Tenet Healthcare's largest investor has called for a vote that would allow the hospital chain's shareholders to take action—including removing and electing directors—by written consent without the need for a meeting.
Larry Robbins, CEO of Glenview Capital Management, which holds a nearly 18% stake in Tenet, said in a letter to his fellow investors that allowing for action by written consent is necessary because of Tenet's "long-term underperformance, operationally as well as financially."
If the shareholders have the ability to take action by written consent outside of meetings, it will allow them to better encourage improvement and monitor progress, Robbins said.
"Just as a person in worsening health may need more frequent medical attention than a check-up once every 12-18 months, a chronically unhealthy company is likely to return to health quicker and with more certainty if its owners are allowed more frequent board oversight," Robbins wrote in the letter.
Glenview filed a written consent request with the Securites and Exchange Commission in mid-January.
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Tenet responded to Glenview's filing with one of its own with the SEC, changing its bylaws to allow its shareholders to meet outside of their annual gathering. However, the changes require that 50% of investors to request a meeting before one can be held.
Tenet said in a statement that it is reviewing Glenview's request, and said it would make recommendations to investors "in due course." Tenet's bylaw changes shows its commitment to enhancing its corporate governance, the company said in the statement.
"These amendments demonstrate Tenet’s continued commitment to strong governance, and provide a clear process for shareholders to decide on company matters that are important to all shareholders," Tenet said.
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Tenet's shareholders will vote on the written consent proposal at their annual meeting, which is planned for May.
Should Glenview's proposal be approved, it could lead "aggressive activist hedge funds to launch a boardroom battle seeking to replace directors," according to an article from The Street, a financial news and analysis site.
This is especially likely as Tenet's share took a hit Friday amid the overall market downturn, dropping 4%, according to the article. And even if Glenview's calls for action by written consent fail, that they requested the vote at all suggests that number of investors in Tenet are unhappy with the company's financial performance.
Tenet reported a net operating loss of $1.7 billion at the end of 2016, and a leadership shake-up—pushed for by Glenview—followed the financial woes. Former CEO Trevor Fetter left the company in October 2017, five months earlier than expected, and Tenet announced it would cut 1,300 jobs to save $150 million.
An additional 700 job cuts were announced last month as part of further cost cutting. Tenet said it also plans to sell Conifer Health Solutions, its revenue cycle management business.