CHS shareholders seek to limit executive windfalls if company is sold

Shareholders of Franklin, Tenn.-based Community Health Systems have proposed a measure that aims to ban accelerated vesting of unearned equity awards for executives if there is a change in control of the company.

Equity-based awards help align executive pay with performance, as there are performance-based measures attached to the awards. This helps ensure executives are compensated for results that drive long-term shareholder value.

In the event of a merger, acquisition or other change in control, the acceleration of unvested awards is meant to protect and compensate executives. However, some view the automatic, full acceleration of unearned equity as an executive windfall.

The pending CHS shareholder proposal looks to ban accelerated vesting of all executive equity awards. The measure is expected to go to a vote at CHS' annual shareholder meeting this year, according to a press release from National Nurses United.

National Nurses United strongly supports the shareholder proposal. "An entrenched management that stands to receive lucrative golden parachutes and continues with poor corporate governance is not in the best interest of the patients or communities that CHS hospitals serve," said Brenda Meadwell, an RN at CHS' Bluefield (W.Va.) Regional Medical Center.

A CHS spokeswoman told Becker's the company will address the shareholder proposal in its proxy statement, as addressing the proposal in advance is a possible violation of proxy solicitation rules.

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