A long-term investor in Community Health System wants the Board of Directors to remove CEO Wayne Smith over the company's financial troubles.
In an August 8 letter to John A. Fry of CHS's Board of Directors, investor ASL Strategic Value Fund berated the board for not returning its phone calls, for what it called failing continuously to meet its own operating guidance for financial results, for a poorly executed HMA acquisition and for the loss of about 50 percent of the shareholders' stock value since CHS sent public in 2000, while Smith retained his total compensation of $350 million.
"The five senior most executives have received total compensation of over $500 million, this amount is nearly the current market capitalization of the company," ASL Managing Directgor Steven Braveman said.
ASL's share of the Franklin-Tennessee-based system was not stated.
"It is time for the Board to exercise its fiduciary duty to the shareholders and replace the current CEO," the letter said. "It should also act immediately to claw back significant portions of this past compensation from existing and retired executives."
CHS has also failed to follow a 2016 court settlement agreement to improve its corporate governance by adding two independent directors to the board, with one being named lead director, it said.
"It is time for the Board to take immediate action. Management's previous missteps have resulted in billions of dollars of shareholder losses, all the while reaping tens of millions of dollars in compensation," the letter said.
CHS, one of the largest, publicly traded health systems in the country, has been steadily selling off hospitals and about 80 percent of its home care division.
During their May 1 earnings call, CHS reported a net loss of $199 million, compared with net income of $11 million during the same period in 2016. It also reported an 11.5 percent drop in admissions this first quarter compared to last year.
The week prior to ASL sending the letter, CHS's stock price declined.
CHS went public in 2000 at a market price of $13 per share, according to the letter. The recent closing price was half, at $6.50 per share. Shareholders have lost about 50 percent of their capital over the past 17 years, the letter said.
It's stock rose by more than 8.8 percent Monday about 10 minutes before the closing bell.