The former CEO of

Toys R Us


has accused


(THC) - Get Report

of playing games with shareholder money.

Robert Nakasone recently told

The Wall Street Journal

that he resigned from Tenet's board because he opposed, among other things, the company's adoption of a generous executive bonus policy. He said that 100 Tenet executives, led by CEO Trevor Fetter, are now in line to collect huge payouts this year, even if the company's dismal performance fails to improve. Nakasone also told the


that he never wanted to hire Fetter in the first place and even supported discussions, carried out during last year's CEO search, that might have led Tenet to merge with a smaller company.

Instead, the board apparently dropped the merger negotiations, chose to hire an insider as its permanent CEO and then raised the minimum for this year's annual bonuses. According to Tenet's latest proxy statement, eligible employees will receive at least 50% of their target bonuses -- up from 25% last year -- if they meet certain financial and "other discretionary" performance goals.

"In 17 years of service on large public company boards, I have never witnessed such a sense of executive entitlement," Nakasone wrote in a resignation letter provided last week to the



In Tenet's defense, Chairman Edward Kangas told the


that the company "would have to significantly exceed its anticipated performance" for executives to collect their bonuses this year. But Tenet has already told investors to expect little financial improvement -- and no positive cash flow -- from the company in 2004.

"After nine months on the board, I am personally frustrated by the lack of progress on all fronts," Nakasone wrote in his resignation letter, supplied to the


after Tenet failed to disclose the reasons behind his departure.

Nakasone told the


that he threatened to resign from the board "unless certain conditions were met" by the company. But Kangas countered by describing Nakasone as a difficult board member -- prone to revisiting old decisions and even arguing over boardroom minutes -- who was asked to step down from his post.

Still, the Tenet Shareholder Committee expressed clear regret at Nakasone's departure.

"It was reported that other board members found Mr. Nakasone 'disruptive,'" committee spokesman Paul Brickman told

on Monday. "In our view, Tenet needed many more disruptive board members and far fewer who were willing to go along with a corporate culture that produced disastrous outcomes for Tenet patients and shareholders."

Tenet's stock, pressured for more than a year over allegations of corporate wrongdoing, inched up 4 cents to $11.29 on Monday.

Alarm Bells

Prudential analyst David Shove already voiced concerns after Tenet filed its proxy statement last week.

Shove believes that Tenet is losing valuable directors just when the company needs them most. He says that Nakasone brought strong retail marketing experience to the boardroom table. He believes that Lawrence Biondi and Sanford Cloud -- both of whom are leaving their posts in May -- offered a crucial not-for-profit perspective. And he is convinced that Monica Lozano, who may step down next year, deserves some credit for Tenet's ability to resolve legal issues with the company's uninsured Hispanic patients.

"Despite Tenet management's proclamation of a better, investor-friendly board of directors, we believe the 2004 proxy and new board departures point to the opposite," wrote Shove, who has recommended selling the company's stock for some time. "For a company in the midst of turmoil, we believe the board of directorship developments are unwelcome news and point to choppy waters ahead."

In the meantime, Shove is already puzzled over the company's executive compensation policy. He points out that both ousted CEO Jeffrey Barbakow and his replacement collected generous pay packages during a year when the company itself suffered greatly. He was particularly "startled" by the rewards -- including big stock-related grants and a $1.2 million relocation check -- picked up by the current CEO.

The proxy "contained compensation information that, we believe, begs the question: What is management being compensated for?" Shove noted. "Despite the cash flow crunch and destruction of shareholder value, Tenet's board of directors has been amazingly generous."

Now, however, Nakasone is apparently having second thoughts about the compensation policy he voted to approve. Nakasone's comments to the Journal also indicate that he differed with the board on two other crucial matters. He suggested that he might have been receptive to a merger that could have altered Tenet's plans to sell many of its hospitals. And he apparently favored hiring an outsider as the company's permanent CEO.

Interestingly, Nakasone was one of just three members on the ad hoc committees established to review Tenet's assets and recommend its next CEO. Kangas, who is now criticizing Nakasone, sat on those same committees.

As directors, both men were entitled to $65,000 in base pay annually. They also picked up $1,500 per board meeting and $1,200 per committee meeting. In addition, they collected a flat fee of $15,000 each for selecting Tenet's current CEO. And Kangas scored an extra $50,000 for serving as the company's nonexecutive chairman.