Tenet's ( THC) board continues to undergo reconstructive surgery. The company's governing body -- altered significantly during a tumultuous 2003 -- is about to lose more than a quarter of its members. Three directors, including one newcomer, are resigning. A fourth may follow suit next year. The company, which has no plans to replace the three departing directors, will be left with an eight-member board after next month's annual meeting. Tenet critics have repeatedly called upon the company to expand the board -- and make it truly independent. "With a reduction to eight members, Tenet's board is too small to adequately staff the six board committees and to function properly," Tenet Shareholder Committee Chairman Lee Pearce said on Monday. "The board needs at least five more independent directors.
But in view of the multiple problems, it will be hard to recruit highly qualified individuals to help fix this broken company." Tenet is losing a new independent director and two veteran directors who have enjoyed special relationships with the company in the past. Robert Nakasone, the former CEO of Toys R Us ( TOY), resigned last month. Meanwhile, both Lawrence Biondi and Sanford Cloud have decided against seeking reelection when Tenet hosts its annual meeting May 6 in Dallas. Tenet just welcomed Nakasone to its board less than a year ago. "The addition of Bob Nakasone demonstrates the seriousness of our commitment to adding high-caliber independent directors," former CEO Jeffrey Barbakow announced last May. Tenet gave no reason for Nakasone's departure. But it did say that Biondi and Cloud are leaving "to focus their energies on other endeavors." Pearce, for one, is glad to see the two "holdover members from the scandal-plagued Barbakow era" leaving the board. "Their failure as chairs of the two key board committees ... justified their removal much earlier, as we had recommended," Pearce said on Monday.
In the past, the committee has suggested that possible conflicts may have compromised the performance of both directors. Biondi, who currently chairs the company's ethics, quality and compliance committee, serves as president of a university that sold its hospital to Tenet in 1997 and, since then, has collected millions of dollars from the company. Cloud, who chairs Tenet's corporate governance and compliance committee, presides over an organization that's in the process of collecting large annual donations from the company. Both directors also serve on the executive committee that holds "all of the powers of the board in the management of
Tenet's business and affairs when the board is not in session." Only one member of that committee -- Tenet Chairman Edward Kangas -- will remain. Going forward, another director with possible conflicts may leave the board as well. Monica Lozano, publisher of a Spanish-language newspaper that sells advertising to Tenet, has informed the company that she may not seek reelection next year. She currently serves on the two committees chaired by the departing directors. All together, six directors -- including three independent newcomers -- will try to keep their board seats this year. And they will be seeking votes far away from Tenet's Santa Barbara headquarters in a city that, some believe, could become the company's next home. "Tenet has four acute-care hospitals and its largest corporate office in the Dallas area," the company explained, when announcing the location of this year's meeting. Last month, however, Tenet CEO Trevor Fetter signaled that a permanent move could be coming. "I think it's clear to everyone that the Santa Barbara headquarters location was originally created for the personal convenience of the top executives of this company," Fetter wrote in a March 15 memo to his corporate staff. "Unfortunately, this company and its predecessors had a tradition of self-indulgence at the top. One of my top priorities has been to do away with that tradition."