LifePoint Health's board of directors is plowing ahead with a $120 million golden parachute plan for four top executives ahead of the company's sale, despite overwhelming opposition from shareholders.
The board itself, which will disband when the deal goes through, is getting more than $11.3 million, not counting the company's chairman and CEO's take, as part of the sale.
The payouts are raising eyebrows in the investment community given they total more than the company's 2017 net income. Analysts, attorneys and others who follow the industry say the unusually high level of backlash the investor-owned hospital company's golden parachutes proposal received—including rejection from owners of 83% of voting shares and opposition from two leading proxy advisory firms—could come back to haunt LifePoint directors who serve on other boards and should serve as a cautionary tale for other companies establishing such severance packages ahead of acquisition deals.
“It's a signal to the market that this type of approach is a problem and investors are not happy with it,” said Julian Hamud, director of executive compensation research with proxy advisory firm Glass Lewis. “But as it relates to LifePoint specifically, that's not necessarily going to do a lot.”
Federal securities law required Brentwood, Tenn.-based LifePoint, which expects to close on its sale to affiliates of the private equity firm Apollo Global Management by year-end, to hold a nonbinding shareholder vote last week on the golden parachutes plan. The results were never going to carry any weight, however: The cash severance and other payout provisions were already in executives' contracts. The stock awards outlined in the plan will be paid upon the Apollo deal's closing.