Michael E. Prevoznik
QUEST DIAGNOSTICSAbout Michael E. Prevoznik
Senior Vice President and General Counsel at Quest Diagnostics. Age 63; joined Quest in 1999 as VP & General Counsel and has served in roles spanning legal, compliance, government affairs, international operations, and clinical trials management; currently also Vice Chair of the Quest Foundation . Company performance context for incentive alignment: 2024 net revenues rose 6.7% to $9.87B; adjusted diluted EPS $8.93; 1-year TSR 11.8%, 3-year TSR -7.3%, 5-year TSR 56.3% versus S&P 500 Health Care 2.6%, 2.6%, 46.9% respectively .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Quest Diagnostics | VP & General Counsel (later SVP & GC) | 1999–present | Led legal; expanded remit to government affairs (since 2003), compliance (1999–Apr 2009), international diagnostics (Apr 2011–Jan 2017), and clinical trials business (Apr 2011–Jan 2013) . |
| Quest Diagnostics Foundation | Vice Chair | n/a | Corporate philanthropy leadership (Vice Chair) . |
| SmithKline Beecham | VP, Compliance (prior roles in compliance) | pre-1999 | Coordinated worldwide compliance across the enterprise . |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Quest Diagnostics Foundation | Vice Chair | n/a | Internal foundation role (philanthropy) . |
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary ($) | 535,000 | 542,500 | 550,000 |
| 2024 Base Salary Rate ($) | 550,000 | ||
| 2024 Base Salary Rate YoY Change | 0% (no increase) |
Performance Compensation
Annual Incentive (SMIP) – Structure and 2024 Outcome
- 2024 SMIP metrics and weights: Adjusted diluted EPS 40%, Revenues 40%, Non-financial (patient experience, employee experience, community impact) 20% .
- 2024 payout factors: EPS 29.6%, Revenues 46.8%, Non-financial 20.2% → Total 96.6% of target .
| Item | Value |
|---|---|
| Target bonus (% of salary) – 2024 | 70% |
| Actual payout (% of target) – 2024 | 96.6% |
| Actual payout ($) – 2024 | 371,910 |
| 2024 SMIP Metric | Weight | Threshold | Target | Max | Result | Weighted Payout |
|---|---|---|---|---|---|---|
| Adjusted diluted EPS ($) | 40% | 8.35 | 9.00 | 9.72 | 8.84 (ex-LifeLabs) | 29.6% |
| Revenues ($MM) | 40% | 9,132 | 9,512 | 9,988 | 9,631 (ex-LifeLabs) | 46.8% |
| Non-financial goals | 20% | n/a | n/a | n/a | 115.9% quant.; overall at target qualit. | 20.2% |
Note: Committee excluded LifeLabs acquisition impact from 2024 SMIP calculations; also applied standard adjustments (restructuring, amortization, etc.) consistent with policy .
Long-Term Incentives (LTI)
- 2024 mix (executive program): Performance Shares 50% (3-year cliff vest), Stock Options 25% (10-year term; 3-year ratable vest), RSUs 25% (3-year ratable vest) .
- 2024 awards to Prevoznik (grant date 2/14/2024):
| Instrument | Shares/Options | Terms | Pricing/Notes | Grant-Date FV ($) |
|---|---|---|---|---|
| Performance Shares (target) | 5,847 | 3-year performance period; cliff vest on 2/14/2027 | Metrics include revenue CAGR, ROIC, relative TSR (disclosed methodology) | 711,580 |
| RSUs | 2,935 | Vest 1/3 annually over 3 years | Dividend equivalents on RSUs | 375,108 |
| Stock Options | 12,231 | Vest 1/3 annually over 3 years; 10-year term | Exercise price $127.81/sh; grant-date close $127.72 | 374,874 |
- Recently completed PSU cycle: 2021–2023 performance shares paid at 186% of target; Prevoznik earned 7,569 shares . Metric results (company-level): Base Revenue CAGR 10.38% (70.0), Cumulative COVID-19 Revenue $4,447MM (30.0), Avg Adjusted ROIC 13.17% (60.0), Relative TSR 57th percentile (25.5) – weighted factors in parentheses .
Multi‑year Summary Compensation (reported)
| Component ($) | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary | 535,000 | 542,500 | 550,000 |
| Stock Awards (PSUs, RSUs) | 1,016,786 | 1,020,747 | 1,086,688 |
| Option Awards | 349,798 | 349,948 | 374,874 |
| Non‑Equity Incentive (SMIP) | 487,796 | 293,357 | 371,910 |
| All Other Compensation | 53,920 | 45,368 | 45,174 |
| Total | 2,443,300 | 2,251,920 | 2,428,646 |
Perquisites and benefits components (2024): 401(k) match $17,250; SDCP match $14,680; financial planning $13,244 .
Equity Ownership & Alignment
- Stock ownership guidelines: 4x base salary for executive officers; executives must retain 50% of net shares until in compliance; as of April 1, 2025, all current named executive officers are compliant .
- Hedging/pledging: Executives prohibited from hedging and pledging; also subject to window period trading policy .
Beneficial Ownership (as of March 7, 2025)
| Holding | Amount |
|---|---|
| Shares owned | 38,642 |
| Options exercisable within 60 days | 93,138 |
| Total beneficial (SEC definition) | 131,780 |
| Shares underlying RSUs (not counted as beneficial) | 5,116 |
| Ownership as % outstanding | Each NEO <1% |
Outstanding Equity (12/31/2024)
-
RSUs unvested and PSU opportunities: | Grant Year | Unvested RSUs (#) | Market Value at $150.86 | Unearned PSUs (#) | Market/Payout Value | |---|---:|---:|---:|---:| | 2022 | 9,463 | 1,427,588 | — | — | | 2023 | 1,628 | 245,600 | 9,398 (max) | 1,417,782 | | 2024 | 2,935 | 442,774 | 11,694 (max) | 1,764,157 |
-
Stock options outstanding: | Grant Date | Exercisable | Unexercisable | Exercise Price | Expiration | |---|---:|---:|---:|---| | 2/19/2018 | 28,690 | — | $103.57 | 2/19/2028 | | 2/18/2020 | 22,677 | — | $112.17 | 2/18/2030 | | 2/17/2021 | 17,958 | — | $121.81 | 2/17/2031 | | 2/24/2022 | — | 4,434 | $127.73 | 2/24/2032 | | 2/23/2023 | 3,217 | 6,436 | $143.33 | 2/23/2033 | | 2/14/2024 | — | 12,231 | $127.81 | 2/14/2034 |
Vesting cadence: RSUs and options vest in equal annual installments over three years; PSUs vest after a single 3-year performance period; dividend equivalents accrue on RSUs (not on PSUs) .
Employment Terms
- No individual employment agreement; covered by Executive Officer Severance Plan; non-compete and non-solicitation covenants apply post-termination (duration not disclosed) .
- Clawback policies: Dodd-Frank compliant recoupment policy adopted Nov 2023; additional discretionary recoupment allows recovery for restatements and for misconduct leading to overpayment .
- Change-in-control treatment: Double trigger for equity (accelerated vesting if terminated without cause or resign for good reason within two years post-CIC); cash severance multiple increases under CIC; 280G/4999 cutback applies; no excise tax gross-ups .
Severance Economics (illustrative, as of 12/31/2024)
| Scenario | Cash ($) | Accelerated Options ($) | Accelerated PSUs ($) | Accelerated RSUs ($) | Total ($) |
|---|---|---|---|---|---|
| Involuntary (no CIC) | 1,870,000 | — | 1,896,461 | — | 3,876,461 |
| CIC + Qualifying Termination | 2,805,000 | 433,029 | 3,649,451 | 826,260 | 7,823,740 |
Benefits include continued medical/life insurance (up to 18 months for Schedule A), outplacement, and a lump sum equal to prior year company matches to 401(k) and SDCP; Prevoznik is a Schedule A participant .
Deferred Compensation (SDCP) – 2024
| Item | Amount ($) |
|---|---|
| Executive contributions | 14,951 |
| Company matching credits | 14,680 |
| Aggregate earnings | 534,044 |
| Year-end balance | 5,980,584 |
Compensation Structure Analysis
- Mix and risk: Majority of total direct compensation at risk via annual incentive and LTI; PSUs use multi-year ROIC, revenue CAGR, and relative TSR—tight linkage to profitable growth and capital discipline .
- Year-over-year: Base salary flat in 2024; SMIP design simplified in 2024 (combined revenue metric) and further tightened for 2025 to emphasize adjusted EPS (45% weight) with gating caps on non-financial and revenue payouts if EPS is below 90% of target .
- Governance: No CIC tax gross-ups; minimum 1-year vesting (except de minimis); no dividend equivalents on PSUs; independent consultant (Pearl Meyer) confirmed independent Feb 2025; 2024 Say-on-Pay support ~89% .
Say‑on‑Pay, Peer Group, and Shareholder Feedback
- 2024 Say-on-Pay support ~89% of votes cast .
- Peer group (14 companies across healthcare services/equipment), with targets set around market competitive (median) levels and structure reviewed annually .
- Ongoing investor outreach program; Board reports feedback to Compensation Committee .
Investment Implications
- Alignment: Significant unvested equity across PSUs, RSUs, and options, ownership guidelines (4x salary) and hedging/pledging prohibitions align incentives with long-term TSR and profitable growth (ROIC) .
- Retention: Long tenure (joined 1999) and eligibility for retirement treatment indicate low near-term retention risk, though retirement eligibility could pull forward certain vesting; continued overlapping PSU cycles and annual vesting on RSUs/options maintain multi-year retention hooks .
- Selling pressure watchpoints: Annual February grant anniversaries (RSU/option 1/3 vests) and PSU payouts in Q1 following performance periods may drive periodic Form 4 activity for tax/withholding; 2022–2024 PSU cycles outstanding (2022–2024 cycle paid at 157% in Feb 2025) suggest continued potential share deliveries into early 2026–2027 .
- Downside protection and risk: No hedging/pledging and recoupment policies reduce misalignment and excessive risk-taking; CIC benefits are double-trigger with 280G cutback, limiting shareholder-unfriendly outcomes .
Overall, Prevoznik’s pay is heavily performance-based with rigorous multi-year metrics and strong governance guardrails; equity overhang from unvested RSUs/options/PSUs provides sustained retention but creates predictable vest-related selling windows. Company-level execution on revenue growth and ROIC will remain the primary lever on PSU realizations and total compensation outcomes .