Yesterday the nation’s largest public employee union, the American Federation of State, County and Municipal Employees (AFSCME) weighed in on the side of the incumbent board. However, on Tuesday the nation’s largest public pension fund, the California Public Employees Retirement System (CalPERS) said it would support a dissident slate of board nominees headed by Dr. M. Lee Pearce.
Agree, But Disagree
However, AFSCME also noted in a letter to shareholders that ” we share many of the concerns advanced by Mr. Pearce, particularly in the areas of Tenet’s poor corporate governance practices and excessive executive compensation.”
Pearce is a Miami Beach doctor, investor, and former director of predecessor companies of Tenet. Last month Pearce filed documents with the SEC, stating his intention to solicit proxies to elect himself and three associates to the Santa Barbara, Calif., company’s board at its annual meeting on Oct. 11.
The company said it believed Pearce’s action was unwarranted, particularly in light of the success of Tenet’s operating strategy and its strong performance.
CalPERS, which owns about 1.8 million Tenet shares, believes the dissident nominees will “spur Tenet to pursue strategies that result in more efficient management and increased shareholder value.” CalPERS has also criticized Tenet’s current board for ignoring shareholder votes to de-stagger the board in 1998, and for proposing an “excessive” increase in a stock option plan for directors.
Pearce has also chided Tenet management for profiting from personal investments in Broadlane, a private e-commerce subsidiary, and for overpaying themselves.
Conflicts in Interest
The American Federation of State, County and Municipal Employees (AFSCME), whose 1.3 million members own through pension funds about 2% of Tenet’s stock and represents 3% of its employees, cited the dissident group’s conflicts of interest and checkered governance record.
The American Federation of State, County and Municipal Employees (AFSCME) claims that Pearce:
- has real estate holdings in direct competition with Tenet in Florida and has been engaged in prolonged litigation against Tenet for three years.
- companies directly compete with Tenet’s Internet investments and related businesses
- has failed to institute corporate governance reform or rein in excessive executive pay at many of the public companies he has led and controlled.
- has demonstrated a willingness to engage in greenmail and to protect his own interests at the expense of other shareholders.
Tenet, which has a total of 10 directors, closed up 1/2 at $36-1/16 after hitting a new 52-week high of $36 1/8 earlier in the day.