DEF 14A 1 d132672ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

(Amendment No.     )

 

 

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  Preliminary Proxy Statement
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  Definitive Proxy Statement
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Tenet Healthcare Corporation

(Name of Registrant as Specified in Its Charter)

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Dear fellow shareholders,

 

It has been a year since we entered the pandemic and the last 12 months clearly have been an extraordinary challenge and learning experience. This has brought a marked increase to the pace of our operations, as well as a need to handle an equally significant increase of information effectively and efficiently coupled with many emotional ups and downs never experienced in our past. Our company was at the front line across our system experiencing the frustrations, fear and the other external and internal pressures that resulted from dealing with what started as an unknown. I am pleased to report that your company took on these challenges directly, struggled through the early days, never lost a step in responding — and today we are a stronger, leaner, and more focused business, driven by an experienced and highly qualified team of professionals. We had a renewed commitment to operate as a closer and more engaged organization, shedding the truly unnecessary costs and aggressively seeking out effective solutions that had strength and sustainability.

2020 started with positive upward trends in January and February building on solid momentum from the prior year and seeing the positive impact of our multi-year turnaround work. The virus was in the news, but minimal actionable information was available, so we decided to pre-purchase additional PPE and review in detail each facilities’ infection control processes. We established our headquarters clinical team to be the single source of truth with daily group calls with the field, and they had the responsibility of monitoring and disseminating both clinical and regulatory information. We added support personnel to this team to ensure we had adequate and skilled personnel dedicated to areas such as HR policies, reimbursement methods directly related to COVID and our government relations team on policies that seemed to be forthcoming daily.

As with others, we faced challenges never experienced in the history of our company. We believe the transformation we started in late 2017 played a major role in our ability to respond quickly, pivot immediately and ensure we had companywide clarity on what steps were needed. As we stated in the last two years, we had upgraded many key roles, established processes tightly tied to data-driven metrics and a decision process that was efficient with streamlined accountability and ownership. Our ability to perform under such difficult and constantly evolving circumstances underscores the effectiveness of the changes we had made, the strength and commitment of our people and the ability to grasp and respond to the unknown.

 

LOGO

 

Ronald A. Rittenmeyer

Executive Chairman and CEO

 

This last year demonstrated how a clear strategy and actionable and accountable teams will come together successfully amid a tumultuous environment. Not only were we able to continue providing vital healthcare, but we also executed well on multiple strategic initiatives. We did not stray from our stated plans because they were the right ones for our patients, our physicians, our shareholders and our people. We pride ourselves on being accountable – and we were.

 

    First and foremost, we kept our hospital doors open at all times, building every protocol around the delivery of safe care and committing our resources where they were needed most. We met critical care needs, instituted COVID-safe infrastructure, advanced medical technology improvements and implemented strong infection control policies to keep our extended communities safe. Richer data for our operators, open and constant lines of communication and a cohesive response were critical to our recovery.
 


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    We advanced top-tier clinical programs to serve growing needs across our hospitals. This included the launch of market-wide programs and new offerings, while also receiving awards for excellence in service lines that address highly acute and chronic conditions.

 

    Our ambulatory business achieved many milestones, not just in terms of performance but also by earning trust and distinction through recognitions that focus on quality and patient experience. We expanded our relationships with our universe of physician and health system partners and demonstrated how those collaborations were vital.

 

    Our most transformational move came with the acquisition of 45 quality ambulatory surgery centers in December, in addition to the eight centers acquired throughout the rest of 2020. Through this transaction, we can now offer our communities additional access points for more affordable, consumer-friendly outpatient surgeries performed by leading physicians. We continue to own a small portion of a fragmented industry, and as we selectively expand our network, with each integration we maintain the intimacy and neighborhood feel of these smaller, lower cost of care settings.

 

    For Conifer, we achieved a high level of margin performance, providing outstanding support to our clients during a particularly challenging time and raising the bar on cash collection expectations. We also added new talent to the leadership bench and promoted from within.

 

    Our Global Business Center continued to perform through 2020 and we added an additional 1,000 associates to improve our response to our individual business units on a 24-hour basis. This group continues to operate at 90% plus effectiveness with a very high level of accuracy.

 

    We maintained stability of performance through our ongoing recovery. With the mandated shut-down of elective care early in the pandemic, along with the uncertainty surrounding surges that moved rapidly, we experienced significant troughs and peaks last spring through the end of 2020. We are very appreciative of the stimulus funding we received, which while measurably short of our losses created by the pandemic, helped mitigate these losses to our system and allowed us to remain focused on patient and staff needs. At the same time, we proactively managed our liquidity to preserve financial stability and made a series of operational changes to cement our recovery. Our performance speaks to this, along with the market confidence we gained throughout the year.

Across our network of more than 600 facilities, we are extremely proud that we were able to carry forward a cohesive response while remaining true to the commitments set forth before the virus took hold. Those include supporting our employees, giving back to local and national causes, our approach to leadership and governance, fostering a culture of inclusivity and cultivating programs that mitigate our impact on the environment. They all fit together to create sustainable business across every level.

Solidifying our commitment to the values and goals of ESG (Environmental, Social and Governance), we have formally established a new committee of our Board of Directors consisting of independent directors to focus directly on our company’s increasing efforts in the areas of ESG. We believe this topic is of the utmost importance and deserves special attention by our Board. Unlike many industries, delivery of healthcare has many unique requirements. We believe we can continuously improve over time and have launched in our facilities several engineering efforts to outline opportunities in

sustainability. We also created a Diversity Council and are building Employee Resource Groups to foster, develop and ensure a more sustainable inclusive environment throughout our business. Our Board of Directors, which has been refreshed by over 70%, since the fourth quarter of 2017, represents the commitment we have to a balanced, effective and diverse organization. We will, with the addition of the ESG Committee of our Board and the development of other programs, measure improvements and address opportunities ensuring this commitment is an enduring part of the fabric of the company.

In 2020, our resilience as an organization was tested, and we outperformed, delivered on our commitments and continued building a framework for our future growth and success. This was possible because of our team members and their selfless commitment to our patients, each other and our communities. Together, they have fostered a very strong character for Tenet – and we are incredibly grateful.

In closing, we are also grateful to our shareholders, the communities we serve and the many partners we engage to deliver the care we provide. Our mission is of the highest order, and we approach every day grateful for these points of support and with a determination to provide the best possible care with humility, dignity and professionalism. From our patients, our team, our Board and our many partners, thank you for your confidence and support as we advance our mission.

With gratitude,

 

 

LOGO

Ronald A. Rittenmeyer

Executive Chairman and CEO

 


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LOGO

 

TENET HEALTHCARE CORPORATION

14201 Dallas Parkway

Dallas, Texas 75254

(469) 893-2200

Notice of Annual Meeting of Shareholders

to be held on Thursday, May 6, 2021

March 26, 2021

To our Shareholders:

Our 2021 Annual Meeting of Shareholders (the “Annual Meeting”) will be held on May 6, 2021, at 8:00 a.m. Central Time. You will be able to attend and participate in the Annual Meeting by visiting www.virtualshareholdermeeting.com/THC2021, where you will be able to listen to the meeting live, submit questions, and vote, for the following purposes:

 

1.

To elect the eleven directors named in the accompanying Proxy Statement, each to serve until the next annual meeting of shareholders or until his or her successor is duly elected and qualified, whichever is later, or until the director’s earlier resignation or removal.

 

2.

To vote, on an advisory basis, to approve the Company’s executive compensation.

 

3.

To ratify the selection of Deloitte & Touche LLP as our independent registered public accountants for the year ending December 31, 2021.

 

4.

To transact any other business that properly comes before the meeting or any adjournment or postponement of the meeting.

Only shareholders of record of our common stock at the close of business on March 12, 2021, are entitled to notice of and to vote at the Annual Meeting.

It is important that your shares be represented and voted at the Annual Meeting. You may vote your shares via the Internet, by telephone or by completing and returning a proxy card. Specific voting instructions are set forth in the “General Information Regarding the Annual Meeting and Voting” section of the accompanying Proxy Statement and on the proxy card.

 

LOGO
Audrey T. Andrews
Executive Vice President, General Counsel and Corporate Secretary

 

Important Notice Regarding the Availability of Proxy Materials

for the Annual Meeting of Shareholders To Be Held on May 6, 2021

The accompanying Proxy Statement and the Company’s proxy card, as well as our Annual

Report on Form 10-K for the year ended December 31, 2020, are available at www.proxyvote.com.

 

As provided above, due to the public health impact of the COVID-19 pandemic, we have adopted a virtual meeting format for our Annual Meeting, conducted via a live audio webcast. You will be able to attend the Annual Meeting online, listen to the meeting live, submit questions and vote your shares electronically during the meeting by visiting www.virtualshareholdermeeting.com/THC2021. We have designed the format of the Annual Meeting to provide shareholders substantially the same rights and opportunities to participate as they would at an in-person meeting. As always, we encourage you to vote your shares prior to the Annual Meeting.

 


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2021 Proxy Statement

 

    

 

    

 

 

Table of Contents

 

Proxy Statement Summary     1  
Proposal 1-Election of Directors     5  
Corporate Governance and Board Practices     14  

Commitment to Sound Corporate Governance Policies and Practices

    14  

Board Leadership Structure

    14  

Board and Committee Organization and Responsibilities

    15  

Role of Board and its Committees in Risk Oversight

    19  

Policies on Ethics and Conduct

    21  

Certain Relationships and Related Person Transactions

    21  

Communications with the Board of Directors by Shareholders and Other Interested Parties

    22  
Director Compensation     23  

2020 Director Compensation Table

    24  

Compensation Plans Applicable to Directors

    24  

Director Stock Ownership and Retention Requirements

    25  
Executive Officers     26  
Securities Ownership     28  

Securities Ownership of Management

    28  

Securities Ownership of Certain Shareholders

    29  
Compensation Discussion and Analysis     30  

Overview

    31  

Detailed Description and Analysis

    35  
Human Resources Committee Report     47  
Executive Compensation Tables     48  

Summary Compensation

    48  

Grants of Plan-Based Awards During 2020

    50  

Outstanding Equity Awards

    51  

Option Exercises and Stock Vested

    53  

Pension Benefits

    53  

Nonqualified Deferred Compensation

    55  

Potential Payments Upon Termination or Change of Control

    56  

Pay Ratio Disclosure

    61  
Securities Authorized for Issuance Under Equity Compensation Plans     62  

Equity Compensation Plan Information

    62  
Proposal 2-Advisory Vote to Approve Executive Compensation     63  
Audit Committee Report     64  
Proposal 3-Ratification of the Selection of Independent Registered Public Accountants     66  
General Information Regarding the Annual Meeting and Voting     67  
Other Information     71  
Appendix A: Non-GAAP Financial Measures     A-1  

This Proxy Statement includes certain financial measures not in accordance with generally accepted accounting principles in the United States (GAAP), such as Adjusted EBITDA, Adjusted Free Cash Flow and Adjusted EPS. Definitions of these measures are contained in Appendix A to this Proxy Statement.


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Proxy Statement Summary

Below are highlights of certain information in this Proxy Statement. Please refer to the complete Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2020, before you vote.

2021 ANNUAL MEETING OF SHAREHOLDERS

 

 

 

LOGO

 

Date and Time:

Thursday, May 6, 2021,

at 8:00 a.m. Central Time

 

   

 

 

LOGO

 

Place:

Online at www.virtualshareholdermeeting.com/
THC2021

 

   

 

 

LOGO

 

Record Date:

March 12, 2021

 

Information:

The Notice of Internet Availability, this Proxy Statement and related proxy materials are being mailed or made available to shareholders on or about March 26, 2021. Copies of this Proxy Statement, the Company’s proxy card and our Annual Report on Form 10-K are available at www.proxyvote.com.

VOTING MATTERS AND BOARD RECOMMENDATIONS

 

Proposals

     

Board’s

Recommendation

 

Page    

 

    1    

 

 

Election of Eleven Director Nominees

 

 

Vote FOR each nominee

 

 

5    

 

    2    

 

 

Advisory Approval of the Company’s Executive Compensation

 

 

Vote FOR

 

 

63    

 

    3    

 

 

Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accountants for the Year Ending December 31, 2020

 

 

Vote FOR

 

 

66    

 

  2021 PROXY STATEMENT      1  


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Proxy Statement Summary

 

 

Business Overview

Tenet is a diversified healthcare services company focused on our mission to provide quality, compassionate care in the communities we serve. Tenet has approximately 110,000 employees delivering and supporting care through our three business units – Hospitals, Ambulatory Care and Conifer. We operate an expansive network across the country, with 65 acute care hospitals and over 550 other healthcare facilities, including ambulatory surgery centers, urgent care centers, imaging centers, surgical hospitals, off-campus emergency departments and micro-hospitals. Through our subsidiary United Surgical Partners International (USPI), Tenet operates the nation’s largest ambulatory platform in the country that includes partnerships with more than 50 prominent health systems and close to 5,000 physicians. In addition, our subsidiary Conifer Health Solutions is a leading provider of revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other clients.

 

 

LOGO

Our Resilience in Responding to COVID-19

COVID-19 presented some of the most difficult challenges we have ever witnessed for our business, our healthcare workers and our families. The response demonstrated by our caregivers and staff was nothing short of heroic. They worked tirelessly on the frontlines and through a support network to adjust to a fluid and uncertain environment, and they demonstrated compassion for patients and fellow team members, as well as a determination to bring us all to the other side of this crisis.

Every protocol in our response was built to maintain the highest standards for quality and safety and meet the needs of our communities. We adapted at every step, including facing reduced demand for services from the shut-down of elective care across our network, investing in the establishment of COVID-safe infrastructure throughout our hospitals and facilities, managing numerous community surges and supporting our healthcare workers in providing excellent care at all times.

Our Incident Command Center served as the hub of this effort, including close coordination across a network of more than 600 facilities and thoughtful calibration of strategy. Our response was also informed by the use of custom, real-time dashboards, allowing us to constantly have a pulse on critical metrics, such as supply inventory, PPE, medication, equipment and ICU availability.

 

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Proxy Statement Summary

 

    

 

    

 

 

Every day, but especially during this challenging time, our team members have led by example and done what they have been called upon and trained to do – with honor and professionalism.

Governance Highlights

 

Formed ESG
Committee
in 2021 to
formally oversee
growing ESG initiatives
 

Significant Board
refreshment
with nine

new independent
directors added since
fall 2017

  Strong independent
Lead Director
role with
robust responsibilities
   
Active shareholder
outreach and
engagement
  Shareholder right to
call special meetings
with 25% vote threshold
  Proxy access
right adopted in
2019 with market
standard terms

Board Refreshment

In response to specific shareholder feedback, the Board accelerated its refreshment process in the fall of 2017, recruiting nine independent directors since that time. On November 4, 2020, the Board appointed the Company’s President and Chief Operating Officer, Saum Sutaria, M.D., as a director. Dr. Sutaria’s leadership has been especially pivotal in accelerating the Company’s growth and successfully navigating the many challenges posed by the pandemic. In addition, on January 7, 2021, the Board appointed Admiral Cecil D. Haney, a retired four-star Admiral, as a director. Admiral Haney complements the Board given his leadership and experience, particularly in the areas of cybersecurity and systems planning. Further, on January 22, 2021, following his confirmation by the U.S. Senate as Secretary of Defense, General Lloyd J. Austin III resigned from the Board. We are grateful to General Austin for his service as our Board member. Altogether, these new directors have brought a diversity of viewpoints, approaches and experiences to the Board as it addresses the risks and pursues the long-term strategies in front of the Company.

Sound Governance Practices

Our Board is committed to sound corporate governance policies that protect the long-term interests of shareholders, promote accountability, and give shareholders a voice. The Board has long maintained many best practices, including annual election of directors by majority standard, a robust annual self-evaluation process, and frequent shareholder engagement. In recent years, the Board has further enhanced the Company’s governance practices. That includes an amendment to our Bylaws in 2018 that provides shareholders with beneficial ownership of 25% of Tenet’s outstanding shares with the right to call a special meeting, as well as an amendment in 2019 that allows for shareholders to nominate directors via proxy access on market standard terms.

ESG Committee

In 2021, the Board formed an ESG Committee. The ESG Committee’s purpose is to oversee and support the Company’s commitment to social, environmental and other public policy initiatives, including, among other things, climate change impacts, sustainability, and diversity and inclusion. The formation of the ESG Committee and our other recent governance enhancements, driven in large part by shareholder feedback, are intended to ensure the continued alignment of our corporate governance policies and practices with the long-term interests of our business and our shareholders.

Active Shareholder Engagement Program

Our Board regularly solicits input from investors and governance groups to better inform decision-making and gain insight into shareholder perspectives on a broad range of topics, including corporate governance practices. We value our shareholders’ perspectives on our business and interact with them through a variety of shareholder engagement activities. As we engage with shareholders, feedback is regularly reviewed by our Board.

 

  2021 PROXY STATEMENT      3  


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Proxy Statement Summary

 

 

Board Characteristics

 

 

Tenet’s recent Board refreshment activities have cultivated a balanced mix of diversity, age, tenure and viewpoints in the boardroom. The Board believes that a range of backgrounds, viewpoints, beliefs, ethnicities and ages, in addition to gender diversity, contributes to strong governance and successful oversight of the Company.

 

Diversity, Age and Tenure of Board Nominees

 

 

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Director Nominees

 

    

 

    

 

 

Proposal 1 –

Election of

Directors

Nominees for Election to the Board of Directors

 

Tenet’s Board of Directors is elected annually by our shareholders. Our nominees for election include nine independent directors and our Executive Chairman and Chief Executive Officer as well as our President and Chief Operating Officer. The Board has selected the nominees listed below to serve as directors until the 2022 annual meeting, or until their successors are elected or appointed. Each of the nominees listed below, other than Admiral Haney and Dr. Sutaria, were last elected by the Company’s shareholders at the 2020 annual meeting of shareholders. The nominees for director will be elected if the votes cast for the nominee exceed the votes cast against the nominee, with abstentions and broker non-votes not counted either for or against a nominee.

 

LOGO The Board recommends that you vote “FOR” the election of each of the following nominees.

 

      

 

RONALD A. RITTENMEYER

Executive Chairman and Chief Executive Officer

 

          
  LOGO   

Age: 73

 

Director Since: 2010

 

Other Public
Company
Directorships:

Current: IQVIA Holdings Inc.

 

Others in Past Five Years:

American International Group, Inc., Avaya Holdings Corp. and IMS Health Holdings, Inc.

 
 

Career Highlights:

Mr. Rittenmeyer was named Executive Chairman of Tenet in August 2017 and Chief Executive Officer in October 2017. He has served on our Board since 2010, including serving as Lead Director before he became Executive Chairman. He previously served as Chairman of the Board and Chief Executive Officer of Millennium Health, LLC, a health solutions company. He served as the Chairman, President and Chief Executive Officer of Expert Global Solutions, Inc., a provider of business process outsourcing services, from 2011 to 2014. From 2005 to 2008, Mr. Rittenmeyer held a number of senior management positions with Electronic Data Systems Corporation, including Chairman and Chief Executive Officer, President, Chief Operating Officer and Executive Vice President, Global Service Delivery. Prior to that, he was a managing director of the Cypress Group, a private equity firm, serving from 2004 to 2005. He served as Chairman, Chief Executive Officer and President of Safety-Kleen Corp. from 2001 to 2004. He formerly served as Chairman of the Federation of American Hospitals’ board of directors. Mr. Rittenmeyer received his Bachelor of Science degree in commerce and economics from Wilkes University and his M.B.A. from Rockhurst University.

 

Skills and Qualifications:

Our Board values Mr. Rittenmeyer’s deep experience in transformational leadership. As Chief Executive Officer of Safety Kleen, he led the company out of bankruptcy with pivotal strategic changes. He also led a turnaround at EDS in the same role and previously served as the Chief Executive Officer of other public companies, including Millennium Health and Expert Global Solutions. Mr. Rittenmeyer also brings to the Board his knowledge of the healthcare industry, information technology, business process outsourcing, public company board governance, and crisis management.

 

 
 

 

  2021 PROXY STATEMENT      5  


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Director Nominees

 

 

      

 

J. ROBERT KERREY

Lead Director since October 2017

 

      
  LOGO   

Age: 77

 

Director Since: 2012*

 

Other Public
Company Directorships:

Current: Lux Health Tech Acquisition Corp.

 

Others in Past Five Years:

None

 

Committee Membership:

Human Resources (Chair)

QCE

 
 

Career Highlights:

Senator Kerrey is a former governor and U.S. Senator from Nebraska. He has served as managing director at Allen & Company, an investment banking firm, since 2014. He has also served as Executive Chairman of The Minerva Institute for Research and Scholarship, a non-profit that offers exceptional educational experiences to students and advances faculty research, since 2013. From 2011 to 2013, he was President Emeritus of The New School University in New York City, where he served as President from 2001 to 2010. From 2011 to 2012, he served as the Chairman of M & F Worldwide Education Holdings. From 1989 to 2000, he served as a U.S. Senator for the State of Nebraska. Previously, Senator Kerrey was Governor of the State of Nebraska from 1982 to 1987. Prior to public service, he founded and operated a chain of restaurants and health clubs. A former member of the elite Navy SEAL Team, Senator Kerrey is a highly decorated Vietnam veteran who was awarded the Congressional Medal of Honor – America’s highest military honor. He holds a degree in pharmacy from the University of Nebraska.

 

Skills and Qualifications:

Senator Kerrey’s 18 years of experience in the public sector as a former U.S. Senator and Governor of Nebraska provide a key perspective to the Board in the highly regulated healthcare industry. Further, he has extensive experience in finance and public policy from his service at the investment banking firm Allen & Company and as a leader of a major university. The Board also values Senator Kerrey’s service on public company boards and crisis management.

 

*   Senator Kerrey served as a director from March 2001 to March 2012 prior to his appointment in November 2012

 

 

 
      

 

JAMES L. BIERMAN

 

      

 

  LOGO   

Age: 68

 

Director Since: 2017

 

Other Public
Company Directorships:

Current: KL Acquisition Corp., MiMedx Group, Inc. and Novan, Inc.

 

Others in Past Five Years:

Owens & Minor, Inc. and Team Health Holdings, Inc.

 

Committee Membership:

Governance

QCE (Chair)

 

 
 

Career Highlights:

Mr. Bierman served as President and Chief Executive Officer of Owens & Minor, Inc., a Fortune 500 company and a leading distributor of medical and surgical supplies, from September 2014 to June 2015. Previously, he served in various other senior roles at Owens & Minor, including President and Chief Operating Officer from August 2013 to September 2014, Executive Vice President and Chief Operating Officer from March 2012 to August 2013, Executive Vice President and Chief Financial Officer from April 2011 to March 2012, and as Senior Vice President and Chief Financial Officer from June 2007 to April 2011. From 2001 to 2004, Mr. Bierman served as Executive Vice President and Chief Financial Officer at Quintiles Transnational Corp. Prior to joining Quintiles Transnational, Mr. Bierman was a partner at Arthur Andersen LLP. Mr. Bierman earned his B.A. from Dickinson College and his M.B.A. at Cornell University’s Johnson Graduate School of Management.

 

Skills and Qualifications:

Mr. Bierman brings to the Board the skillsets he developed serving in multiple leadership positions at Owens & Minor, Inc., including as Chief Executive Officer. The Board values his significant operational and financial experience in the healthcare industry.

 

 
 

 

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Director Nominees

 

    

 

    

 

 

      

 

RICHARD W. FISHER

 

      
  LOGO   

Age: 72

 

Director Since: 2017

 

Other Public
Company Directorships:

Current: AT&T Inc. and PepsiCo, Inc.

 

Others in Past Five Years:

None

 

Committee Membership:

Audit

ESG (Chair)

Human Resources

 
 

Career Highlights:

Mr. Fisher served as President and Chief Executive Officer of the Federal Reserve Bank of Dallas from 2005 until 2015. During his tenure, he served as a member of the Federal Open Market Policy Committee, as the chair of the Conference of Federal Reserve Bank Presidents, and as the chair of the Information Technology Oversight Committee for the 12 Federal Reserve banks. Previously, from 2001 to 2005, Mr. Fisher was Vice Chairman of Kissinger McLarty Associates, a strategic advisory firm. From 1997 to 2001, Mr. Fisher served as Deputy U.S. Trade Representative with the rank of Ambassador. Mr. Fisher currently serves as a Senior Advisor for Barclays PLC, a leading investment bank, and as a Trustee of the University of Texas Southwestern Medical Foundation. Mr. Fisher received his B.A. in economics from Harvard University and earned his M.B.A. from Stanford University.

 

Skills and Qualifications:

Mr. Fisher offers valuable financial and policy perspectives from his experience as President and Chief Executive Officer of the Dallas Federal Reserve. The Board values his insight in public finance, trade, technology and risk management.

 

 
      

 

MEGHAN M. FITZGERALD, DrPH

 

      
  LOGO   

Age: 50

 

Director Since: 2018

 

Other Public
Company Directorships:

Current: Thimble Point Acquisition Corp

 

Others in Past Five Years:

Arix Bioscience plc and Concert Pharmaceuticals, Inc.

 

Committee Membership:

Governance (Chair)

ESG

QCE

 
 

Career Highlights:

Ms. FitzGerald is a private equity investor, where she serves as an advisor to several firms, including Wellspring Capital. In addition, Ms. FitzGerald serves as an Adjunct Associate Professor of Health Policy at Columbia University. Ms. FitzGerald served from December 2016 to January 2020 as the CEO and managing partner at Letter One’s inaugural health vehicle. Prior to that, she served for nearly 20 years as an operator and strategist working for many healthcare firms, including Merck, Pfizer and Medco. From May 2015 to October 2016, Ms. FitzGerald served as Executive Vice President of Strategy and Policy at Cardinal Health, a healthcare services and product company. From 2010 to 2015, she served as President of Cardinal’s Specialty Solutions division. Ms. FitzGerald also currently serves as a director of Thimblepoint Acquisition Corp and previously served as a director of Arix Bioscience plc from July 2017 to April 2019. She is the founder of K2HealthVentures, a life science investment fund as well as an advisor and volunteer at TrekMedics, an international tech non-profit. She holds a DrPH in Healthcare Policy from New York Medical College, a BSN in Nursing from Fairfield University, and a Master of Public Health from Columbia University.

 

Skills and Qualifications:

Ms. FitzGerald brings to the Board a broad range of experience in the healthcare industry, including senior strategic leadership, public policy, care delivery from her service as a nurse, and transactions and investments in a variety of healthcare fields from technology to life sciences.

 

 
 

 

  2021 PROXY STATEMENT      7  


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Director Nominees

 

 

      

 

CECIL D. HANEY

 

      
  LOGO   

Age: 65

 

Director Since: 2021

 

Other Public
Company Directorships:

Current: General Dynamics Corporation

 

Others in Past Five Years:

 

Committee Membership:

Audit

Governance

 
 

Career Highlights:

Cecil D. Haney is a retired four-star Admiral, who completed 38 years of service in the U.S. Navy in 2017. Between 2013 and 2016, he also served as commander of the U.S. Strategic Command, where he was responsible for strategic capabilities involving nuclear forces, missile defense, space and cyberspace. In addition, between 2012 and 2013, he also served as commander of the U.S. Pacific Fleet, leading the U.S. Navy’s operations and the manning, operations and maintenance of the U.S. Navy fleet located in the Pacific and Indian oceans. He currently serves on the Johns Hopkins University Applied Physics Board of Managers, the Naval Studies Board, the Aerospace Corporation Board of Trustees, and the Board of Directors for General Dynamics Corporation, Systems Planning and Analysis Inc., and the Center for New American Security. He also serves as Chairman of the Board of Directors for the Military Child Education Coalition. Mr. Haney is a graduate of the U.S. Naval Academy and holds Master’s degrees in National Security Strategy from the National Defense University and in Engineering Acoustics and System Technology from the Naval Post Graduate School.

 

Skills and Qualifications:

The Board values Admiral Haney’s leadership experience as a former four-star Admiral in the U.S. Navy. He brings to the Board valuable insights into cybersecurity, systems planning and crisis and risk management.

 

 
      

 

CHRISTOPHER S. LYNCH

 

      
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Age: 63

 

Director Since: 2019

 

Other Public
Company Directorships:

Current: American International Group, Inc.

 

Others in Past Five Years:

Federal Home Loan Mortgage Company (Freddie Mac)

 

Committee Membership:

Audit

Human Resources

 
 

Career Highlights:

Mr. Lynch served as National Partner in Charge of the Financial Services practice at KPMG, LLC from 2004 until his retirement in 2007. Prior to that, Mr. Lynch held a variety of positions at KPMG during his 29-year tenure, including chair of KPMG’s Americas Financial Services Leadership team and a member of the Global Financial Services Leadership and U.S. Industries Leadership teams. He currently serves as an independent director of American International Group, Inc. (AIG), a position he has held since 2009. From 2008 to 2019, he also served as an independent director of Federal Home Loan Mortgage Corporation (Freddie Mac) and was the Non-Executive Chairman of the Board from 2011 to 2018. Mr. Lynch has chaired audit committees of both AIG and Freddie Mac and has relevant committee experience on Risk, Compensation, Nomination and Corporate Governance and Technology. Mr. Lynch is a former member of the Advisory Board of the Stanford Institute for Economic Policy Research and a member of the Audit Committee Chair Advisory Council of the National Association of Corporate Directors. He received a Bachelor of Science in Accounting from the University of Kansas.

 

Skills and Qualifications:

The Board values Mr. Lynch’s deep accounting, financial and corporate governance experience, including serving in leadership positions at KPMG and chairing audit committees at two highly regulated public companies.

 

 
 

 

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Director Nominees

 

    

 

    

 

 

      

 

RICHARD J. MARK

 

      
  LOGO   

Age: 65

 

Director Since: 2017

 

Other Public
Company Directorships:

Current: None

 

Others in Past Five Years:

None

 

Committee Membership:

Audit

ESG

Governance

 
 

Career Highlights:

Mr. Mark serves as Chairman and President of Ameren Illinois Company, a multi-billion dollar energy and utility company responsible for electric and natural gas distribution to more than 1.2 million electric and 806,000 natural gas customers in Illinois. Mr. Mark joined Ameren in 2002 as Vice President of Customer Service before moving up to various senior management roles. Before joining Ameren, he served for 11 years at Ancilla Systems Inc. While at Ancilla, the parent company to St. Mary’s Hospital in East St. Louis, Illinois, he served as Vice President for Governmental Affairs and Chief Operating Officer before becoming Chief Executive Officer of St. Mary’s Hospital in East St. Louis, Illinois from 1994 to 2002. Mr. Mark served as Director of Union Electric Company from 2005 until 2012 and has been Chairman of Ameren Illinois (subsidiaries of Ameren Corporation) since 2012. Mr. Mark earned his B.S. from Iowa State University and his M.S. at National Louis University.

 

Skills and Qualifications:

Mr. Mark offers the Board extensive experience as Chairman and President of Ameren Illinois Company in a highly regulated industry in addition to multiple leadership positions at an acute care hospital, including service as Chief Executive Officer.

 

 
      

 

TAMMY ROMO

 

      
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Age: 58

 

Director Since: 2015

 

Other Public
Company Directorships:

Current: None

 

Others in Past Five Years:

None

 

Committee Membership:

Audit (Chair)

Human Resources

 
 

Career Highlights:

Ms. Romo is Executive Vice President and Chief Financial Officer of Southwest Airlines Co., a major passenger airline, where she is responsible for strategic planning and overall finance activities, including reporting, accounting, investor relations, treasury, tax, corporate planning, and financial planning and analysis. Ms. Romo also oversees supply chain management. Ms. Romo previously served in a number of financial management and leadership positions at Southwest Airlines, including Senior Vice President of Planning, Vice President and Controller, Vice President and Treasurer, and Senior Director of Investor Relations. Before joining Southwest Airlines in 1991, Ms. Romo was an audit manager at Coopers & Lybrand, LLP. Ms. Romo is currently a member of the McCombs School of Business Advisory Council at the University of Texas at Austin. She received a B.B.A. in accounting from the University of Texas at Austin, and she is a Certified Public Accountant in the State of Texas.

 

Skills and Qualifications:

Ms. Romo brings to the Board her experience as Executive Vice President and Chief Financial Officer of Southwest Airlines, where she oversees a broad range of financial activities. The Board values her deep knowledge of accounting and financial matters in addition to her understanding of risk management.

 

 
 

 

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Director Nominees

 

 

      

 

SAUMYA SUTARIA M.D

 

      
  LOGO   

Age: 48

 

Director Since: 2020

 

Other Public
Company Directorships:

Current: None

 

Others in Past Five Years:

None

 

Committee Membership:

None

 
 

Career Highlights:

Dr. Sutaria was appointed as the Company’s Chief Operating Officer in January 2019, President in November 2019, and as a member of the Board in November 2020. Prior to joining the Company, Dr. Sutaria worked for McKinsey & Company for 18 years, most recently as a Senior Partner providing advisory support for hospitals, healthcare systems, physicians groups, ambulatory care models, integrated delivery, and government-led delivery, while also working with institutional investors in healthcare. He previously held an associate clinical faculty appointment at the University of California at San Francisco, where he also engaged in postgraduate training with a focus in internal medicine and cardiology. Dr. Sutaria received his Bachelor’s Degree in molecular and cellular biology and his Bachelor’s Degree in economics, both from the University of California, Berkeley, as well as his Medical Degree from the University of California, San Diego.

 

Skills and Qualifications:

Dr. Sutaria brings tremendous experience in healthcare leadership both within Tenet and prior to joining the company in 2019. The Board values his strategic prowess in navigating complex matters, his ability to thoughtfully consider the impact on different stakeholders and his innate capacity for effective change management.

 

 
      

 

NADJA Y. WEST, M.D.

 

      
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Age: 60

 

Director Since: 2019

 

Other Public
Company Directorships:

Current: Johnson & Johnson and Nucor Corporation

 

Others in Past Five Years:

None

 

Committee Membership:

ESG

Governance

QCE

 
 

Career Highlights:

Dr. West is a retired Lieutenant General in the U.S. Army, the 44th Surgeon General of the U.S. Army and the former Commanding General of the U.S. Army Medical Command. Previously, she served as Joint Staff Surgeon at the Pentagon, where she acted as chief medical advisor to the Chairman of the Joint Chiefs of Staff and coordinated all related health services issues, including operational medicine, force health protection, and readiness within the military. Dr. West has served in combat deployment as well as in leadership positions in multiple hospitals both in the United States and abroad. She is the recipient of numerous U.S. military awards, including the Distinguished Service Medal, the Defense Superior Service Medal, and the Legion of Merit with three Oak Leaf Clusters. She has served as an independent director on the board of Nucor Corporation since 2019. Dr. West has served as a trustee on the board of the National Recreation Foundation, a non-profit organization dedicated to enhancing the role of recreation as a positive force in improving the quality of life of youth, since 2019. Dr. West is a graduate of the U.S. Military Academy and earned her medical degree from The George Washington University School of Medicine in Washington, D.C. She has completed residencies in both family medicine and dermatology.

 

Skills and Qualifications:

The Board values Dr. West’s comprehensive experience in healthcare, including her service as the 44th Surgeon General of the U.S. Army. Her experience in a variety of healthcare leadership positions and clinical background offer the Board valuable perspectives on healthcare delivery, policy, and crisis and risk management.

 

 
 

 

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Proposal 1: Election of Directors

 

    

 

    

 

 

Director Nomination and Qualifications

Our Board regularly reviews its composition and is committed to recommending a group of directors who represent a diverse mix of viewpoints, skills, experience and backgrounds that align with the Company’s business and strategic goals. The Nominating and Corporate Governance Committee (Governance Committee) is responsible for nominating individuals, and the entire Board is responsible for selecting those who hold these characteristics to stand for shareholder election at each annual meeting as well as to fill any vacancies on the Board as they arise.

Since late 2017, the Governance Committee has focused its refreshment efforts on identifying candidates to further strengthen the Board’s effectiveness. To date, this process has resulted in the identification and appointment of nine new independent directors (eight of whom are up for election this year) who collectively bring deep healthcare, financial, public sector, operational expertise, cybersecurity, systems planning and crisis management skills that complements the current skillsets and enhances the effectiveness of the overall Board. In addition, each of our directors has the dedication and leadership qualities that enable them to exercise robust oversight of the Company, especially as the Company navigates a transformation amidst the challenges and opportunities in the healthcare industry.

Nomination Process

The Governance Committee considers candidates based on the recommendation of, among others, our Board members and our shareholders. Board members recommended Dr. Sutaria in 2020 and Admiral Haney in 2021 to the Governance Committee. The Governance Committee may also engage professional search firms and other consultants to assist in identifying, evaluating and conducting due diligence on potential candidates. We intend to continue to actively engage with our shareholders regarding Board composition and director qualifications, including considering their input on potential director candidates. Once potential candidates have been identified, they typically meet with each member of the Board and pass a thorough screening process before the Governance Committee makes a final recommendation to the Board. This process involves a rigorous evaluation that assesses attributes beyond specific business skills, including character, diversity and personal and professional integrity.

Shareholders may propose nominees for election in accordance with the terms of our bylaws or recommend candidates for consideration by the Board by writing to the Governance Committee in care of the Corporate Secretary at Tenet Healthcare Corporation, 14201 Dallas Parkway, Dallas, Texas 75254, or by email to boardofdirectors@tenethealth.com. For more detailed information regarding the process by which shareholders may nominate directors, including under our proxy access provisions, please refer to “Other Information—Shareholder Proposals” below and our bylaws. Our bylaws may be found under the “Governance” heading in the “For Investors” section on our website at www.tenethealth.com.

Assessment of Board Composition and Criteria for Board Membership

The Governance Committee evaluates the composition of the Board on an ongoing basis and considers potential nominees to the Board as appropriate. As part of this process, the Governance Committee reviews the composition of the Board as a whole, including the balance of business backgrounds, diversity, qualifications, skillsets and other qualities represented on the Board to ensure the right balance to effectively oversee management. The Governance Committee also reviews updated biographical information for each incumbent director on an annual basis, including information relating to changes in professional status, independence, other professional commitments and public company directorships. In light of our current structure and operations, and in consideration of the evaluation of the Board’s composition, the Governance Committee believes the following criteria best represent the qualities required for service on the Company’s Board:

 

Professionalism, dedication, business judgment, integrity and commitment to the Company’s mission

   

Diversity of personal and occupational backgrounds, including ethnicity, gender, background, experience and viewpoints

   

Service as the chief executive officer or in other senior leadership positions in a company or major governmental, professional or non-profit organization

    

       

Experience in the healthcare industry or other relevant industry experience

   

Expertise in financial and accounting matters and familiarity with the regulatory and corporate governance requirements applicable to public companies

   

Government, regulatory and public sector experience

    

       

Ability and willingness to commit adequate time to Board and committee matters

   

Degree to which the individual’s skills complement those of other directors and potential nominees

   

Familiarity with the communities in which we do business

 

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Proposal 1: Election of Directors

 

 

Board Evaluations

The Governance Committee oversees the Board’s annual performance evaluation to determine whether the Board, its committees and individual directors are functioning well in view of their responsibilities and the Company’s business. To ensure that the self-evaluation process is conducted with transparency and rigor, the Board has for many years retained a third party advisor to interview each director, review their feedback, and facilitate a discussion based on the results at a special executive session of the Board. This comprehensive and disciplined approach to evaluation has proven to be an important element to maintain a high-performing and collaborative Board that can properly address risk management and execution of Company strategy.

On an annual basis, the Board and each committee conduct self-evaluations. The evaluations focus discussions on, among other things, the composition and effectiveness of the Board in light of changes in membership, the effectiveness of Mr. Rittenmeyer and Senator Kerrey in their respective leadership roles, and the performance of each committee and committee chair. The Lead Director, in conjunction with the Governance Committee, also takes an oversight role in the Board performance evaluation process. Directors also provide input on key focus areas for the Board in the upcoming year. The results of the evaluation are reviewed by the Lead Director who reports the results to the Board. As part of the annual performance evaluation process, each committee also compares its performance with the requirements of its charter. As part of the Board’s last annual evaluation, the Board noted, among other things, that its processes and committees were functioning properly, noting healthy levels of debate, collaboration and respect among directors.

Director Nominees’ Qualifications and Experience

Based on the review process described above, the Governance Committee concluded that our eleven director nominees possess the diversity of experience, skills and other characteristics best suited to meet the needs of the Board and the Company in light of our current business and operating environment. The following table highlights several core skills and experiences of our current nominees, in addition to those described in the director biographies outlined beginning on page 5.

 

 

LOGO

Personal Qualities and Diversity. The Governance Committee determined that each nominee has demonstrated a commitment to professionalism and high integrity. In particular, the Governance Committee noted that each nominee has the ability to provide candid and direct feedback as well as effective oversight of the Company’s operations and management on behalf of all shareholders. Additionally, our Board includes a diverse group of individuals of differing ages, genders, ethnicities and backgrounds. Three of our eleven director nominees are women, and in 2019 the Board appointed Tammy Romo and Meg FitzGerald to chair our Audit and Governance committees, respectively.

Special Considerations Regarding Service on Other Boards. Our directors must seek the approval of the Governance Committee prior to serving on another public company’s board. In addition, the Governance Committee limits the number of public boards on which a director may serve in addition to our Board to three, or two in the case of directors currently serving as chief executive officers or in equivalent positions of public companies. All of the Company’s directors are in compliance with these requirements, and Mr. Rittenmeyer serves on only one other public company board of directors.

 

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Proposal 1: Election of Directors

 

    

 

    

 

 

Director Independence

Our independence requirements for our Board are set forth in our Corporate Governance Principles, available under the “Governance” heading in the “For Investors” section on our website at www.tenethealth.com. Under our Corporate Governance Principles, at least two thirds of the Board must consist of “independent” directors. The Board will not consider a director to be independent unless the Board affirmatively determines that the director has no material relationship with Tenet and the director otherwise qualifies as independent under the corporate governance standards of the New York Stock Exchange (NYSE). The Board reviews each director’s independence at least annually and has made the affirmative determination that each of our current non-employee directors (Messrs. Kerrey, Bierman, Fisher, Haney, Lynch and Mark and Mses. FitzGerald, Romo and West) has no material relationship with the Company and is independent. In addition, the Board determined that General Austin was independent during the time he served on our Board during 2020 when the Board last assessed his independence. The only two non-independent directors who serve on our Board are our Chief Executive Officer, Mr. Rittenmeyer, and our President and Chief Operating Officer, Dr. Sutaria.

In making its independence determinations, the Board broadly considers all relevant facts and circumstances and focuses on the organizations with which each director has an affiliation. If a director or member of the director’s immediate family has a material relationship with the Company, the Board reviews the interest to determine if it would preclude an independence determination.

The Audit Committee, the Human Resources Committee (HR Committee) and the Governance Committee are comprised exclusively of independent directors as required by the NYSE. In addition, all directors serving on the Audit Committee meet the more stringent independence standards for audit committee members required by the Securities and Exchange Commission (SEC), and all directors serving on the HR Committee meet the more stringent independence standards for compensation committee members required by the NYSE.

 

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Corporate Governance and Board Practices

Commitment to Sound Corporate Governance Policies and Practices

Tenet is committed to maintaining corporate governance policies and practices that protect the long-term interests of our shareholders and promote Board and management accountability. Our Board recognizes that this requires us to continually review and refine our corporate governance practices to ensure their continued alignment with evolving market practices and the best interests of our Company and shareholders. Some of our key corporate governance policies and practices include:

 

 

Shareholder Rights

  Annual election of directors

  Majority vote standard and director resignation policy in uncontested elections

  Shareholder right to call special meetings at 25% threshold

  Proxy access

  One-year limit on “poison pills” unless approved by shareholders

    

Board Practices

  All directors are independent other than our Chief Executive Officer and President and Chief Operating Officer

  Highly diverse and experienced Board

  Independent Lead Director with clearly defined and robust responsibilities

  Commitment to Board refreshment practices, including committee chair rotation

 

 

  

  Self-evaluation of all directors

  Board oversight of political contributions

  Regular executive sessions of independent directors

  Ongoing engagement with shareholders

  Increased focus on ESG matters with recently formed ESG Committee

  

Our Board has also adopted Corporate Governance Principles that provide the framework for our existing corporate governance policies and practices, which the Board reviews annually. These Corporate Governance Principles address in detail matters such as director independence, director qualifications and responsibilities, director compensation, and director and officer stock ownership and retention guidelines. For more information, please see our Corporate Governance Principles under the “Governance” heading in the “For Investors” section on our website at www.tenethealth.com.

Board Leadership Structure

Senator Kerrey has served as our independent Lead Director since October 2017, shortly after Mr. Rittenmeyer became Executive Chairman on August 31, 2017. The Company’s governing documents give the Board the flexibility to determine the appropriate leadership structure for the Company based on our particular circumstances at the time. The Governance Committee regularly reviews the Board’s leadership structure to assess whether to separate or combine the roles of Chairman and Chief Executive Officer based on applicable facts and circumstances at the time. By retaining the flexibility to adjust the Company’s leadership structure, the Board is best able to provide appropriate management and oversight of the Company as well as address any circumstances the Company may face, as no single leadership model is universally or permanently appropriate in all circumstances. The Board believes that this flexibility has served the Company and its shareholders well during recent turnaround efforts and that Mr. Rittenmeyer’s current leadership of both the Board and the management team is effective.

 

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Corporate Governance and Board Practices

 

    

 

    

 

 

Role of Independent Lead Director of the Board

The role of our Lead Director is set forth in our Corporate Governance Principles. Senator Kerrey, as independent Lead Director of the Board, coordinates the activities of the Board and exercises a robust set of duties described below. Specifically, in his role as independent Lead Director, Senator Kerrey:

 

Presides at all meetings at which the Chairman is not present

 

Chairs executive sessions of independent directors of the Board

 

Serves as the liaison between the Chairman and independent directors

 

Reviews and approves information sent to the Board

 

Reviews and approves Board meeting agendas and schedules

 

Calls meetings of independent directors if necessary

 

Participates in consultation and direct communication with shareholders

 

Advocates on behalf of the Board in meetings with investors, legislators, regulators and other government officials

 

Serves an oversight role, in conjunction with the Governance Committee, in the Board performance evaluation process

In addition to his formal duties, Senator Kerrey has participated in in-person engagement meetings with a number of our significant shareholders to discuss and seek feedback on various matters regarding the Company’s strategy and governance practices, establishing a direct line of communication between shareholders and independent members of our Board. Senator Kerrey shares the feedback with the full Board so that it may be incorporated into the Board’s decision-making processes.

Board and Committee Organization and Responsibilities

Board Meetings and Attendance

We are governed by our Board. Members of our Board are kept informed of our business through discussions with our Chief Executive Officer and other senior officers, by reviewing materials provided to them and by participating in meetings of the Board and its committees. Directors are also encouraged to attend continuing education courses relevant to their service on the Company’s Board. Significant business decisions are generally considered by the Board as a whole. The Board met 11 times during 2020. The independent directors of the Board, the Board and each committee of the Board frequently meet in executive sessions, including at least once during each regularly scheduled Board meeting.

Each incumbent director who served during 2020 participated in at least 75% of the aggregate meetings of the Board and the committees on which he or she served during the period he or she served as a director and committee member. Board members are encouraged to attend our annual meeting of shareholders. All 10 directors elected at last year’s annual meeting were in attendance at the 2020 Annual Meeting.

 

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Corporate Governance and Board Practices

 

 

Committees

Tenet has four standing committees: Audit Committee, HR Committee, Governance Committee, and Quality, Compliance & Ethics Committee (QCE Committee). Tenet also has one special committee: ESG Committee. The following table identifies the current members of each of our committees.

 

Director

     Audit*     

Human

Resources

     Governance      QCE      ESG

James L. Bierman

                  

LOGO

    

Chair

      

Richard W. Fisher

    

LOGO

    

LOGO

      

 

           

Chair

Meghan M. FitzGerald

                  

Chair

    

LOGO

    

LOGO

Cecil D. Haney

    

LOGO

      

 

    

LOGO

             

J. Robert Kerrey

           

Chair

           

LOGO

      

 

Christopher S. Lynch

    

LOGO

    

LOGO

             

 

      

 

Richard J. Mark

    

LOGO

    

LOGO

             

 

    

LOGO

Ronald A. Rittenmeyer

                           

 

      

 

Tammy Romo

    

Chair

    

LOGO

      

 

      

 

      

 

Saum Sutaria

             

 

      

 

      

 

      

 

Nadja Y. West

             

 

    

LOGO

    

LOGO

    

LOGO

 

*

All members of the Audit Committee have been designated as financially literate within the meaning of the NYSE listing standards. Mr. Fisher, Mr. Lynch and Ms. Romo have been designated as audit committee financial experts, as defined by SEC rules.

Each of the Board’s standing committees operates under a written charter that is reviewed and approved annually by the respective committee. The charters are available for viewing under the “Governance” heading in the “For Investors” section on our website at www.tenethealth.com. The Board and each committee may retain independent advisors and consultants, at the Company’s cost, to assist the directors in carrying out their responsibilities.

 

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Corporate Governance and Board Practices

 

    

 

    

 

 

 

The Audit Committee

 

Membership: Romo (Chair), Austin, Fisher, Lynch, Mark (All Independent)

 

     

 

Meetings held in 2020:

  8  

Primary Responsibilities:

  Assist the Board in oversight of:

  Accounting, reporting and financial practices

  The integrity of financial statements

  Compliance with legal and regulatory requirements with respect to applicable accounting and auditing matters

  Independent registered public accountants’ qualifications, independence and performance

  Internal audit function

  Cybersecurity

  Establish and maintain policies and procedures for the receipt, retention and treatment of complaints and concerns regarding accounting, internal accounting controls and auditing matters

  Authority to select, retain and review the independent registered public accountants qualifications, independence and performance

  Oversee the performance of the Company’s chief internal auditor, who reports directly to the Audit Committee

     

Key Skills and Experience:

  Expertise in auditing, accounting and tax-related matters

  Preparation or oversight of financial statements

  Extensive knowledge of compliance and relevant regulatory issues

 
     

 

   

 

 

The ESG Committee

 

Membership: Fisher (Chair), FitzGerald, Mark, West (All independent)

 

     

 

Committee formed in 2021

      

Primary Responsibilities:

  Review and discuss with management the Company’s ESG strategy, initiatives, and policies

  Review and monitor the operational, regulatory, and reputational risks and impacts of ESG on the Company and provide insight and guidance with respect to the Company’s management of such risks and impacts

  Review and discuss reports from management regarding the Company’s progress toward its key ESG objectives

  Provide input and guidance with respect to communications with employees, investors, and other stakeholders, as appropriate, regarding the Company’s position on or approach to ESG matters

     

Key Skills and Experience:

  Experience with governance, social and sustainability matters

  Knowledge of the Company’s ESG strategy, initiatives, and policies, including those related to sustainability, diversity and inclusion

 
     

 

 

 

   

 

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Corporate Governance and Board Practices

 

 

 

The Human Resources Committee

 

Membership: Kerrey (Chair), Austin, Fisher, Lynch, Romo (All Independent)

 

     

 

Meetings held in 2020:

  7  

Primary Responsibilities:

  Establish general compensation policies for the Company that:

  Support overall business strategies and objectives

  Enhance efforts to attract and retain skilled employees

  Link compensation with business objectives and organizational performance

  Provide competitive compensation opportunities for key executives

  Oversee the administration of executive compensation programs with responsibility for establishing and interpreting the Company’s compensation policies and approving compensation paid to executive officers

  Review, approve and make recommendations regarding compensation of non-employee directors, the Company’s executive officers and other members of the senior management team

  Review the performance of the Chief Executive Officer and, either as a committee or together with other independent directors, determine and approve the CEO’s compensation level based on this evaluation

  Discuss and evaluate, in consultation with the Chief Executive Officer, the performance of other executives

  Oversee the Company’s policies and procedures regarding harassment in the workplace and sexual misconduct matters, including reporting systems and treatment of received complaints, and monitor compliance with such policies and applicable law

  Provide perspectives to management regarding the Company’s talent management, which may include performance management, succession planning, leadership development, diversity, recruiting, retention and employee training

     

Key Skills and Experience:

  Extensive knowledge of executive compensation best practices

  Human capital management

  Expertise in evaluating executive performance and determining appropriate compensation programs

  Leading cultural change

 
     

 

   

 

 

The Nominating and Corporate Governance Committee

 

Membership: FitzGerald (Chair), Bierman, Mark, West (All Independent)

 

     

 

Meetings held in 2020:

  4  

Primary Responsibilities:

  Identify and evaluate existing and potential corporate governance issues, and make recommendations to the Board concerning our Corporate Governance Principles and other corporate governance matters

  Review and recommend individuals qualified to become Board members and recommend to the Board candidates to stand for election or re-election to the Board

  Consider amendments to the Company’s articles of incorporation and bylaws with respect to corporate governance and make recommendations to the Board concerning such proposed amendments

  Review and make recommendations to the Board regarding Board size, composition and structure

  Review and approve proposed related-person transactions

 

     

Key Skills and Experience:

  Corporate governance expertise

  Board succession planning

  Public company board service and experience overseeing large organizations

 
     

 

 

   

 

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Corporate Governance and Board Practices

 

    

 

    

 

 

 

The Quality, Compliance & Ethics Committee

 

Membership: Bierman (Chair), FitzGerald, Kerrey, West (All Independent)

 

     

 

Meetings held in 2020:

  4  

Primary Responsibilities:

  Assist the Board with overseeing and reviewing Tenet’s significant healthcare-related regulatory and compliance issues, including its compliance programs and the status of compliance with applicable laws, regulations and internal procedures

  Oversee performance under the Company’s Quality, Compliance & Ethics Program Charter

  Receive, and review and consult with management on, periodic reports from the Ethics and Compliance department on all aspects of the compliance program, including efforts in risk assessment, development of policies and procedures, training, auditing and monitoring, and investigations and remediation of compliance matters

  Receive and review periodic reports from the Clinical Quality department regarding efforts to advance quality healthcare

  Oversee performance under the Company’s non-prosecution agreement, including interacting with the independent co-monitors appointed thereunder

  Oversee the performance of the Company’s Chief Compliance Officer, who reports directly to the QCE Committee

 

     

Key Skills and Experience:

  Experience in establishing and ensuring adherence to quality and compliance controls

  Expertise in compliance-related policies and procedures

  Knowledge of and commitment to ethical business practices

 
     

 

   

HR Committee Interlocks and Insider Participation

No member of the HR Committee was at any time during 2020 or at any other time an officer or employee of the Company, and no member had any relationship with the Company requiring disclosure as a related person transaction under “Certain Relationships and Related Person Transactions” on page 21 of this Proxy Statement. None of our executive officers has served on a board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of our Board or HR Committee during 2020.

Role of Board and its Committees in Risk Oversight

Management is primarily responsible for the identification, assessment and management of the various risks that we face. The Board oversees this process as an integral and continuous part of the Board’s oversight of our business. The Board receives regular reports from the heads of our principal businesses and corporate functions that include discussions of the risks involved in their respective areas of responsibility. The Board is routinely informed of developments that could affect our risk profile or other aspects of our business. Among other things, the Board has requested that the Company’s management and its internal and external legal counsel advise it promptly of any material developments relating to litigation, regulatory proceedings, and investigations and compliance issues. The Board considers the oversight of regulatory and litigation risk to be one of its highest priorities. In addition, the Board has identified the oversight of cybersecurity risks to be one of its priorities and receives regular reports from the Company’s management on the security of the Company’s information technology systems.

The Board’s committees oversee risks related to their respective areas, as further described below. The Board is kept informed of its committees’ risk oversight and other activities primarily through reports of the committee chairs to the full Board. These reports are presented at every regular Board meeting in executive session, as well as at other times when appropriate. As risk-related issues sometimes overlap, certain issues are addressed at the full Board level. In addition, as part of its annual self-evaluation process, the Board discusses and evaluates its ongoing role in enterprise risk oversight.

 

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Role of Audit Committee in Risk Oversight

Our Audit Committee is primarily responsible for overseeing risk management processes relating to our accounting practices, financial reporting, corporate finance and general business operations. Among other responsibilities, the Audit Committee:

 

Receives quarterly reports from management on business and operational risks, internal audit reports relating to the integrity of our internal financial reporting controls and procedures, potential loss contingencies resulting from pending or threatened litigation or regulatory proceedings, and investigations and reports made to the Company from our Ethics Action Line or any other sources relating to allegations of financial fraud or other infractions.

 

Meets regularly with our Chief Executive Officer, Chief Financial Officer, Controller, General Counsel and Chief Compliance Officer, as well as our external and internal auditors, to discuss potential risks and other contingencies relating to our business.

 

Meets on a quarterly basis to review these topics with selected chief executive officers and/or other senior officers of our major operating units.

 

Reviews material risk issues in connection with its review of our quarterly and annual filings with the SEC.

 

Reviews the Company’s cybersecurity program at least annually and receives frequent updates on cybersecurity matters.

 

Reports and discusses the outcome of its meetings to the full Board, including any other material risks identified by the Audit Committee in the course of its deliberations that require discussion or action by the full Board.

Role of Quality, Compliance & Ethics Committee in Risk Oversight

Our QCE Committee is primarily responsible for overseeing our assessment and management of regulatory and compliance risk. In particular, the QCE Committee:

 

Oversees our information, procedures and reporting systems to provide reasonable assurance that: (1) our operations comply with applicable laws and regulations, particularly those related to healthcare providers; (2) we, including our directors and employees, act in accordance with appropriate ethical standards; and (3) our subsidiaries’ hospitals and other facilities deliver quality medical care to their patients.

 

Oversees our Compliance Program, which is governed by our Quality, Compliance & Ethics Program Charter. Our Compliance Program is intended to foster compliance with federal and state laws and regulations applicable to healthcare providers, and receives quarterly reports from our Chief Compliance Officer (who reports directly to the QCE Committee), our Ethics and Compliance Department, and our internal and external legal, regulatory and other officers and advisors.

 

Oversees the Company’s compliance with its non-prosecution agreement, including the Company’s ongoing work with the independent co-monitors appointed pursuant to the terms of the agreement.

Role of Human Resources Committee in Risk Oversight

Our HR Committee is responsible for assessing our compensation policies and practices relative to all our employees, including non-executive officers, to determine if the risks arising from these policies and practices are reasonably likely to have a material adverse effect on the Company. In performing its duties, the HR Committee meets at least annually with our management and the HR Committee’s independent compensation consultant to review and discuss potential risks relating to our employee compensation plans and programs. The HR Committee reports to the Board any risks associated with our compensation plans and programs, including recommended actions to mitigate such risks.

The HR Committee has determined that there are no risks arising from our compensation policies and practices that are reasonably likely to have a material adverse effect on the Company. This finding is based upon the HR Committee’s ongoing review of our compensation programs and practices, the mechanisms in our compensation plans and programs intended to reduce the risk of conduct reasonably likely to have a material adverse effect on our company, and an overall risk assessment of such programs. Among other things, the HR Committee has reviewed our pay philosophy, balance of cash and equity compensation, balance of long-term and short-term performance periods in our plans and programs, and our use of performance metrics that encourage management to act in the long-term interest of our shareholders. The HR Committee has also considered our equity grant administration policy, stock ownership guidelines, incentive pay policies on clawbacks and bonus modifiers, as well as our internal financial reporting and regulatory compliance procedures.

Role of ESG Committee in Risk Oversight

Recognizing the importance of ESG matters to the Company and its stakeholders, our Board formed an ESG Committee in February 2021 in order to provide support for the Company’s ongoing efforts in this area. Our ESG Committee, which consists entirely of independent directors, is responsible for overseeing and supporting the Company’s commitment to ESG matters, such as climate change impacts, energy and natural resources conservation, environmental and supply chain sustainability, human rights, diversity and inclusion and other ESG issues that are relevant and material to the Company. In addition to discussing with

 

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management the Company’s ESG strategy, initiatives, and policies, the Committee monitors the operational, regulatory and reputational risks and impacts of ESG on the Company, and provides input and guidance on communications with employees, investors and other stakeholders regarding ESG. This year we published a detailed ESG report titled “Commitment to our Communities,” which outlines our commitment to the communities we serve and our objectives and progress in the areas of environmental sustainability, social initiatives and governance performance and is available in the “For Investors” section on our website at www.tenethealth.com.*

Policies on Ethics and Conduct

Code of Conduct

All of our employees, including our Chief Executive Officer, Chief Financial Officer and Controller, are required to abide by Tenet’s policies on business conduct summarized in our Code of Conduct to ensure that our business is conducted in a legal and ethical manner. The members of our Board of Directors and all of our contractors having functional roles similar to our employees are also required to abide by our Code of Conduct. Tenet’s policies form the foundation of a comprehensive compliance program that includes compliance with corporate policies and procedures, extensive training, robust auditing and monitoring, an open relationship among colleagues to foster good business conduct, and a high level of integrity. Our policies and procedures cover all major areas of professional conduct, including quality patient care, compliance with all applicable laws and regulations, appropriate use of our assets, protection of patient information, avoidance of conflicts of interest and employment practices.

Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of Tenet’s policies on business conduct. Retaliation against any employee who in good faith seeks advice, raises a concern, reports misconduct, or provides information in an investigation is strictly prohibited. The Code of Conduct is published in the “Our Commitment To Compliance” section under the “About Us” heading on our website at www.tenethealth.com. In addition, amendments to the Code of Conduct and any grant of a waiver from a provision of the Code of Conduct requiring disclosure under applicable SEC and NYSE rules will be disclosed at the same location as the Code of Conduct on our website at www.tenethealth.com.

As part of the program, we provide annual ethics and compliance training sessions to every employee as well as to our Board and certain physicians and contractors.

Quality, Compliance & Ethics Program Charter

We operate our ethics and compliance program pursuant to a Quality, Compliance & Ethics Program Charter, which has been approved by our QCE Committee. The Charter requires all Company employees and many of our contractors to:

 

Follow our Code of Conduct.

 

Participate in annual ethics training and specialized compliance training tailored to the individual’s job duties.

 

Work with our hospital, corporate and business unit compliance teams to resolve issues of concern.

 

Contact the Tenet Ethics Action Line at 1-800-8ETHICS, via email or through our intranet website, to report any conduct that they believe in good faith to be an actual or apparent violation of Tenet’s policies.

Our Quality, Compliance & Ethics Program Charter may be found in the “Our Commitment To Compliance” section under the “About Us” heading on our website at www.tenethealth.com.

Certain Relationships and Related Person Transactions

Our written Code of Conduct requires all employees, including our executive officers and members of our Board, to report conflicts of interest and those situations in which there may be the appearance of a conflict of interest. The full text of our Code of Conduct is published on our website at www.tenethealth.com, and a description of our policies on ethics and conduct can be found above. In the event that a related person transaction (as defined under the SEC rules) involving Tenet or its subsidiaries is identified, our policy is to require that any such transaction be reviewed and approved by the Governance Committee, which is comprised entirely of independent directors. Under SEC rules, a related person is a director, executive officer, nominee for director, or 5% shareholder of Tenet, and their immediate family members. There were no “related person” transactions that require disclosure under the SEC rules since the beginning of our last completed fiscal year.

 

*

Information included on our website and in any reports on our website shall not be deemed a part of, and is not incorporated by reference into, this proxy statement.

 

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Communications with the Board of Directors by Shareholders and Other Interested Parties

Shareholders may communicate with the Board of Directors by email to boardofdirectors@tenethealth.com or by writing to the Board in care of the Corporate Secretary, Tenet Healthcare Corporation, 14201 Dallas Parkway, Dallas, Texas 75254. Shareholder communications will be reviewed internally to determine if the shareholder’s concern can best be addressed by referral to a Tenet department, such as Investor Relations. All other communications will be referred to the Corporate Secretary, who will determine if the communication should be brought to the attention of the full Board, the Chairman of the Board or a particular Board committee or Board member.

Other interested parties may make their concerns known to our non-employee directors by following the procedures for reporting concerns to the Audit Committee set forth in our Corporate Governance Principles, which are available under the “Governance” heading in the “For Investors” section on our website at www.tenethealth.com.

 

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Director Compensation

The HR Committee reviews our non-employee director compensation programs each year with the assistance of the HR Committee’s independent compensation consultant. The Board considers any changes recommended by the HR Committee following its review. In May 2020, the committee chair cash retainers were increased for the Nominating and Corporate Governance Committee and the Quality, Compliance & Ethics Committee, from $15,000 to $17,500, in order to align with market practices.

Employee directors do not receive any compensation for their service as a director. All 2020 compensation for our Executive Chairman and Chief Executive Officer, Mr. Rittenmeyer, and our President and Chief Operating Officer, Dr. Sutaria, is shown in the 2020 Summary Compensation Table on page 48.

Each of our non-employee directors donated at least half of their cash fees for the second quarter of 2020 to the Tenet Care Fund, a 501(c)(3) established to assist Company employees who have experienced hardships from the COVID-19 pandemic and other challenges.

Our 2020 annual compensation program for non-employee directors was structured as follows:

 

Annual Compensation Element

  Amount  

 

Annual Cash Retainer

 

  $

 

95,000

 

 

 

 

Annual Grant of Restricted Stock Units (RSUs)

 

  $

 

175,000

 

 

 

 

Annual Committee Chair Cash Retainers:

 

       

 

  Audit Committee

 

  $

 

25,000

 

 

 

 

  Human Resources Committee

 

  $

 

20,000

 

 

 

 

  Nominating and Corporate Governance Committee

 

  $

 

17,500

 

 

 

 

  Quality, Compliance & Ethics Committee

 

  $

 

17,500

 

 

 

 

Annual Retainer for Lead Director or Non-Executive Chair:

 

       

 

  Cash Fee

 

  $

 

150,000

 

 

 

 

  Additional Grant of RSUs

 

  $

 

50,000

 

 

 

Non-employee directors also receive $2,000 per committee meeting attended and for Board meetings receive:

 

no fee for the first seven Board meetings each year; and

 

for additional meetings, $3,000 per in-person meeting and $1,500 per telephonic meeting attended.

A newly appointed director receives an initial grant of RSUs valued at $65,000 and a prorated annual RSU grant. All annual cash fees are prorated for partial year service. Directors are reimbursed for any travel expenses and other out-of-pocket costs incurred while attending meetings.

 

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2020 Director Compensation Table

 

Name

 

Fees Earned or
Paid in Cash

($)

 

Stock Awards

($)(1)(2)

 

Total

($)

 

Lloyd J. Austin, III

   

 

 

 

129,000

 

   

 

 

 

175,002

 

   

 

 

 

288,627

 

 

James L. Bierman

   

 

 

 

133,490

 

   

 

 

 

175,002

 

   

 

 

 

294,492

 

 

Richard W. Fisher

   

 

 

 

127,500

 

   

 

 

 

175,002

 

   

 

 

 

286,627

 

 

Meghan M. FitzGerald

   

 

 

 

129,740

 

   

 

 

 

175,002

 

   

 

 

 

291,992

 

 

J. Robert Kerrey

   

 

 

 

292,500

 

   

 

 

 

225,009

 

   

 

 

 

493,298

 

 

Christopher S. Lynch

   

 

 

 

130,500

 

   

 

 

 

175,002

 

   

 

 

 

284,127

 

 

Richard J. Mark

   

 

 

 

125,000

 

   

 

 

 

175,002

 

   

 

 

 

297,002

 

 

Tammy Romo

   

 

 

 

155,500

 

   

 

 

 

175,002

 

   

 

 

 

311,114

 

 

Nadja Y. West

   

 

 

 

117,000

 

   

 

 

 

175,002

 

   

 

 

 

272,320

 

 

(1)

Amounts shown in this column reflect the grant date fair value, computed in accordance with FASB ASC Topic 718, of RSU awards granted under our stock incentive plan. Assumptions used in the calculation of these amounts are discussed in the footnotes below and/or in Note 10 to our consolidated financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K.

 

(2)

The amounts shown in this column reflect annual RSU grants applicable to the 2020-2021 board service year valued at approximately $175,000. We calculated the grant date fair value of these RSUs based on the NYSE closing price per share of our common stock on such date, adjusted for a discount for illiquidity of approximately 28% to reflect the mandatory post-vest holding period applicable to the 2020 annual awards. On May 29, 2020, based on the NYSE closing price of $21.76 per share of our common stock (adjusted as described in the preceding sentence), each non-employee director then serving was granted 11,139 RSUs under the program, and Senator Kerrey was granted an additional 3,183 RSUs in respect of his service as Lead Director. All equity awards then held by our non-employee directors were fully vested s of December 31, 2020. In connection with General Austin’s resignation from the Board on January 22, 2021 following his confirmation by the U.S. Senate as Secretary of Defense, the settlement of his outstanding RSUs, which were fully vested, was accelerated in order to comply with governmental ethics standards.

Compensation Plans Applicable to Directors

Stock Incentive Plans

Each non-employee director receives an annual award under our stock incentive plan of RSUs that is meant to compensate the director for service on the Board beginning on the date of that year’s annual shareholders meeting and ending on the date of the following year’s annual shareholders meeting. These grants are typically made on the first business day following the annual shareholders meeting and vest immediately on the grant date. A mandatory post-vest holding period of three years is applied to these annual RSU awards, which are settled in shares of our common stock on the third anniversary of the date of grant (unless deferred under the Special RSU Deferral Plan, discussed below).

On the first or 15th day of any month (or, if such date is not a trading day, the following date that is a trading day) following the date on which a new non-employee director is elected to the Board, the director receives a grant of that number of RSUs equal to $65,000 divided by the NYSE closing price per share of our common stock on the date of the grant. These one-time awards vest immediately on the grant date and are settled in shares of our common stock within 60 days of the termination of the director’s service on the Board.

Special RSU Deferral Plan

We adopted the Special RSU Deferral Plan to permit directors to defer the settlement of their annual RSU grants under our stock incentive plan for a period of five years as provided under the terms of the award agreement. In the event of a change of control of the Company, the RSUs will be settled on the subsequent deferral date irrespective of whether the underlying award agreement would provide for earlier settlement by reason of such change in control. As of the record date, none of our current directors have elected to defer settlement of RSU grants pursuant to the terms of the Special RSU Deferral Plan.

2006 Deferred Compensation Plan

Under our 2006 Deferred Compensation Plan (DCP), directors and eligible employees may defer all or a portion of their compensation paid during a given calendar year. For directors, compensation is defined as cash compensation from retainers,

 

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meeting fees and committee fees. Senator Kerrey was the only non-employee director who participated in the DCP in 2020. A more complete description of the DCP can be found under “Nonqualified Deferred Compensation—Deferred Compensation Plan” beginning on page  55.

Director Stock Ownership and Retention Requirements

The Board has adopted stock ownership and retention requirements that require each non-employee director with more than one year of service on the Board to own shares of our stock. In addition, each non-employee director is required to own shares of our stock with a value equal to five times the annual cash retainer within five years after the date on which the director joins the Board. Directors who have not satisfied their ownership requirements must retain 100% of any “net shares” received upon the exercise of stock options and the vesting of restricted stock or RSUs until such time as the requirements are met. For this purpose, “net shares” means the number of shares received upon exercise of stock options or upon vesting of restricted stock or RSUs less the number of shares sold or deducted to pay the exercise price (in the case of options), withholding taxes and any brokerage commissions. A detailed discussion of these requirements can be found under “Stock Ownership and Retention Requirements” beginning on page 45. As of the record date, all of our non-employee directors were in compliance with the requirements or within the applicable period to come into compliance.

 

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Executive Officers

Biographical information for the executive officers of the Company is set forth below. Biographical information for Mr. Rittenmeyer and Dr. Sutaria can be found under “Nominees for Election to the Board of Directors” on page 5.

Audrey T. Andrews, Executive Vice President, General Counsel and Corporate Secretary

Ms. Andrews, 54, was appointed Tenet’s General Counsel in January 2013 and Executive Vice President in March 2019. In this capacity, she oversees the legal and government relations functions for Tenet, USPI and Conifer. Ms. Andrews was also appointed Corporate Secretary in March 2020. Ms. Andrews previously held the title of Senior Vice President from January 2013 to February 2019. From July 2008 through December 2012, she served as Senior Vice President and Chief Compliance Officer and, prior to that, served as Vice President and Chief Compliance Officer from November 2006. She joined Tenet in 1998 as hospital operations counsel. Ms. Andrews earned her law degree and her bachelor’s degree in government, both from the University of Texas at Austin. She is a member of the American and Texas Bar Associations and the American Health Lawyers Association.

Paola M. Arbour, Executive Vice President and Chief Information Officer

Ms. Arbour, 57, was appointed Tenet’s Chief Information Officer in May 2018 and Executive Vice President in March 2019. In this capacity, Ms. Arbour oversees the leadership and strategic direction for Tenet’s information technology (IT) systems and identifies opportunities to support the company’s expansive care network through the application of digital technology, data and automation and customer experience. Ms. Arbour previously held the title of Senior Vice President from May 2018 to February 2019. Prior to Tenet, Ms. Arbour served as President at ProV International from November 2017 to April 2018, Vice President Services Global Delivery at ServiceNow from July 2016 to September 2017, and as Vice President of Service Delivery at Dell Services from December 2010 to April 2016. From 1985 to 2009, Ms. Arbour held several leadership roles within IT operations at Electronic Data Systems – both at the company’s headquarters and also in London and Frankfurt. Ms. Arbour earned her bachelor’s degree in telecommunications arts and sciences from Michigan State University.

Daniel J. Cancelmi, Executive Vice President and Chief Financial Officer

Mr. Cancelmi, 58, was appointed Tenet’s Chief Financial Officer in September 2012 and Executive Vice President in March 2019. He previously served as Senior Vice President from April 2009, Principal Accounting Officer from April 2007 and Controller from September 2004. Mr. Cancelmi was a Vice President and Assistant Controller at Tenet from September 1999 until his promotion to Controller. He joined the Company as Chief Financial Officer of Hahnemann University Hospital. Prior to that, he held various positions at PricewaterhouseCoopers, in the Pittsburgh office and in the firm’s National Accounting and SEC office in New York City. Mr. Cancelmi is a certified public accountant licensed in the states of Florida and Texas who received his bachelor’s degree in accounting from Duquesne University in Pittsburgh. He is also a member of the American and Florida Institutes of Certified Public Accountants and the Texas Society of Certified Public Accountants.

Howard B. Hacker, Executive Vice President and Chief Compliance Officer

Mr. Hacker, 49, was appointed Tenet’s Chief Compliance Officer in May 2016 and Executive Vice President in March 2019. In this capacity, he is responsible for overseeing the ethics and compliance programs for the Tenet enterprise, reporting directly to the Quality, Compliance and Ethics Committee of Tenet’s board of directors. Mr. Hacker previously held the title of Senior Vice President from May 2016 to February 2019. Mr. Hacker joined Tenet after more than a decade at Pfizer Inc., where he had served in various legal and compliance leadership positions since May 2004. Prior to Pfizer, Mr. Hacker worked for the law firms of Jones Day and Akin Gump Strauss Hauer & Feld, where he specialized in securities law and mergers and acquisitions. Mr. Hacker earned his law degree from the University of Texas at Austin and his bachelor’s degree in Russian and history from Washington University in St. Louis.

Marie Quintana, Executive Vice President of Communications and Chief Marketing Officer

Ms. Quintana, 64, was appointed Tenet’s Chief Marketing Officer in May 2018 and Executive Vice President of Communications in March 2019. Ms. Quintana previously held the title Senior Vice President, Communicataions from July 2018 to February 2019. Under her leadership, Tenet activated its first integrated national marketing campaign, driving strong results in brand recognition and awareness. She also serves as chair of the Tenet Healthcare Foundation and is a director on the Governing Board of the Detroit Medical Center, which is operated by Tenet. Prior to joining Tenet, Ms. Quintana spent 14 years at PepsiCo where she held the positions of Senior Vice President of Sales and Marketing from March 2005 to April 2012, Vice President of Global IT

 

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Strategy from July 2003 to March 2005, and Vice President of Technology from October 1998 to July 2003. Ms. Quintana earned her bachelor’s degree from Louisiana State University and her master’s degree from Tulane University. She co-founded the PepsiCo Women of Color Alliance, which was awarded the Catalyst Award in 2007. She is a past founding board member of the Network of Executive Women and previously served on the Board of Catholic Charities of Dallas. She has also been named one of the Top 50 Hispanic Women in Business by Hispanic Business Magazine and one of the Top 50 Women in Grocery by Progressive Grocer. She currently serves on the board of directors for Fetch Rewards, Inc.

 

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Securities Ownership

Securities Ownership of Management

The table below discloses the shares, options and other securities beneficially owned by our directors and director nominees, each of our NEOs, and our current directors and executive officers as a group, as of March 15, 2021 (unless indicated below otherwise). No director or current executive officer has pledged any shares of our common stock.

 

Name

Shares Beneficially Owned(1)

Shares of

Common Stock(2)

Options
Exercisable Within
60 Days of

March 15, 2021

Percent

of Class
as of
March 15, 2021

 

Audrey Andrews

 

 

 

65,545

 

 

 

 

 

56,626

 

 

 

 

*

 

 

Paola Arbour

 

 

 

9,029

 

 

 

 

 

-0-

 

 

 

 

*

 

 

James L. Bierman

 

 

 

42,242

 

(3) 

 

 

 

-0-

 

 

 

 

*

 

 

Daniel J. Cancelmi

 

 

 

362,000

 

 

 

 

 

-0-

 

 

 

 

*

 

 

Richard W. Fisher

 

 

 

41,825

 

(4) 

 

 

 

-0-

 

 

 

 

*

 

 

Meghan M. FitzGerald

 

 

 

36,021

 

(5) 

 

 

 

-0-

 

 

Cecil D. Haney

 

 

 

3,057

 

(6) 

 

 

 

-0-

 

 

 

 

*

 

 

Sandra R.A. Karrmann

 

 

 

8,309

 

(7) 

 

 

 

-0-

 

 

 

 

*

 

 

J. Robert Kerrey

 

 

 

75,769

 

(8) 

 

 

 

-0-

 

 

 

 

*

 

 

Christopher S. Lynch

 

 

 

22,120

 

(9) 

 

 

 

-0-

 

 

 

 

*

 

 

Richard J. Mark

 

 

 

41,825

 

(4) 

 

 

 

-0-

 

 

 

 

*

 

 

Ronald A. Rittenmeyer

 

 

 

626,534

 

(10) 

 

 

 

119,260

 

(11) 

 

 

 

*

 

 

Tammy Romo

 

 

 

56,802

 

(12) 

 

 

 

-0-

 

 

 

 

*

 

 

Saumya Sutaria

 

 

 

100,331

 

 

 

 

 

-0-

 

 

 

 

*

 

 

Nadja Y. West

 

 

 

19,984

 

(13) 

 

 

 

-0-

 

 

 

 

*

 

 

Current executive officers and directors as a group (17 persons)

 

 

 

1,538,936

 

(14) 

 

 

 

188,368

 

 

 

 

1.6

 

%

 

*

Less than 1%.

 

(1)

Except as indicated, each individual named has sole control as to investment and voting power with respect to the securities owned.

 

(2)

As noted below, the totals in this column for each non-employee director include RSUs granted under the terms of our stock incentive plans. These RSUs are settled in shares of our common stock either upon termination of service or upon the third anniversary of the date of grant.

 

(3)

Includes 33,947 RSUs granted under our stock incentive plans.

 

(4)

Includes 34,005 RSUs granted under our stock incentive plans.

 

(5)

Includes 29,868 RSUs granted under our stock incentive plans.

 

(6)

Represents 3,057 RSUs granted under our stock incentive plans.

 

(7)

Holdings for Ms. Karrmann are reported as of October 24, 2020, the date that she ceased to be an executive officer of the Company.

 

(8)

Includes 37,794 RSUs granted under our stock incentive plans.

 

(9)

Represents 22,120 RSUs granted under our stock incentive plans.

 

(10)

Includes 15,000 shares held by Mr. Rittenmeyer’s spouse.

 

(11)

Represents 119,260 RSUs granted under our stock incentive plans. These RSUs are scheduled to vest and settle in shares of our common stock on March 31, 2021.

 

(12)

Includes 30,706 RSUs granted under our stock incentive plans.

 

(13)

Includes 18,984 RSUs granted under our stock incentive plans.

 

(14)

Includes RSUs granted to non-employee directors under our stock incentive plans.

 

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Securities Ownership of Certain Shareholders

Based on reports filed with the SEC, each of the following entities owns more than 5% of our outstanding common stock as of the dates indicated below. We know of no other entity or person that beneficially owns more than 5% of our outstanding common stock.

 

Name and Address

 

Number of Shares

Beneficially Owned

 

Percent

of Class

as of

   March 15, 2021   

 

Glenview Capital Management, LLC

    767 Fifth Avenue, 44th Floor

    New York, NY 10153

      16,225,320 (1)        15.24 %

 

BlackRock, Inc.

    55 East 52nd Street

    New York, NY 10055

      12,191,094 (2)        11.45 %

 

The Vanguard Group, Inc.

    100 Vanguard Blvd.

    Malvern, PA 19355

      11,407,086 (3)        10.71 %

Harris Associates L.P.

 

    111 S. Wacker Drive, Suite 4600

    Chicago IL 60606

      7,114,001 (4)        6.68 %

 

(1)

Based on a Schedule 13D/A filed with the SEC on February 4, 2021 by Glenview Capital Management, LLC and its named subsidiaries and affiliates (collectively, “Glenview”), and Lawrence M. Robbins, as of February 2, 2021, and additional information available to the Company as described in this footnote. Glenview Capital Management, LLC serves as an investment manager to various Glenview funds, and Mr. Robbins is the Chief Executive Officer of Glenview Capital Management. Glenview and Mr. Robbins reported shared voting and investment power with respect to all of the shares indicated above.

 

(2)

Based on a Schedule 13G/A filed with the SEC on January 27, 2021 by BlackRock, Inc., on behalf of itself and its named subsidiaries and affiliates (collectively, “BlackRock”), as of December 31, 2020. BlackRock reported sole voting power with respect to 11,992,806 of the shares indicated above and sole dispositive power with respect to all of the shares indicated above.

 

(3)

Based on a Schedule 13G/A filed with the SEC on February 10, 2021 by The Vanguard Group, Inc., on behalf of itself and its named subsidiaries and affiliates (collectively, “Vanguard”), as of December 31, 2020. Vanguard reported sole voting power with respect to 0 of the shares indicated above, shared voting power with respect to 116,030 of the shares indicated above, sole dispositive power with respect to 11,210,504 of the shares indicated above and shared dispositive power with respect to 196,582 of the shares indicated above.

 

(4)

Based on a Schedule 13G/A filed with the SEC on February 12, 2021 by Harris Associates L.P. (Harris), as of December 31, 2020. Harris reported sole voting power with respect to 4,710,340 shares and sole dispositive power with respect to all of the shares indicated above.

Delinquent Section 16(a) Reports

Due to a technical issue, the Form 4 filing reporting one transaction for J. Robert Kerrey was filed one day late.

 

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Table of Contents

Compensation Discussion & Analysis

 

 

This CD&A describes our compensation programs and reviews compensation decisions for the following Named Executive Officers (NEOs) for 2020:

 

Named Executive Officer

  Title

Ron Rittenmeyer

 

Executive Chairman and Chief Executive Officer (CEO)

Saum Sutaria

 

President and Chief Operating Officer

Dan Cancelmi

 

Executive Vice President and Chief Financial Officer

Audrey Andrews

 

Executive Vice President and General Counsel

Paola Arbour

 

Executive Vice President and Chief Information Officer

Sandi Karrmann

 

Former Executive Vice President and Chief Human Resources Officer(1)

 

(1)

Ms. Karrmann served as Executive Vice President and Chief Human Resources Officer of the Company until her resignation on October 24, 2020

CD&A Table of Contents

 

Overview

     31  

2020: Delivering Quality, Compassionate Care While Responding to COVID-19

     31  

2020 Compensation Program Highlights

     32  

Say-on-Pay Vote

     33  

Compensation Elements Link Pay with Performance

     33  

Best Practices Support Strong Compensation Governance

     34  

Detailed Description and Analysis

     35  

2020 Compensation Decisions

     35  

Base Salary

     35  

Annual Incentive Plan

     35  

Long-Term Incentive Compensation

     39  

The Compensation Process

     42  

Role of the Human Resources Committee

     42  

Independent Compensation Consultant

     42  

Benchmarking Against Peer Companies

     42  

Other Compensation, Benefits and Considerations

     44  

Perquisites

     44  

Executive Severance Plan

     44  

Executive Retirement Programs

     44  

Employee Benefits

     44  

Tax Matters

     45  

Compensation Governance Practices

     45  

Stock Ownership and Retention Requirements

     45  

Equity Grant Timing and Stock Option Exercise Prices

     45  

Prohibition on Hedging or Pledging Our Stock

     46  

Clawback Policies

     46  

 

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Overview

2020: Delivering Quality, Compassionate Care While Responding to COVID-19

In 2020, Tenet faced challenges never experienced in our history. Our ability to perform under such difficult and constantly evolving circumstances underscored the strength of our colleagues across the enterprise as well as the positive impact of our multi-year turnaround, which began under the leadership of our Board and Executive Chairman and Chief Executive Officer (CEO), Ron Rittenmeyer. We implemented a comprehensive and active response to the pandemic, focused on the safety of our personnel and our patients, and steadily improved performance in each operating segment as we moved through the year. We continued to advance top-tier clinical programs to serve growing acute and chronic care needs in our hospitals, while completing a transformational ambulatory transaction and pivoting our business toward higher-growth, lower cost-of-care settings. And, we continued to post an improved level of margin performance at Conifer, which provided exceptional support to clients throughout the pandemic.

 

 

COVID-19 Response

We continued to manage COVID-19 and its impact on operations, and we focused on the highest standards for quality and safety. Our protocols were designed to protect our patients and employees as we all battled the pandemic. Operational teams used real-time data to ensure sufficient staffing, intensive care unit bed capacity and personal protective equipment (PPE), all while adapting to constantly changing federal and state guidelines and managing ongoing surges across the country.

 

Operational Excellence

Our results in this last year underscore the operational discipline we have put into action on an ongoing basis. As the pandemic has continued to evolve in waves, we met each sharp turn with a carefully coordinated response. Our Incident Command Center has served as the hub of our pandemic response to provide continuity across the enterprise and ensure we always had dedicated resources in place to support caregivers and staff in our facilities.

 

Transformative Acquisition

In December 2020, we announced the acquisition of a portfolio of 45 ambulatory surgical centers from SurgCenter Development for approximately $1.1 billion. This transaction supports our ongoing commitment to invest in lower cost of care, consumer friendly facilities that improve healthcare affordability; cements Tenet’s position as the preeminent national musculoskeletal services leader across the care continuum; and enhances Tenet’s overall business mix and earnings profile.

     
 

Commitment to ESG

In 2020, we accelerated our commitment to environmental, social and governance (ESG) goals. We supported our employees in need, strengthened our sustainability program, and launched additional diversity and inclusion programs. In 2021, our Board formed an ESG Committee that will further support these efforts going forward.

 

Improved Financial Position

We ensured there was proactive management of liquidity throughout the pandemic by issuing additional notes as well as expanding our revolver debt capacity. We actively and responsibly managed our capital budget across the entire system, and our consistent focus on free cash flow helped deliver excellent results.

 

Cultivating Talent

Our efforts to ensure strong leadership across the enterprise continued to be a top priority in 2020. We attracted external talent to provide outside perspectives and new thinking. We also elevated strong performers by expanding their scope and by transitioning internal leaders to new opportunities within the enterprise that will support their further growth and development.

 

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Compensation Discussion & Analysis

 

 

LOGO

Our strong relative TSR performance highlights the successful execution of our multi-year turnaround strategy since our change in leadership a little over three years ago. We believe that our three-year TSR, which captures the effect of the intense turnaround effort that began in late 2017, is a more meaningful measure of our longer-term performance than our one-year TSR, which can be significantly impacted by short-term market volatility unrelated to our performance (as occurred at various times during 2020). Despite the challenge and uncertain macroeconomic environment presented during the last year by COVID-19, the achievements highlighted above illustrate the positive impact of our multi-year turnaround as well as our continued momentum in building a framework for our long-term growth and success. Further, our 2021 year-to-date TSR performance (as of March 25, 2021) remains strong and ranks above the 90th percentile of our peer group and the S&P 500.

2020 Compensation Program Highlights

 

   

Secured Extension of CEO’s Employment

 

In February 2020, after considering his extraordinary accomplishments in turning Tenet around and his continued importance in implementing the Company’s long-term strategic goals, the Board extended Mr. Rittenmeyer’s term of service from June 2021 through December 2022 through an amendment to his Employment Agreement that:

 

  Increased Mr. Rittenmeyer’s annual base salary to $1.5 million

 

  Provided for an award of RSUs, vesting quarterly through December 2022, valued at $10 million to recognize his extended service period

 

 

Streamlined

LTI Program

 

In February 2020, the HR Committee approved a streamlined and simplified long-term equity compensation program, which further aligns NEO and shareholder interests. The 2020 LTI compensation for executive officers other than Mr. Rittenmeyer and Dr. Sutaria consists entirely of RSUs:

 

  50% time-based awards vesting ratably over three years

 

  50% performance-based awards earned over a three-year period based on the achievement of Adjusted EPS and Adjusted Free Cash Flow Less Cash NCI. These performance metrics are established at the start of each year of the three-year performance period subject to a cumulative three-year Relative TSR performance modifier.*

 

 

Donated Salaries in

Response to

COVID-19

  Mr. Rittenmeyer donated 100% of his base salary earned from April through June 2020 to the Tenet Care Fund, a 501(c)(3) established to assist Company employees who have experienced hardships from the COVID-19 pandemic and other challenges. Each of our other NEOs donated 20% of their salaries over the same period. The Tenet Care Fund supported over 1,100 of our employees in 2020, with approximately $2,000,000 raised over the year.
 

 

2020 Annual Incentive

Plan Payouts

  Our Compensation Committee applied negative discretion after our 2020 annual incentives were earned at 200% of target, based upon our maximum achievement of both performance metrics, Adjusted EBITDA (weighted 70%) and Adjusted Free Cash Flow Less NCI (weighted 30%). As a result of these downward adjustments, corporate performance was deemed achieved at 117% of target and final payouts for our NEOs ranged from 130% to 150% of target payout levels after applying each officer’s individual performance multiplier.**

 

*

See Appendix A for definitions of Adjusted EPS and Adjusted Free Cash Flow which is then less cash distributions paid to NCI as reflected on the Company’s consolidated statements of cash flow.

 

**

Ms. Karrmann did not receive a 2020 annual incentive plan payment due to her October 2020 resignation.

 

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Compensation Discussion & Analysis

 

    

 

    

 

 

Say-On-Pay Vote

Our annual Say-on-Pay vote is one of our opportunities to receive feedback from shareholders regarding our executive compensation program, and the HR Committee takes the result of this vote into account when shaping the compensation program for the Company’s NEOs. Our Company has continued to receive strong support for our Say-on-Pay proposal every year since 2017, with 90% of votes cast in favor of such proposal at our 2020 Annual Meeting. In light of the continued strong shareholder support, our HR Committee did not make any changes to the structure of our executive compensation program as a result of the 2020 vote. The HR Committee will continue to consider shareholder feedback, input from our independent compensation consultant and the outcomes of future Say-on-Pay votes when assessing our executive compensation programs and policies and making compensation decisions for our NEOs.

Compensation Elements Link Pay with Performance

The following table outlines the primary components of our NEOs’ 2020 compensation packages (other than Mr. Rittenmeyer and Dr. Sutaria, as discussed above):

 

Element   Description   Purpose

 

Base Salary

 

  Fixed cash compensation set annually

 

  Based on market data, individual performance, internal pay equity and the scope and complexity of the role

 

  Attracts and retains talented executives with competitive fixed pay

 

 

Annual

Incentive Plan

 

  Compensation tied to achievement of annual performance goals

 

  Award amount increases with executive’s level of influence on business outcomes and reflects individual performance

 

  Motivates and rewards executives for meeting annual goals that drive long-term growth

 

  Challenging, objective performance metrics set annually based on Company’s business plans

Long-Term Incentive Compensation   LOGO

 

Performance -

Based RSUs

 

 

LOGO

 

 

  Awards cliff vest in three years based on performance against adjusted earnings per share (EPS)* and adjusted free cash flow (FCF) minus cash distributions paid to noncontrolling interests (NCI).* These goals are established at the beginning of each year within the three-year period

 

  Relative total shareholder return (TSR) modifier is measured over the full three-year performance period and may reduce or increase earned payouts

 

  Establishing goals for each year of the three-year performance period provides the Company with flexibility to ensure goals remain relevant and challenging throughout the performance period and avoids awards that weaken retentive value in the event of a single year of below threshold performance

 

  Relative TSR modifier applied over the full vesting period strengthens long-term shareholder alignment and motivates our executives to achieve long-term share price appreciation

 

Time-Based RSUs

 

 

LOGO

 

 

  RSUs vest ratably over three years

 

  Aligns economic interests of executives and shareholders through equity ownership

 

  Encourages retention and subject to forfeiture in the event executive terminates employment

 

*

See Appendix A for definitions of Adjusted EPS and Adjusted Free Cash Flow which is then less cash distributions paid to NCI as reflected on the Company’s consolidated statements of cash flow.

 

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Compensation Discussion & Analysis

 

 

Best Practices Support Strong Compensation Governance

We maintain the following best practices to ensure our governance of executive compensation reflects our pay-for-performance philosophy and aligns the interests of our executives and shareholders.

 

What We Do

 

   LOGO   Active engagement with investors

 

 

 

LOGO   Emphasis on pay-for-performance

 

 

   LOGO   Meaningful stock ownership and retention requirements

 

 

LOGO   Clawback provisions for all performance-based compensation

 

 

   LOGO   Conduct an annual compensation risk assessment

 

 

 

LOGO    Double-trigger change-in-control benefits

 

   LOGO   Cap payouts under annual incentive and performance- based RSU    programs

 

 

 

LOGO    Independent compensation consultant

 

What We Don’t Do

 

  Ø  No excise tax gross-ups on change-in-control
   severance benefits

 

 

 

Ø  Directors and executive officers cannot hedge or
 pledge Company securities

 

 

  Ø  No excessive perquisites

 

 

 

Ø  No repricing of underwater stock options

 

 

  Ø  No single-trigger equity acceleration on a change-in-control

 

   

 

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Detailed Description and Analysis

2020 Compensation Decisions

Base Salary

Base salary provides our NEOs with a fixed base annual income and helps us attract and retain high-performing executives. The HR Committee sets NEO salaries each year considering individual performance reviews, internal pay equity considerations, the scope and complexity of the executive’s role and an assessment of peer group and market survey data provided by our independent compensation consultant. In addition to the increase in Mr. Rittenmeyer’s base salary as part of his 2020 Employment Agreement extension described above, in February 2020, the HR Committee approved a 4.9% increase in Mr. Cancelmi’s base salary in recognition of his strong performance and to better align with competitive market practices. The HR Committee determined that the base salaries for all other NEOs would remain unchanged for 2020.

As discussed above, to help Company employees facing adversity during the COVID-19 pandemic, Mr. Rittenmeyer donated 100% of his base salary earned from April through June 2020 to the Tenet Care Fund, and each of the other NEOs donated 20% of their salaries to the Tenet Care Fund over the same period.

 

Named Executive Officer

 

2020
Annual Base Salary

(As of December 31, 2020) 

 

Ron Rittenmeyer

 

 

$1,500,000

Saum Sutaria

  $1,000,000

Dan Cancelmi

  $   650,000

Audrey Andrews

  $   550,000

Paola Arbour

  $   500,000

Sandi Karrmann(1)

  $   500,000

 

  (1)

Ms. Karrmann served as Executive Vice President and Chief Human Resources Officer of the Company until her resignation on October 24, 2020.

Annual Incentive Plan

Our AIP provides annual cash incentives to our executives that drive financial, operational and individual performance. The program is designed to motivate executives to meet objectives that matter to our investors and align with the Company’s long-term strategy. To that end, the HR Committee selects financial and operational metrics that our executives directly influence with challenging targets so that, in order to pay out, the Company must meet the goals communicated to shareholders. The Annual Incentive Plan also includes an individual performance component to focus directly on the contributions of each NEO and to reflect performance on qualitative factors like leadership, integrity, promotion of Company values, and a positive influence on Company culture.

 

 

LOGO

 

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Compensation Discussion & Analysis

 

 

2020 Target Annual Incentive Award Levels for Named Executive Officers

In 2020, the HR Committee approved the following target bonus award levels for each NEO, none of which were increased relative to the prior year.

 

Named Executive Officer

  Target Award Relative
to Base Salary
 

 

Ron Rittenmeyer

 

 

 

 

150

 

Saum Sutaria

    100

Dan Cancelmi

    100

Audrey Andrews

    75

Paola Arbour

    75

Sandi Karrmann

    75

2020 AIP Performance Metrics and Results

Funding for the 2020 AIP pool was based on the Company’s total annual Adjusted EBITDA (weighted 70%) and Adjusted Free Cash Flow Less Cash Payments to Noncontrolling Interests (Adjusted Free Cash Flow Less NCI) (weighted 30%). Payout of these metrics can range from 0% to 200% depending on performance.

The HR Committee continued to use Adjusted EBITDA as the most significant metric because it is the primary measure used by financial analysts and investors to judge the Company’s financial performance. The HR Committee selected Adjusted Free Cash Flow less NCI as a metric because it captures the Company’s ability to sustainably generate cash that can be used for the Company’s long-term strategic goals, including acquisitions, investing in joint ventures, or repurchasing outstanding equity or debt securities, as well as other general corporate purposes. Furthermore, free cash flow generation allows the Company to fund growth without raising additional debt and can also be used to retire existing indebtedness, both of which enhance long-term shareholder value. Given the importance of Adjusted Free Cash Flow less NCI to both short-term and long-term value creation for shareholders, the HR Committee decided to continue using it in both the 2020 AIP and LTI programs.

The HR Committee, on the recommendation of management, determined that it was appropriate to exercise negative discretion to reduce the AIP funding pool from 200% to 117% in order to offset favorability in our overall financial performance resulting from the COVID-19 pandemic, including grants and other benefits the Company received under the CARES Act, that was unrelated to management’s actions. The adjusted payout level reflects the Company’s projected performance before the impact of the COVID-19 pandemic.

 

Metric

  Threshold
Level
  Target
Level
  Maximum
Level
  Actual
Performance
  Percentage
of Target
  Calculated
Payout

 

Adjusted EBITDA(1)

   

 

$

 

2.650 billion

 

   

 

$

 

2.825 billion

 

   

 

$

 

3.050 billion

 

   

 

$

 

3.146 billion

 

   

 

 

 

200

 

%

 

 

140     

 

Adjusted FCF less NCI(2)

    $ 390 million     $ 480 million     $ 570 million     $ 2,914 million       200 %     60     

Initial Funding Pool

 

  200% 

Negative Discretionary Adjustment

 

  (83%)

Final Funding Pool

 

  117% of Target  

 

(1)

See Appendix A for definition of Adjusted EBITDA.

 

(2)

Adjusted Free Cash Flow (see Appendix A for definition) minus cash distributions paid to NCI reflected on the Company’s consolidated statements of cash flow.

Individual Performance Modifiers

After completion of the fiscal year, the HR Committee undertakes a robust individual performance review for our executive officers. These reviews allow the HR Committee to incorporate into the AIP program certain quantitative and qualitative elements tailored specifically to each executive’s role and circumstances. These reviews also allow the HR Committee to take into consideration factors such as integrity, promotion of Company values, and a positive influence on Company culture, which

 

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further the Company’s business objectives and strategies. The result is an individual performance multiplier applied to the calculated AIP amount that can range from 0% to 150%. The ratings are calibrated across the entire Company to ensure the AIP funding pool remains fixed.

For the CEO, the HR Committee gathers feedback from select members of management as well as a CEO self-evaluation and discusses the performance of the CEO with the other independent members of the Board in executive session. For reviews of other executive officers, the CEO provides the HR Committee a detailed evaluation and recommendation based in part on a self-assessment completed by each executive officer.

 

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The HR Committee applied the following performance modifiers for our NEOs based on the material factors provided below. Ms. Karrmann did not receive a 2020 AIP Payout in light of her October 2020 resignation.

 

Named Executive Officer

 

Individual

Performance

Multiplier

  Performance Review Summary

 

Mr. Rittenmeyer

 

 

150%

 

 

  Focused first and foremost on quality and safety, led a cohesive and coordinated enterprise-wide response to the pandemic while delivering strong financial and operational results in a turbulent year.

 

  Repositioned the Company’s growth trajectory by advancing key strategic objectives like the transformative acquisition of 45 ambulatory surgery centers.

 

  Strengthened the Company’s commitment to elevating its people, fostering an inclusive culture, ensuring effective governance and realigning on purpose.

 

Dr. Sutaria

 

 

150%

 

  Leadership has been especially pivotal in accelerating our growth and performance, reassuring our ongoing resilience during the pandemic, and bringing to bear expanded offerings for patients notwithstanding the tremendous challenges we all faced in 2020.

 

  Continued to drive changes in business unit leadership to strengthen organizational roots and position our best people to expand their skills and continue to positively impact the enterprise.

 

  Appointed to the Company’s Board of Directors in November 2020.

 

Mr. Cancelmi

 

 

140%

 

  Instrumental in leading our finance team through the pandemic with equal commitment to diligent review of various governmental orders and grants and improved quality of our ongoing operational processes.

 

  Restructured the balance sheet and reinforced investor confidence while ensuring transparency.

 

  Championed talent upgrades for key leadership roles in finance team.

 

Ms. Andrews

 

 

130%

 

  Successfully navigated the pandemic related rules that changed frequently and covered all legal issues.

 

  Leadership and support to the compliance team that allowed us to meet key priorities notwithstanding the impact of COVID-19.

 

  Significant contributions to streamlining USPI’s structure and legal processes to align with enterprise goals.

 

Ms. Arbour

 

 

130%

 

  Quickly led transition to successfully relocate our headquarters, satellite offices and Global Business Center (GBC) employees to a remote working environment within a short period.

 

  Improved process and successfully worked with third parties to meet cybersecurity protection goals.

 

  Adjusted capital expenditures while partnering with teams in the field on the right enterprise priorities and creating a true service culture.

 

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The table below shows target and actual AIP awards earned by each NEO for 2020.

 

Named Executive Officer

 

Target

AIP Payout

  Calculated
AIP Payout
 

Individual

Performance

Multiplier

 

2020 Actual  

AIP Payout  

 

Ron Rittenmeyer

   

 

$

 

2,250,000

 

   

 

$

 

2,632,500

 

   

 

 

 

150

 

%

   

 

$

 

3,948,750

 

Saum Sutaria

   

$

1,000,000

   

$

1,170,000

   

 

150

%

   

$

1,755,000

Dan Cancelmi

   

$

650,000

   

$

760,500

   

 

140

%

   

$

1,064,700

Audrey Andrews

   

$

412,500

   

$

482,625

   

 

130

%

   

$

627,413

Paola Arbour

   

$

375,000

   

$

438,750

   

 

130

%

   

$

570,375

Sandi Karrmann(1)

   

$

375,000

   

 

N/A

   

 

N/A

   

 

N/A

   

 

(1)

As a result of her separation, Ms. Karrmann was not eligible to receive an AIP payout.

Pandemic Special Bonuses

The HR Committee periodically approves additional “off-cycle” awards to key employees, including NEOs, in connection with promotions, recruitment and retention efforts, succession planning, or significant accomplishments or achievements. The Committee approved one-time cash bonuses of $500,000 and $250,000 to Dr. Sutaria and Mr. Cancelmi, respectively, to reward them for their special efforts during the pandemic in 2020. In particular, the Committee recognized Dr. Sutaria’s extraordinary achievements partnering with our hospitals and other providers to respond quickly and effectively to COVID-19 and Mr. Cancelmi’s success in maintaining the Company’s financial performance and liquidity during the most challenging periods of the year.

Long-Term Incentive Compensation

The HR Committee undertook a holistic review of our executive compensation program design in 2020 and determined that changes to the LTI design were appropriate to further encourage sustained value creation for shareholders and simplify our equity compensation structure. The LTI design changes primarily addressed the compensation of executive officers other than Mr. Rittenmeyer, whose LTI compensation is described above under “2020 Compensation Program Highlights”, and Dr. Sutaria, who entered into an employment agreement with the Company when he joined in 2019 that provides for an annual grant of $4,000,000 of time-based RSUs vesting ratably over three years. In 2020, the Committee awarded Dr. Sutaria performance-based RSUs valued at $1,000,000 in acknowledgement of his critical role in the Company’s future success and to further align his long-term incentives with those of the Company’s shareholders.

Beginning in 2020, LTI compensation for executive officers other than Mr. Rittenmeyer and Dr. Sutaria moved to entirely in RSUs, comprised of 50% time-based awards vesting ratably over three years and 50% performance-based awards earned over a three-year period. The HR Committee believes that a simplified equity-only program provides stronger alignment of management’s incentives with shareholder interests. In its review, the HR Committee considered peer group and other market data, emerging best practices, the availability of shares under Company plans and the retention value of LTI compensation.

 

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Long-Term Incentive Compensation

 

       
  

 

  Year 1          Year 2          Year 3       
     
Performance-Based RSUs
(50%)
 

 

  Based on Adjusted FCF less Cash NCI and Adjusted EPS, with goals set annually on current conditions and business strategy to a tranche of three overlapping cycles with threshold (0%), target (100%), and max (200%)

 

  Subject to Relative TSR modifier based on performance over the entire performance period (+/- 25% based on cumulative performance versus direct peers)

 

 

Three-year performance period with one-year

goals set annually

 

 

33.3%       

 

 

 

33.3%       

 

 

 

33.3%       

 

     

Time-Based RSUs
(50%)

 

 

  Restricted stock unit that is solely subject to service-based vesting or forfeiture conditions

 

  Awards directly align executive and shareholder interests while encouraging retention throughout the vesting cycle

 

 

         Vest ratably over three years

 

 

33.3%       

 

 

 

33.3%       

 

 

 

33.3%       

 

 

Performance Metrics

  Description

 

Adjusted Earnings Per Share

 

  Key metric for our shareholders because our Adjusted Earnings drives share price performance

 

  Measures the Company’s per-share profitability, excluding certain gains and losses

 

Adjusted Free Cash Flow Less NCI

 

  Sustained cash flow generation allows the Company to fund objectives important to the Company’s long-term strategy without raising additional debt

 

  Measures the Company’s ability to generate cash flows from operations that can be used for acquisitions, capital expenditures or repaying debt

 

Relative Total Shareholder Return

 

  Comparing the Company’s share price performance to its direct competitors rewards management’s ability to deliver above-market returns to long-term shareholders

 

  Measures the Company’s shareholder return against its three direct publicly traded competitors: Community Health Systems, HCA Healthcare and Universal Health Services

 

  Three-year total shareholder return multiplier applied to full three-year performance period measured relative to three direct competitors, with +25% for ranking first, no change for second or third, and -25% for fourth

Rigor of Performance Goals

In establishing target, threshold and maximum performance levels for our performance-based cash awards, the HR Committee considers annual and longer-term growth rates that the Company discloses to shareholders, as well as the consensus of analyst estimates and business-planning projections. The HR Committee sets the target amounts at demanding levels that require NEOs to achieve significant improvement each year of the performance period, and beginning with the 2020 awards, the target amounts are established at the beginning of each one-year performance period to ensure that the goals remain relevant and challenging as the overall three-year performance period progresses. For the Relative TSR modifier, the Company placing first among the direct peer group results in a 25% increase, and the Company placing fourth among the direct peer group results in a 25% decrease, with no adjustments for placing second or third among the direct peer group.

 

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Compensation Discussion & Analysis

 

    

 

    

 

 

2020 LTI Grant Values for Named Executive Officers

The following table summarizes the total target grant value of LTI awards granted in February 2020 to each of our NEOs participating in our 2020 LTI program. LTI Compensation for Mr. Rittenmeyer is described above under “2020 Compensation Program Highlights.”

 

Named Executive Officer

  Performance-
Based RSUs(1)(2)
   

Time-Based

RSUS(2)

    Total 2020 LTI
Grant Value
 

Saum Sutaria

  $ 1,000,022     $ 4,000,003     $ 5,000,025  

Dan Cancelmi

  $ 1,250,027     $ 1,250,027     $ 2,500,054  

Audrey Andrews

  $ 750,016     $ 750,016     $ 1,500,032  

Paola Arbour

  $ 450,026     $ 450,026     $ 900,052  

Sandi Karrmann(3)

  $ 487,501     $ 487,501     $ 975,002  

 

(1)

Assumes target level performance.

 

(2)

Value is based on the NYSE closing price per share of our common stock on the date of grant (February 26, 2020: $27.80).

 

(3)

Ms. Karrmann forfeited her 2020 LTI awards upon her resignation.

The Company will disclose its achievement against the applicable performance metrics for the 2020 Performance-Based RSUs following completion of the three-year performance period.

Results of 2018 LTI Awards

The performance cash LTI awards granted in March 2018 had a performance period of three years with performance measured across three equally weighted performance metrics as set forth in the table below (achievement at target on any metric would result in 33.3% of the total payout). Two of our 2020 NEOs — Ms. Andrews and Mr. Cancelmi — received these grants, which vested in February 2021 following the HR Committee’s certification of the Company’s achievement under the performance metrics. Although Ms. Karrmann was granted a 2018 performance cash LTI award, it was forfeited on her October 2020 departure.

When considering the Company’s Adjusted Free Cash Flow Less Cash NCI (Adjusted Free Cash Flow) performance over the three-year performance period, the HR Committee, on the recommendation of management, excluded certain federal payments and tax deferrals that the Company received under the CARES Act. Specifically, the HR Committee excluded Medicare advance payments that the Company expects to be required to repay in addition to payroll tax deferrals for fiscal year 2020. The negative discretion reduced the Company’s Adjusted Free Cash Flow to $2.012 billion, resulting in a below-target payout of 10.73 for the metric. Including such funds would have resulted in Adjusted Free Cash Flow of $3.679 billion, well above the maximum payout.

The following table shows the Company’s results under each of the applicable performance metrics measured over the three-year period ended December 31, 2020.

 

2018 LTI Performance Metric

  Threshold     Target     Maximum    

Actual

Performance

   

Calculated

Payout

 

Adjusted Earnings per Share

  $ 6.82     $ 8.02     $ 9.22     $ 12.55       66.67  

Adjusted Free Cash Flow less NCI

  $ 1.978 billion     $ 2.327 billion     $ 2.676 billion     $ 2.012 billion       10.73  

Relative total shareholder return

    4 th      3 rd      1 st      1 st      66.67  

Total Pay Delivery

 

    144.06% of Target  

Additional Awards for Ms. Karrmann

In February 2020, Ms. Karrmann executed a cash bonus agreement pursuant to which she received $944,045 in connection with the termination of the USPI Holding Company, Inc. 2015 Stock Incentive Plan in which she participated. The cash bonus agreement provided for a full release of claims in favor of the Company, USPI Holdings Company, Inc. and their respective affiliates.

 

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In addition, in February 2020, Ms. Karrmann was granted a cash-based long-term incentive award of $5,000,000, which was scheduled to vest in 20% increments on each of the first, second and third anniversaries of the grant date and 40% on the fourth anniversary, in each case, subject to her continued employment through such vesting dates. This award was granted in recognition of her strong performance at the Company and to encourage her long-term retention.

In connection with her separation in October 2020, Ms. Karrmann forfeited the entirety of the cash-based long-term incentive award.

The Compensation Process

Role of the Human Resources Committee

The HR Committee is comprised entirely of independent directors and makes all compensation decisions regarding our NEOs. The HR Committee considers input from (i) the other independent members of our Board of Directors, (ii) the Company’s shareholders and (iii) its independent compensation consultant. In the case of NEOs other than the CEO, the HR Committee also considers input and recommendations from the CEO. The HR Committee’s decisions regarding compensation of our NEOs are made outside the presence of these officers. The HR Committee is also responsible for approving our executive compensation program and general compensation policies, all new or materially amended broad-based compensation plans and the performance measures used in our executive compensation programs.

Independent Compensation Consultant

The HR Committee has retained Frederic W. Cook & Co. (the “Consultant”) as its independent consultant to assist the Committee with its duties. In 2020, the Consultant participated in or provided input with respect to all meetings of the HR Committee and regularly communicated with the Committee Chair, who also serves as the Lead Director. This year, the Consultant’s services included:

 

 

Providing market data, industry trends and competitive analysis relative to our peers.

 

Advising on the key elements of our executive compensation plans and policies.

 

Reviewing our compensation peer group and suggesting changes, if warranted.

 

Advising on the adjustments to the 2020 LTI program.

 

Providing recommendations on the structure and competitiveness of compensation for our CEO and COO.

Subject to the approval of the HR Committee, the Consultant meets with members of management to review management’s proposed compensation recommendations to the Committee, discuss compensation trends and best practices, and review Company compensation data. Any material information provided to management by the Consultant is disclosed to the HR Committee.

To safeguard the independence of the Consultant:

 

 

The HR Committee retains the Consultant, determines the terms and conditions of the Consultant’s engagement and has the sole authority to approve the Consultant’s fees and other retention terms or to terminate the engagement.

 

The Consultant reports directly to the HR Committee and has direct access to the Committee Chair during and between meetings.

 

The Consultant provides no services to the Company or management, except as related to executing the provisions of the HR Committee Charter, and with the knowledge and approval of the HR Committee Chair.

The HR Committee has assessed the independence of the Consultant pursuant to SEC and NYSE rules and concluded that no conflict of interest exists in connection with the Consultant’s service as an independent advisor to the Committee.

Benchmarking Against Peer Companies

Each year the HR Committee reviews market compensation practices to evaluate the competitiveness of the Company’s pay levels and program design. Given the small number of publicly held healthcare providers and competition with not-for-profit companies, the HR Committee relies on a blend of peer group and market survey data to survey market practices. The HR Committee uses the peer group to assess whether executive officer pay levels are aligned with Company performance on a relative basis and considers the “market median” to be a helpful benchmark in setting compensation levels for our executive officers.

 

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2020 Peer Group

The Company currently has only three direct competitors that are publicly traded: Community Health Systems, Inc., HCA Healthcare, Inc. and Universal Health Services, Inc. As a result, in August 2019 the HR Committee followed an objective selection process that looked to related industry segments with companies approximating Tenet in revenues, market-capitalization, enterprise value and number of employees to ensure we retained a sufficiently large and appropriate peer group. The selection process yielded 15 companies with similar business complexity. As compared to the 2019 peer group, based on the objective selection process, the HR Committee determined it was appropriate to remove Aetna, Cigna, Envision Healthcare and Kindred Healthcare and add Encompass Heath, Molina Healthcare and Select Medical.

 

Direct Peers

  Community Health Systems

  HCA Healthcare

  Universal Health Services

  

Additional Peers

  Baxter International

  Becton, Dickinson and Company

  Boston Scientific

  DaVita

  Encompass Health

  Genesis Healthcare

  

 

  Humana

  LabCorp

  Molina Healthcare

  Quest Diagnostics

  Select Medical

  Stryker

 

 

The following chart illustrates Tenet’s size compared to the 2020 peer group median of revenues, enterprise value and number of employees, using data provided to the HR Committee by the Consultant in August 2019.

 

 

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Market Survey Data

For 2020 compensation decisions, the HR Committee reviewed additional compensation data from the following third-party general-industry survey sources:

 

Survey

   Targeted Annual Revenue of Companies Comprising
Data Used by Consultant

2019 Aon Hewitt Total Compensation Measurement survey

   $10 billion to $25 billion

2019 Willis Towers Watson U.S. Compensation Database survey

   $10 billion to $20 billion

2019 FW Cook Long-Term Incentives survey

   $18.3 billion

The Consultant compiles data from these surveys relating to compensation levels for Tenet executive officers against the compensation levels received by executives holding similar positions at other companies. The Consultant then presents the data to the HR Committee in aggregated form, and the identity of the companies comprising the survey data is not disclosed to, or considered by, the HR Committee in its decision-making process.

 

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Other Compensation, Benefits and Considerations

Perquisites

Perquisites for our NEOs are limited and generally represent an immaterial element of our executive compensation program. They largely consist of life insurance premiums, Company contributions to retirement programs available to other senior officers, and personal use of Company aircraft.

Upon the recommendation of an independent, third-party security study, the Company also provides Mr. Rittenmeyer a car and personal security driver that he primarily uses for commuting and local business travel. The HR Committee does not consider these security costs as personal benefits because they serve a business purpose arising from his employment as CEO. However, the Company is required to disclose the unreimbursed incremental costs associated with the personal use of the Company-provided car, including commuting expenses, as well as the personal security driver. The amounts of these services are disclosed in the Summary Compensation Table on page 48. The security study also recommended Mr. Rittenmeyer use Company aircraft for both business and personal use to ensure his safety. Our aircraft usage policy requires Mr. Rittenmeyer to reimburse us for any personal use of the corporate aircraft above 75 hours per year and allows Mr. Rittenmeyer to approve limited personal use of Company aircraft by certain other Company executives. In 2020, Mr. Rittenmeyer’s personal use of the corporate aircraft totaled approximately 11 hours. The unreimbursed incremental cost of his and other NEO’s use is disclosed in the Summary Compensation Table on page 48.

The Company does not provide tax gross-ups to NEOs except to Mr. Rittenmeyer exclusively to cover personal income tax obligations due to imputed income for use of a Company-provided car for security purposes. We do not provide our NEOs with any other significant perquisites.

Executive Severance Plan

The Tenet Executive Severance Plan (ESP) applies to certain of our NEOs in addition to other senior managers and officers of the Company. The ESP provides cash severance and other benefits that vary by position level, consistent with market practice. ESP participants do not receive gross ups of excise taxes that may be incurred upon a change of control.

Each of the NEOs, other than Mr. Rittenmeyer and Dr. Sutaria, participated in the ESP in 2020. The severance periods for the Company’s NEOs under the ESP were determined by the HR Committee based on (1) past company practice, (2) competitive data provided by the Consultant regarding the severance periods in place for executives of similar-sized companies and other healthcare peers, and (3) the HR Committee’s analysis of the financial impact of various severance compensation scenarios on each of these executives and the Company.

Provisions in the ESP and related severance agreements regarding non-competition, confidentiality, non-disparagement and non-solicitation as a condition of receipt of severance benefits under the ESP remain in effect for at least the period during which the severed executive is entitled to receive severance payments.

A more detailed description of the ESP is contained in “Potential Payments Upon Termination or Change of Control” beginning on page 56.

Executive Retirement Programs

Certain of our NEOs participate in our frozen Supplemental Executive Retirement Plan (SERP), our Executive Retirement Account (ERA) and our Sixth Amended and Restated Tenet 2006 Deferred Compensation Plan (Deferred Compensation Plan, or DCP). These programs are designed to provide retirement benefits to participating management-level employees, whose retirement benefits under our tax-qualified programs are otherwise limited under provisions of the Internal Revenue Code. Additional information regarding these programs is provided in the narrative discussion following the 2020 Pension Benefits Table on page 53 and under “Nonqualified Deferred Compensation” beginning on page 55.

Employee Benefits

Our NEOs participate in the Company’s broad-based programs generally available to all employees, including our 401(k) Retirement Savings Plan, health and dental and various other insurance plans, including disability and life insurance. Also, in connection with the SERP, we provide additional life insurance and accidental death and dismemberment insurance as described under “Potential Payments Upon Termination or Change of Control—Death, Disability and Retirement” beginning on page 57. These benefits are consistent with providing a total pay program that is sufficiently competitive with our peer companies to attract and retain highly qualified personnel.

 

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Tax Matters

Section 162(m) of the Internal Revenue Code (Section 162(m)) generally disallows a tax deduction to public companies for compensation in excess of $1,000,000 paid to certain “covered employees” in any single year. Prior to 2018, the HR Committee generally sought to structure our performance-based compensation elements in a manner intended, but not guaranteed, to qualify as “performance-based” for purposes of satisfying the conditions of an exemption to this limit on deductibility. For taxable years beginning after December 31, 2017, the Tax Cut and Jobs Act repealed this exemption from Section 162(m)’s deduction limit for all but certain grandfathered compensation arrangements that were in effect as of November 2, 2017. Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and related regulations including the scope of relief for grandfathered arrangements, no assurance can be given that compensation awarded or paid in prior years and intended by the HR Committee to satisfy the requirements for deductibility under Section 162(m) will in fact be fully tax deductible. Notwithstanding the repeal of the “performance-based” compensation deduction pursuant to Section 162(m), the Company has continued to subject a significant portion of the incentive compensation payable to our NEOs to the achievement of one or more performance metrics specified by the HR Committee.

Compensation Governance Practices

Stock Ownership and Retention Requirements

The Board has adopted stock ownership and stock retention requirements for our non-employee directors and all Company officers with the title of Senior Vice President and above, to further align such individual’s economic interests with those of our shareholders. The ownership requirements must be met within five years from the date on which an individual becomes a director or senior officer, with two-year extensions in the event of a promotion.

Each senior officer is required to own shares of our stock with a value equal to the following multiple of his or her base salary:

 

Executive Level

  

Market Value of Stock as a
Multiple of Base Salary

Chief Executive Officer

  

6x

President or Chief Operating Officer

  

4x

Executive Vice Presidents

  

2x

Senior Vice Presidents

  

1x

Shares counted toward the stock ownership requirements include: (i) shares of common stock held of record or in a brokerage account by the individual or his or her spouse; (ii) unvested restricted stock or RSUs; and (iii) stock units credited under deferred compensation plans. Outstanding stock options do not count toward satisfaction of the ownership requirements.

If a director or senior officer does not meet the applicable ownership requirements, he or she must retain 100% of any “net shares” received upon the exercise of stock options and the vesting of restricted stock or RSUs until such time as the requirements are met. For this purpose, “net shares” means the number of shares received upon exercise of stock options or upon vesting of restricted stock or RSUs less the number of shares sold or deducted to pay the exercise price (in the case of options), withholding taxes and any brokerage commissions.

All NEOs who are current employees of the Company comply with these requirements. All senior officers are required to certify that they are in compliance with these guidelines prior to executing a sale of the Company’s common stock.

Equity Grant Timing and Stock Option Exercise Prices

Historically, we have made annual equity awards to NEOs and other employees during the first quarter of the year in connection with annual executive compensation decisions. In accordance with the terms of our equity plans, the grant date of these awards is the date the HR Committee approves the grant, which usually occurs at a meeting scheduled more than one year in advance.

We occasionally may grant equity awards, including stock options, to newly hired employees, employees who have been promoted, or for special recognition, retention or other purposes outside of the annual grant process. For equity grants awarded outside of the annual grant cycle, the grant date generally is the first or 15th day of the month following hire or approval (or, if such date is not a trading day, the following date that is a trading day). The exercise price for all stock options is the NYSE closing

 

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price per share of our common stock on the date of grant or on the immediately preceding trading day if the date of grant is not a trading day. HR Committee approval is required in all cases where the recipient of the equity grant is a NEO or other senior officer.

Prohibition on Hedging or Pledging Our Stock

Our insider trading policy prohibits any director, NEO or any other officer or employee subject to its terms (approximately 60 people) from entering into short sales, derivative transactions or any other similar transactions designed to hedge or offset, any decrease in the market value of our stock, whether directly or indirectly. In addition, these directors, officers and employees are prohibited from pledging our stock, including through holding our stock in margin accounts. Our Code of Conduct prohibit all employees from engaging in any market transaction that could put their personal gain in conflict with the Company or its shareholders, including trading in options, warrants, puts, calls or similar derivative interests in Company securities.

Clawback Policies

All awards under our AIP, including for NEOs, are subject to clawback and forfeiture provisions under which the Board may require forfeiture or reimbursement to the Company of a cash bonus in the event of a material restatement of our financial results caused by the recipient’s fraud or in other circumstances involving material violations of Company policy, fraud or misconduct that cause substantial harm to the Company even in the absence of a restatement of financial statements. In addition, performance-based LTI awards made to our NEOs are subject to clawback if, within three years following the end of the performance period, the Company materially restates its financial results with respect to the performance period and the recipient’s fraud or misconduct caused or partially caused the need for the restatement.

 

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Human Resources Committee Report

Our Human Resources Committee (HR Committee) has reviewed and discussed with management the Compensation Discussion and Analysis above. Based on this review and these discussions, the HR Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, and included in this Proxy Statement.

Members of the Human Resources Committee

J. Robert Kerrey, Chair

Richard W. Fisher

Christopher S. Lynch

Richard J. Mark

Tammy Romo

 

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Executive Compensation Tables

 

 

Summary Compensation

The following table summarizes the compensation for the years ended December 31, 2020, 2019 and 2018 for our NEOs for 2020. Dr. Sutaria and Ms. Arbour became NEOs for the first time in 2019, and Ms. Karrmann became an NEO for the first time in 2020.

2020 Summary Compensation Table

 

Name and

Principal

Position

  Year   Salary
($)
  Bonus
($)(1)
  Stock
Awards
($)(2)
  Option
Awards
($)
  Non-Equity
Incentive Plan
Compensation
($)(3)
 

Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings

($)(4)

  All Other
Compensation
($)(5)
  Total
($)

Ron Rittenmeyer

Executive Chairman and

Chief Executive Officer

      2020       1,444,615       875,000       10,000,021 (6)        -0-       3,948,750       -0-       407,143       16,675,529  
      2019       1,200,000       3,500,000       16,000,021       -0-       3,223,800       -0-       364,839       24,288,660  
      2018       1,513,846       2,625,000       8,716,976       -0-       1,799,460       -0-       328,739       14,984,021  

Saum Sutaria

President and Chief

Operating Officer

      2020       1,000,000       500,000       5,000,025       -0-       1,755,000       -0-       325,634       8,580,659  
     

 

2019

 

 

      961,539       -0-       11,000,016       -0-       1,731,300       -0-       258,569       13,951,423  

Dan Cancelmi

EVP and Chief Financial

Officer

      2020       641,385       250,000       2,500,054       -0-       2,169,160       1,620,368         39,529       7,220,496  
      2019       618,000       -0-       766,694       766,674       1,433,502       1,546,506       12,292       5,143,667  
      2018       618,000       -0-       766,670       766,674       570,290       292,830       12,080       3,026,544  

Audrey Andrews

EVP and General Counsel

      2020       550,000       -0-       1,500,032       -0-       1,347,713       1,207,934         8,671       4,614,350  
      2019       550,000       -0-       500,004       500,012       899,754       1,175,079       12,113       3,636,962  
      2018       550,000       -0-       500,003       500,008       396,516       342,367       11,935       2,300,829  

Paola Arbour

EVP and Chief Information

Officer

      2020       500,000       -0-       900,052       -0-       570,375       -0-       125,459       2,095,886  
      2019       500,000       -0-       266,690       266,674       559,688       -0-       108,400       1,701,452  

Sandi Karrmann

Former EVP and Chief Human

Resources Officer

      2020       423,077       944,045 (7)        975,002       -0-       -0-       -0-         131,133       2,478,257  

 

(1)

For Mr. Rittenmeyer, the 2020 value reflects the vesting of the final quarterly installment of a restricted cash awards granted pursuant to his Employment Agreement in 2018. For Dr. Sutaria and Mr. Cancelmi, these amounts reflect the 2020 Pandemic Special Bonuses described under “Pandemic Special Bonuses” in the Compensation Discussion & Analysis.

 

(2)

Values in this column for 2020 represent the grant date fair value of time-based restricted stock unit awards and performance-based restricted stock unit awards. We calculate the grant date fair value of restricted stock units based on the NYSE closing price per share of our common stock on the date of grant, which was $27.90 on February 26, 2020. Performance-based RSUs are shown assuming target achievement of the applicable performance conditions. If maximum performance were assumed, the performance-based RSUs included in these totals for 2020 would be as follows: Dr. Sutaria: $2,250,049, Mr. Cancelmi: $2,812,561, Ms. Andrews: $1,687,536, Ms. Arbour: $1,012,559, and Ms. Karrmann: $1,096,877. Ms. Karrmann forfeited her 2020 equity awards in connection with her October resignation.

 

(3)

This column reflects cash awards earned under our AIP for performance in the relevant year. In addition, for 2020, this amount reflects the following payouts of our 2018 performance cash LTI awards for Ms. Andrews: $720,300 and Mr. Cancelmi: $1,022,272, which were paid in early 2021 based on performance from January 1, 2018 through December 31, 2020 as discussed further on page 41.

 

(4)

The 2020 amounts represent the change in the actuarial present value of accumulated benefits under our SERP as of December 31, 2020 for Mr. Cancelmi and Ms. Andrews, our only NEOs who participate in the SERP. These amounts do not reflect compensation actually paid to the NEO. No NEO received preferential or above-market earnings on deferred compensation.

 

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(5)

Amounts shown in this column for 2020 include the following:

 

    

Rittenmeyer

   

Sutaria

   

Cancelmi

   

Andrews

   

Arbour

   

Karrmann

 

Premiums for long-term disability and survivor benefit life insurance

 

 

128

 

 

 

145

 

 

 

124

 

 

 

121

 

 

 

118

 

 

 

118

 

Matching contributions under our 401(k) Retirement Savings Plan

 

 

-0-

 

 

 

8,550

 

 

 

8,550

 

 

 

8,550

 

 

 

8,550

 

 

 

8,550

 

Matching contributions under our 2006 DCP

 

 

-0-

 

 

 

66,939

 

 

 

-0-

 

 

 

-0-

 

 

 

16,791

 

 

 

22,465

 

Company contributions under our ERA

 

 

375,000

 

 

 

250,000

 

 

 

-0-

 

 

 

-0-

 

 

 

100,000

 

 

 

100,000

 

Personal use of company aircraft*

 

 

24,918

 

 

 

-0-

 

 

 

30,855

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

Personal use of Company car and driver provided for security reasons**

 

 

11,702

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

Total

 

 

407,143

 

 

 

325,634

 

 

 

39,529

 

 

 

8,671

 

 

 

125,459

 

 

 

131,133

 

 

  *

Amounts shown in this row represent the incremental costs associated with the personal use of our aircraft. Incremental costs include fuel costs, landing and parking fees, customs and handling charges, per hour accruals for maintenance service plans, passenger catering and ground transportation, crew travel expenses and other trip-related variable costs (including fees for contract crew members and the use of our fractional jet interest). Because our aircraft are used primarily for business travel, incremental costs exclude fixed costs that do not change based on usage, such as pilots’ salaries, aircraft purchase or lease costs, fractional jet interest management fees, home-base hangar costs and certain maintenance fees.

 

  **

For business-related security reasons, a Company car and personal security driver were provided to Mr. Rittenmeyer primarily for commuting and local business travel. The car is valued based on the annualized cost of the car plus maintenance and fuel. For security personnel employed by the Company, the cost is the actual incremental cost of expenses incurred by the security personnel. Total salary and benefits are not allocated because the Company already incurs these costs for business purposes. The amount also includes $4,605 for a related tax gross-up benefit.

 

(6)

Reflects grant of time-based RSUs awarded to Mr. Rittenmeyer in connection with the extension of his employment agreement that vests in seven quarterly installments and is intended to further align his interests with those of shareholders over the remainder of his term of service as CEO and to reward continued stock price growth.

 

(7)

Reflects the payment under Ms. Karrmann’s cash bonus agreement as described on page 41.

 

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Grants of Plan-Based Awards During 2020

The following table sets forth information concerning grants of equity and performance cash awards made in 2020 under our stock incentive plan and grants of cash that potentially could have been earned in 2020 under our AIP.

 

Name

  Award
Type(1)
  Grant
Date
 

 

Estimated Future Payouts
Under Non-Equity Incentive
Plan  Awards

     

 

   

 

Estimated Future Payouts
Under Equity Incentive
Plan Awards

    All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or
Units
(#)
   

Grant
Date
Fair
Value

of
Stock
and
Option
Awards

($)(2)

 
  Threshold
($)
    Target
($)
    Maximum
($)
      

 

    Threshold
(#)
  Target
(#)
    Maximum
(#)
 

Ron Rittenmeyer

 

AIP

   

 

0

 

 

 

2,250,000

 

 

 

4,500,000

 

           
 

RSU

 

2/26/20

                                                     

 

359,713

 

 

 

10,000,021

 

Saum Sutaria

 

AIP

   

 

0

 

 

 

1,000,000

 

 

 

2,000,000

 

           
 

RSU

 

2/26/20

               

 

143,885

 

 

 

4,000,003

 

 

PRSU

 

2/26/20

                                 

0

 

 

35,972

 

 

80,937

 

         

 

1,000,022

 

Dan Cancelmi

 

AIP

   

 

0

 

 

 

650,000

 

 

 

1,300,000

 

           
 

RSU

 

2/26/20

               

 

44,965

 

 

 

1,250,027

 

 

PRSU

 

2/26/20

                                 

0

 

 

44,965

 

 

 

101,171

         

 

1,250,027

 

Audrey Andrews

 

AIP

   

 

0

 

 

 

412,500

 

 

 

825,000

 

           
 

RSU

 

2/26/20

               

 

26,979

 

 

 

750,016

 

 

PRSU

 

2/26/20

                                 

0

 

 

26,979

 

 

 

60,703

         

 

750,016

 

Paola Arbour

 

AIP

   

 

0

 

 

 

375,000

 

 

 

750,000

 

           
 

RSU

 

2/26/20

               

 

16,188

 

 

 

450,026

 

 

PRSU

 

2/26/20

                                 

0

 

 

16,188

 

 

 

36,423

         

 

450,026

 

Sandi Karrmann

 

AIP

   

 

0

 

 

 

375,000

 

 

 

750,000

 

           
 

RSU

 

2/26/20

               

 

17,536

 

 

 

487,501

 

 

PRSU

 

2/26/20

                                 

0

 

 

17,536

 

 

 

39.456

 

         

 

487,501

 

 

(1)

AIP Awards. Awards designated “AIP” are awards that our NEOs might have earned during 2020 under our Annual Incentive Plan, dependent upon our 2020 performance. Awards actually earned are shown in the Non-Equity Incentive Plan Compensation column of the 2020 Summary Compensation Table on page 48.

 

  

Time-Based Restricted Stock Unit Awards. Awards designated “RSU” reflect time-based restricted stock unit awards under our 2008 Stock Incentive Plan. The RSUs granted to Mr. Rittenmeyer on February 26, 2020 vest quarterly in seven equal installments. The remaining RSUs granted on February 26, 2020 vest ratably over each of the first three anniversaries of the grant date.

 

  

Performance-Based Restricted Stock Unit Awards. Awards designated “PRSU” reflect performance-based restricted stock unit awards under our 2019 Stock Incentive Plan. The PRSUs granted on February 26, 2020 are subject to the satisfaction of financial and stock price performance conditions further discussed on page 40.

 

(2)

We calculate the grant date fair value of restricted stock units based on the NYSE closing price per share of our common stock on the date of grant, which was $27.90 on February 26, 2020.

 

50   LOGO   


Table of Contents

Executive Compensation Tables

 

    

 

    

 

 

Outstanding Equity Awards

The following table sets forth information as of December 31, 2020 with respect to outstanding equity awards granted to each of the NEOs. Where applicable, the numbers of securities and values in this table and throughout this Proxy Statement have been adjusted for the reverse stock split effective October 11, 2012.

Outstanding Equity Awards at 2020 Fiscal Year-End Table

 

          Option Awards(1)     Stock Awards  

Name

  Grant
Date
   

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable(1)

    Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number of
Shares or
Units of
Stock that
have not
Vested
(#)
    Market
Value of
Shares or
Units of
Stock
that
have not
Vested
($)(2)
    Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
that have
not
Vested
(#)
   

Equity
Incentive
Plan
Awards:
Market
or
Payout
Value

of
Unearned

Shares,
Units or
Other
Rights
that have
not
Vested
($)(2)

 

Ron Rittenmeyer

 

 

2/27/19

 

                                 

 

125,816

(3) 

 

 

5,023,833

 

               
   

 

2/26/20

 

                                 

 

261,610

(4) 

 

 

10,446,087

 

               

Total values

                                                 

$

15,469,920

 

               

Saum Sutaria

 

 

1/31/19

 

                                 

 

318,327

(5) 

 

 

12,710,797

 

               
   

 

2/27/19

 

                                 

 

94,362

(6) 

 

 

3,767,875

 

               
   

 

2/26/20

 

                                 

 

143,885

(6) 

 

 

5,745,329

 

               
   

 

2/26/20

 

                                                 

 

35,972

(7) 

 

$

1,436,362

 

Total values

                                                 

$

22,224,001

 

         

$

1,436,362

Dan Cancelmi

 

 

9/28/12

 

 

 

37,500

 

         

 

25.08

 

 

 

9/28/22

 

                               
   

 

3/1/17

 

 

 

89,976

         

 

18.99

 

 

 

3/1/27

 

                               
   

 

2/28/18

 

         

 

86,826

 

 

 

20.60

 

 

 

2/28/28

 

                               
   

 

2/28/18

 

                                 

 

12,406

(6) 

 

 

495,372

 

               
   

 

2/27/19

 

         

 

61,383

 

 

 

28.26

 

 

 

2/27/29

 

                               
   

 

2/27/19

 

                                 

 

18,087

(6) 

 

 

722,214

 

               
   

 

2/26/20

 

                                 

 

44,965

(6) 

 

$

1,795,452

 

               
   

 

2/26/20

 

                                                 

 

44,965

(7) 

 

$

1,795,452

 

Total values

                                                 

$

3,013,038

 

         

$

1,795,452

 

  2021 PROXY STATEMENT      51  


Table of Contents

Executive Compensation Tables

 

 

          Option Awards(1)     Stock Awards  

Name

  Grant
Date
   

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable(1)

    Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number of
Shares or
Units of
Stock that
have not
Vested
(#)
    Market
Value of
Shares or
Units of
Stock
that
have not
Vested
($)(2)
    Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
that have
not
Vested
(#)
   

Equity
Incentive
Plan
Awards:
Market
or
Payout
Value

of
Unearned

Shares,
Units or
Other
Rights
that have
not
Vested
($)(2)

 

Audrey Andrews

 

 

2/28/18

 

         

 

56,626

 

 

 

20.60

 

 

 

2/28/28

 

                               
   

 

2/28/18

 

                                 

 

8,091

(6) 

 

 

323,074

 

               
   

 

2/27/19

 

         

 

40,033

 

 

 

28.26

 

 

 

2/27/29

 

                               
   

 

2/27/19

 

                                 

 

11,796

(6) 

 

 

471,014

 

               
   

 

2/26/20

 

                                 

 

26,979

(6) 

 

$

1,077,271

 

               
   

 

2/26/20

 

                                                 

 

26,979

(7) 

 

$

1,077,271

 

Total values

                                                 

$

1,871,359

 

         

 

1,077,271

Paola Arbour

 

 

5/31/18

 

         

 

17,205

 

 

 

35.43

 

 

 

5/31/28

 

                               
   

 

5/31/18

 

                                 

 

2,509

(6) 

 

$

100,184

 

               
   

 

2/27/19

 

         

 

21,351

 

 

 

28.26

 

 

 

2/27/29

 

                               
   

 

2/27/19

 

                                 

 

6,292

(6) 

 

$

251,240

 

               
                                           

 

16,188

(6) 

 

$

646,387

 

               
                                                           

 

16,188

(7) 

 

$

646,387

 

Total values

                                                 

$

997,811

 

         

$

646,387

Sandi Karrmann(8)

                                                                       

 

(1)

All options have a term of 10 years. Performance based stock options granted in 2018 and 2019 vest only if the Company’s stock price increases 25% from grant date and remains at or above that level for 20 consecutive trading days.

 

(2)

Based on the NYSE closing price of $39.93 per share of our common stock on December 31, 2020.

 

(3)

These time-based restrict stock units vest quarterly in equal installments ending on June 30, 2021.

 

(4)

These time-based restricted stock units vest quarterly in equal installments ending on December 31, 2022.

 

(5)

These time-based restricted stock units vest on January 6, 2022.

 

(6)

These time-based restricted stock units vest in equal installments on each of the first three anniversaries of the date of grant.

 

(7)

These performance-based restricted stock units will vest at the end of the three-year performance period ending December 31, 2022, subject to achievement of Adjusted Earnings Per Share and Adjusted Free Cash Flow Less NCI performance goals for each year within the three-year performance period, as modified by the Relative Total Shareholder Return modifier measured over the entirety of the performance period. The amount reported here represents the maximum performance-based restricted stock units that may be earned.

 

(8)

Ms. Karrmann forfeited her outstanding unvested equity awards in connection with her separation.

 

52   LOGO   


Table of Contents

Executive Compensation Tables

 

    

 

    

 

 

Option Exercises and Stock Vested

The following table sets forth certain information regarding stock options exercised and restricted stock unit awards vested during 2020 for the NEOs.

2020 Option Exercises and Stock Vested Table

 

 

 

Option Awards Stock Awards

Name

Number of
Shares
Acquired on
Exercise
(#)

Value Realized

on Exercise
($)(1)

Number of Shares
Acquired on Vesting
(#)

Value Realized

on Vesting
($)(2)

Ron Rittenmeyer

 

408,526

 

9,628,958

 

409,664

 

10,251,274

Saum Sutaria

 

0

 

0

 

47,181

 

1,261,620

Dan Cancelmi

 

0

 

0

 

34,907

 

921,516

Audrey Andrews

 

58,680

 

1,295,842

 

22,765

 

600,977

Paola Arbour

 

0

 

0

 

5,654

 

138,693

Sandi Karrmann

 

0

 

0

 

3,145

 

84,097

 

(1)

Calculated by multiplying the number of options exercised by the difference between the market price of common stock on the date of exercise and the exercise price. The values shown do not represent proceeds earned by the NEOs, as shares were withheld to cover applicable taxes.

 

(2)

Calculated by multiplying the number of shares vested by the market price of common stock on the vesting date. The values shown do not represent proceeds earned by the NEOs, as shares were withheld to cover applicable taxes.

Pension Benefits

The following table sets forth information as of December 31, 2020 with respect to our SERP, which provides for payments or other benefits in connection with the retirement of the following participating NEOs.

2020 Pension Benefits Table

 

Name

Plan Name Number of Years
Credited  Service
(#)(1)
Present Value
of Accumulated
Benefit
($)(2)(3)

Payments During Last

Fiscal Year

($)