Tenet Healthcare
Annual Meeting: May 28, 2020
The Chairman and CEO of Tenet Healthcare, Ronald Rittnemeyer, received $24,288,260 in compensation in 2019. The figure represents a 62% increase from his 2018 pay.
Rittnemeyer’s compensation has recently come under increased scrutiny by prominent shareholders. In an April 2020 letter, the Teamsters recommended a no vote on the company’s “Say-on-Pay” proposal. They urged fellow shareholders to vote no for the following reasons:
“New, lucrative employment agreements that lack real ties to performance: Initially appointed Executive Chair, in August 2017, CEO Ronald Rittenmeyer has gone on to enter a series of lucrative employment extensions providing $42 million in exclusively time-based awards – vesting over a mere two to two and a half years. The hiring of COO Dr. Saum Sutaria has, similarly, been dominated by the large use of time-vesting awards: $12 million in sign-on grants and a $4 million long-term incentive (LTI) opportunity. With other senior executives receiving a far more balanced long-term mix, Tenet has quite perversely, made its two most senior executives the least exposed to corporate performance.”
“A series of egregious exit-arrangements: Vice Chairman Keith Pitts not only recently retired with a $14.4 million Supplemental Executive Retirement Plan (SERP) -- inflated by additional service credits -- but is scheduled to earn $2 million over the next two years for advisory services not to exceed eight hours a week. Similarly, when he finally retires, CEO Rittenmeyer will receive a $750,000 annual retainer for two years - in this case for not more than eight days of consulting a month. Investors ought to be tired of consulting gigs that are little more than discretionary severance by another name.”
“A failure to reinforce accountability at the top: CEO Rittenmeyer trumpets a new ‘Culture of Accountability’ and a vision of ’Community Built on Care;’ but his own long-term pay is singularly divorced from any performance metrics. While the short-term incentive plan for named executive officers (NEOs) does include financial metrics, it is only for other senior officers that specific operational quality and service metrics are factored into incentive pay. In pay terms, this is the equivalent of, ‘Do as I say, not as I do’ and upends the idea that tone and accountability at the top is critical to organizational success.”
The healthcare system has not been immune to the negative effects of coronavirus. Due to a reduction in elective surgeries and other services, 10% of Tenet Healthcare’s workforce was furloughed. In light of the layoffs, Rittenmeyer announced he would donate 50% of his April-June salary to a fund for Tenet workers who have experienced hardship. Other Tenet executives plan to donate 10-20% of their salaries to the same fund. Notably, Rittenmeyer’s salary is only a portion of his compensation. In 2019, Rittenmeyer’s salary only represented approximately 4% of his total compensation. Total compensation figures have not yet been determined for 2020, but Fortune calculates that the approximate “$390,000 that Rittenmeyer is forgoing would only amount to 2% of what he received last year. What’s more, Tenet still pays Rittenmeyer’s predecessor, who left three years ago, roughly $245,000 each month as part of his severance package.” The Teamsters argued that Rittenmeyer’s donation is “only a gesture and one that is cushioned by the Board’s recent decision to boost CEO Rittenmeyer’s future annual base salary. Gestures are no substitute for comprehensive pay reform that matches executive pay with performance.”
Tenet Healthcare workers make a median pay of $53,714 per employee. The pay ratio of CEO to employee is 452:1.