Inc. As a result, in August 2020, in consultation with its Consultant, the HR Committee followed an objective selection process that looked to related industry segments with companies approximating Tenet in revenues, market capitalization, enterprise value and number of employees to ensure we retained a sufficiently large and appropriate peer group. In connection with this review, the HR Committee determined that as a result of its voluntary delisting in March 2021, Genesis Healthcare would be replaced by Henry Schein, Inc. for Tenet’s peer group for 2022.
Direct Peers
Compensation Discussion & Analysis• HCA Healthcare
• Universal Health Services | Additional Peers • Baxter International • Becton, Dickinson and Company • Boston Scientific • DaVita • Encompass Health • Henry Schein |
• Humana • LabCorp • Molina Healthcare • Quest Diagnostics • Select Medical • Stryker |
The following chart illustrates Tenet’s size compared to
Compensation Discussion & Analysis
Market Survey Data For 2022 compensation decisions, the HR Committee reviewed additional compensation data from the 2021 Willis Towers Watson U.S. Compensation Database survey, which includes companies with targeted annual revenue ranging from $10 billion to $25 billion. The Consultant compiles data from this survey relating to compensation levels for Tenet 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, and the identity of the companies comprising the survey data is not disclosed to, or considered by, the HR Committee in its decision-making process. Other Compensation, Benefits and Considerations Perquisites 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, prior to his resignation the Company also provided Mr. Rittenmeyer a car and personal security driver that he primarily used for commuting and local business travel. The HR Committee does not consider these security costs as personal benefits because they served a business purpose arising from his employment as Executive Chairman. However, the Company is required to disclose the unreimbursed incremental costs associated with the personal use of the Company-provided car, including commuting expenses, as well as the personal security driver. The amounts of these services are disclosed in the Summary Compensation Table on page 50. The security study also recommended that Mr. Rittenmeyer use Company aircraft for both business and personal use to ensure his safety. The Rittenmeyer Agreement required that he reimburse us for any personal use of the corporate aircraft above 100 hours per year. Additionally, the Sutaria Agreement requires Dr. Sutaria to reimburse us for any personal use of the corporate aircraft above 50 hours per year (which was increased to 100 hours commencing with 2023), and our aircraft usage policy allows the CEO to approve limited personal use of Company aircraft by certain other Company executives. In 2022, Dr. Sutaria did not use the corporate aircraft for material personal use, and Mr. Rittenmeyer’s personal use of the corporate aircraft totaled approximately 6.5 hours. The unreimbursed incremental cost of their and any other NEO’s use is disclosed in the Summary Compensation Table on page 50. During 2022, the Company provided a tax gross-up 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. Executive Severance Plan The Tenet Executive Severance Plan (ESP) applies to certain of our NEOs in addition to other senior managers and officers of the Company. The ESP provides cash severance and other benefits that vary by position level, consistent with market practice. ESP participants do not receive gross-ups of excise taxes that may be incurred upon a change of control. Each of the NEOs, other than Dr. Sutaria and Mr. Rittenmeyer, was eligible to receive severance benefits under the ESP during 2022 in the event of a qualifying termination. 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 of similar-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 regarding non-competition, confidentiality, non-disparagement and non-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 59.
Compensation Discussion & Analysis
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Executive Retirement Programs
Certain of our NEOs participate in our frozen Supplemental Executive Retirement Plan (SERP), our Executive Retirement Account (ERA) and our Sixth Amended and Restated Tenet 2006 Deferred Compensation Plan (Deferred Compensation Plan, or DCP). These programs are designed to provide retirement benefits to participating management-level employees, whose retirement benefits under our tax-qualified programs are otherwise limited under provisions of the Internal Revenue Code. Additional information regarding these programs is provided in the narrative discussion following the 2022 Pension Benefits Table on page 56 and under “Nonqualified Deferred Compensation” beginning on page 58.
Employee Benefits
Our NEOs participate in the Company’s broad-based benefit 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. These benefits are consistent with providing a total pay program that is sufficiently competitive with our peer companies to attract and retain highly qualified personnel.
Tax Matters
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 million paid to certain “covered employees” in any single year. Prior to 2018, certain performance- based compensation elements were exempt from this limit on deductibility; however, the Tax Cut and Jobs Act repealed this exemption. Notwithstanding the repeal of the “performance-based” compensation exemption pursuant to Section 162(m), the Company has continued to subject 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. As a result of the repeal, we generally expect that compensation payable to our NEOs in excess of $1 million will not be deductible.
Compensation Governance Practices
Stock Ownership and Retention Requirements
The Board has adopted stock ownership and stock retention requirements for our non-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, with two-year extensions in the event of a promotion.
Each senior officer is required to own shares of our stock with a value equal to the following multiple of his or her base salary:
Executive Level | Market Value of Stock as a | |
Chief Executive Officer | 6x | |
President or | 4x | |
| 2x | |
| 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 time-based restricted stock or RSUs; and (iii) stock units credited under deferred compensation plans. Outstanding stock options and unearned performance-based RSUs 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.
All NEOs who are current employees of the Company comply 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.
2023 PROXY STATEMENT | 47 |
Compensation Discussion & Analysis
Equity Grant Timing and Stock Option Exercise Prices
Historically, we have made annual equity awards to 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 to newly hired employees, employees who have been promoted, or for special recognition, retention or other purposes outside of the annual grant process. For equity grants awarded outside of the annual grant cycle, the grant date generally is the first or 15th day of the month following hire or approval (or, if such date is not a trading day, the following date that is a trading day). The exercise price for all stock options is the NYSE closing 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 a NEO or other senior officer.
Prohibition on Hedging or Pledging Our Stock
Our insider trading policy prohibits any director, executive officer or any other employee subject to its terms from entering into short sales, derivative transactions or any other similar transactions designed to hedge or offset, any decrease in the market value of our 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.
Clawback Policies
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 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. The Company intends to adopt a clawback policy compliant with Exchange Act Rule 10D-1 upon or prior to the effectiveness of final listing standards from the NYSE implementing such rule.
48 |
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, 2021,
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, 2022, 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
2022 Summary Compensation Table
The following table summarizes the compensation for the years ended December 31, 2022, 2021 2020 and 20192020 for our NEOs. Mr. Arnst became ana NEO for the first time in 2021.
2021, Summary Compensation Tableand Ms. Foo became a NEO for the first time in 2022.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(2) | Change in ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer Executive Chairman | 2021 | 1,500,000 | -0- | 10,000,013 | -0- | 6,750,000 | -0- | 416,147 | 18,666,160 | ||||||||||||||||||||||||||||||||||||
2020 | 1,444,615 | 875,000 | 10,000,021 | -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 | |||||||||||||||||||||||||||||||||||||
Saum Sutaria Chief Executive Officer | 2021 | 1,146,154 | -0- | 15,000,119 | -0- | 4,500,000 | -0- | 507,399 | 21,153,671 | ||||||||||||||||||||||||||||||||||||
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 | 2021 | 686,575 | -0- | 2,750,103 | -0- | 3,353,464 | 2,621,133 | 8,700 | 9,419,975 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Tom Arnst EVP, Chief Administrative Officer, General Counsel and Corporate Secretary | 2021 | 461,538 | -0- | 1,500,094 | -0- | 1,580,000 | -0- | 128,700 | 3,670,333 | ||||||||||||||||||||||||||||||||||||
Paola Arbour EVP and Chief Information Officer | 2021 | 500,000 | -0- | 900,036 | -0- | 1,414,584 | -0- | 108,846 | 2,923,465 | ||||||||||||||||||||||||||||||||||||
2020 | 500,000 | -0- | 900,052 | -0- | 954,536 | (5) | -0- | 125,459 | 2,480,047 | ||||||||||||||||||||||||||||||||||||
2019 | 500,000 | -0- | 266,690 | 266,674 | 559,688 | -0- | 108,400 | 1,701,452 | |||||||||||||||||||||||||||||||||||||
Audrey Andrews Former EVP and General Counsel | 2021 | 550,000 | -0- | 750,047 | -0- | 1,825,000 | -0- | 8,700 | 3,133,747 | ||||||||||||||||||||||||||||||||||||
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 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||||||||||||||
Saum Sutaria Chief Executive Officer | 2022 | 1,441,154 | -0- | 6,847,258 | 2,340,000 | -0- | 418,716 | 11,047,128 | ||||||||||||||||||||||||
2021 | 1,146,154 | -0- | 15,000,119 | 4,500,000 | -0- | 507,399 | 21,153,672 | |||||||||||||||||||||||||
2020 | 1,000,000 | 500,000 | 5,000,025 | 1,755,000 | -0- | 325,634 | 8,580,659 | |||||||||||||||||||||||||
Dan Cancelmi EVP and Chief Financial Officer | 2022 | 740,178 | -0- | 2,054,149 | 780,000 | -0- | 33,757 | 3,608,084 | ||||||||||||||||||||||||
2021 | 686,575 | -0- | 2,750,103 | 3,353,464 | 2,621,133 | 8,700 | 9,419,975 | |||||||||||||||||||||||||
2020 | 641,385 | 250,000 | 2,500,054 | 2,169,160 | 1,620,368 | 39,529 | 7,220,496 | |||||||||||||||||||||||||
Tom Arnst EVP, Chief Administrative Officer, General Counsel and Corporate Secretary | 2022 | 639,712 | 181,500 | (5) | 1,369,445 | 507,000 | -0- | 152,893 | 2,850,550 | |||||||||||||||||||||||
2021 | 461,538 | -0- | 1,500,094 | 1,580,000 | -0- | 128,700 | 3,670,332 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Lisa Foo EVP, Commercial Operations | 2022 | 630,385 | 150,000 | (6) | 684,713 | 507,000 | -0- | 158,998 | 2,131,096 | |||||||||||||||||||||||
Paola Arbour EVP and Chief Information Officer | 2022 | 540,192 | -0- | 684,713 | 363,000 | -0- | 119,171 | 1,707,076 | ||||||||||||||||||||||||
2021 | 500,000 | -0- | 900,036 | 1,414,584 | -0- | 108,846 | 2,923,466 | |||||||||||||||||||||||||
2020 | 500,000 | -0- | 900,052 | 954,536 | -0- | 125,459 | 2,480,047 | |||||||||||||||||||||||||
Ron Rittenmeyer Former Executive Chairman | 2022 | 1,182,692 | 5,000,000 | (7) | 7,741,359 | (8) | 1,750,192 | -0- | 8,634,562 | 24,308,805 | ||||||||||||||||||||||
2021 | 1,500,000 | -0- | 10,000,013 | 6,750,000 | -0- | 416,147 | 18,666,160 | |||||||||||||||||||||||||
2020 | 1,444,615 | 875,000 | 10,000,021 | 3,948,750 | -0- | 407,143 | 16,675,529 |
(1) | Values in this column for |
(2) | This column reflects cash awards earned under our AIP for performance in the relevant year. |
(3) | The |
Executive Compensation Tables
|
|
|
(4) | Amounts shown in this column for |
Rittenmeyer | Sutaria | Cancelmi | Arnst | Arbour | Andrews | Sutaria | Cancelmi | Arnst | Foo | Arbour | Rittenmeyer | |||||||||||||||||||||||||||||||||||||
Matching contributions under our 401(k) Retirement Savings Plan |
| -0- |
|
| 8,700 |
|
| 8,700 |
|
| 8,700 |
|
| 8,700 |
|
| 8,700 |
|
| 9,150 |
|
| 9,150 |
|
| 9,150 |
|
| 9,150 |
|
| 9,150 |
|
| -0- |
| ||||||||||||
Matching contributions under our 2006 DCP |
| -0- |
|
| 138,900 |
|
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
|
| 33,750 |
|
| -0- |
|
| -0- |
|
| 19,848 |
|
| -0- |
|
| -0- |
| ||||||||||||
Company contributions under our ERA |
| 375,000 |
|
| 300,000 |
|
| -0- |
|
| 120,000 |
|
| 100,000 |
|
| -0- |
|
| 375,000 |
|
| -0- |
|
| 130,000 |
|
| 130,000 |
|
| 110,000 |
|
| 875,000 |
| ||||||||||||
Personal use of company aircraft* |
| 21,344 |
|
| 59,799 |
|
| -0- |
|
| -0- |
|
| 146 |
|
| -0- |
|
| 739 |
|
| 24,448 |
|
| 13,743 |
|
| -0- |
|
| -0- |
|
| 36,702 |
| ||||||||||||
Personal use of Company car and driver provided for security reasons** |
| 19,803 |
|
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
| ||||||||||||||||||||||||||||||
Personal use of Company car and driver for security reasons** |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
|
| 9,679 |
| ||||||||||||||||||||||||||||||
Disability benefits*** |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
|
| 7,713,181 |
| ||||||||||||||||||||||||||||||
Other**** |
| 77 |
|
| 159 |
|
| -0- |
|
| -0- |
|
| 21 |
|
| -0- |
| ||||||||||||||||||||||||||||||
Total |
| 416,147 |
|
| 507,399 |
|
| 8,700 |
|
| 128,700 |
|
| 108,846 |
|
| 8,700 |
|
| 418,716 |
|
| 33,757 |
|
| 152,893 |
|
| 158,998 |
|
| 119,171 |
|
| 8,634,562 |
|
* | 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, a Company car and personal security driver were provided to Mr. Rittenmeyer primarily for commuting and local business travel. The car is valued based on the annualized cost of the car plus maintenance and fuel. For security personnel employed by the Company, the cost is the actual incremental cost of expenses incurred by the security personnel. Total salary and benefits are not allocated because the Company already incurs these costs for business purposes. The amount also includes |
*** | Represents the benefits payable to Mr. Rittenmeyer under the terms of the Rittenmeyer Agreement upon his resignation, which was considered a termination on account of disability, as described under “Mr. Rittenmeyer’s Disability Benefits” below. |
**** | Represents a payroll tax gross-up resulting from an administrative timing error on certain inputed income. |
(5) | In |
(6) | In March 2022, Ms. |
(7) | Represents Mr. Rittenmeyer’s $5 million retention bonus granted in 2021, which was |
(8) | In connection with his resignation, the second and third tranches of Mr. Rittenmeyer’s performance-based restricted stock units granted in |
Executive Compensation Tables
Grants of Plan-Based Awards During 20212022
The following table sets forth information concerning grants of equity awards made in 20212022 under our stock incentive plan2019 Stock Incentive Plan and grants of cash that potentially could have been earned in 20212022 under our AIP.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or | Grant of | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or | Grant Date of Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Award Type(1) | Grant Date | Threshold ($) | Target ($) | Maximum ($) |
| Threshold (#) | Target (#) | Maximum (#) | Units (#) | Awards ($)(2) | Award Type(1) | Grant Date | Threshold ($) | Target ($) | Maximum ($) |
| Threshold (#) | Target (#) | Maximum (#) | Units (#) | Awards ($)(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer | AIP |
| 0 |
|
| 2,250,000 |
|
| 6,750,000 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/24/21 |
| 189,215 |
|
| 10,000,013 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Saum Sutaria | AIP |
| 0 |
|
| 1,500,000 |
|
| 4,500,000 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/24/21 |
| 75,686 |
|
| 4,000,005 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/24/21 | 0 |
| 56,765 |
|
| 127,721 |
|
| 3,000,030 |
| AIP |
| 0 |
|
| 2,250,000 |
|
| 6,750,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 9/1/21 |
| 53,341 |
|
| 4,000,042 |
| RSU | 2/23/22 |
| 63,196 |
|
| 5,000,068 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 9/1/21 | 0 |
| 53,341 |
|
| 120,017 |
|
| 4,000,042 |
| PRSU | 2/23/22 | 0 |
| 21,065 |
|
| 47,396 |
|
| 1,847,190 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Dan Cancelmi | AIP |
| 0 |
|
| 700,050 |
|
| 2,100,150 |
| AIP |
| 0 |
|
| 750,000 |
|
| 2,250,000 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/24/21 |
| 26,018 |
|
| 1,375,051 |
| RSU | 2/23/22 |
| 18,959 |
|
| 1,500,036 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/24/21 | 0 |
| 26,018 |
|
| 58,541 |
|
| 1,375,051 |
| PRSU | 2/23/22 | 0 |
| 6,319 |
|
| 14,218 |
|
| 554,113 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Tom Arnst | AIP |
| 0 |
|
| 450,000 |
|
| 1,350,000 |
| AIP |
| 0 |
|
| 487,500 |
|
| 1,462,500 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/24/21 |
| 14,192 |
|
| 750,047 |
| RSU | 2/23/22 |
| 12,640 |
|
| 1,000,077 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/24/21 | 0 |
| 14,192 |
|
| 31,932 |
|
| 750,047 |
| PRSU | 2/23/22 | 0 |
| 4,213 |
|
| 9,479 |
|
| 369,438 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Lisa Foo | AIP |
| 0 |
|
| 487,500 |
|
| 1,462,500 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/23/22 |
| 6,320 |
|
| 500,038 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/23/22 | 0 |
| 2,106 |
|
| 4,739 |
|
| 184,675 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paola Arbour | AIP |
| 0 |
|
| 375,000 |
|
| 1,125,000 |
| AIP |
| 0 |
|
| 412,500 |
|
| 1,237,500 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/24/21 |
| 8,515 |
|
| 450,018 |
| RSU | 2/23/22 |
| 6,320 |
|
| 500,038 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/24/21 | 0 |
| 8,515 |
|
| 19,159 |
|
| 450,018 |
| PRSU | 2/23/22 | 0 |
| 2,106 |
|
| 4,739 |
|
| 184,675 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Audrey Andrews | AIP |
| 0 |
|
| 412,500 |
|
| 1,237,500 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/24/21 |
| 14,192 |
|
| 750,047 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer | AIP |
| 0 |
|
| 2,250,000 |
|
| 6,750,000 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/23/22 |
| 53,716 |
|
| 4,250,010 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/23/22 | 0 |
| 17,905 |
|
| 40,286 |
|
| 1,570,089 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 10/1/22 |
| 35,811 |
|
| 1,921,260 | (3) |
(1) | AIPAwards.Awards designated “AIP” are awards that our NEOs might have earned during |
Time-Based Restricted Stock Unit Awards.Awards designated “RSU” reflect time-based |
Performance-Based Restricted Stock Unit Awards.Awards designated “PRSU” reflect the first one-third tranche of the performance-based |
(2) | We calculate the grant date fair value of |
(3) | In connection with his resignation, the second and third tranches of Mr. Rittenmeyer’s performance-based restricted stock units |
Executive Compensation Tables
|
|
|
Outstanding EquityNarrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Sutaria Employment Agreement
Dr. Sutaria and the Company are parties to an amended and restated employment agreement (the “Sutaria Agreement”), which provides for an initial term from September 1, 2021 through December 31, 2025, with automatic one-year renewals unless either party provides advance notice of their intention not to renew and subject to earlier termination in accordance with the terms of the agreement. In addition to setting forth standard terms regarding minimum base salary, target bonus under the AIP, eligibility for LTI awards and employee benefits, the Sutaria Agreement provides for an annual Company contribution to the ERA of no less than $250,000.
The following table sets forth informationSutaria Agreement includes severance payments and benefits in the event of a qualifying termination, as ofdescribed in further detail on page 60.
Rittenmeyer Employment Agreement
Prior to his resignation, Mr. Rittenmeyer and the Company were parties to an amended and restated employment agreement, which was most recently amended on February 25, 2022 (the “Rittenmeyer Agreement”). The Rittenmeyer Agreement, as amended, provided that Mr. Rittenmeyer would serve as Executive Chairman through December 31, 20212023 and as advisor to the CEO and the Board through December 31, 2025. In addition to setting forth standard terms regarding minimum base salary, target bonus under the AIP, eligibility for LTI awards and employee benefits, the Rittenmeyer Agreement provided for a $5 million retention bonus, subject to his continued employment through December 31, 2024. The Rittenmeyer Agreement also provided for severance payments and benefits in the event of a qualifying termination, pursuant to which Mr. Rittenmeyer received disability benefits in connection with respect to outstanding equity awards granted to each of the NEOs.his resignation, as described below under “Mr. Rittenmeyer’s Disability Benefits” on page 59.
Outstanding Equity Awards at 2021 Fiscal Year-End Table
Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | 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 | 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 130,806 | (3) | 10,685,542 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
| 94,608 | (3) | 7,728,528 |
|
|
|
|
|
| ||||||||||||||
Saum Sutaria | 1/31/19 |
|
|
|
|
|
|
|
|
|
|
|
| 318,327 | (4) | 26,004,133 |
|
|
|
|
|
| ||||||||||||||
| 2/27/19 |
|
|
|
|
|
|
|
|
|
|
|
| 47,181 | (5) | 3,854,216 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 95,924 | (5) | 7,836,032 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 35,972 | (6) | 2,938,553 | ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
| 75,686 | (5) | 6,182,789 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 113,530 | (7) | 9,274,266 | ||||||||||||||
| 9/1/21 |
|
|
|
|
|
|
|
|
|
|
|
| 53,341 | (8) | 4,357,426 |
|
|
|
|
|
| ||||||||||||||
| 9/1/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 106,682 | (9) | 8,714,853 | ||||||||||||||
Dan Cancelmi | 2/27/19 |
|
|
| 61,383 | (10) | 28.26 | 2/27/29 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| 2/27/19 |
|
|
|
|
|
|
|
|
|
|
|
| 9,044 | (5) | 738,804 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 29,977 | (5) | 2,448,821 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 44,965 | (6) | 3,673,191 | ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
| 26,018 | (5) | 2,125,410 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 52,036 | (7) | 4,250,821 | ||||||||||||||
Tom Arnst | 7/9/19 |
|
|
|
|
|
|
|
|
|
|
|
| 8,985 | (11) | 733,985 |
|
|
|
|
|
| ||||||||||||||
| 6/2/20 |
|
|
|
|
|
|
|
|
|
|
|
| 15,077 | (12) | 1,231,640 |
|
|
|
|
|
| ||||||||||||||
| 6/2/20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 22,615 | (6) | 1,847,419 | ||||||||||||||
| 2/24/21 |
|
| 14,192 | (5) |
| 1,159,344 |
| ||||||||||||||||||||||||||||
| 2/24/21 |
|
| 28,384 | (7) |
| 2,318,689 |
|
Executive Compensation Tables
Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | 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 ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#) | Equity of Shares, | |||||||||||||||||||||||||||
Paola Arbour | 5/31/18 | 17,205 |
|
|
| 35.43 | 5/31/28 |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
| 2/27/19 |
|
|
| 21,351 | (10) | 28.26 | 2/27/29 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| 2/27/19 |
|
|
|
|
|
|
|
|
|
|
|
| 3,146 | (5) | 256,997 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 10,792 | (5) | 881,598 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 16,188 | (6) | 1,322,398 | ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
| 8,515 | (5) | 695,590 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 17,030 | (7) | 1,391,181 | ||||||||||||||
Audrey Andrews | 2/27/19 |
|
|
| 40,033 | (10) | 28.26 | 2/27/29 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| 2/27/19 |
|
|
|
|
|
|
|
|
|
|
|
| 5,898 | (5) | 481,808 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 17,986 | (5) | 1,469,276 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 26,979 | (6) | 2,203,915 |
Outstanding Equity Awards
The following table sets forth information as of December 31, 2022 with respect to outstanding equity awards granted to each of the NEOs other than Mr. Rittenmeyer. As of December 31, 2022, Mr. Rittenmeyer had no outstanding equity awards.
Outstanding Equity Awards at 2022 Fiscal Year-End Table
Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity (#) | Equity or Payout of | |||||||||||||||||||||||||||
Saum Sutaria | 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 47,962 | (3) | 2,340,066 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 57,449 | (4) | 2,802,937 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
| 50,458 | (3) | 2,461,846 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 127,722 | (5) | 6,231,556 | ||||||||||||||
| 9/1/21 |
|
|
|
|
|
|
|
|
|
|
|
| 53,341 | (6) | 2,602,507 |
|
|
|
|
|
| ||||||||||||||
| 9/1/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 120,018 | (7) | 5,855,678 | ||||||||||||||
| 2/23/22 |
|
|
|
|
|
|
|
|
|
|
|
| 63,196 | (3) | 3,083,333 |
|
|
|
|
|
| ||||||||||||||
| 2/23/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 47,396 | (8) | 2,312,463 | ||||||||||||||
Dan Cancelmi | 2/27/19 | 61,383 | — | 28.26 | 2/27/29 |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 14,989 | (3) | 731,313 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 71,810 | (4) | 3,503,610 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
| 17,346 | (3) | 846,311 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 58,541 | (5) | 2,856,215 | ||||||||||||||
| 2/23/22 |
|
|
|
|
|
|
|
|
|
|
|
| 18,959 | (3) | 925,010 |
|
|
|
|
|
| ||||||||||||||
| 2/23/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 14,218 | (8) | 693,684 | ||||||||||||||
Tom Arnst (10) | 6/2/20 |
|
|
|
|
|
|
|
|
|
|
|
| 7,539 | (9) | 367,828 |
|
|
|
|
|
| ||||||||||||||
| 6/2/20 |
|
|
|
|
|
|
|
|
|
|
|
| 28,790 | (4) | 1,404,664 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
| 9,462 | (3) | 461,651 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 31,932 | (5) | 1,557,962 | ||||||||||||||
| 2/23/22 |
|
|
|
|
|
|
|
|
|
|
|
| 12,640 | (3) | 616,706 |
|
|
|
|
|
| ||||||||||||||
| 2/23/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,479 | (8) | 462,493 |
54 |
Executive Compensation Tables
Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity (#) | Equity or Payout of | |||||||||||||||||||||||||||
Lisa Foo | 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 1,799 | (3) | 87,773 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 8,620 | (4) | 420,570 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
| 2,208 | (3) | 107,728 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
| 7,452 | (5) |
| 363,583 |
| ||||||||||||||||||||||||||||
| 2/23/22 |
|
| 6,320 | (3) |
| 308,353 |
| ||||||||||||||||||||||||||||
| 2/23/22 |
|
| 4,739 | (8) |
| 231,191 |
| ||||||||||||||||||||||||||||
Paola Arbour | 5/31/18 | 17,205 |
|
|
| 35.43 | 5/31/28 |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
| 2/27/19 | 21,351 |
|
|
| 28.26 | 2/27/29 |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 5,396 | (3) | 263,271 |
|
|
|
|
|
| ||||||||||||||
| 2/26/20 |
|
|
|
|
|
|
|
|
|
|
|
| 25,854 | (4) | 1,261,417 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
| 5,677 | (3) | 276,981 |
|
|
|
|
|
| ||||||||||||||
| 2/24/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19,159 | (5) | 934,768 | ||||||||||||||
| 2/23/22 |
|
|
|
|
|
|
|
|
|
|
|
| 6,320 | (3) | 308,353 |
|
|
|
|
|
| ||||||||||||||
| 2/23/22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,739 | (8) | 231,191 |
(1) | All options have a term of 10 years. |
(2) | Based on the NYSE closing price of |
(3) |
|
|
These time-based restricted stock units vest in equal installments on each of the first three anniversaries of the date of grant. |
These performance-based restricted stock units |
These performance-based restricted stock units will vest |
These time-based restricted stock units vest on August 31, 2025. |
These performance-based restricted stock units will vest on August 31, 2025, subject to achievement of annual performance goals for each year (or partial year) within the performance period beginning January 1, 2021 and ending June 30, 2025, as modified by the Relative TSR modifier measured over the entirety of the performance period. The amount reported here represents the maximum performance-based restricted stock units that may be earned. |
These performance-based restricted stock |
These time-based restricted stock units vested on February 28, |
|
55 |
Executive Compensation Tables
Option Exercises and Stock Vested
The following table sets forth certain information regarding stock options exercised and restricted stock unit awards vested during 20212022 for the NEOs. No NEOs exercised stock options during 2022.
20212022 Option Exercises and Stock Vested Table
| Option Awards | Stock Awards | 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 | Number of (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||||||||||||||
Ron Rittenmeyer | 0 | 0 | 351,227 | 22,538,834 | ||||||||||||||||||||||||||||||||
Saum Sutaria | 0 | 0 | 95,142 | 4,854,146 |
|
| 438,698 | 34,924,495 | ||||||||||||||||||||||||||||
Dan Cancelmi | 214,302 | 7,517,761 | 36,437 | 1,859,016 |
|
| 32,704 | 2,763,949 | ||||||||||||||||||||||||||||
Tom Arnst | 0 | 0 | 16,523 | 843,003 |
|
| 21,253 | (2) | 1,804,889 | |||||||||||||||||||||||||||
Lisa Foo |
|
| 2,903 | 243,837 | ||||||||||||||||||||||||||||||||
Paola Arbour | 0 | 0 | 11,051 | 603,690 |
|
| 11,380 | 962,580 | ||||||||||||||||||||||||||||
Audrey Andrews | 56,626 | 3,276,346 | 37,174 | 2,331,886 | ||||||||||||||||||||||||||||||||
Ron Rittenmeyer |
|
| 332,846 | 19,165,624 |
(1) |
|
Calculated by multiplying the number of shares vested by the market price of common stock on the vesting date. The values shown do not represent the total value of shares received by the NEOs, as shares were withheld to cover applicable taxes. |
(2) | Includes 8,896 restricted stock units transferred pursuant to a domestic relations order. |
Pension Benefits
The following table sets forth information as of December 31, 20212022 with respect to our SERP, which provides for payments or other benefits in connection with the retirement of the following participating NEOs.
20212022 Pension Benefits Table
Name | Plan Name | Number of Years Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2)(3) | Payments During Last Fiscal Year ($) | Plan Name | Number of Years of Credited Service(1) | Present Value ($)(2)(3)(4) | Payments During Last Fiscal Year | ||||||||||||
Dan Cancelmi | SERP | 20 | 12,664,070 | (4) | -0- | SERP | 20 | 9,661,518 | -0- | |||||||||||
Audrey Andrews | SERP | 20 | 6,491,496 | (4) | -0- |
(1) | Credited service under the SERP is limited to a maximum of 20 years. |
(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 offset by any benefit received under the ERA and other retirement benefits. For more information on amounts payable under the ERA, see the |
56 |
Executive Compensation Tables
Supplemental Executive Retirement Plan
Mr. Cancelmi and Ms. Andrews are participantsis a participant in our SERP, which provides 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 the six-month delay applicable to key employees under Section 409A of the Internal Revenue 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:
Highest average monthly earnings (base salary and annual cash bonus under our AIP) for any consecutive 60-month period during the 10 years preceding retirement | x | Years of credited services | x | Vesting factor | x | Percentage factor (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% for each year that employment termination occurs before age 62 (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. As of her separation from service (for purposes of Section 409A) on December 31, 2021, Ms. Andrews was eligible for the early retirement provisions under the SERP.
In the event of a change of control, participants fully vest in their SERP benefits 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 the six-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, 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.
57 |
Executive Compensation Tables
Nonqualified Deferred Compensation
The following table sets forth information as of December 31, 20212022 with respect to our deferred compensation plans.
20212022 Nonqualified Deferred Compensation Table
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 ($)(5) | Plan Name(1) | Executive Contributions in Last Fiscal Year ($)(2) | Registrant Contributions in Last Fiscal Year ($)(3) | Aggregate Earnings in Last Fiscal Year ($)(4) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer | DCP | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
ERA | -0- | 375,000 | 25,599 | | -0- | 1,374,743 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Saum Sutaria | DCP | 277,800 | 138,900 | 6,494 | -0- | 625,866 | DCP | 270,000 | 33,750 | 25,238 | -0- | 752,354 | (6) | |||||||||||||||||||||||||||||||||||||||||||||||
| ERA | -0- | 300,000 | 14,482 | -0- | 823,614 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Saum Sutaria | ERA | -0- | 375,000 | 37,018 | -0- | 1,235,631 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dan Cancelmi | DCP | -0- | -0- | 82,532 | -0- | 479,657 | DCP | -0- | -0- | (125,447 | ) | -0- | 354,210 | |||||||||||||||||||||||||||||||||||||||||||||||
| ERA | -0- | -0- | -0- | -0- | 69,502 | ERA | -0- | -0- | -0- | -0- | 69,502 | ||||||||||||||||||||||||||||||||||||||||||||||||
Tom Arnst | DCP | -0- | -0- | -0- | -0- | -0- | DCP | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||||||||||||||||||||||||
| ERA | -0- | 120,000 | 16,011 | -0- | 242,693 | ERA | -0- | 130,000 | (38,734 | ) | -0- | 333,960 | |||||||||||||||||||||||||||||||||||||||||||||||
Lisa Foo | DCP | 39,697 | 19,848 | (48,577 | ) | -0- | 210,755 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| ERA | -0- | 130,000 | 8,577 | -0- | 303,388 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paola Arbour | DCP | -0- | -0- | 6,434 | -0- | 66,718 | DCP | -0- | -0- | (11,914 | ) | -0- | 54,804 | |||||||||||||||||||||||||||||||||||||||||||||||
| ERA | -0- | 100,000 | 7,895 | -0- | 418,223 | ERA | -0- | 110,000 | 17,085 | -0- | 545,308 | ||||||||||||||||||||||||||||||||||||||||||||||||
Audrey Andrews | DCP | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer | DCP | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ERA | -0- | -0- | -0- | -0- | 55,858 | ERA | -0- | 875,000 | 45,419 | 2,295,162 | -0- |
(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 fiscal year-end balance reported for the Deferred Compensation Plan includes the following amounts that were previously reported in Summary Compensation Tables as compensation for previous years: |
(6) | Dr. Sutaria’s aggregate balance under the DCP as of December 31, 2021 was previously reported at $625,866; however, the correct balance as of December 31, 2021 was $423,366. |
Deferred Compensation Plan
All our Named Executive Officers and non-employee directors are eligible to participate in our Deferred Compensation Plan. Dr. Sutaria, Mr. Cancelmi, Ms. Foo and Ms. Arbour participated in this plan in 2021;2022; however, only Dr. Sutaria and Ms. Foo made employee contributions during 2021.2022.
Participants are permitted to elect to defer various types of covered compensation (“Deferral Contributions”) to the Deferred Compensation Plan. We make an employer matching contribution 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. All elective deferrals and employer contributions made to the Deferred Compensation Plan are fully vested when made.
Amounts deferred under the Deferred 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 a one- to 15-year period, as elected by the participant. Any amounts that are payable from the Deferred Compensation Plan upon a termination of employment are subject to the six-month delay applicable to key employees under Section 409A.
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|
Participants may request, no more frequently than daily, that any of the following investment crediting rates be applied to amounts credited to their Deferred 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 20212022 of 2.16%3.47%); (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 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, Mr. Arnst, Ms. Foo, Ms. Arbour and Ms. Arbour.Mr. Rittenmeyer. Mr. Cancelmi and Ms. Andrews began participating in the ERA prior to becoming eligible to participate in the SERP but areis no longer actively participating in the ERA. For active participants in the ERA other than Dr. Sutaria, 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. Under the 2021 Sutaria Agreement, Dr. Sutaria is entitled to an annual Company contribution to the ERA of no less than $250,000. All 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 regarding the 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 participantsa participant in the SERP, Mr. Cancelmi’s and Ms. Andrews’ participation in the ERA and theirhis account balances werebalance was frozen and no additional contributions or earnings credits will be made, though the account balances continuebalance continues to accrue years of vesting service. Upon a qualifying termination of employment, Mr. Cancelmi and Ms. Andrews will receive theirhis vested balances under the ERA and will also be entitled to receive theirhis applicable benefit under the SERP, but such SERP benefit will be 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 ana NEO’s employment had terminated on December 31, 2021.2022. 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 $81.69$48.79 per share of our common stock on December 31, 2021.30, 2022, the last trading day of 2022. 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. AnA NEO’s benefits under our 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 AgreementDisability Benefits
Upon certain terminations of Mr. Rittenmeyer’s employment with the Company by the Company without “cause”, by Mr. Rittenmeyer for “good reason”, or asAs a result of his death or “disability” (each as defined inresignation, which was considered a termination on account of disability under the 2021 Rittenmeyer Agreement), the 2021 Rittenmeyer Agreement, as in effect on December 31, 2021, provided thataddition to accrued obligation, Mr. Rittenmeyer would be eligible to receivereceived the following severancedisability payments and benefits, which vary based on whether such termination occurs during the “Initial Term” (from the date of the 2021 Rittenmeyer Agreement through December 31, 2022) or the “Subsequent Term” (January 1, 2023 through December 31, 2024):benefits:
payment of any AIP bonus for any preceding fiscal year during the Initial Term that is unpaid as of the termination date (the “Prior Year Bonus”);
• | a lump sum payment equal to the amount of base salary that remains payable through December 31, 2025, equal to $3,375,000; |
• | a pro-rata AIP bonus for 2022 based on actual performance, equal to $1,750,192; |
• | a lump sum payment equal to the sum of (i) the AIP bonus for 2022, based on the higher of actual and target performance, for the portion of 2022 following the date of termination, plus (ii) the target AIP bonuses for 2023, 2024 and 2025, equal to $4,317,123 in total; |
• | accelerated vesting and settlement of his $5 million retention bonus; |
• | accelerated vesting of all equity and other long-term incentive awards held by Mr. Rittenmeyer, which as of the date of termination had a total value of $7,944,352; |
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Executive Compensation Tables
• | settlement of his deferred restricted stock units originally granted in 2010 for service as a non-employee director with a value of $181,458; and |
• | continued coverage under the Company’s health and welfare plans and other benefits and perquisites for him and his dependents, which had an estimated total value of $21,058. |
a lump sum payment equal to the amount of base salary that remains payable through December 31, 2024;
if such termination occurs during the Initial Term, a pro-rata AIP bonus for the year in which the termination of employment occurs based on actual performance (the “Pro-Rata Annual Bonus”);
if such termination occurs during the Initial Term, a lump sum payment equal to the sum of (1) a pro rata portion of the AIP bonus Mr. Rittenmeyer would have had the opportunity to earn for the remaining portion of the year of termination based on the higher of actual and target performance and (2) a pro-rata portion of the AIP bonus(es) Mr. Rittenmeyer would have had the opportunity to earn over the remaining years of the Initial Term based on target performance (the “Pro-Rata Remaining Bonus”);
accelerated vesting and settlement of his $5 million retention bonus;
accelerated vesting of all equity and other long-term incentive awards held by Mr. Rittenmeyer; and
continued coverage under the Company’s health and welfare plans and other benefits and perquisites through December 31, 2024.
Mr. Rittenmeyer’s entitlement to suchthese disability benefits iswas contingent upon his compliance with his post-termination restrictive covenants and, in the case of a termination without cause or resignation for good reason, his execution of a general release of claims in favor of the Company and its affiliates.covenants. Pursuant to the 2021 Rittenmeyer Agreement, Mr. Rittenmeyer iswas bound by perpetual confidentiality and non-disparagement covenants. The Employment Agreement also contains covenants, as well as non-competition and non-solicitation covenants that apply for the duration of Mr. Rittenmeyer’s employment with the Company andwould have applied for two years thereafter.following the date of termination had he not passed away.
The February 2022 amendment to the 2021 Rittenmeyer Agreement extends these severance protections, as it extends the Initial Term through December 31, 2023 and extends the Subsequent Term through December 31, 2025. In addition, if Mr. Rittenmeyer’s employment is terminated during the revised Subsequent Term by the Company without “cause,” by Mr. Rittenmeyer for “good reason,” or as a result of Mr. Rittenmeyer’s death or “disability”, the severance payable to him will also include the Prior Year Bonus, the Pro-Rata Annual Bonus, and the Pro-Rata Remaining Bonus, subject to the terms and conditions set forth in the Employment Agreement.
Dr. Sutaria’s Employment Agreement Benefits
Upon termination of Dr. Sutaria’s employment with the Company without “cause” (including as a result of the Company’s election not to renew the 2021 Sutaria Agreement) or Dr. Sutaria’s resignation with “good reason” (in each case as defined in the 2021 Sutaria Agreement) more than six months prior to, or more than two years following, a change of control (as defined in the ESP), the 2021 Sutaria Agreement provides that Dr. Sutaria will be eligible to receive, subject to his execution of a release of claims in favor of the Company:
payment of any earned but unpaid AIP bonus for the year prior to the year in which the termination of employment occurs;
a pro-rata AIP bonus for the year in which the termination of employment occurs based on actual performance;
a cash amount equal to 2.5X the sum of Dr. Sutaria’s base salary plus target AIP bonus, paid over two and one-half year period following the termination date;
accelerated vesting of all outstanding unvested equity and other long-term incentive awards; and
continued coverage under the Company’s health and welfare plans during the two and one-half year period following the termination date.
• | payment of any earned but unpaid AIP bonus for the year prior to the year in which the termination of employment occurs (the “Prior Year Bonus”); |
• | a pro-rata AIP bonus for the year in which the termination of employment occurs based on actual performance (the “Pro-Rata Bonus”); |
• | a cash amount equal to 2.5x the sum of Dr. Sutaria’s base salary plus target AIP bonus, paid over two and one-half year period following the termination date; |
• | accelerated vesting of all outstanding unvested equity and other long-term incentive awards; and |
• | continued coverage under the Company’s health and welfare plans during the two and one-half year period following the termination date. |
If such termination occurs within six months prior to, or within two years following, a change of control, Dr. Sutaria will instead be eligible to receive, subject to his execution of a release of claims in favor of the Company:
payment of any earned but unpaid AIP bonus for the year prior to the year in which the termination of employment occurs;
a pro-rata AIP bonus for the year in which the termination of employment occurs based on actual performance;
a cash amount equal to 3.0X the sum of Dr. Sutaria’s base salary plus target AIP bonus paid in single lump-sum;
accelerated vesting of all outstanding unvested equity and other long-term incentive awards; and
continued coverage under the Company’s health and welfare plans during the three year period following the termination date.
• | the Prior Year Bonus; |
• | the Pro-Rata Bonus; |
a cash amount equal to 3.0x the sum of Dr. Sutaria’s base salary plus target AIP bonus paid in single lump-sum; |
Executive Compensation Tables
• | accelerated vesting of all outstanding unvested equity and other long-term incentive awards; and |
• | continued coverage under the Company’s health and welfare plans during the three year period following the termination date. |
If Dr. Sutaria’s employment is terminated as a result of Dr. Sutaria’s death or “disability” (as defined in the 2021 Sutaria Agreement), Dr. Sutaria will be eligible to receive:
payment of any earned but unpaid AIP bonus for the year prior to the year in which the termination of employment occurs;
a pro-rata AIP bonus for the year in which the termination of employment occurs based on actual performance; and
accelerated vesting of all outstanding unvested equity and other long-term incentive awards.
• | the Prior Year Bonus; |
• | the Pro-Rata Bonus; and |
• | accelerated vesting of all outstanding unvested equity and other long-term incentive awards. |
In the event Dr. Sutaria elects not to renew 2021the Sutaria Agreement upon expiration of its then-current term, Dr. Sutaria will be entitled to continued vesting of all equity-based awards granted during the term of the 2021 Sutaria Agreement during the two and one-half year period following the conclusion of the then-current term as if Dr. Sutaria had remained employed by Company, subject to his execution of a release of claims in favor of the Company and continued compliance with the restrictive covenants set forth in the 2021 Sutaria Agreement.
Pursuant to the terms of the 2021 Sutaria Agreement, Dr. Sutaria is bound by perpetual confidentiality and non-disparagement covenants. The 2021 Sutaria 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 four of the Company’s primary competitors for the duration of Dr. Sutaria’s employment with the Company and for one year thereafter.
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Executive Compensation Tables
Death, Disability and Retirement
Upon retirement on or after age 62, ana NEO would receive a pro-rata bonus earned under the AIP for the year that includes the date of retirement.
Other than the treatment of Mr. Rittenmeyer’s and Dr. Sutaria’s awards under their employment agreementsthe Sutaria Agreement as discussed above, pursuant to the terms of the award agreements under the 2019 Stock Incentive Plan, if ana NEO dies, becomes totally and permanently disabled or, in the case of stock options, retires on or after age 62, unvested options and restricted stock units will vest in full. If the options or RSUs are subject to performance criteria then for awards granted prior to 2020, vesting is subject toand the satisfaction of such performance criteria, and if termination occurs prior to the end of the performance period, the awards will be subject to pro-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.
The table set forth below reflects the estimated aggregate amount of payments and other benefits each NEO would have received upon termination of employment due to death, disability or retirement if such terminations occurred as of December 31, 2021.2022. As of December 31, 2021,2022, Mr. Cancelmi and Ms. Andrews werewas considered early retirement-eligible (and Ms. Andrews in fact incurred a separation from service) for purposes of the SERP, Mr. Rittenmeyer was considered normal retirement-eligible for purposes of the ERA,SERP, and no executives with retirement provisions under their award agreements were considered retirement-eligible for such awards.
Ms. Andrews’s Retirement Agreement
In connection with her retirement, we entered into a Retirement Agreement and General Release with Ms. Andrews on December 30, 2021 (the “Retirement Agreement”). Under the Retirement Agreement, Ms. Andrews will serve as a non-executive senior advisor from January 1, 2022 through April 15, 2022 providing transition services and support and will receive a salary of $750 per week during such period. Ms. Andrews received an AIP award for 2021 but will not be eligible to receive an AIP award for 2022, and her outstanding equity awards will continue vesting through her retirement date of April 15, 2022. With the exception of vested benefits under the SERP and ERA that Ms. Andrews is entitled to, the Retirement Agreement does not provide for any post-retirement compensation or benefits.
Executive Compensation Tables
2021 Death, Disability and Retirement Table
Name | Termination Scenario | SERP/ERA ($)(1) | Severance ($)(2) | Accelerated Equity Awards ($)(3) | Performance and Retention Cash ($)(4) | Total ($) | Termination Scenario | SERP/ERA Benefit ($)(1) | Severance Benefits ($)(2) | Accelerated Equity Awards ($)(3) | Total ($) | |||||||||||||||||||||||||||||
Ron Rittenmeyer | Death |
| 1,374,743 |
|
| 12,043,520 |
|
| 18,413,928 |
|
| 5,000,000 |
|
| 36,832,191 |
| ||||||||||||||||||||||||
Disability |
| 1,374,743 |
|
| 12,043,520 |
|
| 18,413,928 |
|
| 5,000,000 |
|
| 36,832,191 |
| |||||||||||||||||||||||||
Retirement |
| 1,374,743 |
|
| -0- |
|
| -0- |
|
| -0- |
|
| 1,374,743 |
| |||||||||||||||||||||||||
Saum Sutaria | Death |
| -0- |
|
| 4,500,000 |
|
| 29,494,729 |
|
| 5,000,000 |
|
| 38,994,729 |
| Death |
| -0- |
|
| 2,340,000 |
|
| 21,154,796 |
|
| 23,494,796 |
| |||||||||||
Disability |
| -0- |
|
| 4,500,000 |
|
| 29,494,729 |
|
| 5,000,000 |
|
| 38,994,729 |
| Disability |
| -0- |
|
| 2,340,000 |
|
| 21,154,796 |
|
| 23,494,796 |
| ||||||||||||
Retirement |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
| Retirement |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
| ||||||||||||
Dan Cancelmi | Death |
| 5,882,660 |
|
| -0- |
|
| 11,923,833 |
|
| 1,533,334 |
|
| 19,339,827 |
| Death |
| 4,756,156 |
|
| -0- |
|
| 7,460,136 |
|
| 12,216,292 |
| |||||||||||
Disability |
| 10,901,893 |
|
| -0- |
|
| 11,923,833 |
|
| 1,533,334 |
|
| 24,359,060 |
| Disability |
| 7,817,849 |
|
| -0- |
|
| 7,460,136 |
|
| 15,277,985 |
| ||||||||||||
Retirement |
| 12,180,287 |
|
| -0- |
|
| -0- |
|
| -0- |
|
| 12,180,287 |
| Retirement |
| 9,825,664 |
|
| -0- |
|
| -0- |
|
| 9,825,667 |
| ||||||||||||
Tom Arnst | Death |
| -0- |
|
| -0- |
|
| 4,275,401 |
|
| 455,000 |
|
| 4,730,401 |
| Death |
| -0- |
|
| -0- |
|
| 3,331,215 |
|
| 3,331,215 |
| |||||||||||
Disability |
| -0- |
|
| -0- |
|
| 4,275,401 |
|
| 455,000 |
|
| 4,730,401 |
| Disability |
| -0- |
|
| -0- |
|
| 3,331,215 |
|
| 3,331,215 |
| ||||||||||||
Retirement |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
| Retirement |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
| ||||||||||||
Lisa Foo | Death |
| -0- |
|
| -0- |
|
| 1,133,765 |
|
| 1,133,765 |
| |||||||||||||||||||||||||||
Disability |
| -0- |
|
| -0- |
|
| 1,133,768 |
|
| 1,133,765 |
| ||||||||||||||||||||||||||||
Retirement |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
| ||||||||||||||||||||||||||||
Paola Arbour | Death |
| -0- |
|
| -0- |
|
| 3,749,797 |
|
| 533,334 |
|
| 4,283,131 |
| Death |
| -0- |
|
| -0- |
|
| 2,489,667 |
|
| 2,489,667 |
| |||||||||||
Disability |
| -0- |
|
| -0- |
|
| 3,749,797 |
|
| 533,334 |
|
| 4,283,131 |
| Disability |
| -0- |
|
| -0- |
|
| 2,489,667 |
|
| 2,489,667 |
| ||||||||||||
Retirement |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
| Retirement |
| -0- |
|
| -0- |
|
| -0- |
|
| -0- |
| ||||||||||||
Audrey Andrews | Death |
| 3,717,108 |
|
| -0- |
|
| 5,446,102 |
|
| 1,000,000 |
|
| 10,163,210 |
| ||||||||||||||||||||||||
Disability |
| 6,415,798 |
|
| -0- |
|
| 5,446,102 |
|
| 1,000,000 |
|
| 12,861,900 |
| |||||||||||||||||||||||||
Retirement |
| 6,491,496 |
|
| -0- |
|
| -0- |
|
| -0- |
|
| 6,491,496 |
|
(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 a 60-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) | For |
(3) | Unvested performance-based restricted stock unit awards are reported as vesting at target levels. Amounts reflected are based on the NYSE closing price of |
| ||||||
2023 PROXY STATEMENT | 61 |
Executive Compensation Tables
Non-Cause Termination/No Change of Control
Subject to the terms of the ESP and applicable equity plans and award agreements, including execution of a severance agreement containing restrictive covenants and a release of claims, Mr. Cancelmi, Mr. Arnst, Ms. ArbourFoo and Ms. AndrewsArbour are (or in the case of Ms. Andrews, prior to her retirement would be) entitled to the following severance payments and other benefits if the executive’s employment is terminated by the Company 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 Mr. Cancelmi and one and a half years for Mr. Arnst, Ms. Arbour and Ms. Andrews.
• | Severance pay (base salary plus target bonus (or, for Ms. Foo, the average bonus payout percentage for the preceding three years (or if greater, 50%) multiplied by base salary)) during the “severance period” which is two and a half years for Mr. Cancelmi and one and a half years for Mr. Arnst, Ms. Foo and Ms. Arbour. |
• | Lump sum pro-rata bonus earned under the AIP for the year that includes the date of 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 NEO receives comparable benefits through other employment during the severance period. |
Executive Compensation Tables
Lump sum pro-rata bonus earned under the AIP for the year that includes the date of 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 NEO receives comparable benefits through other employment during the severance period.
Outplacement services not to exceed $25,000.
Pursuant to the terms of the ESP, the NEOs will forfeit any non-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 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). In February of 2022, Mr. Cancelmi’s and Ms. Arbour’s participation agreements under the ESP and Mr. Arnst’s offer letter were amended to provide for continued vesting upon a qualifying termination, even if the underlying equity award agreements do not provide for such vesting treatment.
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 (i.e., any previously “banked” amounts shall also be payable).
Age and service credit under the SERP during the severance period, for employees who became participants in the SERP prior to August 3, 2011.
• | Outplacement services not to exceed $25,000. |
• | Pursuant to the terms of the ESP, the NEOs will forfeit any non-vested outstanding equity awards at termination to the extent the underlying equity award agreements do not otherwise provide for acceleration of vesting. Time-vested restricted stock unit awards and stock options vest upon a non-cause termination. Likewise, subject to satisfaction of the performance criteria, performance-based restricted stock unit awards and performance-based stock options vest upon a non-cause termination (with proration for any performance period not completed as of termination with respect to performance-based restricted stock unit awards). In February of 2022, Mr. Cancelmi’s and Ms. Arbour’s participation agreements under the ESP and Mr. Arnst’s offer letter were amended to provide for continued vesting upon a qualifying termination, even if the underlying equity award agreements do not provide for such vesting treatment. |
• | Performance cash awards are subject to the same treatment as performance-based restricted stock unit awards with respect to any performance period not completed as of termination (i.e., any previously “banked” amounts shall also be payable). |
• | Age and service credit under the SERP during the severance period, for employees who became participants in the SERP prior to August 3, 2011. |
The table set forth below reflects the estimated aggregate amount of payments and other benefits (not including reimbursable legal fees, if any, to obtain benefits under the ESP and certain reimbursable excise taxes, if any, incurred by the participant under Section 409A) each NEO would receive upon a non-cause termination unrelated to any change of control assuming that terminations occurred as of December 31, 2021.2022.
Name | Cash Severance ($)(1) | Pro-Rata Bonus ($)(2) | Health and Welfare Benefits ($)(3) | Outplacement Services ($) | Additional SERP/ ERA Benefit ($)(4) | Performance and Retention Cash ($)(5) | Accelerated Equity Awards ($)(6) | Excise Tax Reimbursements ($) | Total ($) | Cash Severance ($)(1) | Pro-Rata Bonus ($)(2) | Health and Welfare Benefits ($)(3) | Outplacement ($) | Additional ($)(4) | Accelerated ($)(5) | Excise Tax ($) | Total ($) | |||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer |
| 5,250,000 |
|
| 6,750,000 |
|
| 43,520 |
|
| -0- |
|
| -0- |
|
| 5,000,000 |
|
| 18,413,928 |
| Not a benefit |
| 35,457,448 |
| |||||||||||||||||||||||||||||||||||||||
Saum Sutaria |
| 6,750,000 |
|
| 4,500,000 |
|
| 51,101 |
|
| -0- |
|
| -0- |
|
| 5,000,000 |
|
| 29,494,729 |
|
| 45,795,830 |
|
| 9,375,000 |
|
| 2,340,000 |
|
| 47,895 |
|
| -0- |
|
| -0- |
|
| 21,154,796 |
| Not a benefit |
| 32,917,691 |
| ||||||||||||||||||
Dan Cancelmi |
| 3,500,250 |
|
| 1,820,130 |
|
| 49,862 |
|
| 25,000 |
|
| 1,967,505 |
|
| 1,533,334 |
|
| 11,923,833 |
|
| 20,819,914 |
|
| 3,750,000 |
|
| 780,000 |
|
| 44,067 |
|
| 25,000 |
|
| 1,225,501 |
|
| 7,460,136 |
|
| 13,284,704 |
| |||||||||||||||||||
Tom Arnst |
| 1,575,000 |
|
| 1,125,000 |
|
| 22,111 |
|
| 25,000 |
|
| -0- |
|
| 455,000 |
|
| 4,275,401 |
|
| 7,477,512 |
|
| 1,706,250 |
|
| 507,000 |
|
| 22,481 |
|
| 25,000 |
|
| -0- |
|
| 3,331,215 |
|
| 5,591,946 |
| |||||||||||||||||||
Lisa Foo |
| 1,881,750 |
|
| 507,000 |
|
| 26,904 |
|
| 25,000 |
|
| -0- |
|
| 1,133,765 |
|
| 3,574,419 |
| |||||||||||||||||||||||||||||||||||||||||||
Paola Arbour |
| 1,312,500 |
|
| 881,250 |
|
| 20,022 |
|
| 25,000 |
|
| -0- |
|
| 533,334 |
|
| 3,749,797 |
|
| 6,521,903 |
|
| 1,443,750 |
|
| 363,000 |
|
| 14,286 |
|
| 25,000 |
|
| -0- |
|
| 2,489,667 |
|
| 4,335,703 |
| |||||||||||||||||||
Audrey Andrews |
| 1,443,750 |
|
| 825,000 |
|
| 29,706 |
|
| 25,000 |
|
| 735,525 |
|
| 1,000,000 |
|
| 5,446,102 |
| Not a benefit |
| 9,505,083 |
|
(1) |
|
(2) | Represents each NEO’s pro-rata AIP bonus for |
(3) | 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. |
(4) | Represents the present value of the additional benefit payable under the SERP for eligible NEOs, which is attributable to the additional age and service credits that the NEOs accrue during their applicable severance periods, for employees who became participants in the SERP prior to August 3, 2011; however, the additional SERP benefit attributable to such age and service credits does not begin to be paid until the end of the severance period. The additional SERP benefit amounts do not include an amount of SERP benefits equal to that which would be payable in the event of retirement as shown in the |
(5) |
|
Unvested performance-based restricted stock unit are reported as vesting at target levels. Amounts reflected are based on the NYSE closing price of |
Executive Compensation Tables
|
|
|
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 a non-cause termination outside the context of a change of control, as described above, provided that the “severance period” is three years for Mr. Cancelmi and two years for Mr. Arnst, Ms. Arbour and Ms. Andrews. However, If the termination occurs within the six months prior to a change of control that results from the liquidation or dissolution of the Company, then the severance period applicable to non-cause terminations outside the context of a change of control will apply.
Equity awards under our 2008 and 2019 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 NEO terminates employment.
Equity awards under our 2008 and 2019 Stock Incentive Plans that have not vested and are assumed or substituted by the successor to the Company will accelerate and become vested upon a non-cause termination in connection with a change of control, and performance-based RSUs 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).
• | The same benefits to which the executive would be entitled with respect to a non-cause termination outside the context of a change of control, as described above, provided that the “severance period” is three years for Mr. Cancelmi and two years for Mr. Arnst, Ms. Foo and Ms. Arbour. However, If the termination occurs within the six months prior to a change of control that results from the liquidation or dissolution of the Company, then the severance period applicable to non-cause terminations outside the context of a change of control will apply. |
• | Equity awards under our 2008 and 2019 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 NEO terminates employment. |
• | Equity awards under our 2008 and 2019 Stock Incentive Plans that have not vested and are assumed or substituted by the successor to the Company will accelerate and become vested upon a non-cause termination in connection with a change of control, and performance-based RSUs 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). |
In 2012, the Company amended the ESP to eliminate all reimbursements and 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 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 an after-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 would receive upon a non-cause termination related to any change of control assuming that terminations occurred as of December 31, 2021.2022.
Name | Cash Severance ($)(1) | Pro-Rata Bonus ($)(2) | Health and Welfare Benefits ($)(3) | Outplacement Services ($) | Additional SERP/ Benefit ($)(4) | Performance Cash | Accelerated Equity | Excise Tax Reimbursements | Total ($)(7) | Cash Severance ($)(1) | Pro-Rata Bonus ($)(2) | Health and Welfare Benefits ($)(3) | Outplacement ($) | Additional ($)(4) | Accelerated ($)(5) | Excise Tax ($) | Cutback for ($)(6) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Ron Rittenmeyer |
| 5,250,000 |
|
| 6,750,000 |
|
| 43,520 |
|
| -0- |
|
| -0- |
|
| 5,000,000 |
|
| 18,413,928 |
| Not a benefit |
| 35,457,448 |
| |||||||||||||||||||||||||||||||||||||||||||
Saum Sutaria |
| 8,100,000 |
|
| 4,500,000 |
|
| 61,322 |
|
| -0- |
|
| -0- |
|
| 5,000,000 |
|
| 29,494,729 |
|
| 47,156,051 |
|
| 11,250,000 |
|
| 2,340,000 |
|
| 57,474 |
|
| -0- |
|
| -0- |
|
| 21,154,796 |
| Not a benefit |
| -0- |
|
| 34,802,270 |
| |||||||||||||||||||
Dan Cancelmi |
| 4,200,300 |
|
| 1,820,130 |
|
| 59,835 |
|
| 25,000 |
|
| 1,453,301 |
|
| 1,533,334 |
|
| 11,923,833 |
|
| 21,015,733 |
|
| 4,500,000 |
|
| 780,000 |
|
| 52,880 |
|
| 25,000 |
|
| 641,676 |
|
| 7,460,136 |
|
| -0- |
|
| 13,459,692 |
| ||||||||||||||||||||
Tom Arnst |
| 2,100,000 |
|
| 1,125,000 |
|
| 29,482 |
|
| 25,000 |
|
| -0- |
|
| 455,000 |
|
| 4,275,401 |
|
| 8,009,883 |
|
| 2,275,000 |
|
| 507,000 |
|
| 29,974 |
|
| 25,000 |
|
| -0- |
|
| 3,331,215 |
|
| (602,870 | ) |
| 5,565,319 |
| ||||||||||||||||||||
Lisa Foo |
| 2,509,000 |
|
| 507,000 |
|
| 35,872 |
|
| 25,000 |
|
| -0- |
|
| 1,133,765 |
|
| (709,935 | ) |
| 3,500,702 |
| ||||||||||||||||||||||||||||||||||||||||||||
Paola Arbour |
| 1,750,000 |
|
| 881,250 |
|
| 26,697 |
|
| 25,000 |
|
| -0- |
|
| 533,334 |
|
| 3,749,797 |
|
| 6,966,078 |
|
| 1,925,000 |
|
| 363,000 |
|
| 19,048 |
|
| 25,000 |
|
| -0- |
|
| 2,489,667 |
|
| (184,025 | ) |
| 4,637,690 |
| ||||||||||||||||||||
Audrey Andrews |
| 1,925,000 |
|
| 825,000 |
|
| 39,608 |
|
| 25,000 |
|
| 4,334,684 |
|
| 1,000,000 |
|
| 5,446,102 |
| Not a benefit |
| 13,595,394 |
|
(1) | In the case of a non-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 a non-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 any six-month delay required by Section 409A. For |
(2) | Represents each NEO’s pro-rata AIP bonus for |
(3) | 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. |
(4) | Represents the present value of the SERP benefit payable in the event of a non-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 a non-cause termination unrelated to a change in control, which is presented in the “Additional SERP/ERA Benefit” column of the table on page |
Executive Compensation Tables
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, |
Present value calculations use the assumptions discussed in footnote 3 to the |
(5) |
|
Amounts reflected have been calculated using the NYSE closing price of |
Represents a reduction in otherwise payable benefits in an amount sufficient to avoid an application of the excise tax imposed by Section 4999 of the Internal Revenue Code. The payments and benefits provided to |
Definitions:
“Cause” under our deferred compensation plans, ESP, SERP, AIP and 2008 and 2019 Stock Incentive Plans is defined as:
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; or
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 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 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.
• | 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; or |
• | 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 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 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 a 12-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 such 12-month period); (iii) a majority of the members of the Board are replaced during any 12-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).
“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.
Executive Compensation Tables
|
|
|
The 20212022 annual total compensation of the median compensated of all our employees, other than Saum Sutaria, our CEO, was $55,245;$58,435; Dr. Sutaria’s 20212022 annual total compensation was $21,153,671;$11,047,128; and the ratio of these amounts was approximately 1 to 383.189.
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 2021,2022, 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 20212022 for all employees who were employed for all of 2021,2022, and we used the annualized value of total gross wages earned during calendar year 20212022 for all employees who were hired during 20212022 and were employed as of December 31, 2021,2022, but did not serve a full year with the Company (including employees who were furloughed for a portion of 2021).Company. We identified our employee population as of December 31, 2021,2022, based on our payroll and employment records. As permitted by SEC rules, we excluded approximately 2,0003,000 employees located in the Philippines, who in the aggregate represented approximately 1.9%2.9% of our approximately 101,000102,400 employees as of December 31, 2021.2022.
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.
65 |
Average Summary Compensation | Average | Value of Initial Fixed $100 Investment | ||||||||||||||||||||||||||||||||||||||
Year | Summary Compensation Table Total for Dr. Sutaria ($) (1) | Summary Compensation Table Total for Mr. Rittenmeyer ($) (1) | Compensation Actually Paid to Dr. Sutaria ($) (1)(2) | Compensation Actually Paid to Mr. Rittenmeyer ($) (1)(2) | Table Total for Non-PEO NEOs ($) (1) | Compensation Actually Paid to Non-PEO NEOs ($) (1)(2) | Company TSR ($) | Peer Group TSR ($) | Net Income ($MM) (4) | Adjusted EBITDA ($MM) (5) | ||||||||||||||||||||||||||||||
2022 | 11,047,128 | — | (9,106,588 | ) | — | 6,921,122 | 1,325,894 | 128.29 | 140.29 | 411 | 3,469 | |||||||||||||||||||||||||||||
2021 | 21,153,672 | 18,666,160 | 50,394,322 | 34,148,681 | 4,786,880 | 11,458,403 | 214.80 | 143.09 | 1,476 | 3,483 | ||||||||||||||||||||||||||||||
2020 | — | 16,675,529 | — | 16,079,648 | 4,996,930 | 5,700,379 | 105.00 | 113.45 | 768 | 3,146 |
(1) | Mr. Rittenmeyer served as our principal executive officer (PEO) during 2020 and 2021 until he was succeeded by Dr. Sutaria on September 1, 2021, who served as our PEO for the remainder of 2021 and 2022. The Non-PEO NEOs for whom the average compensation is presented in this table are: (i) for fiscal 2022, Messrs. Rittenmeyer, Cancelmi and Arnst and Mss. Arbour and Foo, (ii) for fiscal 2021, Messrs. Cancelmi and Arnst, Ms. Arbour and Audrey Andrews, our former Executive Vice President and General Counsel and (iii) for fiscal 2020, Dr. Sutaria, Mr. Cancelmi, Mss. Andrews and Arbour and Sandi Karrmann, our former Executive Vice President and Chief Human Resources Officer. |
(2) | The amounts shown as Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect the total compensation actually realized or received by the Company’s NEOs. In accordance with these rules, these amounts reflect total compensation as set forth in the Summary Compensation Table for each year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of the grant. |
Mr. Rittenmeyer | 2021 | 2020 | ||||||
Summary Compensation Table Total | 18,666,160 | 16,675,529 | ||||||
Less, value of Stock Awards and Option Awards reported in Summary Compensation Table | (10,000,013 | ) | (10,000,021 | ) | ||||
Plus, year-end fair value of outstanding and unvested equity awards granted in the year | 7,728,528 | 10,446,087 | ||||||
Plus, year over year change in fair value of outstanding and unvested equity awards granted in prior years | 5,462,459 | 239,051 | ||||||
Plus, fair value as of vesting date of equity awards granted and vested in the year | 6,317,870 | 2,699,468 | ||||||
Plus (less), year over year change in fair value of equity awards granted in prior years that vested in the year | 5,973,677 | (3,980,466 | ) | |||||
Compensation Actually Paid to Mr. Rittenmeyer | 34,148,681 | 16,079,648 |
Dr. Sutaria | 2022 | 2021 | ||||||
Summary Compensation Table Total | 11,047,128 | 21,153,672 | ||||||
Less, value of Stock Awards and Option Awards reported in Summary Compensation Table | (6,847,258 | ) | (15,000,119 | ) | ||||
Plus, year-end fair value of outstanding and unvested equity awards granted in the year | 5,227,267 | 20,942,669 | ||||||
Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years | (17,620,981 | ) | 22,242,975 | |||||
Plus (less), year over year change in fair value of equity awards granted in prior years that vested in the year | (912,744 | ) | 1,055,125 | |||||
Compensation Actually Paid to Dr. Sutaria | (9,106,588 | ) | 50,394,322 |
66 |
Average Non-PEO NEOs | 2022 | 2021 | 2020 | |||||||||
Summary Compensation Table Total | 6,921,122 | 4,786,880 | 4,996,930 | |||||||||
Less, value of Stock Awards and Option Awards reported in Summary Compensation Table | (2,506,876) | (1,475,070 | ) | (2,175,033 | ) | |||||||
Less, Change in Pension Value reported in Summary Compensation Table | -0- | (655,283 | ) | (565,660 | ) | |||||||
Plus, year-end fair value of outstanding and unvested equity awards granted in the year | 731,847 | 3,148,375 | 4,098,316 | |||||||||
Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years | (4,075,913 | ) | 4,639,027 | 317,308 | ||||||||
Plus, fair value as of vesting date of equity awards granted and vested in the year | 1,109,226 | 289,836 | -0- | |||||||||
Plus (less), year over year change in fair value of equity awards granted in prior years that vested in the year | (853,512 | ) | 724,638 | (593,527 | ) | |||||||
Plus (less), fair value at last day of prior year of equity awards forfeited during the year | -0- | -0- | (377,955) | |||||||||
Plus, pension service cost for services rendered during the year | -0- | -0- | -0- | |||||||||
Plus, prior pension service cost or credit associated with any plan amendments or initiations during the year for services rendered during prior years. | -0- | -0- | -0- | |||||||||
Compensation Actually Paid to Average Non-PEO NEOs | 1,325,894 | 11,458,403 | 5,700,379 |
(3) | Amounts in these columns assume $100 was invested for the cumulative period from December 31, 2019 through the end of the listed fiscal year, in either the Company or the S&P 500 Health Care Index (the Company’s peer group), as applicable, and reinvestment of the pre-tax value of dividends paid. Historical stock performance is not necessarily indicative of future stock performance. |
(4) | Reflects the Company’s net income, as reported in the Company’s Annual Report on Form 10-K for each of Fiscal years 2022, 2021 and 2020. |
(5) | We determined Adjusted EBITDA to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to our PEO and other NEOs in 2022. This performance measure may not have been the most important financial performance measure for years 2021 and 2020 and we may determine that a different financial performance measure to be the most important measure in future years. Adjusted EBITDA, a non-GAAP measure, is defined in Appendix A, and reconciliations of thisnon-GAAP financial measure to the most directly comparable GAAP measure may be found in the Company’s Annual Report on Form10-K for each of Fiscal Years 2022, 2021 and 2020. |
2023 PROXY STATEMENT | 67 |
68 |
2023 PROXY STATEMENT | 69 |
Securities Authorized for Issuance
Under Equity Compensation Plans
The following table summarizes certain information with respect to our equity compensation plans pursuant to which rights remain outstanding as of December 31, 2021.2022.
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 (C) | Number of and Rights (A) | Weighted- | Number of (C) | ||||||||||||||||||
Equity compensation plans approved by security holders | 520,998 | (2) | $ | 23.90 | 7,289,323 | (3) | 460,947 | (2) | $ | 23.33 | 10,791,253 | (3) | ||||||||||||
Equity compensation plans not approved by security holders(4) | 53,816 | -0- | -0- | 62,247 | -0- | -0- | ||||||||||||||||||
Total | 574,814 | $ | 23.90 | 7,289,323 | 523,194 | $ | 23.33 | 10,791,253 |
(1) | The weighted average exercise price does not consider the shares issuable upon the vesting of outstanding RSUs, which have no exercise price. In addition, no exercise price is applicable to the stock units under our deferred compensation plans. |
(2) | 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. |
(3) | Includes |
All shares available under the 2019 Stock Incentive Plan may be used for option-based and all other awards authorized under the 2019 Stock Incentive Plan. As approved by our shareholders, option-based awards and stock appreciation rights reduce the number of shares available for issuance on a one-to-one basis. However, grants of all other awards, such as RSUs, reduce the number of shares available under the 2019 Stock Incentive Plan by 1.65 shares for each share subject to such awards. |
(4) | Consists of deferred compensation invested in |
|
|
|
Proposal 2-Advisory2 - 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 33, 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 20212022 Summary Compensation Table and other related compensation tables and narrative, appearing on pages 5250 through 67,64, 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 20222023 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. Although non-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 advisory say-on-pay vote on an annual basis, the next advisory say-on-pay vote will be held at our 20232024 Annual Meeting of Shareholders.
The Board recommends that you vote “FOR” the approval of the advisory resolution to approve executive compensation. |
Proposal 3-Approval3 - Advisory Vote on Frequency of First AmendmentFuture Advisory Votes to the 2019 Stock Incentive PlanApprove Executive Compensation
Executive Summary of Proposal and Selected Plan Information
Introduction
Our Board, on the recommendationPursuant to Section 14A of the HR Committee, isExchange Act, we are asking shareholders to vote on whether future advisory votes to approve executive compensation of the First Amendment (the Amendment)nature reflected in Proposal 2 above should occur every year, every two years or every three years.
The Board of Directors has determined that continuing to hold an advisory say-on-pay vote every year is the Tenet Healthcare 2019 Stock Incentive Plan (the Plan, as amendedmost appropriate policy for the Company at this time and recommends that shareholders vote for future advisory say-on-pay votes to occur every year. While the Company’s executive compensation programs are designed to promote a long-term connection between pay and performance, the Board recognizes that executive compensation disclosures are made annually. Holding an annual advisory say-on-pay vote provides the Company with more direct and immediate feedback on our compensation disclosures. However, shareholders should note that because the advisory say-on-pay vote occurs well after the beginning of the compensation year, and because the different elements of our executive compensation programs are designed to operate in an integrated manner and to complement one another, in many cases it may not be appropriate or feasible to change our executive compensation programs in consideration of any one year’s advisory say-on-pay vote by the Amendment,time of the Amended Plan) to assist us in continuing to attract and retain talented employees and non-employee directors who are expected to contribute tofollowing year’s annual meeting of shareholders. An annual advisory say-on-pay vote also is consistent with the Company’s successpractice of having all directors elected annually and annually providing shareholders the opportunity to continueratify the Audit Committee’s selection of independent registered public accountants.
We understand that our shareholders may have different views as to achieve financialwhat is an appropriate frequency for future advisory say-on-pay votes, and strategic objectives thatwe will benefitcarefully review the Company and its shareholders throughvoting results on this proposal. Shareholders will be able to specify one of four choices for this proposal on the grant of awards underproxy card: one year, two years, three years or abstain. Shareholders are not voting to approve or disapprove the Plan, including equity-based awards that will enable them to share in the ownershipBoard’s recommendation. If none of the Company.
On February 23, 2022, the Board approved the Amendment, subject to the approval of our shareholders. The Plan is the only plan under which equity-based compensation may currently be awarded to our employees and non-employee directors.
If the Amendment is approved by our shareholders at the Annual Meeting, the Amendment will become effective on February 23, 2022 (the Amendment Effective Date). If our shareholders approve the Amendment, we intend to file, pursuant to the Securities Act of 1933, a registration statement on Form S-8 to register the additional shares available for delivery under the Amended Plan. If our shareholders do not approve the Amendment, the Plan will remain in effect in its current form, subject to its expiration date. However, there will be insufficient shares available under the 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 and non-employee directors.
Approval of this proposal requires approval by holders ofthree frequencies receive a majority of the shares representedvotes cast, the Board will consider the frequency voting choice receiving the greatest number of votes cast as the advisory vote of shareholders on this matter. This advisory vote on the frequency of future advisory say-on-pay votes is not binding on the Board. Although non-binding, the Board will carefully review the voting results on this proposal. Notwithstanding the Board’s recommendation and the outcome of the shareholder vote, the Board may in personthe future decide to conduct advisory say-on-pay votes on a more or by proxyless frequent basis and entitledmay vary its practice based on factors such as discussions with shareholders and the adoption of material changes to vote atcompensation programs. Unless marked to the Annual Meeting. Abstentionscontrary, proxies will be treatedvoted for the option of every “ONE YEAR” as votes against this proposal. If you are a street name shareholder and you do not provide your brokerage firm with voting instructions, your shares will be treated as not entitled to vote on this Proposal and your brokerage firm may not cast votes with respect to the shares that you beneficially own. These broker non-votes will have no effect on the vote.
Increased Share Reserve
The Amendment reserves for issuance an additional 4,275,000 shares of our common stock such that the aggregate share reserve under the Amended Plan is equal to 8,275,000 shares of our common stock plus the number of shares of our common stock that remained available for awards under the Sixth Amended and Restated Tenet Healthcare 2008 Stock Incentive Plan (the 2008 Plan) on May 2, 2019 plus any shares of our common stock subject to outstanding awards under the 2008 Plan on May 2, 2019 that are or were forfeited, cancelled, expired, or settled in cash.
If any award granted under the Amended 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 availablefrequency for future grant under the Amended 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 Amended 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 Amended Plan.advisory say-on-pay votes.
Fungible Share Counting
Any shares that are subject to awards of options or SARs will 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 will 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 Amended Plan will 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.
The Board recommends that you vote “ONE YEAR” on the proposal concerning the frequency of future advisory votes to approve executive compensation. |
Proposal 3 - Approval of First Amendment to the 2019 Stock Incentive Plan
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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 focus our leadership team and key employees on our strategic priorities.
The total fully-diluted overhang as of March 1, 2022, assuming that the entire remaining share reserve is granted in stock options or SARs under the Amended Plan, would be 9.5%, and the total fully-diluted overhang, assuming the entire remaining share reserve is granted in full-value awards only, would be 7.1%. The Company’s recent practice has been to grant primarily full-value awards but the Company has also granted some stock options, 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 as of March 1, 2022.
Our Board believes that the proposed additional share reserve represents a reasonable amount of potential equity dilution to accommodate our long-term strategic and growth priorities.
Governance Highlights
The Amended Plan incorporates numerous governance best practices, including:
No “liberal share recycling” of options or SARs
No dividends or dividend equivalents on options or SARs
Dividends and dividend equivalent rights, if any, on all other awards 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
Minimum 100% grant date fair market value exercise price for options and SARs
No repricing of options or SARs and no cash buyout of underwater options and SARs without shareholder approval, except for equitable adjustments in connection with certain corporate transactions
No “liberal” change-in-control definition
No excise tax gross-ups
Awards subject to clawback policy adopted by the Company
Amended Plan limits aggregate dollar value of equity-based awards (based on grant date fair market value) and cash fees paid to any non-employee director to $650,000 per calendar year, or up to $850,000 for any calendar year in which the director serves as Chairman or Lead Director
Amended Plan Expiration
The Amended Plan will terminate on March 18, 2029, unless terminated earlier by the Board. Termination of the Amended Plan will 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 Plan or the 2008 Plan, under which no new awards could be granted after May 2, 2019:
| 2021 | 2020 | 2019 | 3-Year Average Share Usage Rate | ||||||||||||
Stock Options/SARs Granted | 0 | 0 | 230,713 | (1) |
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Stock-Settled Time-Vested Restricted Shares/Units Granted | 601,526 | 1,188,317 | 1,382,213 | (2) |
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Stock-Settled Performance-Based Stock Units Earned | 298,492 | 579,413 | 98,808 |
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Total Shares Granted | 900,018 | 1,767,730 | 1,711,734 |
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Weighted-Average Basic Common Shares Outstanding | 106,833,000 | 105,010,000 | 103,398,000 |
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Share Usage Rate | 0.8 | % | 1.7 | % | 1.7 | % | 1.4 | % |
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Proposal 3-Approval of First Amendment to the 2019 Stock Incentive Plan
Overhang as of March 1, 2022
The following table sets forth certain information as of March 1, 2022 with respect to the Company’s existing equity compensation plans:
Stock Options/SARs Outstanding | 514,325 | |||
Weighted-Average Exercise Price of Outstanding Stock Options/SARs | $ | 23.84 | ||
Weighted-Average Remaining Term of Outstanding Stock Options/SARs | 6.07 years | |||
Total Stock-Settled Full-Value Awards Outstanding (assuming maximum achievement of performance goals) | 2,940,294 | |||
Shares Available for Grant under the Plan | 3,723,028 | |||
Basic Common Shares Outstanding | 109,130,414 |
Amended Plan Summary
A summary of the Amended Plan is set forth below. The summary is qualified by, and subject to, the actual provisions of the Amended 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 Amended Plan.
Administration. The Amended 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 Amended 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 Amended Plan, to determine the terms and conditions of Awards and to make all other determinations relating to the Amended Plan that it deems necessary or desirable for the administration of the Amended Plan. The HR Committee may also delegate various functions to executive officers.
Eligibility. Eligible participants under the Amended Plan include all of our directors and employees as selected by the HR Committee. Approximately 780 persons currently participate in the Plan. The numbers of employees and non-employee directors eligible to be granted awards under the Plan as of March 1, 2022 were approximately 706 and 9, respectively.
Shares Available under the Amended Plan. The aggregate number of shares that may be issued under the Amended Plan is equal to the sum of (i) 8,275,000 Shares, plus (ii) the number of Shares remaining available under the 2008 Plan as of May 2, 2019, plus (iii) any Shares subject to outstanding awards under the 2008 Plan that on or after May 2, 2019 are forfeited, are cancelled, expire, or are settled in cash. Any Shares that are subject to Awards of Options or Stock Appreciation Rights are 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 are 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 Amended Plan. In the event that withholding tax liabilities arising from an Award other than an Option or Stock Appreciation Right or, after May 2, 2019, 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 Amended Plan; provided, however, that Shares that again become available for issuance under the Amended Plan pursuant to the preceding clause will not increase the numbers of shares that may be granted under the Amended Plan in connection with “incentive stock options”. Any Shares that again become available for Awards under the Amended Plan are 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 Amended 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 Amended 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 will not again be made available for Awards under the Amended 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
Proposal 3-Approval of First Amendment to the 2019 Stock Incentive Plan
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 Amended Plan.
Awards under the Amended Plan. Awards that may be granted under the Amended Plan include Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards, Other Share-Based Awards and any other right, interest or option relating to shares of the Company or cash. Each Award granted under the Amended 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 the non-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 one or more executive officers 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 Amended 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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Proposal 3-Approval of First Amendment to the 2019 Stock Incentive Plan
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Performance Criteria. The HR 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 material non-recurring 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 or non-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 Amended Plan during a calendar year to a non-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 a non-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.
Proposal 3-Approval of First Amendment to the 2019 Stock Incentive Plan
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 Amended Plan, regarding the effect of a Change in Control on Awards.
Transferability of Awards. Generally, Awards granted under the Amended 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 Amended Plan. For the avoidance of doubt, in no event will any Award be transferrable by a participant in exchange for value.
Amendment and Termination of the Amended Plan. The Amended 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 Amended Plan at any time, provided, however, that the HR Committee must obtain prior shareholder approval amend the Amended Plan to (i) increase the number of Shares that may be the subject of Awards under the Amended Plan, (ii) expand the types of Awards available under the Amended Plan, (iii) materially expand the class of persons eligible to participate in the Amended Plan, (iv) amend any provision of the Amended 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 or non-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, including such consequences that may arise under foreign, state, local, gift, estate or excise tax laws. Also, our ability to obtain a deduction for future payments under the Amended 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. As such, we recommend that all participants consult their own tax advisor concerning the tax implications of awards granted under the Amended Plan
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
Proposal 3-Approval of First Amendment to the 2019 Stock Incentive Plan
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 Amended 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 Amended Plan are designed to comply with the requirements of Section 409A to the extent such Awards are not exempt from coverage. However, if the Amended 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.
Proposal 3 - Approval of First Amendment to the 2019 Stock Incentive Plan
Awards Granted Under the Plan
No awards made under the Plan prior to the date of the 2022 Annual Meeting were granted subject to shareholder approval of the Amendment. The following table sets forth information with respect to stock options, RSUs and PRSUs (assuming achievement of target performance) that have been granted to the NEOs and the specified groups set forth below under the Plan as of March 1, 2022:
| Stock Options | RSUs | PRSUs | |||||||
Ronald A. Rittenmeyer | -0- | 602,644 | 53,716 | |||||||
Saumya Sutaria | -0- | 336,108 | 209,274 | |||||||
Daniel J. Cancelmi | -0- | 89,942 | 89,942 | |||||||
Thomas W. Arnst | -0- | 76,402 | 49,447 | |||||||
Paola Arbour | -0- | 31,023 | 31,023 | |||||||
Audrey Andrews | -0- | 41,171 | 26,979 | |||||||
All current executive officers as a group (six individuals) | -0- | 1,151,147 | 448,430 | |||||||
All current directors who are not executive officers as a group (nine individuals) | -0- | 218,852 | -0- | |||||||
J. Robert Kerrey | -0- | 33,231 | -0- | |||||||
James L. Bierman | -0- | 25,916 | -0- | |||||||
Richard W. Fisher | -0- | 25,916 | -0- | |||||||
Meghan M. Fitzgerald | -0- | 25,916 | -0- | |||||||
Cecil D. Haney | -0- | 7,017 | -0- | |||||||
Christopher S. Lynch | -0- | 26,080 | -0- | |||||||
Richard J. Mark | -0- | 25,916 | -0- | |||||||
Tammy Romo | -0- | 25,916 | -0- | |||||||
Nadja Y. West | -0- | 22,944 | -0- | |||||||
Each associate of the above mentioned directors or executive officers | -0- | -0- | -0- | |||||||
Each other person who received or is to receive 5% of such awards | -0- | -0- | -0- | |||||||
All employees, excluding current and former executive officers, as a group (109 individuals) | -0- | 624,690 | 510,779 |
Proposal 3 - Approval of First Amendment to the 2019 Stock Incentive Plan
New Plan Benefits
As described above, the selection of officers, employees and non-employee directors who will receive awards under the Amended 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 Amended 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 2021 table on page 54 for information on awards granted in 2021 under the Plan to our named executive officers.
The Audit Committee is composed of the five members named below, each of whom is independent, as defined by the NYSE rules and the rules of the SEC. The Board has determined that Mr. Fisher, Mr. Lynch and Ms. Romo are each an Audit Committee Financial Expert, as defined by SEC rules, and that each Audit Committee member is financially literate, as required by NYSE rules.
The Audit Committee has reviewed and discussed with management and the Company’s independent registered public accountants, Deloitte & Touche LLP (Deloitte), the audited consolidated financial statements for the year ended December 31, 2021.2022.
The Audit Committee has discussed with Deloitte the matters required under applicable professional auditing standards and regulations adopted by the Public Company Accounting Oversight Board (PCAOB). and the SEC. In addition, the Audit Committee received and reviewed the written disclosures and the letter from Deloitte required by applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence and has discussed with Deloitte its independence from management and the Company.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the Company’s 20212022 audited consolidated financial statements be included in the Form 10-K and filed with the SEC.
Members of the Audit Committee
Tammy Romo, Chair
Richard W. Fisher
Cecil D. Haney
Christopher S. Lynch
Richard J. Mark
Audit Committee Report
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Independent Registered Public Accounting Firm Fees
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2022 | Year Ended December 31, 2021 | ||||||||||||
Audit fees(1) | $ | 4,939,926 | $ | 4,706,122 | ||||||||||||
Audit fees(1)* | $ | 6,739,912 | $ | 4,939,926 | ||||||||||||
Audit-related fees(2) | 3,600,431 | 2,982,235 | ||||||||||||||
Audit-related fees(2)* | 2,143,898 | 3,600,431 | ||||||||||||||
Tax fees(3) | 116,085 | 761,775 | 30,503 | 116,085 | ||||||||||||
All other fees(4) | -0- | 582,147 | -0- | -0- |
(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) |
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* | The increase in audit fees |
How We Control and Oversee the Non-Audit Services Provided by Deloitte
The Audit Committee has retained Deloitte (along with other accounting firms) to provide non-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 to non-audit services. services:
• | We Restrict the Non-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 of non-audit services that Deloitte may provide to us. |
• | We Have Pre-Approval Processes for Non-Audit Services. The Audit Committee has adopted policies and procedures to pre-approve all audit and non-audit services provided to us by our independent registered public accountants, in accordance with any applicable law, rules or regulations. The Audit Committee pre-approved all fees presented in the table above. |
The Audit Committee has adopted policies and procedures for pre-approving all non-audit services that Deloitte performs for us. Specifically, the Audit Committee has pre-approved the use of Deloitte forfor: 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 of non-audit services (tax services and all other) that the Company can obtain from Deloitte (for 2021,2022, this limit was approximately $7.7 million). The chair of the Audit Committee is authorized to pre-approve any audit or non-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 4-Ratification4 - 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, 2022.2023. 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 historic and recent performance of Deloitte, 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 of non-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;
the tenure of the independent audit firm and potential impact of rotating to another independent audit firm; 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.
• | the historic and recent performance of Deloitte, 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 of non-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; |
• | the tenure of the independent audit firm and potential impact of rotating to another independent audit firm; 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.
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.
The Board recommends that you vote “FOR” the ratification of the selection of Deloitte & Touche LLP as our independent registered public accountants for the year ending December 31, |
Proposal 5 - Requesting a Report on Patients’ Right to Access Abortion in Emergencies
The Marguerite Casey Foundation has advised the Company that it intends to introduce the following non-binding shareholder proposal at the Annual Meeting. The Company is not responsible for any inaccuracies it may contain. Following the proposal and supporting statement, which are set forth below, we explain why our Board recommends a vote “AGAINST” this proposal.
HOSPITAL POLICIES CONCERNING PREGNANT PATIENTS’ RIGHT TO ACCESS ABORTION IN EMERGENCIES
WHEREAS:
Tenet Health operates hospitals and other acute health care facilities in 19 states that have adopted laws severely restricting access to abortion. According to its website, Tenet Health’s impact “spreads far and deep with more than 465 ambulatory surgery centers and surgical hospitals, 61 hospitals and approximately 110 additional outpatient centers and other sites of care.”1
Although most abortions are not performed in a hospital setting, those that are performed in a hospital are often the most serious and complicated abortions, including those performed because a woman’s life or health is in danger or in later stages of pregnancy, when severe fetal anomalies are first detected.
As many as 30% of pregnancies end in miscarriage, and the methods of managing a miscarriage are the same as for abortion. Some untreated miscarriages can lead to complications that can be life-threatening. Ectopic pregnancies (1-2% of all pregnancies) are never viable. (Washington Post, 7.16.22)
It has been widely reported that in states that have passed severe restrictions on abortion, doctors have been struggling with the legality of providing terminations for ectopic pregnancies, incomplete miscarriages, or other circumstances where miscarriage is inevitable or the health or life of the pregnant woman is in danger. Some patients have been denied care by health care providers. (Associated Press, 6.16.22; Bloomberg, 7.12.22; Washington Post, 7.16.22; Texas Tribune, 7.15.22; Kaiser Health News, 8.8.22)
The Department of Health and Human Services, under guidance from the executive order of President Biden, clarified that the Emergency Medical Treatment and Active Labor Act (EMTALA) preempts any state law which prohibits abortion and does not include an exception for the life and health of the pregnant person. Therefore, healthcare providers are required to provide stabilizing medical treatment, including abortion, to a patient who presents to the emergency department and is found to have an emergency medical condition.
RESOLVED:
Shareholders request that the Company report on its current policy regarding availability of abortions in its operations, including but not limited to whether such policy includes an exception for the life and health of the pregnant person, and how the Company defines an emergency medical condition.
1 | https://www.tenethealth.com/about |
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Proposal 5-Requesting a Report on Patients’ Right to Access Abortion in Emergencies
The Board’s Statement in Opposition
Tenet is committed to the highest standards of ethics and compliance, and has a long history of commitment to excellence in healthcare for women and babies. Tenet complies with applicable federal and state laws, including the Emergency Medical Treatment & Labor Act (“EMTALA”), and has adopted an EMTALA Policy to ensure individuals presenting at Tenet’s emergency departments receive an appropriate medical screening examination and stabilizing treatment, including medically necessary abortions, or appropriate transfer in accordance with EMTALA. An “emergency medical condition” is defined in EMTALA and Tenet applies that definition in its operations.
As an organization, we rely upon our community of medical providers to determine the detailed clinical policies at each of our facilities, consistent with applicable law and faith-based commitments, if any. These laws are separately established by each state and vary significantly. While we support our facilities in meeting the highest clinical standards and provide the necessary hospital infrastructure, as an organization, we do not dictate clinical activities on a national basis. For this reason, Tenet does not have a company-level policy regarding the availability of procedures, including abortions. Women presenting to our facilities can take comfort in knowing that our hospitals’ local policies and clinical practices protect their safety and access to medically necessary life-saving procedures, including abortions.
We believe a Company-level policy regarding the availability of abortions is not appropriate or applicable beyond our general requirement to comply with all applicable laws and the access already provided in our facilities to medically necessary abortions via compliance with EMTALA.
The Board recommends that you vote “AGAINST” the shareholder proposal. |
2023 PROXY STATEMENT | 77 |
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 via a live audio webcast at www.proxydocs.com/THCat 8:00 a.m. Central Time on Friday,Thursday, May 6, 2022,25, 2023, 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 25, 2022,April 14, 2023, we mailed to our shareholders and also made available online at www.proxydocs.com/THCa 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 Form 10-K for the year ended December 31, 2021,2022, 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 25, 2022.April 14, 2023.
Who Can Vote
Only shareholders of record of our common stock at the close of business on March 11, 2022,28, 2023, 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 109,208,618103,430,470 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 form) 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 you are also invited to attend the Annual Meeting online. 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, proxy card or voting instruction form.
General Information Regarding the Annual Meeting and Voting
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By Telephone.You may vote by calling the toll-free telephone number noted on your Notice, proxy card or voting instruction form. 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.
Online During the Annual Meeting.While we encourage shareholders to vote prior to the meeting, you may vote online during the Annual Meeting. You will need the control number included on your proxy card or voting instruction form. Each shareholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf.
SHARES MUST BE VOTED EITHER ONLINE DURING THE ANNUAL MEETING, 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.
Brokers holding shares must vote according to specific instructions they receive from the beneficial owners of those shares. If brokers do not receive specific instructions, brokers may in some cases vote the shares in their discretion but are not permitted to vote on certain proposals and may elect not vote on any of the proposals unless you provide voting instructions. Therefore, unless you provide specific voting instructions, your shares of our common stock are held by a broker in street name, undermay not be represented or voted at the rules of the NYSE, your broker may vote your shares only on “routine” matters ifmeeting. 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 “broker non-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 authorityelects to vote theyour shares becauseon some but not all matters, it will result in a “broker non-vote” for the matter is non-routine. The non-routine matters on which the agenda for this year’s Annual Meeting include the election of directors and an advisory approvalbroker does not vote. We urge you to promptly provide voting instructions to your broker to ensure that your shares are voted on all of the Company’s executive compensation.proposals, even if you plan to attend the Annual Meeting.
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 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 broker non-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 eleven 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 (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.
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 not re-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 offer, or whether to take other action. Our Board would then act on the Governance Committee’s recommendation and
• | The ten 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 (and therefore having no effect on the election). |
General Information Regarding the Annual Meeting and Voting
• | 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. |
• | 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 not re-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 offer, or whether to take other action. Our Board would then act on the Governance Committee’s recommendation and make prompt public disclosure of its decision and the rationale behind it, if applicable. If the Board accepts a director’s |
2023 PROXY STATEMENT | 79 |
General Information Regarding the Annual Meeting and Voting
resignation offer, the Governance Committee will recommend to the Board and the Board will then determine whether to fill the vacancy or reduce the size of the Board. Under our bylaws, in contested elections, directors will be elected by a plurality of the votes cast. This standard will not apply at the Annual Meeting, as this year’s elections are uncontested. |
• | Proxies cannot be voted for a greater number of persons than the number of nominees named in this Proxy Statement.
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• | The following items of business will be approved if the votes cast for the proposal exceed those cast against the proposal, with neither abstentions nor broker non-votes 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); |
• | advisory approval on the frequency of future advisory votes to approve the Company’s executive compensation (Proposal 3); |
• | ratification of the selection of independent registered public accountants (Proposal 4); and |
• | approval of shareholder proposal requesting a report on patients’ right to access abortion in emergencies (Proposal 5). |
Attending the Annual Meeting and Asking Questions
We plan to hold this year’s Annual Meeting online via a live audio webcast. This format will enable shareholders to attend the meeting and participate from any location, at no cost.
To attend and participate in the Annual Meeting, register at www.proxydocs.com/THC. After you complete your registration, you will receive further instructions via email, including a unique link that will allow you access to the Annual Meeting, where you will be able to listen to the meeting live, submit questions and vote.
To participate in the Annual Meeting, you will need the control number included on your proxy card or voting instruction form (if your shares are held through a stockbroker or another nominee).
We encourage you to access the Annual Meeting prior to the start time and allow ample time to log in to the meeting webcast and test your computer audio system. Note that if you have technical difficulties during the check-in time or during the Annual Meeting, you should call the technical support number that will be posted on the virtual shareholder meeting login page and in the instructions you will receive via email.
Shareholders may submit written questions by logging into the virtual platform. Questions pertinent to meeting matters will be answered during the question and answerquestion-and-answer portion of the meeting, subject to the rules of conduct that will be posted to the virtual meeting platform on the day of the meeting. The rules of conduct will also provide additional information about the relevancy of questions to meeting matters. When reading questions, personal details may be omitted for data protection purposes, and if we receive substantially similar questions, we may group these questions together and provide a single response to avoid repetition.
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 reasonable out-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 reasonable out-of-pocket and clerical expenses.
General Information Regarding the Annual Meeting and Voting
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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 to the Corporate Secretary,
Tenet Healthcare Corporation, 14201 Dallas Parkway, Dallas, Texas 75254.
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 Rule 14a-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 Rule 14a-8 must be received at our principal executive offices no later than the close of business (5:00 p.m. Central Time) on November 25, 2022.December 16, 2023. Proposals should be addressed to the Corporate Secretary, Tenet Healthcare Corporation, 14201 Dallas Parkway, Dallas, Texas 75254. Our Governance Committee reviews all shareholder proposals and makes recommendations to the Board for action on such proposals. We will determine whether or not to include any proposals in the proxy statement in accordance with applicable law, including SEC regulations.
Director Nominations for Inclusion in Next Year’s Proxy Statement Pursuant to the Company’s Bylaws (Proxy Access) and SEC Rule 14a-19 (Universal Proxy). 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 20232024 annual meeting must satisfy the requirements specified in our bylaws and must provide written notice to our Corporate Secretary, which must be received no later than the close of business on November 25, 2022,December 16, 2023, and no earlier than the close of business on October 26, 2022.November 16, 2023. However, in the event that the annual meeting is called for a date that is not within 30 days before or after the first anniversary of the date the definitive proxy statement was first released to shareholders in connection with the immediately preceding annual meeting of shareholders, to be timely, the shareholder notice must be so delivered not earlier than the 150th day prior to such annual meeting and not later than the close of business on the later of the 120th day prior to such annual meeting or the 10th10th day following the day on which public announcement of the date of such meeting is first made by the Company. The notice of proxy access must include the information specified in our bylaws, including information concerning the nominee and information about the shareholder’s ownership of and agreements related to our stock. Pursuant to SEC Rule 14a-19, for the Company’s 20232024 annual meeting, the Company will be required to include on its proxy card all nominees for director of whom the Company has received adequate notice under the rule. For the proxy card relating to the 20232024 annual meeting, the Company must receive notice of a shareholder’s intent to solicit proxies and provide the names of their nominees no later than the close of business on March 7, 2023.26, 2024.
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 14a-8 or under our proxy access bylaw) must give us written notice between the close of business on January 6, 202326, 2024 and close of business on February 5, 2023,25, 2024, unless the 20232024 annual meeting is called for a date that is not within 30 days before or after the anniversary of the 20222023 annual meeting, in which case notice must be received no later than the close of business on the 10th10th day following the day on which we make a public announcement of the date of the annual meeting. The notice must comply with the requirements of our bylaws, which may be found under the “Governance” heading in the “Investors” section on our website at www.tenethealth.com*, and any applicable law. Any such business should be addressed to the Corporate Secretary, Tenet Healthcare Corporation, 14201 Dallas Parkway, Dallas, Texas 75254. Any proposal or nomination that is not timely received by our Corporate Secretary or otherwise does not meet the requirements set forth in our bylaws will not be considered at the next annual meeting. If the shareholder does not also comply with the requirements of Rule 14a-4(c)(2) under the Exchange Act, we may exercise discretionary voting authority under proxies that we solicit to vote in accordance with our best judgment on any such proposal or nomination.
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 specifically incorporates it by reference into such filing. Website references throughout this Proxy Statement are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this document.
Other Information
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Annual Report on Form 10-K
We will provide to shareholders by mail, without charge, a copy of our 2022 Annual Report on Form 10-K. To request a copy, of the Annual Report on Form 10-K, you should write to the Corporate Secretary, Tenet Healthcare Corporation, 14201 Dallas Parkway, Dallas, Texas 75254.
Forward-Looking Statements
Certain statements contained in this Proxy Statement are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on future expectations, plans and prospects for the Company’s business and operations that involve a number of risks and uncertainties. Such statements may include, among other words, “believe”, “expect”, “anticipate”, “intend”, “plan”, “will”, “predict”, “potential”, “continue”, “strategy”, “aspire”, “target”, “forecast”, “project”, “estimate”, “should”, “could”, “may” and similar expressions or words and variations thereof that convey the prospective nature of events or outcomes generally indicative of forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. It is possible that Tenet’s actual results may differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements. For a discussion of some of the risks and important factors that could affect the Company’s future results and financial condition, see “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and in other filings made by the Company from time to time with the SEC. Forward-looking and other statements in this Proxy Statement may also address our corporate responsibility progress, plans and goals (including sustainability and environmental matters), and the inclusion of such statements is not an indication that these contents are necessarily material to investors or required to be disclosed in the Company’s filings with the SEC. In addition, historical, current and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
APPENDIX A
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Appendix A: Non-GAAP Financial Measures
Adjusted EBITDA, a non-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,principles, (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) other non-operating income (expense), net, (7) interest expense, (8) litigation and investigation benefit (costs), 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 and closed businesses (i.e., health plan businesses). Litigation and investigation costs excluded do not include ordinary course of business malpractice and other litigation and related expenses.
Adjusted Free Cash Flow, a non-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, a non-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 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, net of tax, (2) gain (loss) from early extinguishment of debt, (3) litigation and investigation benefitsbenefit (costs), net of insurance 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 (i.e., health plan businesses), and (7) the associated impact of these items on taxes and noncontrolling interests. Litigation and investigation costs excluded do not include ordinary course of business malpractice and other litigation and related expenses.
The Company believes the foregoing non-GAAP measures are useful to investors and analysts because they present additional information about the Company’s financial performance. Investors, analysts, Company management and the Company’s Board of Directors utilize these non-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 use similar non-GAAP financial measures in their presentations and earnings releases. The HR Committee of the Company’s Board of Directors also uses certain of these measures to evaluate management’s performance for the purpose of determining incentive compensation. Additional information regarding the purpose and utility of specific non-GAAP measures used in this Proxy Statement is set forth below.
The Company believes that Adjusted EBITDA is a useful measure, in part, because certain investors and analysts use both historical and projected Adjusted EBITDA, in addition to GAAP and other non-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 investors and analysts use, Adjusted Free Cash Flow as a supplemental non-GAAPmeasure to analyze cash flows generated from the Company’s operations. The Company believes this measure is useful to investors in evaluating its ability to fund distributions paid to noncontrolling interests or for acquisitions, purchasing equity interests in joint ventures or repaying debt.
These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Because these measures exclude many items that are included in the Company’s financial statements, they do not provide a complete measure
2023 PROXY STATEMENT | A-1 |
Appendix A: Non-GAAP Financial Measures
of the Company’s operating performance. For example, the Company’s definition of Adjusted Free Cash Flow does not include
Appendix A: Non-GAAP Financial Measures
other important uses of cash including (1) cash used to purchase businesses or joint venture interests, or (2) any items that are classified as Cash Flows Fromfrom Financing Activities on the Company’s Consolidated Statement of Cash Flows, including items such as (i) cash used to repay borrowings, or (ii) distributions paid to noncontrolling interests, or (iii) payments under the Put/Call Agreement for USPI redeemable noncontrolling interest, which are recorded on the Statement of Cash Flows as the purchase of noncontrolling interest.interests. Accordingly, shareholders are encouraged to use GAAP measures when evaluating the Company’s financial performance.
A-2 |
APPENDIX B
Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
Tenet Healthcare Corporation (the “Company”), a Nevada corporation, hereby establishes and adopts the following Tenet Healthcare 2019 Stock Incentive Plan (as amended from time to time, the “Plan”).
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The purpose of the Plan is to assist the Company and its Subsidiaries in attracting and retaining selected individuals to serve as employees and directors of the Company and its Subsidiaries who are expected to contribute to the Company’s success and to achieve financial and strategic objectives which will inure to the benefit of all stockholders of the Company through the additional incentives inherent in the Awards hereunder. To the extent the Plan is approved by the Company’s stockholders at its 2019 annual meeting of stockholders, no new awards may be granted under the 2008 Plan (as defined below) after such approval; however, any awards under the 2008 Plan that are outstanding as of the date of such approval shall remain subject to the terms and conditions of, and be governed by, the 2008 Plan.
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Such 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
Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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 or non-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 Committee, the Committee may make adjustments to the Performance Criteria so as to neutralize the effect of the event on the applicable Award.
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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Appendix B: Tenet Healthcare 2019 Stock Incentive Plan (as amended by the First Amendment thereto)
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OUR MISSIONTO PROVIDE QUALITY, COMPASSIONATE CARE IN THE COMMUNITIESWE SERVE.
TenetHealth
Tenet Health P.O. BOX 8016, CARY, NC 27512-9903
YOUR VOTE IS IMPORTANT! PLEASE VOTE BY: INTERNET Go • To: www.proxydocs.com/THC• Cast your vote online• Have your Proxy Card readyFollow the simple instructions to record your votePHONE Call 1-866-892-1731• • Use any touch-tone telephone• Have your Proxy Card ready Follow the simple recorded instructions MAIL• • Mark, sign and date your Proxy CardFold and return your Proxy Card in the postage-paid envelope providedYou must register to attend the meeting online and/or participate at www.proxydocs.com/THCP.O. BOX 8016, CARY, NC 27512-9903Tenet Healthcare Corporation
INTERNET | ||
Go To: www.proxydocs.com/THC | ||
• Cast your vote online | ||
• Have your Proxy Card ready | ||
• Follow the simple instructions to record your vote | ||
PHONE Call1-866-892-1731 | ||
• Use any touch-tone telephone | ||
• Have your Proxy Card ready | ||
• Follow the simple recorded instructions | ||
• Mark, sign and date your Proxy Card | ||
• Fold and return your Proxy Card in the postage-paid envelope provided | ||
You must register to attend the meeting online and/or participate at www.proxydocs.com/THC |
Tenet Healthcare Corporation |
Annual Meeting of Shareholders
For Shareholders of record as of March 11, 2022TIME: Friday, May 6, 2022 8:00 AM, Central TimePLACE: Annual Meeting to be held virtually via live audio webcast -please visit www.proxydocs.com/THC for more details.
28, 2023
TIME: | Thursday, May 25, 2023 8:00 AM, Central Time | |
PLACE: | Annual Meeting to be held virtually via live audio webcast - | |
please visit www.proxydocs.com/THC for more details. |
This proxy is being solicited on behalf of the Board of Directors
The undersigned hereby appoints Ronald A. Rittenmeyer, Saumya Sutaria, Thomas W. Arnst and Chad J. Wiener (the “Named Proxies”), and each or either of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and authorizes them, and each of them, to vote all the shares of capital stock of Tenet Healthcare Corporation which the undersigned is entitled to vote at said meeting and any adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BOARD OF DIRECTORS’ RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the Named Proxies are authorized to vote upon such other matters that may properly come before the meeting or any adjournment or postponement thereof.
You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The Named Proxies cannot vote your shares unless you sign (on the reverse side) and return this card.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE
Tenet Healthcare Corporation
Annual Meeting of Shareholders
Please make your marks like this: X
☒
THE BOARD OF DIRECTORS RECOMMENDS A VOTE:
FOR ON PROPOSALS 1, 2 3 AND 4
1 YEAR ON PROPOSAL1. Election of Directors 1.01 Ronald A. Rittenmeyer 1.02 J. Robert Kerrey 1.03 James L. Bierman 1.04 Richard W. Fisher 1.05 Meghan M. FitzGerald 1.06 Cecil D. Haney 1.07 Christopher S. Lynch 1.08 Richard J. Mark 1.09 Tammy Romo 1.10 Saumya Sutaria 1.11 Nadja Y. West YOUR VOTE FOR 3
AGAINST ABSTAIN2. To vote to approve, on an advisory basis, the Company’s executive compensation. #P13#3. To vote to approve the First Amendment to the Tenet Healthcare 2019 Stock Incentive Plan. #P14#4. To ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accountants for the year ending December 31, 2022. #P15# Such other business as may properly come before the meeting or any adjournment or postponement of the meeting will be voted on by the proxy holders in their discretion.BOARD OF DIRECTORS RECOMMENDS FOR FOR FOR FOR FOR FOR FOR FOR FOR FOR FOR FOR FOR FOR FOR AGAINST ABSTAIN
ON PROPOSAL 5
BOARD OF | ||||||||||||
DIRECTORS | ||||||||||||
COMPANY PROPOSALS | YOUR VOTE | RECOMMENDS | ||||||||||
1. | Election of Directors | |||||||||||
FOR | AGAINST | ABSTAIN | ||||||||||
1.01 J. Robert Kerrey | ☐ | ☐ | ☐ | FOR | ||||||||
1.02 James L. Bierman | ☐ | ☐ | ☐ | FOR | ||||||||
1.03 Richard W. Fisher | ☐ | ☐ | ☐ | FOR | ||||||||
1.04 Meghan M. FitzGerald | ☐ | ☐ | ☐ | FOR | ||||||||
1.05 Cecil D. Haney | ☐ | ☐ | ☐ | FOR | ||||||||
1.06 Christopher S. Lynch | ☐ | ☐ | ☐ | FOR | ||||||||
1.07 Richard J. Mark | ☐ | ☐ | ☐ | FOR | ||||||||
1.08 Tammy Romo | ☐ | ☐ | ☐ | FOR | ||||||||
1.09 Saumya Sutaria | ☐ | ☐ | ☐ | FOR | ||||||||
1.10 Nadja Y. West | ☐ | ☐ | ☐ | FOR | ||||||||
FOR | AGAINST | ABSTAIN | ||||||||||
2. | To approve, on an advisory basis, the Company’s executive compensation. | ☐ | ☐ | ☐ | FOR | |||||||
1YR | 2YR | 3YR | ABSTAIN | |||||||||
3. | To approve, on an advisory basis, the frequency of future advisory votes on executive compensation. | ☐ | ☐ | ☐ | ☐ | 1 YEAR | ||||||
FOR | AGAINST | ABSTAIN | ||||||||||
4. | To ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accountants for the year ending December 31, 2023. | ☐ | ☐ | ☐ | FOR | |||||||
SHAREHOLDER PROPOSAL | ||||||||||||
5. | Shareholder Proposal requesting a report on patients’ right to access abortion in emergencies. | ☐ | ☐ | ☐ | AGAINST | |||||||
Such other business as may properly come before the meeting or any adjournment or postponement of the meeting will be voted on by the proxy holders in their discretion. |
You must register to attend the meeting online and/or participate at www.proxydocs.com/THC
Authorized Signatures—Signatures - Must be completed for your instructions to be executed.
Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form.Signature (and Title if applicable) Date Signature (if held jointly) Date
Signature (and Title if applicable) | Date | Signature (if held jointly) | Date |