There is ongoing serious concern related to executive compensation at Tenet Healthcare Corporation. First of all in February 2009 CEO Trevor Fetter received a mega mega-grant of 5.5 million stock options at a historically low exercise price of only $1.14, the relative nadir of Tenet’s share price over the past 25 years. In addition, the other four named executive officers (NEOs) received an aggregate total of 3.6 million options at the same exercise price. At fiscal year end, Tenet’s share price has already nearly quadrupled, representing gains of nearly $39 million for all NEOs. As this illustrates, market priced stock options may provide rewards due to a rising market alone, regardless of individual performance. On top of that, Mr. Fetter’s pension and deferred compensation earnings exceeded his base salary for the second straight year and he continues to receive such excessive perks as personal use of corporate aircraft. While we note favorably that the company has finally disclosed annual incentive performance targets and results, it is difficult to judge these components as there is as of yet no year-to-year comparison available. Regarding long-term incentives, 75% of the award is in the form of stock options (as we previously addressed); the remaining 25% of the award consists of performance awards that are based on only three-year performance periods, use one of the same performance metrics (free cash flow) as the annual plan, and are cash-settled. Lastly, we note that all members of the Compensation Committee received at least 13% director withhold votes at the company’s 2009 annual meeting. Will shareholder discontentment continue? We will find out at Tenet Healthcare’s annual meeting on May 5, 2010.
Damion Rallis - Ratings Analyst
