HCA Holdings plans to make good on a pledge made in a lawsuit settlement to add another independent director to its 11-member board.
But HCA will rush to fill that 12th seat only if it gets the exact candidate it nominated for the position, according to a recent proxy statement it filed for the company's April 28 annual shareholders meeting.
HCA said if nominee Charles Holliday is rejected by shareholders at the meeting, the hospital chain will not immediately increase the size of its board. Holliday is the former CEO of chemical giant DuPont and current board chairman of Royal Dutch Shell.
"We have had a consistent strategy of adding independent directors since our IPO, with an eye towards expanding diversity, experience and perspective, and the board's nomination of Charles Holliday as our eighth independent director is part of that strategy," HCA said in a written statement.
Holliday has been nominated by the board on a slate including all 11 current board members, who are seeking re-election for another one-year term.
Ultimately, though, HCA will have to add a 12th member to its board, and make a host of other governance reforms under a settlement agreement with its shareholders dating back to a 2012 lawsuit.
HCA has 18 months to add the director from the time the settlement is finalized, which could come as early as April 12 at a scheduled hearing in the Sixth Circuit Court for Davidson County in Nashville. HCA is the nation's largest hospital company, with 2015 revenue of $39.7 billion.
In a 2012 class-action lawsuit, HCA shareholders, led by the New England Teamsters & Trucking Industry Pension Fund, accused the company of failing to reveal in its initial public offering prospectus that falling Medicaid revenue in Florida and Texas, along with other items, caused its stock to plunge from an offering price of $30 on March 9, 2011 to $18.81 by Oct. 3 of that year.
Late last year, HCA agreed to settle the suit for $215 million, while denying the allegations.
In a related lawsuit that same year, called a derivative lawsuit, HCA shareholders sued individual HCA board members on behalf of the company to hold them and their liability insurers responsible for the shareholder losses.
The governance reforms, including the requirement that HCA add another independent board member, are contained in the settlement of the derivative lawsuit(PDF).
Among other reforms, HCA directors will be limited to one committee-chair assignment each, and prohibited from serving on more than five public corporate boards beyond HCA.
The settlement also requires the board to vet and answer all properly filed shareholder proposals.
Holliday worked for DuPont for 37 years, including serving as CEO from 1998 to 2008, and board chair from 1999 to 2009. He also served as a director of Deere & Company from 2007 to 2015. He was chairman of the Bank of America from 2010 to 2014. He is also the former chairman of the Council on Competitiveness and the World Business Council for Sustainable Development.
"Our board believes Mr. Holliday is highly qualified," the HCA statement said. "He has a solid grasp of the challenges and opportunities facing the healthcare industry, and we look forward to him joining our board."
