Tenet CEO get 2008 compensation valued at $9.7M

Thursday, March 26, 2009
By TOM MURPHY, AP Business Writer

Tenet Healthcare Corp. gave Chief Executive Trevor Fetter compensation valued at $9.7 million in 2008, according to an Associated Press calculation, as the Dallas-based hospital operator reaped a profit but saw its stock plunge 77 percent.

Fetter, 49, received a salary of $1.1 million and a preformance-related bonus of $2.3 million, but most of his compensation came from stock and option awards valued at $6.1 million, according to a proxy statement filed with the Securities and Exchange Commission.

Most of those options are now "underwater," well below Tenet's stock price. Fetter received options valued at about $4.1 million on March 6, 2008. But those options come with an exercise price of $4.94, far above the stock's Thursday trading price of $1.20.

A portion of Fetter's bonus, $937,500, also won't vest until the end of 2010, and the executive will receive it in 2011 only if he's still with the company.

Tenet also gave Fetter $231,066 in other compensation. That included an automobile allowance of $24,200 and $112,796 for personal use of company aircraft.

Fetter became CEO in 2003, and his salary has remained the same since 2005.

Tenet operates 52 hospitals in 12 states and owns or leases physician practices, insurance companies and other health care businesses. The company recorded its first annual profit since 2002 last year and saw same-hospital admissions growth for the first time since 2003.

Fetter has touted its progress in recruiting physicians and stabilizing its outpatient business.

But Tenet also saw its bad debt swell last year, particularly in the fourth quarter, when its collection rate from patients dropped. Bad debt is the amount of debt a hospital is owed from treating uninsured or underinsured patients and has been unable to collect.

Tenet recorded a profit of $25 million, or 5 cents per share, on $8.7 million in revenue last year. That compares with a 2007 loss of $89 million, or 19 cents per share, on $8.2 billion in revenue.

But the hospital operator's share price tumbled from $5.08 at the close of 2007 to $1.15 at the end of 2008. That 77 percent drop more than doubled a 38 percent decline over the same span by the Standard and Poor's 500 index.

In 2009, Tenet's stock slipped below $1 a few times before recovering earlier this month.

The Associated Press compensation formula is designed to isolate the value the company's board placed on the executive's total compensation package during the last fiscal year. It includes salary, any bonuses, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.

The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements, which reflect the size of the accounting charge taken for the executive's compensation in the previous fiscal year.

Fetter also had more than 360,000 shares of restricted stock vest in 2008 with a realized value of $1,586,326. That total was not included in his compensation.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.





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