Triad Hospital’s proposed
$6.4 billion leveraged buyout had an unusual twist: Nancy-Ann DeParle, a former HCFA administrator who sits on Triad’s board of directors, also is a managing director for CCMP Capital Advisors, one of Triad’s possible buyers.
Late last summer when Triad Hospitals Chairman and Chief Executive Officer Denny Shelton advised his board of directors that he wanted to begin talking to private equity firms as potential partners, DeParle said she suggested he hook up with her colleagues at CCMP Capital.
“At that point, I recused myself from both sides of it and had nothing further to do with it from either side,” DeParle said.
Her suggestion apparently blossomed last week with Triad’s announcement of a leveraged buyout with CCMP and GS Capital Partners.
But DeParle said the long-speculated buyout was as much of a surprise to her as anyone since she removed herself from all discussion both at CCMP and Triad.
DeParle—who headed HCFA, now the CMS, from 1997 to 2000—has been managing director of CCMP since its formation in August 2006 by the buyout team of J.P. Morgan Partners, where she was a senior adviser. She serves on the Triad board’s ethics and compliance committee and its nominating and corporate governance committee, according to the Triad Web site. Besides Triad, she also serves on the boards of Cerner Corp. and Boston Scientific Corp.
Triad’s decision to accept the buyout offer from the two private equity firms “was made by disinterested members of the (Triad) board,” which consists of 10 outside directors, including DeParle, said Martha Crombie, a Triad spokeswoman.
Potential conflicts of interest frequently arise on the boards of publicly traded companies, and the way to manage it would be recusal, said Bart Victor, who holds the Cal Turner professorship in moral leadership at the Owen Graduate School of Management at Vanderbilt University in Nashville.
“It’s a paradox of board representation that you want people on the board who know the business and know all aspects that affect the business,” Victor said. “So you need those people, but that which makes them very valuable also makes the potential for conflicts of interest possible. In general, boards don’t try to isolate themselves; they instead try to manage that actively and openly.”
Neither Crombie nor DeParle could say what DeParle’s status with the board would be if and when the deal is completed. “I have no idea. I’ve had no discussions about this transaction whatsoever,” DeParle said.
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