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How Should Investors React To Tenet Healthcare's (NYSE:THC) CEO Pay?

Simply Wall St
·4 min read

Ron Rittenmeyer became the CEO of Tenet Healthcare Corporation (NYSE:THC) in 2017, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Tenet Healthcare.

Check out our latest analysis for Tenet Healthcare

Comparing Tenet Healthcare Corporation's CEO Compensation With the industry

Our data indicates that Tenet Healthcare Corporation has a market capitalization of US$3.3b, and total annual CEO compensation was reported as US$24m for the year to December 2019. That's a notable increase of 62% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.2m.

On comparing similar companies from the same industry with market caps ranging from US$2.0b to US$6.4b, we found that the median CEO total compensation was US$5.9m. This suggests that Ron Rittenmeyer is paid more than the median for the industry. Moreover, Ron Rittenmeyer also holds US$18m worth of Tenet Healthcare stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component

2019

2018

Proportion (2019)

Salary

US$1.2m

US$1.5m

5%

Other

US$23m

US$13m

95%

Total Compensation

US$24m

US$15m

100%

On an industry level, roughly 18% of total compensation represents salary and 82% is other remuneration. A high-salary is usually a no-brainer when it comes to attracting the best executives, but Tenet Healthcare paid Ron Rittenmeyer a nominal salary to the CEO over the past 12 months, instead focusing on non-salary compensation. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
ceo-compensation

Tenet Healthcare Corporation's Growth

Tenet Healthcare Corporation's earnings per share (EPS) grew 75% per year over the last three years. In the last year, its revenue is down 4.2%.

Shareholders would be glad to know that the company has improved itself over the last few years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Tenet Healthcare Corporation Been A Good Investment?

We think that the total shareholder return of 135%, over three years, would leave most Tenet Healthcare Corporation shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Tenet Healthcare primarily uses non-salary benefits to reward its CEO. As we touched on above, Tenet Healthcare Corporation is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But EPS growth and shareholder returns have been top-notch for the past three years. As a result of the excellent all-round performance of the company, we believe CEO compensation is fair. Given the strong history of shareholder returns, the shareholders are probably very happy with Ron's performance.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 1 warning sign for Tenet Healthcare that investors should be aware of in a dynamic business environment.

Important note: Tenet Healthcare is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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