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Tenet Names Kangas as Chairman

The former Deloitte CEO will replace Jeffrey Barbakow, who resigned under pressure.

July 23, 2003|Debora Vrana and Ronald D. White | Times Staff Writers

Seeking to restore its reputation, Tenet Healthcare Corp. on Tuesday tapped an independent director to be chairman.

The nation's second-largest hospital chain named Edward A. Kangas, a former chairman and chief executive of accounting giant Deloitte Touche Tohmatsu, to replace Jeffrey Barbakow, who stepped down as Tenet's chairman and CEO this spring under shareholder pressure.

Santa Barbara-based Tenet, facing several federal and state investigations of its operations, announced the appointment on the eve of its annual shareholder meeting today at Skirball Center in Los Angeles. The meeting will be chaired by Kangas, 59, who started his career as an auditor and eventually took the helm of one of the world's largest accounting firms.

Kangas was appointed to Tenet's board in April, in part to address mounting shareholder concern that the company had too few outside directors.

He wasn't available for comment Tuesday.

Sheryl Skolnick, an analyst at Fulcrum Global Partners, called Kangas "the obvious choice" to succeed Barbakow.

Skolnick said that since Kangas joined the board, he has taken on a leadership role by serving as its spokesman and by dealing effectively with irate investors, in one case dissuading a disgruntled shareholder from launching a proxy fight.

The new chairman's first order of business should be to find a chief executive to help him lead the company, Skolnick said.

She said Tenet's board still needed one or two leading physicians and other directors "who know what it means to have a public company owned by shareholders, rather than people who think the shareholders work for them."

Tenet is California's largest hospital chain, with 40 hospitals.

Last week, its Alvarado Hospital Medical Center in San Diego was indicted on federal criminal charges of paying illegal kickbacks to doctors. The hospital, its CEO and the Tenet subsidiary that owns Alvarado have pleaded not guilty.

In other cases, investigators are looking into whether doctors at a Northern California Tenet hospital performed unnecessary heart surgeries and into Tenet's billing practices for Medicare.

Charles W. Lynch, an analyst with CIBC World Markets, said it is important that Kangas and the board "follow through on the CEO search" despite the possibility that the job would not attract as many top candidates, considering the company's present position.

Trevor Fetter is the acting CEO. He is considered a leading candidate for the permanent post, though the board could decide to look outside the firm.

Kangas "needs to quickly resolve the CEO situation ... and appoint better board members," Skolnick said.

Former colleagues at Deloitte remembered Kangas as being instrumental in the growth of the accounting giant.

Outside of business, he has been active politically, championing the rights of average voters and working for a ban on soft-money contributions to political campaigns.

Kangas, whose father worked for Cessna Aircraft in Wichita, Kan., is a graduate of the University of Kansas. He joined Deloitte in the 1960s in the audit department and was named partner in 1975 and CEO in 1985.

From 1989 to 2000, he was chairman and CEO of Deloitte Touche Tohmatsu. Under his leadership, the firm grew from $4 billion in revenue in 1989 to $13 billion in 2000 as Tohmatsu added clients in the former Soviet Union, China and other countries. He retired from the company in 2000.

Tenet announced the appointment after the close of markets. The company's shares closed up 13 cents at $12.20 on the New York Stock Exchange.

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