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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Tenet Healthcare Corporation

(Name of Registrant as Specified in Its Charter)

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Dear Fellow Shareholders,

 

 

 

 

TENET HEALTHCARE CORPORATION

14201 Dallas Parkway

Dallas, Texas 75254

(469) 893-2200

Notice of Annual Meeting of Shareholders

to be held on Thursday, May 28, 2020

April 17, 2020

To our Shareholders:

Our 2020 Annual Meeting of Shareholders (the “Annual Meeting”) will be held on Thursday, May 28, 2020, at 8:00 a.m. Central Time. You will be able to attend and participate in the Annual Meeting by visiting www.virtualshareholdermeeting.com/THC2020, where you will be able to listen to the meeting live, submit questions, and vote, for the following purposes:

 

1.	To elect the ten 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, 2020.

 

4.	To vote on a shareholder proposal regarding an independent board chairman, if properly presented at the meeting.

 

5.	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 31, 2020, 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.

 

 

 

2020 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			20
Certain Relationships and Related Person Transactions			21
Communications with the Board of Directors by Shareholders and Other Interested Parties			21
Director Compensation			22
2019 Director Compensation Table			23
Compensation Plans Applicable to Directors			23
Director Stock Ownership and Retention Requirements			24
Executive Officers			25
Securities Ownership			27
Securities Ownership of Management			27
Securities Ownership of Certain Shareholders			28
Compensation Discussion and Analysis			29
Overview			30
Detailed Description and Analysis			36
Human Resources Committee Report			47
Executive Compensation Tables			48
Summary Compensation			48
Grants of Plan-Based Awards During 2019			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
Proposal 4-Shareholder Proposal Regarding an Independent Board Chairman			67
General Information Regarding the Annual Meeting and Voting			69
Other Information			73
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.

 

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, 2019, before you vote.

2020 ANNUAL MEETING OF SHAREHOLDERS

 

Date and Time: Thursday, May 28, 2020, at 8:00 a.m. Central Time				Place: Online at www.virtualshareholdermeeting.com/ THC2020				Record Date: March 31, 2020

Information:

The Notice of Internet Availability, this Proxy Statement and related proxy materials are being mailed or made available to shareholders on or about April 17, 2020. 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 Ten 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
4		Shareholder Proposal Regarding an Independent Board Chairman		Vote AGAINST		67

 

		2020 PROXY STATEMENT			1

Proxy Statement Summary

 

 

Business Overview

Tenet is a national diversified healthcare services company focused on our mission to provide quality, compassionate care in the communities we serve. Tenet has over 113,000 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 500 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. 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 customers.

 

 

 

2

Proxy Statement Summary

 

Governance Highlights

 

Significant Board refreshment with seven new directors since 2017		Active shareholder outreach and engagement		Annual election of directors by majority standard
Shareholder right to call special meeting with 25% vote threshold		Strong independent Lead Director with robust responsibilities		Proxy access right adopted in 2019 on market standard terms

Board Refreshment

In response to specific shareholder feedback, the Board accelerated its refreshment process in 2017, and as a result seven of our 10 directors have joined since October 2017. In June 2019, the Board appointed Mr. Lynch, who offers expertise in corporate governance, financial and regulatory matters, and government relations. Effective October 2019, the Board appointed Dr. West, who served as the 44^th Surgeon General of the U.S. Army and has broad healthcare leadership and operational experience. The 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, with a right for shareholders that beneficially own 25% of our outstanding shares to call a special meeting added in 2018 and a right for shareholders to nominate directors via proxy access on market standard terms added in 2019. These 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 our 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.

 

		2020 PROXY STATEMENT			3

Proxy Statement Summary

 

 

Board Characteristics

The recent Board refreshment has led to a balanced mix of diversity, age and tenure in the boardroom. The Board believes that a range of backgrounds, 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

 

4

Director Nominees

 

 

		2020 PROXY STATEMENT			5

Director Nominees

 

 

 

6

Director Nominees

 

 

		2020 PROXY STATEMENT			7

Director Nominees

 

 

 

8

Director Nominees

 

 

		2020 PROXY STATEMENT			9

Director Nominees

 

 

 

10

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, and the entire Board is responsible for selecting, individuals 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 seven new independent directors who collectively bring deep healthcare, financial, public sector, operational expertise 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. In 2019, Board members recommended Mr. Lynch and Dr. West 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 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

 

		2020 PROXY STATEMENT			11

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.

The Board completed its most recent self-evaluation in February 2020, focusing its discussions on, among other things, the composition and effectiveness of the Board in light of several 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. Based on the Board’s annual evaluation, and in accordance with the requirements of the Company’s Corporate Governance Principles, the Board concluded that no changes were necessary in the Board’s leadership or committee structure, including chair assignments. In addition, the Board concluded 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 ten 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.

 

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

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.

 

12

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, Austin, Bierman, Fisher, 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 each of Ms. Brenda J. Gaines and Mr. Edward A. Kangas was independent during the time each of them served on our Board during 2019 when the Board last assessed their independence. In general, all members of our Board during the past 14 years have been independent directors with the exception of the two individuals who have served as our Chief Executive Officer during this time period.

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.

 

		2020 PROXY STATEMENT			13

 

 

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 in order 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 the Chief Executive 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 •  Regular engagement with shareholders

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 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 for 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.

 

14

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 the 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 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 9 times during 2019. The Board frequently meets in executive sessions, including at least once during each regularly scheduled Board meeting.

Each incumbent director who served during 2019 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. Nine of the 10 directors elected at last year’s annual meeting were in attendance at the 2019 Annual Meeting. Mr. Mark was not able to attend due to a preexisting commitment.

 

		2020 PROXY STATEMENT			15

Corporate Governance and Board Practices

 

 

Committees

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

 

Director		Audit*		Human Resources		Governance		QCE
Lloyd J. Austin, III
James L. Bierman								Chair
Richard W. Fisher
Meghan M. FitzGerald						Chair
J. Robert Kerrey				Chair
Christopher S. Lynch
Richard J. Mark
Ronald A. Rittenmeyer
Tammy Romo		Chair
Nadja Y. West

 

 

*	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 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.

 

16

Corporate Governance and Board Practices

 

The Audit Committee   Membership: Romo (Chair), Austin, Fisher, Lynch, Mark (All Independent)				Meetings held in 2019:		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 Human Resources Committee   Membership: Kerrey (Chair), Austin, Fisher, Lynch, Romo (All Independent)				Meetings held in 2019:		6
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

 

		2020 PROXY STATEMENT			17

Corporate Governance and Board Practices

 

 

The Nominating and Corporate Governance Committee   Membership: FitzGerald (Chair), Bierman, Mark, West (All Independent)				Meetings held in 2019:		5
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

 

 

The Quality, Compliance & Ethics Committee   Membership: Bierman (Chair), FitzGerald, Kerrey, West (All Independent)				Meetings held in 2019:		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

 

 

18

Corporate Governance and Board Practices

 

HR Committee Interlocks and Insider Participation

No member of the HR Committee was at any time during 2019 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 2019.

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.

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.

 

		2020 PROXY STATEMENT			19

Corporate Governance and Board Practices

 

 

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.

Policies on Ethics and Conduct

Standards 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 Standards 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 Standards 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 full text of our Standards 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 Standards of Conduct and any grant of a waiver from a provision of the Standards of Conduct requiring disclosure under applicable SEC rules will be disclosed at the same location as the Standards 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 Standards 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.

 

20

Corporate Governance and Board Practices

 

Certain Relationships and Related Person Transactions

Our written Standards of Conduct require 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 Standards 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.

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.

 

		2020 PROXY STATEMENT			21

 

 

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. The Board has not increased director compensation levels or otherwise made changes to the program since 2015.

Employee directors do not receive any compensation for their service as a director. All 2019 compensation for our Executive Chairman and Chief Executive Officer is shown in the 2019 Summary Compensation Table on page 48.

Our 2019 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		$	15,000
•  Quality, Compliance & Ethics Committee		$	15,000
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.

 

22

Director Compensation

 

2019 Director Compensation Table

 

Name		Fees Earned or Paid in Cash ($)					Stock Awards ($)(1)(2)					Total ($)
Lloyd J. Austin, III				127,500					175,002					302,502
James L. Bierman				132,500					175,002					307,502
Richard W. Fisher				125,500					175,002					300,502
Meghan M. FitzGerald				117,500					175,002					292,502
Brenda J. Gaines(3)				133,392					175,002					308,394
Edward A. Kangas(3)				118,126					175,002					293,128
J. Robert Kerrey				283,289					225,009					508,298
Christopher S. Lynch				49,691					193,521	(4)				243,212
Richard J. Mark				124,000					175,002					299,002
Tammy Romo				131,237					175,002					306,239
Nadja Y. West				25,943					164,280	(5)				190,223

 

(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, 2019 included in our Annual Report on Form 10-K.

 

(2)

The amounts shown in this column reflect annual RSU grants applicable to the 2019-2020 board service year valued at approximately $175,000 (prorated for partial-year service in the cases of Mr. Lynch and Dr. West). 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 24% to reflect the mandatory post-vest holding period applicable to the 2019 annual awards. On May 3, 2019, based on the NYSE closing price of $21.40 per share of our common stock (adjusted as described in the preceding sentence), each non-employee director then serving was granted 10,817 RSUs under the program, and Senator Kerrey was granted an additional 3,091 RSUs in respect of his service as Lead Director.

 

(3)	Ms. Gaines and Mr. Kangas ended their terms of service as directors on November 7, 2019, and their cash fees were prorated as applicable.

 

(4)

Upon joining the Board in August 2019, Mr. Lynch was granted an initial stock award of 3,003 RSUs and a prorated annual director grant of 7,978 RSUs applicable to the 2019-2020 board service year. These grants were based on the NYSE closing price of $21.65 per share of our common stock on August 30, 2019 and, in the case of the prorated annual grant, also reflected the discount for illiquidity to reflect the mandatory post-vest holding period applicable to the 2019 annual director awards. The initial stock grant is not subject to the mandatory post-vesting holding period.

 

(5)

Upon joining the Board in October 2019, Dr. West was granted an initial stock award of 2,566 RSUs and a prorated annual director grant of 5,279 RSUs applicable to the 2019-2020 board service year. These grants were based on the NYSE closing price of $25.34 per share of our common stock on October 31, 2019 and, in the case of the prorated annual grant, also reflected the discount for illiquidity to reflect the mandatory post-vest holding period applicable to the 2019 annual director awards. The initial stock grant is not subject to the mandatory post-vesting holding period.

 

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 last trading day of any month in 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.

 

		2020 PROXY STATEMENT			23

Director Compensation

 

 

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, meeting fees and committee fees. Senator Kerrey was the only non-employee director who participated in the DCP in 2019. 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.

 

24

 

Executive Officers

Biographical information for the executive officers of the Company is set forth below. Biographical information for Ronald A. Rittenmeyer 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, 53, was appointed Tenet’s General Counsel in January 2013 and Executive Vice President in March 2019. In this capacity, she oversees the law department and government relations 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, 56, 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, 57, 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, including 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, 48, 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.

Sandra R.A. Karrmann, Executive Vice President and Chief Human Resources Officer

Ms. Karrmann, 54, was appointed Senior Vice President and Chief Human Resources Officer for the Tenet enterprise in November 2017 and Executive Vice President in March 2019. In this capacity, she is responsible for providing leadership and oversight for labor relations, talent development, culture and performance systems, compensation, employee benefits and related matters. She previously held the title of Senior Vice President at Tenet from November 2017 to March 2019. Ms. Karrmann joined the Company as Senior Vice President and Chief Human Resources Officer for USPI in January 2013. Before joining USPI in 2013, Ms. Karrmann served in several leadership roles at various companies, including Chief People Officer for Yum! Restaurants

 

		2020 PROXY STATEMENT			25

Executive Officers

 

 

International and Pizza Hut US from August 2007 to June 2012. She also served as the Executive Vice President and CHRO for Meritage Homes Corporation from December 2005 to August 2007. Prior to that, she served in a number of positions with increasing responsibility over nearly 13 years with PepsiCo, including her last role as vice president of HR for the sales division of Frito-Lay North America. Ms. Karrmann completed her bachelor’s degree in psychology and communications from the University of Michigan and her MBA in finance from the University of Southern California.

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

Ms. Quintana, 63, 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 from May 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 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. 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 Catholic Charities of Dallas.

Saumya (Saum) Sutaria M.D., President and Chief Operating Officer

Dr. Sutaria, 47, was appointed Tenet’s Chief Operating Officer in January 2019 and President in November 2019. In this capacity, he oversees all of Tenet’s acute care hospitals, hospital-affiliated outpatient facilities and physician practices and has direct responsibility for USPI and Conifer. 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.

 

26

 

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 31, 2020 (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 31, 2020					Percent of Class as of March 31, 2020
Audrey Andrews				73,736					58,680					*
Paola Arbour				6,726					2,509	(3)				*
Lloyd J. Austin, III				18,729	(4)				-0-					*
James L. Bierman				31,103	(5)				-0-					*
Daniel J. Cancelmi				339,937					127,476					*
Richard W. Fisher				30,686	(6)				-0-					*
Meghan M. FitzGerald				24,882	(7)				-0-					*
J. Robert Kerrey				59,108	(8)				-0-					*
Christopher S. Lynch				10,981	(9)				-0-					*
Richard J. Mark				30,686	(6)				-0-					*
Keith B. Pitts				336,877	(10)				-0-					*
Ronald A. Rittenmeyer				448,996	(11)				408,526					*
Tammy Romo				45,663	(12)				-0-					*
Saumya Sutaria				49,413					-0-					*
Nadja Y. West				8,845	(13)				-0-					*
Current executive officers and directors as a group (17 persons)				1,205,292	(14)				610,966					1.7	%

 

*	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)	Represents 2,509 RSUs granted under our stock incentive plans. These RSUs are scheduled to vest and settle in shares of our common stock on May 31, 2020.

 

(4)	Represents 18,729 RSUs granted under our stock incentive plans.

 

(5)	Represents 31,103 RSUs granted under our stock incentive plans.

 

(6)	Represents 30,686 RSUs granted under our stock incentive plans.

 

(7)	Includes 18,729 RSUs granted under our stock incentive plans.

 

(8)	Includes 36,336 RSUs granted under our stock incentive plans.

 

(9)	Represents 10,981 RSUs granted under our stock incentive plans.

 

(10)	Holdings for Mr. Pitts are reported as of August 31, 2019, the date that he ceased to be an executive officer of the Company.

 

(11)	Includes 15,000 shares held by Mr. Rittenmeyer’s spouse and 16,539 RSUs granted under our stock incentive plans during the period of time Mr. Rittenmeyer served as a non-employee director.

 

(12)	Includes 32,431 RSUs granted under our stock incentive plans.

 

(13)	Includes 7,845 RSUs granted under our stock incentive plans.

 

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

 

		2020 PROXY STATEMENT			27

Securities Ownership

 

 

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 31, 2020
Glenview Capital Management, LLC     767 Fifth Avenue, 44th Floor     New York, NY 10153				19,383,829	(1)				18.54	%
The Vanguard Group, Inc.     100 Vanguard Blvd.     Malvern, PA 19355				12,430,566	(2)				11.89	%
BlackRock, Inc.     55 East 52nd Street     New York, NY 10055				12,632,145	(3)				12.08	%
Harris Associates L.P.     111 S. Wacker Drive, Suite 4600     Chicago IL 60606				6,184,292	(4)				5.92	%

 

(1)

Based on a Schedule 13D/A filed with the SEC on August 15, 2019 by Glenview Capital Management, LLC and its named subsidiaries and affiliates (collectively, Glenview), and Lawrence M. Robbins, as of August 14, 2019, 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. The 19,383,829 shares includes 25,728 shares issuable by the Company upon settlement of the RSUs that were granted to former members of the Company’s Board who were employees of Glenview.

 

(2)

Based on a Schedule 13G/A filed with the SEC on February 12, 2020 by The Vanguard Group, Inc., on behalf of itself and its named subsidiaries and affiliates (collectively, Vanguard), as of December 31, 2019. Vanguard reported sole voting power with respect to 207,579 of the shares indicated above, shared voting power with respect to 13,156 of the shares indicated above, sole dispositive power with respect to 12,221,163 of the shares indicated above and shared dispositive power with respect to 209,403 of the shares indicated above.

 

(3)

Based on a Schedule 13G/A filed with the SEC on February 4, 2020 by BlackRock, Inc., on behalf of itself and its named subsidiaries and affiliates (collectively, BlackRock), as of December 31, 2019. BlackRock reported sole voting power with respect to 12,407,784 of the shares indicated above and sole dispositive power with respect to all of the shares indicated above.

 

(4)

Based on a Schedule 13G/A filed with the SEC on February 14, 2020 by Harris Associates L.P. (Harris), along with its general partner Harris Associates, Inc. (HAI), as of December 31, 2019. Harris and HAI reported sole voting power with respect to 3,989,481 shares and sole dispositive power with respect to all of the shares indicated above.

 

28

Compensation Discussion & Analysis

 

This CD&A describes our compensation programs and reviews compensation decisions for the following Named Executive Officers (NEOs) for 2019:

 

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
Keith Pitts		Former Vice Chairman(1)

 

(1)	Mr. Pitts served as Vice Chairman of the Company until his retirement on August 31, 2019.

The CD&A and Executive Compensation Tables are organized as follows:

CD&A Table of Contents

 

Overview			30
2019: Building on a Strong Foundation			30
Response to Shareholder Feedback			31
2019 Leadership Developments			31
Compensation Elements Link Pay with Performance			34
Best Practices Support Strong Compensation Governance			35
Detailed Description and Analysis			36
2019 Compensation Decisions			36
Base Salary			36
Annual Incentive Plan			36
Long-Term Incentive Compensation			39
The Compensation Process			41
Role of the Human Resources Committee			41
Independent Compensation Consultant			42
Benchmarking Against Peer Companies			42
Other Compensation, Benefits and Considerations			43
Compensation Governance Practices			45

 

		2020 PROXY STATEMENT			29

Compensation Discussion & Analysis

 

 

Overview

2019: Building on a Strong Foundation

In 2019, Tenet delivered strong financial and total shareholder return (TSR) results built on sustainable operational improvements, clear strategic direction and a cultural reset that has taken root throughout the enterprise. This growth is the result of an intense turnaround effort that began in late 2017 under the leadership of our Board and Executive Chairman and Chief Executive Officer (CEO), Ron Rittenmeyer. The changes over the past two-and-a-half years have built powerful momentum for long-term growth propelled by our mission: to provide quality, compassionate care in the communities we serve.

 

		Operational Excellence In 2019 we executed on all fronts, with measurable improvements in quality, safety and patient experience. All three of our business units met or exceeded financial growth targets. The clearest sign of success came from the patients: we delivered positive volume growth all four quarters in 2019, including the highest rate of improvement in over four years.		Strategic Repositioning We continued to optimize our portfolio of assets. Last year we announced plans to divest two hospitals and further our commitment to build a leading specialty care platform with additional scale in the ambulatory surgery market. We also completed our strategic review of our Conifer business unit with the announcement that we are pursuing a spin-off of Conifer.		Cultural Reset Management devoted significant energy and attention to building a “Culture of Accountability” across the organization, achieving its goal of embedding ownership and analytical rigor at every level. To further this development, in early 2020 we moved all three business units to a single corporate headquarters for the first time to reduce time to action and increase collaboration.
		Refreshed Board The changes underway at Tenet begin with the Board. Since our turnaround began in late 2017, 70% of our Board is new, and last year we added two energetic, highly skilled directors. The skillsets and viewpoint diversity in our boardroom help address the Company’s most significant risks and reach the Company’s strategic priorities.		Reduced Costs Over the last three years, we have repeatedly set bold cost-cutting targets that we continue to meet. In 2019, we achieved $300 million in cumulative savings, and we are on track to reach our goal of $450 million through smarter decision-making processes across the enterprise that increase efficiency without sacrificing quality.		Upgraded Talent We have upgraded senior management with new talent across the enterprise, headlined by the addition of Dr. Saum Sutaria as Chief Operating Officer in early 2019 and his elevation to President later in the year. At the same time, we have strengthened our approach to human capital management to ensure the Company develops future leaders.

 

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Compensation Discussion & Analysis

 

Response to Shareholder Feedback

Shareholder feedback has shaped our pay-for-performance philosophy and continues to guide the HR Committee’s decisions. In 2017, the HR Committee broadly solicited shareholder input after a disappointing say-on-pay vote that informed revisions to our pay program. Our Board has continued this dialogue regarding our pay and governance practices in subsequent years to ensure that our target compensation levels, program design and pay delivery align with shareholder priorities. As a result, the Company has received greater than 90% approval from shareholders on its say-on-pay votes every year since 2017, including approximately 92% in 2019.

2019 Leadership Developments

Chief Executive Officer Compensation Background

Mr. Rittenmeyer’s compensation has been structured in progressive steps to reward his success in developing and executing Tenet’s turnaround strategy, while retaining him to ensure that the turnaround’s success is sustainable. Under his leadership, the Company has exceeded difficult near-term milestones, addressed significant legacy challenges, achieved meaningful progress toward a long-term strategy recast to better align with shareholder interests, and put in place a plan for future leadership succession. As Mr. Rittenmeyer has repeatedly demonstrated his strong performance, the Board has determined accordingly that it is in the best interest of Tenet’s shareholders to further extend his service as CEO, as summarized below.

Initial Interim Role (August 2017-February 2018)

Mr. Rittenmeyer began his leadership of Tenet as Executive Chairman in August 2017. He entered this role as a Tenet director with seven years’ experience serving on our Board, and at the same time the Board initiated a broader search for a permanent CEO. As a result, Mr. Rittenmeyer’s initial compensation for service in 2017 reflected the short-term transitionary nature of the position consisting of a $2.9 million annual salary, no cash bonus opportunity, and a $2.3 million performance-based (out-of-the-money) stock option.

2018 Employment Agreement (March 2018-February 2020)

After six months of strong initial performance, the Board engaged Mr. Rittenmeyer to serve as the Company’s CEO for the two-year period from March 2018 through February 2020 under an employment agreement (the Employment Agreement). The HR Committee set the target for Mr. Rittenmeyer’s annual total direct compensation at approximately the 25^th percentile of our peers based on the belief that initial compensation for an incoming CEO should provide room for growth and with the expectation that, should the Employment Agreement be amended or extended, future compensation would be determined based on demonstrated results.

The Employment Agreement provided for a base salary of $1.2 million per year, an annual target bonus of 150% of salary, and $14 million in time-based long-term incentives, with $7 million granted in restricted stock units (RSUs) and $7 million in restricted cash because share availability under the stock plan was constrained. The long-term incentives vested in equal quarterly installments over the two-year term of the Employment Agreement, which reflected Mr. Rittenmeyer’s employment commitment. The long-term incentive grant was not performance-based because the employment commitment was limited, the turnaround strategy was still being formulated, and stock price recovery reflected in Mr. Rittenmeyer’s RSUs and earlier performance option grant was the primary performance focus. Due to a delay in granting Mr. Rittenmeyer’s RSUs, he initially received 51,146 fewer units than the HR Committee intended. As a result, the HR Committee subsequently granted Mr. Rittenmeyer these units in 2018 with a grant-date value of approximately $1.7 million. Under the Employment Agreement, Mr. Rittenmeyer is not covered by Tenet’s Executive Severance Plan.

2019 Employment Agreement Extension (March 2019-June 2021)

In February 2019, recognizing the considerable improvements Mr. Rittenmeyer had already implemented and the additional progress required to complete the Company’s turnaround, the Board approved an amendment to Mr. Rittenmeyer’s Employment Agreement (the 2019 Extension) that extended his term of service as CEO through June 2021.

Under the 2019 Extension, Mr. Rittenmeyer’s base salary and annual target bonus opportunity remained unchanged at $1.2 million and 150% of base salary, respectively. An award of RSUs valued at $16 million that vests in equal quarterly installments through the term of the 2019 Extension was granted to further align Mr. Rittenmeyer’s interests with those of shareholders and to reward continued turnaround performance reflected by Tenet’s stock price growth rather than setting goals

 

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for a short, incremental performance period. The 2019 Extension also extended the duration of the non-competition and non-solicitation covenants to which Mr. Rittenmeyer is subject from 12 months following his termination of employment to two years.

Market-Competitive Pay with Market-Leading Performance in 2019

The HR Committee set Mr. Rittenmeyer’s 2019 target total direct compensation at approximately the median among the Company’s peers over his expected tenure leading the Company through June 2021. Meanwhile, in 2019 the Company outperformed its peers and the broader market as represented by the S&P 500, with Tenet’s annual total shareholder return in the 99^th percentile of both groups.

The graphic below annualizes Mr. Rittenmeyer’s target total direct compensation for his term leading the Company through the end of the 2019 Extension on June 30, 2021. The HR Committee believes that annualizing the target amounts over the expected term provides a more holistic view of Mr. Rittenmeyer’s intended compensation package as compared to the SEC-required disclosure levels shown in the Summary Compensation Table on page 48, where long-term equity awards are reported entirely in the year of grant. The HR Committee granted Mr. Rittenmeyer’s long-term incentives up front to strongly link his potential pay delivery to Tenet’s turnaround results and continued success during this period.

 

2020 Employment Agreement Extension (February 2020-December 2022)

After the completion of the 2019 fiscal year, the Board evaluated the additional progress required to secure the Company’s transformation as well as the Company’s leadership succession plan. Considering Mr. Rittenmeyer’s extraordinary accomplishments in turning Tenet around and his continued importance in implementing the Company’s long-term strategic goals, the Board asked Mr. Rittenmeyer to extend his tenure leading the Company.

In February 2020, the Board approved an amendment to Mr. Rittenmeyer’s Employment Agreement (the 2020 Extension) to extend his term of service from June 2021 to December 2022. Under the 2020 Extension, Mr. Rittenmeyer’s base salary increased to $1.5 million per year and his annual target bonus opportunity as a percentage of base salary remained unchanged. Mr. Rittenmeyer also received an award of RSUs valued at $10 million to recognize his extended service period, which had not been contemplated in previous equity awards. The RSUs vest in equal quarterly installments through the term of the 2020 Extension.

The Board approved Mr. Rittenmeyer’s 2020 Extension at a regularly scheduled meeting before COVID-19 brought unprecedented challenges to the American healthcare industry and broader economy, while the HR Committee simultaneously approved other 2020 compensation decisions, as discussed under “2020 LTI Program Changes” on page 35 below. The Board and HR Committee continue to believe that these decisions reflect their commitment to aligning real earned compensation to

 

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total shareholder return performance, recognizing that this is most relevant to our shareholders. In Mr. Rittenmeyer’s case, the $10 million of RSU grant value referenced above has declined by approximately 48% since grant and is currently valued at approximately $5.2 million of potential compensation value if it were earned at the closing price on our record date of March 31, 2020.

Planning for the Future

To facilitate a smooth transition and to promote stability in leadership, Mr. Rittenmeyer has agreed to serve in an advisory role to his successor over an additional two-year period following the end of his employment. Under this advisory arrangement, which will take effect when his term of service ends, Mr. Rittenmeyer will receive an annual retainer of $750,000, will remain eligible to participate in the Company’s health and welfare benefits programs, and will remain subject to restrictive covenants no less favorable to the Company than those set forth in the Employment Agreement.

Creation of Enterprise-Wide COO Role

The Board maintains and regularly evaluates a strong leadership succession plan. Over the past year, several steps have been taken to ensure that the Company has the appropriate leadership structure and a clear succession process with internal candidates being developed for future key promotions.

As discussed in last year’s Proxy Statement, in January 2019, Mr. Rittenmeyer and the Board appointed Saumya (Saum) Sutaria, M.D., as the Company’s Chief Operating Officer (COO). The appointment created a new position and restructured the Company’s senior leadership team so that Dr. Sutaria had direct responsibility for the Hospital business unit as well as the authority to design and implement enterprise-wide initiatives, particularly with respect to increased integration. This shift in leadership structure aligned with the Company’s broader transformation strategy and leveraged Dr. Sutaria’s clinical, operational and advisory experience accumulated over nearly 20 years working in complicated and diverse healthcare systems and related businesses as a Senior Partner at McKinsey & Company. Previously, Dr. Sutaria practiced medicine with a focus in internal medicine and cardiology.

Chief Operating Officer Employment Agreement

In connection with his appointment as COO, the Company entered into an employment agreement with Dr. Sutaria for an initial three-year term ending January 2022. In determining his compensation, the HR Committee considered his impressive record of achievements, exceptional knowledge of the healthcare industry and the cash compensation he was eligible to receive under the private partnership model at his then-current employer. Consistent with the HR Committee’s goals of paying executives at reasonable compensation levels that incentivize generating sustainable, long-term growth for shareholders, over the three-year period of his employment agreement Dr. Sutaria will receive target total direct compensation in the median annual range for comparable positions, consisting of:

 

•

Base Salary: $1,000,000 per year

•

Annual Incentive Plan: 100% of salary (at target) per year

•

Annual Long-Term Incentives: $4,000,000 in RSUs per year (vesting ratably over three years)

The HR Committee also approved a one-time buyout to Dr. Sutaria valued at $12,000,000, which was a make-whole award intended to replace the value forfeited and forgone earnings from his previous employer. This make-whole award was split between $7 million in RSUs and $5 million in restricted cash to provide for employment retention, as it vests in full upon the expiration of Dr. Sutaria’s initial three-year employment term. LTI awards to Dr. Sutaria are not subject to financial performance goals as part of this initial employment arrangement, which is designed to transition him to a public company compensation program from a private partnership model at his prior employer. Through the grant of RSUs, the Company’s stock price performance over the period will be reflected in ultimate pay delivery. Dr. Sutaria is subject to certain non-competition covenants for one year, and non-solicitation covenants for two years, following termination of his employment. Dr. Sutaria is not covered by Tenet’s Executive Severance Plan, and he received no other hiring inducements.

Promotion to President

On November 12, 2019, the Company announced that Dr. Sutaria had been promoted to President and COO in recognition of his proven leadership, strategic vision and ability to drive operational and financial improvements. In this newly created role, Dr. Sutaria continues to be responsible for the Company’s Hospital business unit and assumed more direct responsibility for our USPI and Conifer business units. There were no changes to Dr. Sutaria’s compensation arrangements as a result of his promotion and these expanded responsibilities.

 

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2020 Performance-Based LTI Award

On February 26, 2020, the HR Committee awarded Dr. Sutaria performance based RSUs valued at $1,000,000 in acknowledgement of his contributions to the Company’s success and to further align his long-term incentives with those of the Company’s shareholders. The award was granted on the same terms and three-year vesting schedule as the awards discussed under “2020 LTI Program Changes” on page 35 below.

Compensation Elements Link Pay with Performance

The following table outlines the primary components of our NEOs’ 2019 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
Performance - Stock Options		•  Vest only if stock price increases 25% from grant date and remains at or above that level for 20 consecutive trading days   •  If performance condition is not met within three years following grant, 100% of the options are forfeited		•  Requires sustained increase in the Company’s stock price for executives to realize any value   •  Strongly incentivizes executives to deliver meaningful growth directly to shareholders
Performance - Based Cash		•  Awards cliff vest in three years based on performance against pre-determined goals measured over cumulative three-year performance period   •  Cash payments conserve equity usage and provide liquidity to insiders who are often precluded from selling stock		Focuses executives on creating long-term shareholder value Rigorous goals are set for Adjusted EPS*, Adjusted Free Cash Flow Less Cash NCI and Relative Total Shareholder Return (TSR) to align with the Company’s long-term success
Time-Based RSUs		•  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 definition of Adjusted EPS.

 

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Compensation Discussion & Analysis

 

2020 LTI Program Changes

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. Beginning in 2020, LTI compensation for executive officers other than Mr. Rittenmeyer and Dr. Sutaria will be 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 interest. 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.

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
Active engagement with investors		Independent compensation consultant
Emphasis on pay-for-performance		Clawback provisions for all performance-based compensation
Significant stock ownership and retention requirements		Double-trigger change-in-control benefits
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

 

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Compensation Discussion & Analysis

 

 

Detailed Description and Analysis

2019 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. None of our NEOs received base salary increases in 2019.

 

Named Executive Officer		2019 Annual Base Salary
Ron Rittenmeyer		$1,200,000
Saum Sutaria		$1,000,000
Dan Cancelmi		$   618,000
Audrey Andrews		$   550,000
Paola Arbour		$   500,000
Keith Pitts(1)		$   925,000

 

(1)

Mr. Pitts served as Vice Chairman of the Company until his retirement on August 31, 2019.

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. Beginning in 2018, the HR Committee added an individual performance component to focus directly on the contributions of each NEO and to reflect performance on qualitative factors like leadership and promotion of Company values.

 

 

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Compensation Discussion & Analysis

 

2019 Target Annual Incentive Award Levels for Named Executive Officers

In 2019, 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	%
Keith Pitts			100	%

2019 AIP Performance Metrics and Results

Funding for the 2019 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 selected 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 use it in both the 2019 AIP and LTI programs.

 

Metric		Threshold Level				Target Level				Maximum Level				Actual Performance				Percentage of Target				Calculated Payout
Adjusted EBITDA(1)		$	2.575 billion			$	2.700 billion			$	2.825 billion			$	2.706 billion				104.7	%		73.3
Adjusted FCF less NCI(2)		$	312 million			$	372 million			$	522 million			$	452 million				153.7	%		46.1
Funding Pool																						119.4% 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. 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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Compensation Discussion & Analysis

 

 

The HR Committee applied the following performance modifiers for our NEOs based on the material factors provided below:

 

Named Executive Officer		Individual Performance Multiplier		Performance Review Summary
Mr. Rittenmeyer		150%		•  Under Mr. Rittenmeyer’s leadership in 2019, Tenet delivered strong financial results and took critical steps toward sustainable operational, strategic and financial improvements.   •  Mr. Rittenmeyer was relentlessly focused on enhancing Tenet’s workforce. In 2019, he brought in exceptional talent to senior management across the enterprise and built out a “Culture of Accountability” with increased ownership and analytical rigor.   •  Mr. Rittenmeyer also built trust with stakeholders across the organization, particularly with investors after delivering market-leading stock price growth in 2019.
Dr. Sutaria		145%		•  Dr. Sutaria quickly immersed himself in the Company and led a significant turnaround in hospital operations performance, with improvement in admissions, operational controls, quality and talent.   •  Dr. Sutaria has inspired confidence among the Board and throughout the organization by clearly articulating a strategic vision and demonstrating a passion for change that is instrumental in driving effective shifts in leadership, decision-making and focus across the Company.
Mr. Cancelmi		125%		•  Mr. Cancelmi’s leadership was pivotal to Tenet’s strong financial performance in 2019, particularly in driving exceptional results in the fourth quarter, as well as continued cost control.   •  Mr. Cancelmi proactively addressed the Company’s capital structure in 2019, refinancing all significant debt with near-term maturities to improve the Company’s financial health, reduce interest expense and increase liquidity.
Ms. Andrews		115%		•  Ms. Andrews made key strategic contributions while further streamlining internal and external legal support in 2019 to improve efficiency and execution.   •  Ms. Andrews’ leadership was central to the successful resolution of several significant legal matters in 2019, including litigation matters and government investigations.
Ms. Arbour		125%		•  Ms. Arbour drove key enhancements in 2019 to the Company’s information management systems that have improved productivity, interoperability, security, and user experience.   •  Ms. Arbour delivered improved risk management with stronger cybersecurity protocols, disaster recovery response and business continuity measures.   •  Ms. Arbour restructured two long-term, strategic partnerships in 2019 to improve care delivery, streamline costs and leverage Tenet’s infrastructure for better data analytics.
Mr. Pitts		100% (no change)		•  Mr. Pitts made important contributions to the Company in 2019, including his leadership of the Company’s exploration of strategic alternatives for the Conifer business unit.   •  Mr. Pitts’ performance was evaluated based on his performance until his retirement in August 2019.

 

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