SUPPORTING STATEMENT: Effectively managing ESG issues offers positive opportunities for companies and should be a key metric by which executives are judged. By integrating clearly disclosed ESG metrics into executive compensation, companies can reduce risks related to underperformance by incentivizing executives to meet sustainability goals, thereby achieving greater long-term value.

According to a recent compensation study, most S&P 500 companies now tie executive pay to some form of ESG performance. (https://corpgov.law.harvard.edu/2022/11/271 linking-executive-compensation-to-esg-performance)

While Tenet says it acknowledges the importance of “ESG matters to the Company and its stakeholders,” recently established a board-level “ESG Committee,” and talks extensively about ESG in its 2023 proxy statement, there is little disclosure on how these priorities translate into executive compensation.

According to last year’s proxy statement, Tenet’s annual incentive plan is subject to an “individual performance modifier” and a “quality and compliance modifier.” However, these mechanisms lack the specificity, accountability, and transparency that a set of clearly identified—and quantifiable ESG measures bring.

Human capital management practices, particularly represent key challenges for Tenet that we believe must be clearly linked to executive compensation. In the 2022 10-K, for instance, Tenet notes the risks from ongoing challenges in recruiting and retaining healthcare professionals.

While a lack of accredited professionals is sometimes cited as driving a “worker shortage,” according to the Michigan Health and Hospital Association many of the nursing vacancies are a result of unplanned retirement, resignation, and burnout, as well as a growing concern for safety. (https://www.wilx.com/2023i11/21hvarsing-health-care-worker-shortage-michigan-continues-surgei) A study by McKinsey similarly found that “not being valued, inadequate pay, and unmanageable workloads” are the top factors behind registered nurses’ decisions to leave, concluding that it is “more important than ever for healthcare organizations to design and deploy initiatives that respond to and address workforce needs.” (https://www.mckinsey.com/industries/healthcare/our-insights/nursing-in-2023).

Given these industry trends, we believe adding ESG metrics such as human capital measures, provides greater accountability and transparency around executives’ management of these critical drivers of long-term value.

We recommend the adoption of quantitative metrics.”