Having engineered a $3.2 billion merger and corporate downsizing, Tenet Healthcare Corp. rewarded its executives and board members with hefty raises and stock options.
The fiscal 1995 compensation for Jeffrey Barbakow, the hospital chain's chairman and chief executive officer, totaled $5.6 million, which includes stock options that are worth nearly $4 million.
The salary for Barbakow and other Tenet executives is disclosed in the company's proxy, which was filed in preparation for the annual share-holders' meeting last week.
The fiscal year, which ended in May, was a busy one for Barbakow, who engineered a merger with American Medical International in March and returned the company to profitability after a $425 million loss in fiscal 1994.
For his work, Barbakow received 500,000 10-year stock options, a change from what he might have expected.
The grant represented a reversal of a policy laid down by Tenet's directors, who said they wouldn't award Barbakow any more stock options until 1996. When the investment banker was hired to run the company in 1993, he was awarded 2 million stock options. A large bequest at the time, the board said it was an exception and that no further stock options would be awarded to Barbakow or the president and chief operating officer, Michael Focht, until 1996.
However, in the 1995 proxy, the board said there were "sound business reasons" to rescind that decision, noting it was made before the AMI merger was announced.
Barbakow now has 2.5 million stock options in the Santa Monica, Calif.-based company, worth an estimated $16 million, according to the proxy.
Focht received 300,000 10-year stock options valued at $2.4 million.
Barbakow received a higher base salary but a smaller bonus in fiscal 1995, the proxy reported. His base salary grew by $50,000 to $900,000, but his bonus dropped 36% to $574,560. The proxy explains that Barbakow did not receive long-term incentive payments because the hospital company did not reach pre-established goals on return on equity.
Barbakow, however, received $125,813 in other compensation, which included $78,718 in expenses for his personal use of the company's airplane.
Tenet's 13 directors also were rewarded with 33% raises. Starting in January, the directors began drawing an annual fee of $40,000 a year, up $10,000 from their previous payment.
In addition, they receive compensation for each meeting they attend. They're now getting more for showing up at board meetings- $1,000, compared with $900 per meeting in 1994.
Committee chairmen receive an extra $4,000 a year plus $1,200 for attending committee meetings. The per-meeting fee for committee members was raised from $1,000.
In addition, Peter de Wetter, a longtime executive with National Medical Enterprises, which became Tenet earlier this year, gets an extra perk. He's paid $12,000 a year to be an adviser to the board's compensation committee and has the use the company airplane for personal use at a cost of $18,565.
Barbakow already garnered one of the highest salaries among CEOs of investor-owned hospital chains. Because Tenet's fiscal year ends in May-the earliest of all hospital companies-it's hard to compare his fiscal 1995 pay with that of executives of other chains.
However, in 1994, Richard Scott, president and CEO of the nation's largest hospital company, Columbia/HCA Healthcare Corp., received a $1.1 million salary and bonus-34% lower than Barbakow's.
Only Richard Scrushy, president and CEO of HealthSouth Corp., had a higher base salary than Barbakow in 1994. Scrushy earned $1.2 million and received another $2 million in bonuses.