Investors in Community Health Systems have repudiated the hospital chain's executive pay program that was opposed by the two largest proxy advisory firms.
At the company's annual meeting earlier this week, shareholders easily approved the slate of candidate directors and the reappointment of Deloitte & Touche as CHS' accounting firm. But when it came to the compensation program for Chairman, President and CEO Wayne Smith and his top lieutenants, they firmly rebuked the CHS board, voting 67 percent against the plan. A year ago, they overwhelmingly approved the plan.
The vote — which is not binding on the board — comes after both Institutional Shareholder Services and Glass Lewis, the two most prominent companies advising investors on governance issues, objected to CHS' pay plans. The firms said Smith is being paid too much relative to his peers and that long-term incentives aren't properly structured. CHS in turn countered by saying it could not have predicted the drop in its stock price last spring when it was sued by competitor Tenet Healthcare and that it has made a number of changes to last year's plan to better align pay and performance.
"While our compensation programs have been consistent over recent years and have always been designed to fairly and effectively reward and retain executive talent, our Board recently took significant steps to further ensure that our management team’s pay is aligned with the Company’s performance, which included actions that impacted 2011 compensation for executive officers," CHS spokeswoman Tomi Galin told NashvillePost.com. "We take the views of our shareholders very seriously. Our management team will consult further with shareholders to understand their concerns and our Compensation Committee will consider this input and work with compensation consultants as it continues to evaluate whether any additional actions are necessary."
At about 2:15 p.m. Friday, shares of CHS (Ticker: CYH) were down more than 2 percent at $21.01. Year to date, they're up 20 percent.