Trevor Fetter, the outgoing CEO of Tenet Healthcare, is to receive a severance package of $22.9 million and $19.4 million in pension payments when his replacement is found, according to Tenet financial documents.
On Aug. 31, Tenet announced it would replace Fetter after its largest shareholder, Glenview Capital Management, relinquished two board seats at the money-losing hospital giant. Dallas-based Tenet has come under fire from Glenview, which owns 18% of Tenet, and other investors in light of the pace of its turnaround.
Fetter has agreed to stay on until March or until a successor is named. In the shakeup, Tenet board leader Ronald Rittenmeyer was appointed executive chairman.
The company announced last week that Rittenmeyer would receive an annualized base salary of $500,000 and $2.3 million in performance-based stock options that vest after a year if Tenet's stock price rises 25% and stays there or rises further for 30 consecutive days.
In March, Tenet disclosed Fetter's severance and compensation in proxy materials leading up to the company's annual shareholder meeting.
The $22.9 million severance package would include cash payments of $10.8 million and accelerated equity awards valued at $8.3 million, among other payouts, documents show.
A Tenet spokesman declined to comment.
Fetter was paid $12.4 million in 2016, including $1.3 million in salary, $7.3 million in stock awards, $1.3 million in nonequity bonuses, and $2.2 million in pension and deferred compensation.
The International Brotherhood of Teamsters, whose $100 billion pension and benefit funds hold a sizable chunk of Tenet shares, asked shareholders at Tenet's annual meeting in May to reject the company's executive compensation plan under an advisory vote known as Say on Pay.
The union felt Fetter, in particular, was being overpaid for the company's stock and earnings performance. Despite the Teamster's opposition, shareholders approved the Say on Pay plan.
Now, Fetter's severance is drawing their ire.
"This is a classic golden push out the door," said Michael Pryce-Jones, Teamster's senior governance analyst.
Pryce-Jones said Fetter has been handsomely compensated over the years, even though the company is unprofitable and its common stock, which was nearly $60 per share two years ago, now trades just above $15.
"It's kind of the alternative world that CEOs are compensated in," Pryce-Jones said.
Typically, the cash outlay in severance for an executive who is terminated or leaves at his or her own will is two times base salary plus bonuses, said an executive compensation leader who works in the healthcare sector but asked not to be named.
Fetter's $10.8 million cash severance is more than three times—a "healthy" departure from industry norms, the executive said. His salary and bonuses are more common when there's a change of control at a company, the executive added.
Tenet has had no change of control. Though the company's board reportedly has asked bankers to do a strategic review, including the possibility that it could be sold or broken up in pieces.
An edited version of this story can also be found in Modern Healthcare's Oct. 2 print edition.
