We are pleased to invite you to attend the DaVita Inc. 2017 Annual Meeting of Stockholders, or Annual Meeting, which will be held on Friday, June 16, 2017, at
4:00 p.m., Mountain Time, at our principal executive offices located at 2000 16th Street, Denver, Colorado 80202. The attached Notice of Annual Meeting and Proxy Statement will serve as your guide to the business to be conducted at
the meeting.
The Proxy Statement includes, among other items, information about the qualifications of our director nominees and the compensation of our executive
officers that is relevant to matters that will be presented at our Annual Meeting. We hope that you will participate in our Annual Meeting, either by attending and voting in person or voting by other available methods as promptly as possible. Voting
by any of the available methods will ensure that you are represented at the Annual Meeting, even if you are not present. You may vote your proxy via the Internet, by telephone, or by mail. Please follow the instructions on the Notice of Internet
Availability of Proxy Materials that you receive in the mail and/or your proxy card.
We value the perspective of our stockholders, and we look forward to sharing
more about our Company at the Annual Meeting.
On behalf of our Board of Directors, I thank you for your continued interest in our business.
Kent J. Thiry
Delivery of
Proxy Statement and Annual Report
Beneficial owners, but not record holders, of our common stock who share a single address may receive only one copy of the
Notice of Internet Availability of Proxy Materials and, as applicable, an Annual Report to Stockholders and Proxy Statement, unless their broker has received contrary instructions from any beneficial owner at that address. This practice, known as
householding, is designed to reduce printing and mailing costs. If any beneficial owner at such an address wishes to discontinue householding and receive a separate copy of the Notice of Internet Availability of Proxy Materials and, if
applicable, an Annual Report to Stockholders and Proxy Statement, they should notify their broker. Beneficial owners sharing an address to which a single copy of the Notice of Internet Availability of
Proxy Materials and, if applicable, an Annual Report to Stockholders and Proxy Statement was delivered can also request prompt delivery of a separate copy of the Notice of Internet Availability
of Proxy Materials and, if applicable, an Annual Report to Stockholders and Proxy Statement by contacting Investor Relations at the following address or phone number: Attn: Investor Relations, DaVita Inc., 2000 16th Street, Denver,
Colorado 80202,
(888) 484-7505.
Additionally, stockholders who share the same address and receive multiple copies of the Notice of Internet Availability of Proxy Materials and, if applicable, an Annual
Report to Stockholders and Proxy Statement, can request a single copy by contacting us at the address or phone number above.
Admission to Annual Meeting
Admission to the Annual Meeting will be limited to holders of the Companys common stock, family members accompanying
holders of the Companys common stock, persons holding executed proxies from stockholders who held the Companys common stock as of the close of business on April 24, 2017 and such other persons as the chair of the Annual Meeting
shall determine.
If you are a holder of the Companys common stock, you must bring certain documents with you in order to be admitted
to the Annual Meeting and in order to bring family members with you. The purpose of this requirement is to help us verify that you are actually a holder of the Companys common stock. Please read the following procedures carefully, because they
specify the
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documents you must bring with you to be admitted to the Annual Meeting. The items that you must bring with you differ depending upon whether you were a record holder of the Companys common
stock as of the close of business on April 24, 2017, a holder of the Companys common stock in street name as of the close of business on April 24, 2017, or if you acquired the Companys common stock after
April 24, 2017. A record holder of stock is someone whose shares of stock are registered in his or her name in the records of the Companys transfer agent. Many stockholders are not record holders because their shares of stock
are held in street name, meaning that the shares are registered in the name of their broker, bank or other nominee, and the broker, bank or other nominee is the record holder instead. If you are unsure as to whether you were a record
holder of the Companys common stock as of the close of business on April 24, 2017, please call the Companys transfer agent, Computershare, at
(877) 889-2012.
If you were a record holder of the Companys common stock as of the close of business on April 24, 2017, then you must bring a valid personal photo
identification (such as a drivers license or passport).
At the Annual Meeting, we will check your name for verification purposes against our list of record
holders as of the close of business on April 24, 2017.
If a broker, bank or other nominee was the record holder of your shares of the Companys common
stock as of the close of business on April 24, 2017, then you must bring:
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valid personal photo identification (such as a drivers license or passport); and
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proof that you owned shares of the Companys common stock as of the close of business on April 24, 2017.
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Examples of proof of ownership include the following: (i) an original or a copy of the voting instruction from your bank or broker with your name on it,
(ii) a letter from your bank or broker stating that you owned the Companys common stock as of the close of business on April 24, 2017, or (iii) a brokerage account statement indicating
that you owned the Companys common stock as of the close of business on April 24, 2017.
If you
acquired your shares of the Companys common stock at any time after the close of business on April 24, 2017, you do not have the right to vote at the Annual Meeting, but you may attend the meeting if you bring with you:
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valid personal photo identification (such as a drivers license or passport); and
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proof that you own shares of the Companys common stock.
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Examples of proof of ownership include the following:
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if a broker, bank or other nominee is the record holder of your shares of the Companys common stock: (i) a letter from your bank or broker stating that you acquired the Companys common stock after
April 24, 2017, or (ii) a brokerage account statement as of a date after April 24, 2017 indicating that you own the Companys common stock; or
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if you are the record holder of your shares of the Companys common stock, a copy of your stock certificate or a confirmation acceptable to the Company that you bought the stock after April 24, 2017.
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If you are a proxy holder for a stockholder of the Company who owned shares of the Companys common stock as of the close of business on
April 24, 2017, then you must bring:
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the executed proxy naming you as the proxy holder, signed by a stockholder of the Company who owned shares of the Companys common stock as of the close of business on April 24, 2017;
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valid personal photo identification (such as a drivers license or passport); and
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if the stockholder whose proxy you hold was not a record holder of the Companys common stock as of the close of
business on April 24, 2017, proof of the stockholders ownership of shares of the Companys common stock as of the close of business on April 24, 2017, in the form of (i) an original or a copy of the voting instruction
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Proxy Statement
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form from the stockholders bank or broker with the stockholders name on it, (ii) a letter from a bank or broker indicating that the stockholder owned the Companys common
stock as of the close of business on April 24, 2017, or (iii) a brokerage account statement indicating that the stockholder owned the Companys common stock as of the close of business on April 24, 2017.
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No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted at the Annual
Meeting. Shares may be voted in person at the Annual Meeting only by (a) the record holder as of the close of business on April 24, 2017 or (b) a person holding a valid proxy executed by such record holder.
Electronic Availability of Proxy Materials for the 2017 Annual Meeting
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to Be Held on June 16, 2017.
This Proxy Statement and the
Annual Report to Stockholders and
Form 10-K
for fiscal year 2016 are available electronically at
www.proxyvote.com.
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Proposal 1 Election of Directors
At the Annual Meeting, you will elect eleven directors to serve until the 2018 annual meeting of stockholders or until
their respective successors are elected and qualified, subject to such directors earlier death, resignation, disqualification or removal.
Our bylaws require
that each director be elected by the majority of votes cast with respect to such director in uncontested elections. In a contested election, where the number of nominees for director exceeds the number of directors to be elected, directors are
elected by a plurality of shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. If a nominee for director who was in office prior to the election is not elected by a majority of votes cast,
the director must promptly tender his or her resignation from the Board, and the Nominating and Governance Committee of the Board will make a recommendation to the Board about whether to accept or reject the resignation, or whether to take other
action. The Board, excluding the director in question, will act on the recommendation of the Nominating and Governance Committee and publicly disclose its decision and its rationale within 90 days (or, if so extended by the Board in certain
circumstances, within 180 days) from the date the election results are certified. If a nominee for director who was not already serving as a director does not receive a majority of votes cast in an uncontested election at the Annual Meeting,
the nominee is not elected to the Board. All 2017 nominees are currently serving on the Board.
None of the nominees has any family relationship with any other
nominee or with any of our executive officers and no arrangement or understanding exists between any nominee and any other person or persons pursuant to which a nominee was or is to be selected as a director or nominee.
After a thorough evaluation and assessment, the Nominating and Governance Committee has recommended, and the Board has nominated or
re-nominated,
Pamela M. Arway, Charles G. Berg, Carol Anthony (John) Davidson, Barbara J. Desoer, Pascal Desroches, Paul J.
Diaz, Peter T. Grauer, John M. Nehra, William L. Roper, Kent J. Thiry and Phyllis R. Yale for election as directors. Roger J. Valine, a member of the Board since 2006, will not stand for
re-election
and will retire from the Board upon expiration of his term immediately prior to the Annual Meeting. Accordingly, effective immediately prior to the Annual Meeting, the size of the Board will be
reduced from twelve members to eleven members. Ms. Yale and Mr. Desroches were appointed to the Board in July 2016 and January 2017, respectively. As part of a search process initiated by the Nominating and Governance Committee,
Ms. Yale was recommended to the Nominating and Governance Committee by a non-management director, and Mr. Desroches was identified as a qualified director candidate by a third-party search firm. Please see the section titled
Corporate Governance Selection of Directors below for more information about the nomination process.
Eight of the eleven nominees for
director have been determined to be independent under the NYSE listing standards. Please see the section titled Corporate Governance Director Independence below for more information. Each nominee has consented to being named
in this Proxy Statement as a nominee and has agreed to serve as a director if elected.
Unless the proxy indicates otherwise, the persons named as proxies in the
accompanying proxy have advised us that at the Annual Meeting they intend to vote the shares covered by the proxies for the election of the nominees named above. If one or more of the nominees are unable or not willing to serve, the persons named as
proxies may vote for the election of the substitute nominees that the Board may propose. The accompanying proxy contains a discretionary grant of authority with respect to this matter. The persons named as proxies may not vote for a greater number
of persons than the number of nominees named above.
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Information Concerning Members of the Board Standing for Election
A biography of each nominee, current as of March 31, 2017, setting forth his or her age, and describing his or her business experience during the past five years,
including other prior relevant business experience is presented below.
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Pamela M. Arway
, 63, has been one of our directors since May 2009. From 2005 to 2007, Ms. Arway served as the president of American Express International, Japan,
Asia-Pacific,
Australia region, a global payment services and travel company. Ms. Arway joined the American Express Company in 1987 after which she served in various capacities, including as chief executive
officer of American Express Australia Limited from 2004 to 2005 and as executive vice president of Corporate Travel, North America from 2000 to 2004. Prior to her retirement in October 2008, she also served as advisor to the American Express
Companys chairman and chief executive officer. Ms. Arway has also been a member of the board of the Hershey Company, a chocolate and confectionary company, since May 2010. She serves as a member of the Audit and Finance Committees of
Hershey Companys board. She joined the board of Iron Mountain Incorporated, an enterprise information management services company, in March 2014 and serves as chair of its Compensation Committee. Ms. Arway brings significant leadership
experience as a global executive, with extensive management experience in the areas of marketing, international business, finance and government affairs.
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Charles G. Berg
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59, has been one of our directors since March 2007, and currently serves as executive chairman of our integrated healthcare business, DaVita Medical Group (DMG, formerly known as HealthCare Partners or HCP). Mr. Berg served as
executive chairman and as a member of the board of directors of WellCare Health Plans, Inc. (WellCare), a provider of managed care services for
government-sponsored
healthcare programs from
January 2008 to December 2010. Mr. Berg served as
non-executive
chairman of the board of directors of WellCare from January 2011 until his retirement in May 2013. From January 2007 to April 2009,
Mr. Berg was a senior advisor to Welsh, Carson, Anderson & Stowe, a private equity firm. From April 1998 to July 2004, Mr. Berg held various executive positions with Oxford Health Plans, Inc. (Oxford), a health
benefit plan provider, which included chief executive officer from November 2002 to July 2004 when Oxford was acquired by UnitedHealth Group, president and chief operating officer from March 2001 to November 2002 and executive vice president,
medical delivery from April 1998 to March 2001. From July 2004 to September 2006, Mr. Berg served as an executive of UnitedHealth Group and was primarily responsible for integrating the Oxford business. Mr. Berg currently serves on the
Operating Council of Consonance Capital Partners, a private equity firm, and the board of directors of Justworks, Inc., a private human resources and payment company. Mr. Berg is an experienced business leader with significant experience
in the healthcare industry and brings an understanding of the operational, financial and regulatory aspects of our industry and business.
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Carol Anthony (John) Davidson
, 61, has been one of our directors since December 2010. From January
2004 until his retirement in September 2012, Mr. Davidson served as the senior vice president, controller and chief accounting officer of Tyco International Ltd. (Tyco), a provider of diversified industrial products and
services. Prior to joining Tyco in January 2004, he spent six years at Dell Inc., a computer and technology services company, where he held various leadership roles, including vice president, audit, risk and compliance, and vice president,
corporate controller. In addition, he previously spent 16 years at Eastman Kodak Company, a provider of imaging technology products and services, in a variety of accounting and financial leadership roles. Mr. Davidson is a director of
Pentair Plc., a provider of products and solutions in water, fluids, thermal management and equipment protection, Legg Mason Inc., a global asset management firm, and TE Connectivity Ltd., a technology company that was spun off by
Tyco. From 2010 to 2015, Mr. Davidson was a member of the Board of Trustees of the Financial Accounting Foundation which oversees financial accounting and reporting standards setting processes for the United States. Mr. Davidson also
serves on the Board of Governors of the Financial Industry Regulatory Authority. Mr. Davidson is a CPA with more than 30 years of leadership experience across multiple industries and brings a strong track record of building and leading
global teams and implementing governance and controls processes.
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Barbara J. Desoer
, 64, has been one of our directors since October 2015. Ms. Desoer currently serves
as the chief executive officer and a member of the board of directors of Citibank, N.A., a wholly owned subsidiary of Citigroup Inc. and a diversified global financial services company, since April 2014. Ms. Desoer previously served as the
chief operating officer of Citibank, N.A. from October 2013 to April 2014. In addition to her chief executive officer responsibilities, Ms. Desoer leads Citigroups comprehensive capital analysis and review process. Prior to Citibank,
Ms. Desoer spent 35 years at Bank of America, a diversified global financial services company, most recently as president, Bank of America Home Loans, where she led the integration of Countrywide, the largest mortgage originator and
servicer in the United States. In previous Bank of America roles, Ms. Desoer was a Global Technology & Operations executive, an international
market-focused
position leading teams in the United
Kingdom, Asia and Latin America. She also served as president, Consumer Products. She serves on the board of visitors at the University of California at Berkeley. Ms. Desoer also has served on the board of directors of various
non-profit
and privately held corporations. Ms. Desoer is an experienced business leader with extensive management experience, and brings a deep understanding of regulated businesses.
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Proxy Statement
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Pascal Desroches
, 53, has been one of our directors since January 2017. Mr. Desroches is the executive
vice president and chief financial officer of Turner Broadcasting System, Inc. (Turner), a Time Warner Company and a global media and entertainment company, a position he has held since January 2015. Mr. Desroches is also
responsible for Turners global technology, security and facilities organizations. Prior to joining Turner, Mr. Desroches was the senior vice president and controller of Time Warner Inc. (Time Warner), a global leader in media
and entertainment with businesses in television networks and film and TV entertainment, from January 2008 to December 2014, where he was responsible for overseeing internal and external financial reporting, financial planning and analysis,
procurement services, shared services program management office, and worked on the management team on mergers and acquisitions and other transactions. Prior to joining Time Warner, Mr. Desroches was a partner in KPMG LLPs Department of
Professional Practice Assurance & Advisory Services in New York from 2000 to 2001. Prior to being admitted into KPMG LLPs partnership, Mr. Desroches was a professional accounting fellow with the Office of the Chief
Accountant of the SEC. Mr. Desroches is a CPA with more than 30 years of experience, and brings significant finance experience to the Board as a current chief financial officer and former controller of a major media company.
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Paul J. Diaz
, 55, has been one of our directors since July 2007. Mr. Diaz currently serves as a
partner of Cressey & Company, a private investment firm focused exclusively on investing in and building healthcare businesses. Since August 2014, Mr. Diaz has served as a partner at Guidon Partners LP, an investment strategy
partnership. He served as executive vice chairman of Kindred Healthcare, Inc. (Kindred), a provider of long-term healthcare services in the United States, from March 2015 until March 2016, chief executive officer from January 2004 to
March 2015, as well as president from January 2002 to May 2012 and as chief operating officer from January 2002 to December 2003. Prior to joining Kindred, Mr. Diaz was the managing member of Falcon Capital Partners, LLC, a private
investment and consulting firm, and from 1996 to July 1998, Mr. Diaz served in various executive capacities with Mariner Health Group, Inc., a healthcare facility operator, including as executive vice president and chief operating officer.
Mr. Diaz serves on the boards of Kindred and Patterson Medical Holdings, Inc., a private medical supply distribution company, and the board of visitors of Georgetown University Law Center and previously served on the board of PharMerica
Corporation. Mr. Diaz is an experienced business leader with significant experience in the healthcare industry and brings an understanding of the operational, financial and regulatory aspects of our industry and business.
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Peter T. Grauer
, 71, has been one of our directors since August 1994 and our lead independent director
since 2003. Mr. Grauer has been chairman of the board of Bloomberg, Inc., a business and financial information company, since April 2001, treasurer since March 2001 and was its chief executive officer from March 2002 until July 2011.
Mr. Grauer has also served as a
non-executive
director of Glencore plc, a global mining and commodities firm listed on the London Stock Exchange, since June 2013. From November 2000 until March 2002,
Mr. Grauer was a managing director of Credit Suisse First Boston, a financial services firm. From September 1992 until November 2000, upon the merger of Donaldson, Lufkin & Jenrette (DLJ), a financial services firm, into
Credit Suisse First Boston, Mr. Grauer was a managing director and founding partner of DLJ Merchant Banking Partners. Mr. Grauer serves as a director of Blackstone Group, L.P., a publicly traded global investment and advisory firm.
Mr. Grauer has significant experience as a business leader and brings a deep understanding of our business and industry through his over 20 years of service as a member of the Board.
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John M. Nehra
, 68, has been one of our directors since November 2000. From 1989 until his retirement in
August 2016, Mr. Nehra was affiliated with New Enterprise Associates (NEA), a venture capital firm, including, from 1993 until his retirement, as general partner of several of its affiliated venture capital limited partnerships.
Mr. Nehra also served as managing general partner of Catalyst Ventures, a venture capital firm, from 1989 to 2013. Mr. Nehra served on the boards of a number of NEAs portfolio companies until his retirement in August 2016 and remains
a retired special partner of NEA. Mr. Nehra is an experienced business leader with approximately 44 years of experience in investment banking, research and capital markets and he brings a deep understanding of our business and industry
through his nearly 17 years of service as a member of the Board as well as significant experience in the healthcare industry through his involvement with NEAs
healthcare-related
portfolio
companies.
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Dr. William L. Roper
, 68, has been one of our directors since May 2001. Dr. Roper has been
chief executive officer of the University of North Carolina (UNC) Health Care System, dean of the UNC School of Medicine and vice chancellor for medical affairs of UNC since March 2004. Dr. Roper also continues to serve as a
professor of health policy and administration in the UNC School of Public Health and a professor of pediatrics and of social medicine in the UNC School of Medicine. From 1997 until March 2004, he was dean of the UNC School of Public Health. Before
joining UNC in 1997, Dr. Roper served as senior vice president of Prudential Health Care. He also served as director of the Centers for Disease Control and Prevention from 1990 to 1993, on the senior White House staff in 1989 and 1990 and as
the administrator of Centers for Medicare & Medicaid Services from 1986 to 1989. Dr. Roper was a member of and is the immediate past chairman of the board of the National Quality Forum, a
non-profit
organization that aims to improve the quality of healthcare. From December 2007 to November 2011, Dr. Roper served on the board of Medco Health Solutions, Inc., a pharmacy benefits
management company, and since November 2011 has served on the board of its successor company, Express Scripts Holding Company. Dr. Roper brings substantial expertise in the medical field, an
in-depth
understanding of the regulatory aspects of our business as well as clinical, financial and operational experience.
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Proxy Statement
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Kent J. Thiry
, 61, has been our chairman of the Board since June 2015 and from October 1999 until
November 2012, and our chief executive officer since October 1999. In October 2014, Mr. Thiry also became chief executive officer of DMG. From November 2012 until June 2015, Mr. Thiry served as our
co-chairman
of the Board. From June 1997 until he joined us in October 1999, Mr. Thiry was chairman of the board and chief executive officer of Vivra Holdings, Inc., which was formed to operate the
non-dialysis
business of Vivra Incorporated (Vivra) after Gambro AB acquired the dialysis services business of Vivra in June 1997. From September 1992 to June 1997, Mr. Thiry was the president and
chief executive officer of Vivra, a provider of renal dialysis services and other healthcare services. From April 1992 to August 1992, Mr. Thiry was president and
co-chief
executive officer of Vivra, and
from September 1991 to March 1992, he was president and chief operating officer of Vivra. From 1983 to 1991, Mr. Thiry was associated with Bain & Company, first as a consultant, and then as vice president. Mr. Thiry previously
served on the board of Varian Medical Systems, Inc. from August 2005 to February 2009 and served as the
non-executive
chairman of Oxford Health Plans, Inc. until it was sold to UnitedHealth Group in
July 2004. As a member of management, Mr. Thiry provides significant healthcare industry experience and unique expertise regarding the Companys business and operations as well as executive leadership and management experience.
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Phyllis R. Yale
, 59, has been one of our directors since July 2016. Ms. Yale has been an Advisory Partner
with Bain & Company, Inc. (Bain), a global management consulting firm, since July 2010. Ms. Yale was a partner with Bain from 1987 to July 2010, and was a leader in building Bains healthcare practice. In her role at
Bain, Ms. Yale works with healthcare payors, providers, and medical device companies, and frequently advises the worlds leading private equity firms on their investments in the healthcare sector. She has served as a member of the board of
directors of several public and private companies in the healthcare sector, and currently serves as Chair of the board of directors of Kindred Healthcare, Inc., a provider of long-term healthcare services in the United States. She is also Chair of
the board of directors of Blue Cross Blue Shield of Massachusetts, a
not-for-profit
health plan headquartered in Boston, and a director of National Surgical Hospitals, a
privately held specialty hospital operator. Ms. Yale previously served as a director of ValueOptions, Inc., a health improvement company specializing in mental and emotional wellbeing and recovery, which merged with Beacon Health Strategies
during 2014. Ms. Yale has a deep knowledge base and experience in several segments of the healthcare industry including corporate strategies, marketing and cost and quality management, as well as mergers and acquisitions.
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The Board recommends a vote FOR the election of each of the named nominees as directors.
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The general governance framework for the Company is provided by its bylaws, corporate governance guidelines, the charters
for each of the Boards committees, the corporate governance code of ethics and corporate code of conduct. These governance documents are available under the Corporate Governance section of our website,
located at
http://www.davita.com/about/corporate
-governance
. The Board adopted the corporate governance guidelines to assist the Board and
its committees in performing their duties and serving the best interests of the Company and our stockholders.
Selection of Directors
Our Board views diversity in a broad sense, taking into consideration the mix of qualifications of our directors including
tenure, experience levels and types of experience, including both industry and subject matter expertise. and
re-evaluating
these qualifications from time to time to ensure continued diversity.
In making its recommendations to the Board, the Nominating and Governance Committee considers a number of factors and assesses the overall mix of qualifications,
individual characteristics, experience level, and diverse perspectives and skills that are most beneficial to our Company. The committee also considers the mix of different tenures of the directors, taking into account the benefits of directors with
longer tenures, including greater board stability and continuity of organizational knowledge, and the benefits of directors with shorter tenures, and takes steps as may be appropriate to ensure that the Board maintains an openness to new ideas and a
willingness to
re-examine
the status quo. In connection with the nomination or
re-nomination
of current directors, it is the committees responsibility to determine
in each case whether nomination or
re-nomination
is appropriate. The committee assesses each directors performance
and contributions to the Board, as well as his or her skills, experience and qualifications, including the continued value to the Company of a directors experience and background in light
of current and future needs. If the incumbent director has not performed or contributed in a meaningful way, the committee should consider whether nomination or
re-nomination
is appropriate in light of any
other relevant facts and circumstances. An integral part of this process is the individual director evaluation process performed by the Board members.
The
Nominating and Governance Committee will consider nominees for director recommended by stockholders upon submission in writing to our Corporate Secretary of the names and qualifications of such nominees at the following address: Corporate Secretary,
DaVita Inc., 2000 16th Street, Denver, Colorado 80202. The committee will evaluate candidates based on the same criteria regardless of whether the candidate was recommended by the Company or a stockholder.
In March 2017, the Nominating and Governance Committee recommended the candidates standing for election at the Annual Meeting.
Our director nominees exhibit an effective mix of
skills, experience and diversity. Over half of our Board is comprised of minorities and women:
Corporate Governance
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Corporate Governance
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Director Independence
Under the listing standards of the NYSE, a majority of the members of the Board must satisfy the NYSE criteria for
independence. No director qualifies as independent under the NYSE listing standards unless the Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder
or officer of an organization that has a relationship with the Company).
The Board evaluates the independence of our directors annually and will review the
independence of individual directors on an interim basis to consider changes in employment, relationships and other factors. The Board has determined that all of the individuals currently serving, or who served at any time during 2016, as members of
the Board, other than Messrs. Berg, Diaz and Thiry, are independent under the NYSE listing standards and the Companys independence standards. In evaluating each directors independence, the Board considered the nature of any executive
officers or other directors personal investment interest in director affiliated entities (active or passive), the level of involvement by the director or executive officer as a partner in any such director affiliated entities, any
special arrangements or relationships between the parties which would lead to a personal benefit, any personal benefits derived as a result of business relationships with the Company, any other personal benefit derived by any director or executive
officer as a result of the disclosed relationships or any other relevant factors.
Under the NYSE listing standards, a director is deemed not independent if he has
been employed as an executive officer of another company where any of the Companys present executive officers at the same time served on that companys compensation committee within the last three years. Mr. Diaz was the chief
executive officer of Kindred Healthcare, Inc. (Kindred) during the time that the Companys current chief financial officer, Joel Ackerman, served on its compensation committee. Mr. Ackerman served on the compensation committee
of Kindred
through May 22, 2014. As a result, Mr. Diaz may not be deemed independent under the NYSE listing standards from February 21, 2017, the day Mr. Ackerman joined the Company, until
May 22, 2017, the three-year anniversary of the date Mr. Ackerman stepped down from Kindreds compensation committee. In anticipation of Mr. Ackermans joining the Company, Mr. Diaz stepped down from the Boards
Compensation Committee and Compliance Committee on February 13, 2017.
Prior to his joining the Board, the Board considered Mr. Desroches independence in
view of his brothers employment as a medical director with the Company. After consideration of relevant factors, the Board determined that the Companys employment of Mr. Desroches brother did not present a conflict of interest
and did not compromise Mr. Desroches independence.
Neither Mr. Thiry nor Mr. Berg are deemed independent because they are currently employed
by the Company.
Our corporate governance guidelines require the Board to evaluate the appropriateness of the directors continued service on the Board in the
event that the director retires from his or her principal job, changes his or her principal job responsibility or experiences a significant event that could negatively affect his or her service to the Board. In such event, the policy provides that
the affected director shall promptly submit his or her resignation to the chairman of the Board and the lead independent director. The members of the Board, excluding the affected director, will determine whether the affected directors
continued service on the Board is in the best interests of our stockholders and will decide whether or not to accept the resignation of the director. In addition, the policy provides that prior to accepting an invitation to serve on the board of
directors of another public company, a director must advise the chairman of the Board and the lead independent director so that the remaining members of the Board may evaluate any potential conflicts of interest.
Continues on next page
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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13
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Leadership Structure and Meetings of Independent Directors
Mr. Thiry is the chairman of our Board and CEO. Since October 2014, Mr. Thiry has also served as CEO of DMG.
Mr. Thiry brings over 15 years of experience with our Company and deep institutional knowledge and experience to the combined role.
We believe that
Mr. Thirys breath of experience and depth of knowledge as our CEO and chairman are essential to the chairman role and are counterbalanced appropriately by the significant role of our lead independent director. Our lead independent
director, Mr. Grauer, who was elected by and from the independent board members, plays a significant role in Board leadership and meetings of the independent directors. Mr. Grauer also chairs our Nominating and Governance Committee, and as
chairman of the Nominating and Governance Committee, Mr. Grauer has the authority to call meetings of the committee, whose primary purposes, as outlined in its charter, include overseeing the composition, structure, operation and evaluation of
the Board, as well as overseeing compliance with governance principles and policies.
As lead independent director, Mr. Grauer serves as liaison between the chairman and the independent directors,
approves information sent to the Board, confers with the CEO/chairman in setting and thereafter approving meeting agendas for the Board, approves meeting schedules to assure that there is sufficient time for discussion of all agenda items, and
presides at all meetings of the Board at which the chairman is not present, including executive sessions of independent directors. Additionally, Mr. Grauer facilitates discussions outside of scheduled Board meetings among the independent
directors on key issues as required, including whether to engage independent advisors for the Board or a Board committee. Mr. Grauer, in his capacity as lead independent director, also has the authority to call meetings of the Board and the
independent directors and, if requested by major stockholders, makes himself available for consultation and direct communication with them.
Independent directors
meet regularly in executive sessions without management. Executive sessions are held in conjunction with each regularly scheduled meeting of the Board.
Corporate Citizenship
Being a leader in American healthcare means being a responsible corporate community. The
Trilogy of
Care
caring for our patients, each other, and the worldis DaVitas vision for social responsibility and is our philosophy for balancing our business responsibilities with our social, economic and environmental ones. For more than
a decade, we have had a vision for creating a true communityone that cares for our teammates as well as our patients. This investment in creating a community has inspired our teammates to realize their full potential and to deliver
ever-improving quality care to our patients.
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Through the
DaVita Way of Giving
program, $2.2 million of company donations were directed to locally-based charities across the United States with the participation of 90 percent of our clinical
teammates in 2016. Since the inception of the DaVita Way of Giving in 2011,
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teammates have directed nearly $9.1 million to
non-profit
organizations, spreading ripples across local communities.
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Through
Village Service Days
, groups of three or more teammates can plan and execute a service project with a local nonprofit. Since 2006, DaVita teammates and their family and friends have volunteered nearly
140,000 hours through nearly 3,600 Village Service Days around the world in the service of our communities.
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In honor of
Earth Day 2016
, approximately 2,600 DaVita teammates, their families and friends volunteered over 7,500 hours through 140 environmental service projects in their local communities.
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14
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Corporate Governance
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In 2016, more than 560 riders participated in
Tour DaVita
, DaVitas annual charity bike ride, which raised over $1.2 million to support
Bridge of Life
. Bridge of Life is a
non-profit
organization founded by DaVita to serve thousands of men, women and children around the world through kidney
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care, primary care, education and prevention and medically supported camps for kids. Since 2006, Bridge of Life has completed 398 domestic and international medical missions and events in 25
countries.
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Sustainability
Through
DaVitas Village Green
we are expanding programs that emphasize environmental sustainability in our
centers and offices around the world. Since the inception of Village Green in 2007, we have made significant strides toward accomplishing our goal to be a leader in sustainable healthcare.
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DaVita was recognized in 2016 for the first time by the
Dow Jones Sustainability Indices
(DJSI), as one of only six providers in the Health Care Providers and Services Industry on the DJSI World Index.
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DaVita
diverted 113,000 pounds of electronic waste
from landfills in 2016.
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DaVitas Smarter Building Initiative systems have been installed at over 375 clinics across the country since 2014. They
reduce energy consumption between 8 and 14
percent
.
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Our
2020 Environmental Goals
were formally announced in 2016. These ambitious goals,
organized around the categories of energy, water, waste, green buildings and supply chain, will set our course for the next four years. These goals include:
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Reducing energy use and carbon emissions
by 10 percent per treatment.
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Adding solid waste recycling
to at least 45 percent of kidney care locations.
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Conducting an
annual sustainability review
with all national vendors and increasing the availability of environmentally preferable products and equipment and reducing packaging.
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Reducing water use
by 30 percent per treatment.
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To learn more about our corporate social responsibility
programs please visit the Community Care section of our website located at
http://www.davita.com/communitycare.com
.
Communications with the Board
Any interested party who desires to contact the lead independent director, Mr. Grauer, may do so by sending an email
to
leaddirector@davita.com.
In addition, any interested party who desires to contact the Board or any member of the Board may do so by writing to: Board of Directors, c/o Corporate Secretary, DaVita Inc., 2000 16th Street,
Denver, Colorado
80202. Copies of any such written communications received by the Corporate Secretary will be provided to the full Board or the appropriate member depending on the facts and circumstances
described in the communication unless they are considered, in the reasonable judgment of the Corporate Secretary, to be improper for submission to the intended recipient(s).
Annual Meeting of Stockholders
We do not have a policy requiring that directors attend the annual meeting of stockholders, and no
director was in attendance at the prior years annual meeting.
Continues on next page
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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15
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Information Regarding the Board and its Committees
The Board has established the following committees: the Audit Committee, the Compensation Committee, the Nominating and
Governance Committee, the Compliance Committee, the Public Policy Committee and the Clinical Performance Committee. As required by the NYSE listing standards and SEC rules, all members of the Audit Committee, the
Compensation Committee and the Nominating and Governance Committee are independent. The Board met six times during 2016. Each of our directors attended at least 75% of the aggregate of the total
number of meetings of the Board and the total number of meetings held by all committees of the Board on which he or she served during 2016.
Committees of the Board
The following chart sets out the current members of our Board committees and describes the principal functions of each committee of our Board. The charter for each
committee is available under the Corporate Governance section of our website, located at
http://www.davita.com/about/corporate
-governance.
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Name of
Committee
and Members
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Principal Functions
of the
Committee
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Meetings
in 2016
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Audit
1
Carol Anthony (John)
Davidson
Chair
Pamela M. Arway
2
Pascal Desroches
3
Roger J. Valine
4
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Oversees the quality and
integrity of our consolidated financial statements including the financial reporting and disclosure processes and the integrity and effectiveness of our system of internal control over financial reporting.
Oversees our compliance with legal and regulatory requirements, including healthcare
compliance in coordination with the Boards Compliance Committee.
Oversees
the independence, qualifications and performance of our independent registered public accounting firm, including a review of the scope and results of their audit, as well as our internal audit function.
Together with the Compliance Committee, assists the Board with overseeing compliance
with legal and regulatory requirements, including those that may have a material impact on the Companys financial statements.
Appoints and engages our independent registered public accounting firm, and
pre-approves
the firms annual audit services (including related fees),
audit-related
services, and all other services in accordance with our
pre-approval
policy.
Oversees our disclosure
controls and procedures and compliance with ethical standards.
Provides an avenue
of communication among the independent registered public accounting firm, management, internal audit department and the Board.
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10
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Compensation
5
Pamela M. Arway
Chair
Pascal Desroches
3
Peter T.
Grauer
Roger J. Valine
4
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Reviews the performance
of our chief executive officer and other executives and makes specific recommendations and decisions regarding their compensation.
Establishes policies relating to the compensation of our executive officers and other
key employees that further the goal of ensuring that our compensation system for our chief executive officer and our other executives, as well as our philosophy for compensation for all employees and the Board, is aligned with the
long-term
interests of our stockholders.
Conducts an evaluation of our chief executive officers performance and the
Companys performance and considers a
self-assessment
prepared by our chief executive officer and periodically engages an outside consultant to conduct an
in-depth
analysis of our chief executive officers performance during the year.
Has
sole authority and discretion to retain or replace its independent compensation consultants, independent legal counsel and other advisors, and is directly responsible for hiring, overseeing and compensating such advisors.
Annually reviews and approves the
long-term
corporate goals and objectives applicable to compensation for our chief executive officer, evaluates our chief executive officers performance in light of those goals and objectives, and determines and approves, subject to ratification by the
independent members of the Board, all elements of our chief executive officers total compensation, including the chief executive officers compensation level based on this evaluation.
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5
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1
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Mr. Berg served on the Audit Committee until October 31, 2016, when he took the position of executive chair of DMG.
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2
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Ms. Arway was appointed to the Audit Committee on November 1, 2016.
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3
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Mr. Desroches was appointed to the Audit Committee on January 5, 2017, and to the Compensation Committee on April 27, 2017.
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4
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Mr. Valine will step down from the Committee when his current Board term expires and he retires from the Board as of the date of the Annual Meeting.
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5
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Mr. Diaz served on the Compensation Committee until February 13, 2017, as previously discussed in the Director Independence section on page 13.
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16
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Corporate Governance
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Name of Committee
and Members
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Principal Functions
of the Committee
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Meetings
in 2016
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Compensation
(continued)
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Works closely with and
considers the recommendations of our chief executive officer to determine the compensation of our other executive officers.
Reviews the goals and objectives and summary performance assessments applicable to
the compensation of our other executive officers. Reviews and approves all elements of total compensation of our other executive officers after considering the recommendations of the chief executive officer, who conducts a performance and
compensation review of each other executive officer and reviews his detailed assessments of the performance of each of the other executive officers with the Compensation Committee.
Reviews the results of advisory stockholder votes and other stockholder feedback on
the compensation of our executive officers and considers whether to make adjustments to our compensation structure, policies and practices as a result of such votes.
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Nominating and
Governance
Peter T. Grauer
Chair
Pamela M. Arway
Carol Anthony
(John)
Davidson
Roger J. Valine
4
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Oversees the composition,
structure, operation and evaluation of the Board.
Reviews and makes recommendations to
the Board about our governance principles, policies and processes, and oversees compliance with existing principles and policies.
Assists in identifying and recruiting candidates for the Board.
Annually reviews the performance of the individual members of the Board.
Proposes a slate of nominees for election at the annual meeting of stockholders.
Makes recommendations to the Board regarding the membership and chairs of the committees
of the Board.
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2
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Compliance Committee
6
Barbara J. Desoer
Chair
7
Dr. William L. Roper
Phyllis R. Yale
8
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Reviews and oversees
compliance with Federal healthcare program requirements and the Corporate Integrity Agreement.
Oversees and monitors the effectiveness of our healthcare regulatory compliance program,
reviews significant healthcare regulatory compliance risk areas, and reviews the steps management is taking to monitor, control and report these risk exposures.
Together with the Audit Committee, assists the Board with oversight of enterprise risk
management and healthcare legal and regulatory compliance.
Has primary responsibility
for oversight of healthcare regulatory requirements and ensuring proper communication of healthcare regulatory compliance issues to the Board.
Meets at least once each quarter in executive sessions with our chief compliance officer
to discuss, among other things, our compliance program and to receive an update on compliance activities initiated or completed during the quarter.
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8
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Public Policy
8
John M. Nehra
Chair
Paul J. Diaz
Phyllis R. Yale
9
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Advises the Board on public
policy and government relations issues facing the healthcare industry and the Company.
Makes recommendations to the Board as to policies and procedures relating to issues of public policy and government relations that are having or could have an impact on the Companys industry, business or operations.
Oversees the Companys government affairs activity and political spending.
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2
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Clinical
Performance
Dr. William L. Roper
Chair
Carol Anthony (John)
Davidson
Barbara J.
Desoer
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Advises the Board on clinical
performance issues facing the Company.
Makes recommendations to management and to the
Board as to policies and procedures relating to issues of clinical performance.
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2
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6
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Mr. Berg served on the Compliance Committee until October 31, 2016, when he took on the position of executive chair of DMG. Mr. Diaz served on the Compliance Committee until February 13, 2017, as
previously discussed in the Director Independence section on page 13.
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7
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Ms. Desoer was appointed chair of the Compliance Committee on November 1, 2016.
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8
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Ms. Arway served on the Public Policy Committee until April 27, 2017.
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9
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Ms. Yale was appointed to the Compliance Committee on November 1, 2016 and to the Public Policy Committee on January 5, 2017.
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Continues on next page
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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17
|
Overview of
Committee Membership Qualifications
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Director
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Independent
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Other Public
Company Boards*
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Pamela M. Arway
1,2
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Yes
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2
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Charles G. Berg
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No
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0
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Carol Anthony (John)
Davidson
2
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Yes
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3
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Barbara J. Desoer
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Yes
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0
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Pascal Desroches
1,2
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Yes
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0
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Paul J. Diaz
4
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No
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1
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Peter T. Grauer
1,3
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Yes
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2
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John M. Nehra
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Yes
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0
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Dr. William L.
Roper
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Yes
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1
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Kent J. Thiry
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No
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0
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Roger J. Valine
1,2
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Yes
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0
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Phyllis R. Yale
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Yes
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1
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1
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Member of the Compensation Committee and is (a) independent under the listing standards of the NYSE and the Companys independence standards, (b) a nonemployee director under Rule
16b-3
of the Securities Exchange Act of 1934 (the Exchange Act), and (c) an outside director as defined in Internal Revenue Service regulations.
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2
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Member of the Audit Committee and qualifies as an audit committee financial expert within the meaning of the rules of the SEC and is independent and financially literate under the
listing standards of the NYSE and the Companys independence standards.
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3
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Mr. Grauer is our Lead Independent Director.
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4
|
Mr. Diaz is not independent under the NYSE listing standards, until at least May 22, 2017. See the section titled Director Independence above for more information.
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*
|
Current as of March 31, 2017.
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Risk
Oversight
The Boards involvement in risk oversight involves the Audit Committee, the Compliance Committee and the full Board.
Each of the Audit Committee and Compliance Committee are comprised of independent
non-executive
directors. The Audit Committee is responsible for legal and regulatory risk oversight and the Compliance
Committee has primary responsibility for oversight of healthcare legal and regulatory compliance requirements. The Audit Committee and the Compliance Committee meet regularly with our chief legal officer and chief compliance officer, and work
together to assist the Board with oversight of legal and compliance enterprise risk management and to ensure that management identifies, monitors, controls and reports such compliance risk exposures. The Compliance Committee reviews significant
healthcare legal and regulatory compliance risk areas, and meets on a regular basis and reports directly to the Board on its findings. The Audit Committee reviews materials on enterprise risk management on an annual basis. These materials include
identification of top enterprise risks for the Company, the alignment of managements accountability and reporting for these risks, and mapping of the Boards and Audit Committees
oversight responsibilities for key risks. In addition, the Audit Committee and the full Board periodically review materials to address the identification and status of major risks to the Company.
The Audit Committee discusses significant risk areas and the actions management has taken to identify, monitor, control and report such exposures. The Audit Committee also reviews with the Companys chief legal officer legal matters that may
have a material impact on the Companys financial statements, the Companys compliance with applicable laws and regulations, and material reports or inquiries received from governmental agencies, including such matters identified by the
Compliance Committee or the chief compliance officer. At each meeting of the full Board, the chairman of the Audit Committee reports on the activities of the Audit Committee, including risks identified and risk oversight.
Additionally, the Compensation Committee annually reviews risk considerations in our compensation program, as described more fully in our Compensation Discussion
and Analysis on page 47.
18
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Corporate Governance
|
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|
Board Share Ownership Policy
We have a share ownership policy that applies to all
non-employee
members of the
Board. The purpose of the policy is to align the financial interests of our
non-employee
Board members with those of our stockholders.
Both shares owned directly and shares underlying vested but unexercised stock appreciation rights (SARs), including
stock-settled
stock appreciation rights (SSARs), restricted stock units (RSUs), and stock options are included in the determination of whether the share ownership guidelines have been
met. The total net realizable share value retained must have a current market value of not less than the lower of:
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25% of the total equity award value realized by the Board member to date in excess of $100,000; or
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three times the annual Board cash retainer of $80,000, or $240,000.
|
As of December 31, 2016, each of our
non-employee
members of the Board had met the requirements of our share ownership guidelines. See Compensation Discussion and Analysis Compensation Policies and Practices Management
Share Ownership Policy on page 47 of this Proxy Statement for more information regarding our management share ownership policy.
Code of Ethics and Codes of Conduct
We have a code of ethics that applies to our chief executive officer, chief financial officer, controller and chief
accounting officer, chief legal officer, and all professionals involved in the accounting and financial reporting functions. We also have a code of conduct that applies to all of our employees, officers and the Board. The code of ethics and the code
of conduct are available under the Corporate Governance section of our website, located at
http://www.davita.com/about/corporate
-governance
. If the Company amends or waives the code of ethics or
the code of conduct with respect to our chief executive officer, chief financial officer, controller or chief accounting
officer, chief legal officer, or persons performing similar functions, we will disclose the amendment or waiver at the same location on our website.
DMG also has a code of conduct that applies to its officers, employees, affiliated physicians, and persons serving on the board of directors of its subsidiaries, and
contracted providers, vendors and all third parties conducting business on behalf of DMG. The DMG code of conduct is available under the Corporate Governance section of our website, located at
http://www.davita.com/about/corporate
-governance
.
Insider Trading Policy
We have adopted an Insider Trading Policy applicable to our directors, executive officers and employees that is intended
to ensure that those individuals do not violate the securities laws by transacting in our common stock or other Company securities while in the possession of material
non-public
information, or by engaging in
other conduct that while lawful might not be aligned with stockholders best interest. Under our Insider Trading Policy,
pre-clearance
by our chief legal officer is required for equity and 401(k) plan
transactions entered into by our executives and Board members, such as an option or stock appreciation right exercise, or electing to invest in
or divest shares of our common stock, as well as certain other transactions involving our common stock. In addition, quarterly trading blackouts are imposed under the Insider Trading Policy upon
our directors, executive officers and certain other employees who are deemed to have access to the Companys financial results prior to their becoming final and being publicly disclosed. The Insider Trading Policy strictly prohibits hedging
transactions. Moreover, our directors, executive officers and other employees are prohibited from pledging Company securities as collateral for a loan.
Continues on next page
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
|
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19
|
Security Ownership of Certain Beneficial Owners and
Management
24
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Security Ownership of Certain Beneficial Owners and Management
|
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3
|
Based solely upon information contained in Amendment No. 6 to Schedule 13G filed with the SEC on February 9, 2017, as of December 31, 2016, The Vanguard Group, Inc., an investment adviser, has sole voting
power with respect to 253,467 shares, shared voting power with respect to 30,078 shares, sole dispositive power with respect to 14,469,557 shares and shared dispositive power with respect to 279,880 shares.
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4
|
Based solely upon information contained in Amendment No. 1 to Schedule 13G filed with the SEC on January 23, 2017, as of December 31, 2016, BlackRock, Inc., an investment advisor, has sole voting power
with respect to 11,337,704 shares and sole dispositive power with respect to 12,884,961 shares.
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5
|
Includes 498,178 shares held in a family trust and 2,041,169 shares issuable upon the exercise of SSARs and 2,306 performance stock units, which are exercisable as of, or will become exercisable within 60 days after,
March 31, 2017.
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6
|
Includes 432,114 shares issuable upon the exercise of SSARs and 1,294 performance stock units, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
|
|
7
|
Includes 45,601 shares issuable upon the exercise of SSARs and 900 restricted stock units, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
|
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8
|
Includes 17,802 shares issuable upon the exercise of SSARs and 1,800 restricted stock units, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
|
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9
|
Includes 34,076 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
|
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10
|
Includes 24,814 shares held in trust and 58,076 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
|
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11
|
Includes 46,076 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
|
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12
|
Includes 3,819 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
|
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13
|
Includes 10,076 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
|
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14
|
Includes 86,717 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
|
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15
|
Includes 82,076 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
|
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16
|
Includes 82,076 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
|
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17
|
Includes 70,076 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
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18
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Includes 3,027,974 shares issuable upon the exercise of SSARs and 6,840 restricted stock units, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2017.
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Continues on next page
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
|
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25
|
Information Concerning Our Executive Officers
|
|
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|
|
|
|
Name
|
|
Age
|
|
|
Position
|
Kent J.
Thiry
|
|
|
61
|
|
|
Chairman and Chief Executive Officer, DaVita, and Chief Executive Officer, DaVita Medical Group
|
Javier J.
Rodriguez
|
|
|
46
|
|
|
Chief Executive Officer, DaVita Kidney Care
|
Joel
Ackerman
|
|
|
51
|
|
|
Chief Financial Officer
|
James K.
Hilger
|
|
|
55
|
|
|
Chief Accounting Officer
|
Kathleen A.
Waters
|
|
|
49
|
|
|
Chief Legal Officer
|
Jeanine M.
Jiganti
|
|
|
57
|
|
|
Chief Compliance Officer
|
LeAnne M.
Zumwalt
|
|
|
58
|
|
|
Group Vice President, Purchasing and Public Affairs
|
Our executive officers are appointed by, and serve at the discretion of, the Board. Set forth below is a brief description
as of March 31, 2017 of the business experience of all executive officers other than Mr. Thiry, who is also a director and whose business experience is set forth above in the section of this Proxy Statement entitled Information
Concerning Members of the Board Standing for Election.
Javier
J. Rodriguez
became our chief executive officer, DaVita Kidney Care
in March 2014. Since joining the Company in 1998, Mr. Rodriguez has served in a number of different capacities. From February 2012 to March 2014, he served as our president. From April 1, 2006 through February 2012, he served as our senior
vice president. Before that, from 2000 to 2006 he served as a vice president of operations and payor contracting. Mr. Rodriguez joined the Company in 1998 as a director of value management. Prior to joining the Company, Mr. Rodriguez
worked for Baxter Healthcare Corporation in Finance from 1995 to 1996. He also previously served as director of operations for CBS Marketing Inc. in Mexico City.
Joel Ackerman
became our chief financial officer on February 27, 2017 after serving as our senior vice president, finance from February 21, 2017 to
February 26, 2017. Prior to joining us, he was the chief executive officer and a member of the board of directors of Champions Oncology, Inc., a company engaged in the development of advanced technology solutions and services to personalize the
development and use of oncology drugs, since October 2010. Mr. Ackerman is currently the Chairman of Champions Oncology.
He was also a managing director at Warburg Pincus, a global private equity firm, where he led the healthcare services team for 10 years from January 1999 to September 2008. Mr. Ackerman sits
on the board of directors at Kindred Healthcare, Inc., a position he has held since December 2008, and previously served on the board of directors of Coventry Health Care, Inc. a national managed care company, from September 1999 until its
acquisition by Aetna Inc. in May 2013. He is also chairman of the board of One Acre Fund, a
non-profit
organization that focuses on smallholder agriculture, and serves more than 400,000 subsistence farmers in
Africa.
James
K. Hilger
became our chief accounting officer in April 2010. Mr. Hilger also served as our interim chief financial
officer from March 2015 until February 2017 and from April 2012 until November 2013. Prior to April 2010, Mr. Hilger served as our vice president and controller since May 2006, after having served as our vice president, finance beginning in
September 2005. Mr. Hilger was our acting chief financial officer from November 2007 through February 2008. From September 2003 to September 2005, Mr. Hilger served as vice president, finance and administration and chief financial officer
of Pyramid Breweries, a brewer of specialty beverages. From December 1998 to July 2003, Mr. Hilger served as chief executive officer and chief financial officer of WorldCatch, Inc., a seafood industry company. From 1987 until joining
WorldCatch, Inc., Mr. Hilger held a variety of senior financial positions in the food industry. Mr. Hilger began his career in public accounting with Ernst & Whinney.
26
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Security Ownership of Certain Beneficial Owners and Management
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Kathleen
A. Waters
became our chief legal officer in May 2016. Prior to joining the Company,
Ms. Waters was senior vice president, general counsel and secretary of Health Net, Inc., a publicly traded managed care organization, from April 2015 to March 2016. She was a partner in Morgan, Lewis & Bockius LLPs
litigation practice from 2003 to 2015. She also was the leader of that firms Los Angeles litigation group and
co-leader
of the healthcare group. Before that, Ms. Waters was a partner at Brobeck,
Phleger & Harrison LLP in Los Angeles.
Jeanine
M. Jiganti
became our chief compliance officer in March 2013. From July 2012
to March 2013, she served as our vice president, international chief compliance officer and deputy chief compliance officer. Prior to joining us, she served as chief compliance officer for Takeda Pharmaceuticals North America, a subsidiary of a
Japanese pharmaceutical company, from October 2005 to March 2012. Additionally, she served as chief compliance officer for several of Takeda Pharmaceutical Company Limiteds affiliates including Takeda Global Research and Development and Takeda
Pharmaceuticals International Operations. During Ms. Jigantis career, she has served as general counsel for the Illinois Department of Commerce and Economic
Opportunity from September 2003 to September 2005, general counsel of Near North Insurance Company from September 2002 to September 2003 and vice president of litigation at Caremark Inc., a
pharmaceutical services company, from 1996 to 2002.
LeAnne
M. Zumwalt
became our group vice president, purchasing and public affairs in
July 2011. From January 2000 to July 2011, Ms. Zumwalt served as our vice president in many capacities. From January 2000 to October 2009, she served as our vice president, investor relations while having other responsibilities. From 1997 to
1999, Ms. Zumwalt served as chief financial officer of Vivra Specialty Partners, Inc. a privately held healthcare service and technology firm. From 1991 to 1997, Ms. Zumwalt held various executive positions, including chief financial
officer, at Vivra Incorporated, a provider of renal dialysis services and other healthcare services. Prior to joining Vivra Incorporated, Ms. Zumwalt was a senior manager at Ernst & Young LLP. Ms. Zumwalt serves on the board
of The Advisory Board Company.
None of the executive officers has any family relationship with any other executive officer or with any of our directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires insiders, including our executive officers, directors and
beneficial owners of more than 10% of our common stock, to file reports of ownership and changes in ownership of our common stock with the SEC and the NYSE, and to furnish us with
copies of all Section 16(a) forms they file. Based solely on our review of the copies of such forms received by us, or written representations from reporting persons, we believe that our
insiders complied with all applicable Section 16(a) filing requirements during 2016.
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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Table of Contents
Compensation Discussion and Analysis
28
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Compensation Discussion and Analysis
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Compensation Discussion and Analysis Information
This Compensation Discussion and
Analysis (the CD&A) describes our executive compensation program for the following named executive officers (NEOs):
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NEO
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TITLE
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Kent J. Thiry
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Chairman and Chief Executive Officer, DaVita, and Chief Executive Officer, DaVita Medical Group
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Javier J. Rodriguez
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Chief Executive Officer, DaVita Kidney Care
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Kathleen A. Waters
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Chief Legal Officer
1
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LeAnne M. Zumwalt
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Group Vice President, Purchasing and Public Affairs
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James K. Hilger
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Former Interim Chief Financial Officer and Chief Accounting Officer
2
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1
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Ms. Waters joined the Company as chief legal officer on May 6, 2016.
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2
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Mr. Hilger served as interim chief financial officer until February 27, 2017 and continues to serve as our chief accounting officer.
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Executive Summary
Our Business
The Company consists of two major divisions, DaVita Kidney Care (DKC) and DaVita Medical Group (formerly known as HealthCare Partners or HCP, and referred
to herein as DMG). DKC is comprised of our U.S. dialysis and related lab services, our ancillary services and strategic initiatives, including our international operations, and our corporate administrative support. DMG provides
healthcare services, primarily under capitation contracts and on a fee-for service basis.
Our largest line of business is our U.S. dialysis and related lab
services business, which is a leading provider of kidney dialysis services in the United States. As of December 31, 2016, we operated or provided administrative services through a network of 2,350 outpatient dialysis centers in the U.S.,
serving a total of approximately 187,700 patients in 46 states and the District of Columbia. We also provide acute inpatient dialysis services in approximately 900 hospitals. In 2016, our overall network of U.S. outpatient dialysis centers increased
by 99 centers primarily as a result of opening new centers and acquisitions. In addition, the overall number of patients that we serve in the U.S. increased by approximately 4.5% from 2015.
Our other major line of business is DMG, a
patient-and
physician-focused
integrated
healthcare delivery and management company
with over two decades of experience providing coordinated,
outcomes-based
medical care in a
cost-effective
manner.
Through capitation contracts with some of the nations leading health plans, DMG had approximately 749,300 members under its care in southern California, central and south Florida, southern Nevada, and central New Mexico as of December 31,
2016. In addition to its managed care business, during the year ended December 31, 2016 DMG provided care in all of its markets to over 896,200 patients whose health coverage is structured on a
fee-for-service
basis, including patients enrolled through traditional Medicare and Medicaid programs, preferred provider organizations and other third party payors.
The DMG patients as well as the patients of DMGs associated physicians, physician groups and independent practice associations benefit from an integrated approach
to medical care that places the physician at the center of patient care. As of December 31, 2016, DMG delivered services to its members via a network of approximately 700 primary care physicians, over 2,500 associated group and other network
primary care physicians, approximately 200 network hospitals, and several thousand associated group and network specialists. Together with hundreds of case managers, registered nurses and other care coordinators, these medical professionals utilize
a comprehensive information technology system, sophisticated risk management techniques and clinical protocols to provide
high-quality,
cost-effective
care to DMGs
members.
Continues on next page
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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Our executive compensation program is best understood within the context of the business environment in which we currently
operate. We face uncertainty in the healthcare industry, with prospective implementation of federal healthcare reform legislation and similar measures that may be enacted at the state level; increase in regulation by numerous federal, state and
local government entities; reductions in reimbursements under federal and state healthcare programs, including Medicare and Medicaid; and continued downward pressure on our commercial payment rates.
Our Executive Compensation Structure
Our executive compensation program is designed to be aligned with our strategic, operational and financial objectives to create stockholder value. Our executive
compensation structure is comprised of both
short-term
and
long-term
incentive opportunities, which are based on challenging performance goals that we believe align with
our strategic objectives to provide high quality care to our patients, increase profitability, maximize growth and increase stockholder value.
The design of our
2016
short-term
and
long-term
criteria, described in further detail starting on page 36, emphasized our objectives as a Company, and our resulting compensation
structure incorporated incentives tied to clinical care, profit and growth.
We will continue our ongoing engagement with our stockholders on corporate governance
and executive compensation issues that are of interest to them. The Compensation Committee considers the feedback we receive from our stockholders when making decisions regarding our compensation program structure and the individual compensation of
our NEOs. We also believe it is important to maintain consistency with our compensation philosophy and approach, described in further detail below in the section entitled Our Compensation Design and Philosophy, to continue to incentivize
management toward
short-term
and
long-term
financial and operating goals, which are intended to create
long-term
stockholder
value.
C
onsideration of
Say-on-Pay
Results and Pay for Performance
At our annual meetings of stockholders held in June 2014, June
2015 and June 2016, approximately 94%, 96% and 86%, respectively of the votes cast by stockholders at the annual meeting were voted in favor of the compensation program for our NEOs. We believe the votes reflect consistent support for our executive
compensation program. In addition, we contacted our largest institutional stockholders in late 2016 to discuss our existing compensation structure. During these discussions, stockholders expressed general satisfaction with our executive compensation
program, and emphasized continued
pay-for-performance.
While we did not modify our executive compensation program in response to the prior year
say-on-pay
vote, based on the feedback we received from our stockholders, we further refined our
short-term
and
long-term
incentive programs by simplifying them to reduce the number of measures and focus instead on key performance measures that best reflect the particular NEOs responsibilities and business division(s)
that he or she oversees.
Our Compensation Design and Philosophy
Our ability to recruit, engage, motivate and retain highly qualified executives is essential to our
long-term
success. An
important goal in the design of our executive compensation program is to attract and retain outstanding leaders who possess the skills and talent necessary to achieve our business goals and objectives, and who embody our mission and values. We
believe it is in the best interests of our stockholders to attract and retain talented leaders, and we strive to do so by providing compensation that we believe is reasonable, provides the best value for our stockholders, aligns incentives with
appropriate performance goals, and is sufficient to achieve our recruitment and retention objectives.
Our ultimate objective is to continue to create
long-term
stockholder value by being a leader in clinical differentiation, generating strong overall revenue growth, increasing market share, improving clinical outcomes, growing operating margins, increasing
Medicare Advantage
30
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Compensation Discussion and Analysis
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enrollment, and delivering consistently strong total stockholder return.
To achieve this objective, we have
established an executive compensation program that we believe:
|
(i)
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rewards superior clinical outcomes;
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(ii)
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rewards strong Company performance;
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(iii)
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aligns our executives interests with our stockholders interests; and
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(iv)
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is competitive with the companies in healthcare services, diagnostics, managed care and solutions markets so that we can attract and retain outstanding executives.
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2016 Financial and Performance Highlights
Our overall 2016 financial and operating performance benefited from increased treatment volume as a result of
non-acquired
growth at existing and new dialysis centers, cost control initiatives, and payor mix improvements in our DKC division. This performance was partially offset by challenges we faced with increasing labor costs and other center related costs,
decreasing Medicare Advantage reimbursement rates, and increasing medical costs. We believe that the NEOs were instrumental in achieving our 2016 results, including the following major achievements and financial operating performance indicators for
2016:
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improved clinical outcomes in our U.S. dialysis operations, including third consecutive year as a leader in scores achieved under the
Five-Star
Quality Rating System created by
the Centers for Medicare and Medicaid Services;
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consolidated net revenue growth of 7.0%;
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5.7% net revenue growth in our U.S. dialysis segment operations;
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U.S. dialysis treatment growth of 4.5%;
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17.3% increase in net revenue for our other ancillary services and strategic initiatives;
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net increase of 99 U.S. dialysis centers and 36 international dialysis centers;
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7.2% increase in DMGs net revenue related to an increase in its
fee-for-service
business from a major acquisition;
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formation of a strategic joint venture in our Asia-Pacific market; and
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strong operating cash flows of $1.963 billion.
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We believe our U.S. dialysis and related lab services clinical
outcomes compare favorably with other dialysis providers in the United States and generally exceed the dialysis outcome quality indicators of the National Kidney Foundation. Our clinical outcomes result in better quality of life for approximately
187,700 dialysis patients we serve.
Linking 2016 NEO Compensation to Performance
Our compensation program for our NEOs emphasizes compensation based on performance and is designed to align our NEOs interests with those of our stockholders. To
that end, our compensation program rewards those individuals who have performed well in creating and protecting significant
long-term
value for the Company and its stockholders by permitting them to share in
the value generated. As such, our compensation program emphasizes variable compensation in the form of cash and equity awards.
When determining the compensation
for our NEOs for 2016, the Compensation Committee gave significant weight to our continued strong clinical performance, our improvement in strategic positioning and our sustained record of solid operating performance, particularly in light of
ongoing general economic volatility and significant industry regulatory challenges and uncertainty. In 2016, we continued to lead industry public policy efforts, achieving favorable outcomes for the industry and the Company. The Compensation
Committee balanced its evaluation of the Companys financial and clinical performance by also considering the Companys operations under the Corporate Integrity Agreement with the United States Department of Health and Human Services,
Office of Inspector General, healthcare reform, changes to government reimbursement policies, other significant healthcare regulatory changes, and government investigations affecting the Company. The Compensation Committee also took into account
both DKCs strong financial performance and DMGs financial
Continues on next page
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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31
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underperformance. DMG continues to experience declines in its financial performance, thereby partially offsetting DKCs strong financial performance. DMGs underperformance is primarily
driven by government reimbursement cuts and our inability to mitigate those cuts in their entirety. When establishing 2016 compensation for our NEOs, the Compensation Committee considered these and other factors in the context of evaluating the
impact that individual NEO
performance had in achieving these results and responding to these challenges. The following table shows the 2016 total direct compensation (base salary, annual
performance-based
cash award and
long-term
incentive award) determined by the Compensation Committee for each NEO. This table is not a substitute for the information
disclosed in the 2016 Summary Compensation Table and related footnotes, which begin on page 50.
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Name
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Base
Salary
1
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Annual Cash
Award
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Annual LTI
Award
5
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Kent J. Thiry
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$1,273,077
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$1,705,153
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2
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$8,614,098
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Javier J. Rodriguez
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$865,385
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$1,856,250
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2
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$6,152,027
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Kathleen A. Waters
3
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$334,385
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$740,000
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4
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$1,468,037
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LeAnne M. Zumwalt
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$400,000
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$200,000
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4
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$371,130
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James K. Hilger
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$375,000
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$210,000
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4
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$467,531
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1
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The amounts reported here reflect the base salary amounts actually paid during the 2016 fiscal year. Ms. Waters joined the Company on May 6, 2016.
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2
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The amounts reported here reflect the bonus payments made to Mr. Thiry and Mr. Rodriguez under the 2016 short-term incentive program.
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3
|
Ms. Waters initial compensation levels were determined based on the negotiations of the parties, taking into account the Companys historical compensation practices, the market data provided by Compensia
as well as the compensation received by Ms. Waters at her prior employer.
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4
|
The amounts reported here reflect the bonus payments made to Ms. Waters, Ms. Zumwalt and Mr. Hilger in lieu of participation in the 2016 short-term incentive program.
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5
|
The amounts reported under the Annual LTI Award column consist of the grant date fair value of all 2016 equity awards (SSARs, RSUs and PSUs) as well as the target value of the 2016
performance-based
cash awards.
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32
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Compensation Discussion and Analysis
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Given the emphasis on variable compensation, the Compensation Committee generally limits increases to fixed
compensation amounts. After taking into account individual performance, and comparative market data provided by the committees outside compensation consultant, Compensia, of the NEOs who were NEOs in the prior years, the Compensation Committee
gave merit-based salary increases for Mr. Thiry and Mr. Rodriguez. The Compensation Committee did not adjust the base salary levels for Mr. Hilger or Ms. Zumwalt. The following pie charts illustrate the allocation of the total
direct compensation that the NEOs above earned or, in the case of the
long-term
incentives, were granted with respect to 2016:
The Compensation Committee believes that the above compensation structure appropriately balanced promoting
long-term
stockholder value creation without motivating or rewarding excessive
risk-taking.
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33
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Stockholder Interest Alignment
Our executive compensation is designed to focus on
pay-for-performance
and to align the interests of our executives with the
long-term
interests of our stockholders. Our incentive
criteria focus on
performance-based
compensation that aligns with our strategic, operational and financial objectives in creating stockholder value. Our CEO receives all
long-term
compensation in the form of equity compensation, while other executives receive
long-term
compensation in the form of both equity compensation and
cash-based
incentive compensation. Our
long-term
equity compensation is comprised of
stock-settled
stock appreciation rights
(SSARs), restricted stock units (RSUs) and performance stock units (PSUs). In 2016, our CEO and Mr. Rodriguez received only SSARs and PSUs as reflected in the charts below.
To create close alignment with stockholder value creation, adjusted earnings per share and/or relative total shareholder return (Relative TSR) account for
50% of the performance criteria for the
2016 PSUs. The equity awards are further subject to time vesting. SSAR and RSU awards granted in 2016 vest 50% on each of the third and fourth anniversaries of the grant date with the exception
of the SSARs and RSUs granted to Ms. Waters in connection with the commencement of employment with the Company, which vest 50% each on the second and third anniversaries of the grant date. PSUs vest 31% on May 15, 2019 and 69% on
May 15, 2020 for Mr. Thiry and 50% on each of May 15, 2019 and 2020 for Mr. Rodriguez. The combination of
performance-based
metrics and extended vesting schedules is intended to assist in
the
long-term
retention of executives and to further align the interests of our executives with the
long-term
interests of our stockholders. A key component of our
executive compensation philosophy and design is that
stock-based
compensation creates an incentive for the executives to contribute to the overall success of the Company and to take actions that result in the
creation of
long-term
stockholder value.
34
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Compensation Discussion and Analysis
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Key Features of Our Executive Compensation Program
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We Do
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We Do Not
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Have double trigger change of control provisions for acceleration of equity award
vesting
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Provide excise tax
gross-ups
on change of control payments for new or materially amended agreements entered into since 2008
1
|
Limit severance payments to not more than three times base salary and bonus
|
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Re-price
or replace underwater stock options or stock appreciation rights
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Provide for multi-year vesting and performance periods for equity award grants to
reinforce a culture in which the Companys long-term success takes precedence over volatile short-term results
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Have our Compensation Committees independent compensation consultant provide any other services to the Company
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Have our Compensation Committee use an independent compensation consultant
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Have a defined benefit pension plan
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Have a clawback policy that permits recovery of bonuses, incentive and equity-based
compensation from executives
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Allow hedging of the Companys securities by directors, executives or other employees
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Seek stockholder feedback on our executive compensation program
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Allow directors, executives and other employees to pledge the Companys securities as collateral for a loan
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Apply meaningful stock ownership guidelines to strengthen alignment of
executives and stockholders interests
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1
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We have not provided for tax
gross-ups
in any employment agreements or amended employment agreements entered into after July 2008. Our CEO has the only remaining legacy agreement
that contains a tax
gross-up;
however, no
gross-up
would have been payable under his agreement in any of the prior five years if a change of control had occurred. See
Potential Payments Upon Termination or Change of Control on pages 55 to 60.
|
Elements of
Compensation
The elements of direct compensation offered under our executive compensation program include both fixed (base salaries)
and variable
(short-term
and
long-term
incentives) compensation.
Base Salary
We compensate our executives with a base salary because we believe it is appropriate that some
portion of compensation be provided in a form that is liquid and assured. Base salaries are initially established at levels necessary to enable us to attract and retain highly qualified executives with reference to comparative pay within the Company
for executives with similar levels of responsibility, the prior experience of the executive, and expected contributions to Company performance.
We do not guarantee base salary adjustments on an annual basis. During March of each year, the Compensation Committee
considers adjustments to base salary as part of the overall annual compensation assessment for our executives. Our CEO typically provides the Compensation Committee with his recommendation regarding
merit-based
increases for each executive officer other than himself. The CEOs base salary is recommended by the Compensation Committee for approval by the independent members of the Board of Directors,
after considering input from Compensia, the Compensation Committees independent compensation consultant, and Compensias analysis of CEO compensation of our comparator peer group.
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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In March 2016, the base salaries for Mr. Thiry and Mr. Rodriguez were each increased by $100,000 in recognition
of their performance and to better align with the competitive market. The Compensation Committee did not adjust the base salary levels for Mr. Hilger or Ms. Zumwalt. Annualized base salaries for the NEOs reflecting these adjustments are
reflected in the below table.
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Name
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2016 Base
Salary*
|
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Kent J. Thiry
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$
|
1,300,000
|
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Javier J. Rodriguez
|
|
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$900,000
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Kathleen A. Waters
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|
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$540,000
|
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LeAnne M. Zumwalt
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$400,000
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James K. Hilger
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$375,000
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*
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The amounts reported reflect the annual base salaries approved in March 2016.
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Short-Term
Incentive Program (STI Program) for 2016
The STI program awards in 2016 were granted pursuant to
the DaVita HealthCare Partners Inc. 2011 Incentive Award Plan, as amended and restated (the Incentive Award Plan), which permits the issuance of stock options, SSARs, restricted stock, RSUs, PSUs, equity-based and
cash-based
performance awards, as well as other forms of equity awards.
Under the STI program in 2016, Mr. Thiry and
Mr. Rodriguez were eligible for a maximum annual
performance-based
bonus potential calculated as a multiple of the annual salary approved in March 2016 by the Compensation Committee, and with respect to
the CEO, the independent members of the Board, as summarized in the table below.
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Name
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2016 Base
Salary
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|
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Multiple of
2016 Base
Salary
|
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2016 STI
Maximum
Bonus Potential
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Kent J. Thiry
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$
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1,300,000
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3.0x
|
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$3,900,000
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Javier J. Rodriguez
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$900,000
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2.5x
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$2,250,000
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Each performance metric under our STI program was assigned a relative weight to determine the percentage of the maximum bonus potential
for which each executive was eligible. The percentage of the maximum bonus potential to be paid was determined based on results achieved in 2016, and the Compensation Committee could then exercise negative discretion to reduce the annual bonus
payment based on changed or special
circumstances, or factors that may not have been anticipated when the criteria range for the metrics was established.
Neither Ms. Waters nor Ms. Zumwalt are subject to the terms of the 2016 STI Program. Ms. Waters joined the Company in May 2016 after the eligible
participants and performance metrics for the program had already been determined. Given the nature of Ms. Zumwalts role, after carefully considering whether formulaic participation in the STI program provided the strongest degree of
alignment with our stockholders, the Compensation Committee determined that Ms. Zumwalt should not be included in the 2016 STI Program. Mr. Hilger was not subject to the terms of the 2016 STI program because he was serving as chief
financial officer on an interim basis.
In lieu of an STI bonus Ms. Waters received a cash bonus in the amount of $740,000 in recognition of her significant
contributions to the Companys efforts to protect the Companys and our patients interests, In addition, Ms. Zumwalt was awarded a cash bonus amount of $400,000 for her efforts in advancing the Companys public policy
interests and pursuing long-term strategic agreements with the Companys suppliers, however, in accordance with the terms of her bonus arrangement, $200,000 of this amount is subject to the achievement of an additional operational goal and will
be paid upon achievement of such goal. The Committee viewed the additional operational goal as reasonably achievable at the time the goal was set. Mr. Hilger received a cash bonus in the amount of $210,000 in recognition of his performance and
dual responsibilities as interim chief financial officer and chief accounting officer. The 2016 eligible performance bonus amounts and the actual bonus amounts awarded to Ms. Waters, Ms. Zumwalt and Mr. Hilger are reflected in the
table below.
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Name
|
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2016 Eligible
Bonus Amount
|
|
|
2016 Actual
Bonus
Amount
|
|
Kathleen A. Waters
|
|
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$750,000
|
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$740,000
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LeAnne M. Zumwalt
|
|
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$400,000
|
|
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|
$400,000*
|
|
James K. Hilger
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$350,000
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|
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$210,000
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*
|
$200,000 of this amount is subject to the achievement of an additional operational goal, and will be paid upon achievement of such goal.
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36
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Compensation Discussion and Analysis
|
|
|
The tables below summarize the relative weights, criteria range, performance based eligibility range, actual
performance and eligible payout achieved for each of the 2016 STI performance metrics, as well as the actual payout percentage and dollar amount for Mr. Thiry and Mr. Rodriguez. The Compensation Committee retained the discretion to reduce
STI awards to Mr. Rodriguez and the independent members of the Board retained the discretion to reduce STI awards to Mr. Thiry if they determined that such adjustments or reductions would be appropriate, based on the Companys and our
stockholders best interests. The Compensation Committee and the independent members of the Board did not use their discretion to reduce any STI awards for 2016. Given the market and operating conditions at the time the targets were set, the
target payout levels were designed to be achievable with strong management performances while maximum payout levels were designed to be difficult to achieve.
Kent J. Thiry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Based
Eligibility Range
|
|
|
|
Eligible
Payout Achieved
|
|
2016 STI Performance Metrics
|
|
Weight
|
|
Criteria Range
|
|
(%)
|
|
($)
|
|
Actual
Performance
|
|
(%)
|
|
|
($)
|
|
Enterprise Adjusted Operating Income
|
|
75%
|
|
$1,837.5 million to $1,950.0 million
1
|
|
25% - 100%
|
|
$731,250 - $2,925,000
|
|
$1,849.5 million
|
|
|
25%
|
|
|
|
$731,250
|
|
Adjusted Kidney Care
Non-Acquired
Growth
|
|
12.5%
|
|
Range tied to internal goal
|
|
50% -
100%
|
|
$243,750 -
$487,500
|
|
Above high end of range
|
|
|
100%
|
|
|
|
$487,500
|
|
DMG Star Metrics
|
|
12.5%
|
|
Customized index range
|
|
30% -
100%
|
|
$146,250 -
$487,500
|
|
Internal index value
|
|
|
99.8%
|
|
|
|
$486,403
|
|
|
|
|
|
|
|
|
|
Total Eligible STI Bonus
|
|
|
43.7%
|
|
|
|
$1,705,153
|
|
|
|
|
|
|
|
|
|
Total Actual STI Bonus
|
|
|
43.7%
|
|
|
|
$1,705,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Criteria range represents the top 75% of the guidance range for 2016 provided to our stockholders with our fourth quarter 2015 earnings release, the latest guidance range available to the Compensation Committee at the
time it approved these performance conditions.
|
Javier J. Rodriguez
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Based
Eligibility Range
|
|
|
|
Eligible
Payout Achieved
|
|
2016 STI Performance Metrics
|
|
Weight
|
|
Criteria Range
|
|
(%)
|
|
($)
|
|
Actual
Performance
|
|
(%)
|
|
|
($)
|
|
Core Kidney Care Adjusted Operating Income
|
|
70%
|
|
$1,650 million to $1,725 million
1
|
|
25% - 100%
|
|
$393,750 - $1,575,000
|
|
$1,715 million
1
|
|
|
75%
|
|
|
|
$1,181,250
|
|
Kidney Care Interdialytic Weight Gain Patients
|
|
15%
|
|
33% to 30% (lower is better)
|
|
25% -
100%
|
|
$84,375 -
$337,500
|
|
29.6%
|
|
|
100%
|
|
|
|
$337,500
|
|
Adjusted Kidney Care
Non-Acquired
Growth
|
|
15%
|
|
Range tied to internal goal
|
|
50% -
100%
|
|
$168,750 -
$337,500
|
|
Above high end of range
|
|
|
100%
|
|
|
|
$337,500
|
|
|
|
|
|
|
|
|
|
Total Eligible STI Bonus
|
|
|
82.5%
|
|
|
|
$1,856,250
|
|
|
|
|
|
|
|
|
|
Total Actual STI Bonus
|
|
|
82.5%
|
|
|
|
$1,856,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Criteria range represents the top 75% of the public guidance range for 2016 for our Kidney Care division at the time this performance metric was developed. Core Kidney Care Adjusted Operating Income is a subset of
Kidney Care Adjusted Operating Income that excludes certain
non-core
business units. Actual Performance represents actual Adjusted Operating Income for our Kidney Care division.
|
Long-Term
Incentive Program
(LTI Program) for 2016
LTI program awards are granted pursuant to the Incentive Award Plan. Our LTI program is designed to provide a link to
long-term
stockholder value through equity awards for all executives, while also providing a more direct tie to our various lines of business for which executives are responsible through
cash-based
performance awards targeting internal operating performance
metrics consistent with our existing compensation philosophy.
Equity Awards
While we emphasize
stock-based
compensation, we do not designate a target percentage of total compensation as
stock-based.
We instead maintain discretion to respond to changes in executives and Company performance and related objectives, as well as to changes in remaining relative values that have yet to be vested. We
Continues on next page
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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37
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|
|
|
|
|
|
believe that our emphasis on
stock-based
compensation creates an alignment of interests between our executives and our stockholders. Grants of equity
awards also serve as an important tool for attracting and retaining executives. To vest in equity awards and earn the full benefit of the award, executives must remain employed for a
multi-year
vesting period,
typically over four years, which reinforces a culture in which the Companys
long-term
success takes precedence over volatile and unsustainable
short-term
results.
Each year, the Compensation Committee reviews an aggregate equity award pool that will be available for grants to all eligible recipients of equity awards, based on
(i) the historical amounts granted, (ii) the amount of equity held by participants that is currently
in-the-money,
(iii) the number of shares we expect to
be forfeited due to anticipated departures, and (iv) the number of shares that will likely be required both to retain and incentivize our
highest-potential
and
highest-performing
employees and to attract new employees we expect to hire during the coming year. The Compensation Committee may also recommend the establishment of special purpose share budgets for proposed
interim grants. After considering such recommendations, the Board approves a budget and delegates authority to the Compensation Committee to make awards to our executive officers and other employees. The equity awards that are granted to our
executives are generally made annually (typically in the first half of the year). Interim awards to our executives may be made during the year to address special circumstances, such as retention concerns, promotions and special performance
recognition awards, and new hire awards. Our annual equity awards are generally awarded upon the completion of performance reviews and in connection with the Compensation Committees decision and review process regarding other forms of direct
compensation. The timing of the interim grants is contingent upon individual circumstances. Under the terms of the Incentive Award Plan, awards are granted with an exercise or base price not less than the closing price of our common stock on the
date of grant. Furthermore, the Incentive Award Plan prohibits repricing or replacing underwater stock options or stock appreciation rights without prior stockholder approval.
Stock-settled
Stock Appreciation Rights
The
majority-of
our equity awards to executives are in the form of SSARs, which only derive value if the market value of our
common stock increases. The economic value and tax and accounting treatment of SSARs are comparable to those of stock options, but SSARs are less dilutive to our stockholders because only shares with a total value equal to the grantees gain
(the difference between the fair market value of the base shares and their base price) are ultimately issued. SSARs are granted with a base price not less than the closing price of our common stock on the date of grant and vest based on the passage
of time. SSARs granted in 2016 vest 50% on each of their third and fourth anniversaries, with the exception of the SSARs granted to Ms. Waters in connection with the commencement of employment with the Company, which vest 50% on each of the
second and third anniversaries.
Restricted Stock Units
We do not typically award RSUs to our NEOs as part of our compensation program. As such, neither Mr. Thiry, Mr. Rodriguez nor Ms. Zumwalt received RSUs
in 2016. Ms. Waters received an RSU award in connection with her joining the Company in May 2016, and Mr. Hilger received an RSU award in consideration of his performance as our interim chief financial officer. RSUs typically vest with the
passage of time over a period of three or more years, but the Compensation Committee may approve alternative vesting schedules based on performance, timing of vesting of individual outstanding grants and other retention related factors. In
connection with the Companys efforts to recruit Ms. Waters and based on the negotiation of the parties, Ms. Waters was granted RSUs that vest on the second and third anniversaries of the grant date. Mr. Hilgers RSUs vest
on the third and fourth anniversaries of the grant date.
Performance Stock Units
As an additional incentive component of our compensation program and to further align pay for performance, we typically award annual grants of PSUs to select executive
officers. PSUs are granted under the Incentive Award Plan and typically vest based on a combination of accomplishment of performance metrics and
38
|
|
|
Compensation Discussion and Analysis
|
|
|
passage of time over a period of three or more years. However, the Compensation Committee may approve alternative vesting schedules based on performance, timing of vesting of individual
outstanding grants, time of grant during the year and other retention related factors.
In 2016, 50% of the CEOs equity compensation and 33% of
Mr. Rodriguezs equity compensation
was awarded in the form of PSUs. Provided that performance goals have been met, the 2016 PSUs vest 31% on May 15, 2019 and 69% on May 15, 2020 for Mr. Thiry, and 50% on each of
May 15, 2019 and May 15, 2020 for Mr. Rodriguez. Based on the level of achievement, more or less than 100% of the target PSUs can vest. Ms. Waters, Ms. Zumwalt and Mr. Hilger were not granted PSUs in 2016.
The tables below summarize the criteria range and
percent range of target PSUs for each of the 2016 PSU performance metrics and detail the relative weightings of each 2016 PSU performance metric for Messrs. Thiry and Rodriguez. We are not able to present performance against the following
metrics, because the varying performance periods have not yet ended. Given the market and operating conditions at the time the targets were set, the target payout levels were designed to be achievable with strong management performance, while
maximum payout levels were designed to be difficult to achieve.
|
|
|
|
|
|
|
2016 PSU Performance Metrics
|
|
Criteria Range
|
|
Percent of Target PSUs
|
|
2019 Adjusted Earnings per Share
|
|
$4.66 - $6.03
|
|
|
50% - 200%
|
|
2019 DMG Adjusted Operating Income
|
|
$200 million - $275 million
|
|
|
50% - 200%
|
|
2018 International Adjusted Operating Income
|
|
($10) million - $20 million
|
|
|
50% - 200%
|
|
2017 & 2018 Kidney Care Star Metric
|
|
5% - 15% better than rest of industry
|
|
|
50% - 100%
|
|
2018 Village Health Hospital Admits
|
|
Range tied to internal goal
|
|
|
50% - 200%
|
|
Relative TSR*
|
|
25
th
percentile to 90
th
percentile
|
|
|
50% - 200%
|
|
*
|
For twelve- month periods ending March 31, 2019 and March 31, 2020, respectively, as compared to the twelve-month period ended March 31, 2016.
|
|
|
|
|
|
|
|
Performance Metrics Weightings
|
2016 PSU Performance Metrics
|
|
Kent J. Thiry
|
|
Javier J. Rodriguez
|
2019 Adjusted Earnings per Share
|
|
25.0%
|
|
|
2019 DMG Adjusted Operating Income
|
|
12.5%
|
|
|
2018 International Adjusted Operating Income
|
|
12.5%
|
|
|
2017 & 2018 Kidney Care Star Metric
|
|
12.5%
|
|
25.0%
|
2018 Village Health Hospital Admits
|
|
12.5%
|
|
25.0%
|
Relative TSR*
|
|
25.0%
|
|
50.0%
|
|
|
|
|
|
*
|
For twelve- month periods ending March 31, 2019 and March 31, 2020, respectively, as compared to the twelve-month period ended March 31, 2016.
|
We issued PSUs to executive officers beginning in 2014 and, with the exception of the Relative TSR metric measured through March 31, 2018, the performance metrics
associated with the PSUs granted in 2014 were measured through December 31, 2016. The Compensation Committee, or the independent members of the Board, as the case may be, may exercise negative discretion to reduce the number of PSUs that vest
based on the achievement of the performance metrics after considering changed or special circumstances, or factors that may not have been anticipated when the criteria ranges for the metrics were developed. Negative discretion was not applied with
respect to the measurable performance metrics for the PSUs granted in 2014.
The tables below summarize the criteria range and percentage range of target PSUs for
each 2014 PSU performance metric, and detail the relative weightings of each performance metric for the 2014 PSUs granted to Messrs. Thiry and Rodriguez. In addition to the performance metrics identified below, the PSUs are further subject to time
vesting, by which 50% of the PSUs associated with each performance metric other than Relative TSR vest on each of May 15, 2017 and May 15, 2018. All of the PSUs subject to the
Continues on next page
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|
|
DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
|
|
39
|
achievement of the 2017 Relative TSR metric vest on May 15, 2017, and PSUs subject to the achievement of the 2018 Relative TSR metric vest on May 15, 2018.
Kent J. Thiry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Based
Eligibility Range
|
|
|
|
Eligible
Payout Achieved
|
|
2014 PSU Performance Metrics
|
|
Weight
|
|
Criteria Range
|
|
(%)
|
|
Shares
|
|
Actual
Performance
|
|
(%)
|
|
|
(Shares)
|
|
Kidney Care Mortality
|
|
12.5%
|
|
13.35 12.15 (lower is better)
|
|
50% - 200%
|
|
3,939 15,756
|
|
>13.35
|
|
|
0%
|
|
|
|
0
|
|
Kidney Care Non Acquired Growth
|
|
12.5%
|
|
3.95% - 4.70%
|
|
50% - 150%
|
|
3,939 11,817
|
|
4.04%
|
|
|
58.6%
|
|
|
|
4,612
|
|
DMG New Market Success
|
|
12.5%
|
|
2 6 markets
|
|
50% -
200%
|
|
3,939 15,756
|
|
<2 markets
|
|
|
0%
|
|
|
|
0
|
|
DMG New Marked Adjusted
Operating Income
|
|
12.5%
|
|
50% - 200% of internal goal
|
|
50% - 200%
|
|
3,939 15,756
|
|
Below low end of range
|
|
|
0%
|
|
|
|
0
|
|
Relative TSR (2017 vesting)
|
|
25.0%
|
|
40
th
90
th
percentile
|
|
50% - 200%
|
|
7,878 31,511
|
|
Below low end of range
|
|
|
0%
|
|
|
|
0
|
|
Relative TSR (2018 vesting)
|
|
25.0%
|
|
40
th
90
th
percentile
|
|
50% - 200%
|
|
7,878 31,511
|
|
NA
|
|
|
NA
|
|
|
|
NA
|
|
|
|
|
|
|
|
|
|
Total Eligible PSUs
|
|
|
7.3%
|
|
|
|
4,612
|
|
|
|
|
|
|
|
|
|
Total Actual PSUs
|
|
|
7.3%
|
|
|
|
4,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Javier J. Rodriguez
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Based
Eligibility Range
|
|
|
|
Eligible
Payout Achieved
|
|
2014 PSU Performance Metrics
|
|
Weight
|
|
Criteria Range
|
|
(%)
|
|
Shares
|
|
Actual
Performance
|
|
(%)
|
|
|
(Shares)
|
|
Kidney Care Mortality
|
|
25.0%
|
|
13.35 12.15 (lower is better)
|
|
50% - 200%
|
|
2,211 8,843
|
|
>13.35
|
|
|
0%
|
|
|
|
0
|
|
Kidney Care Non Acquired Growth
|
|
25.0%
|
|
3.95% - 4.70%
|
|
50%
-
150%
|
|
2,211 6,632
|
|
4.04%
|
|
|
58.6%
|
|
|
|
2,588
|
|
Relative TSR (2017 vesting)
|
|
25.0%
|
|
40
th
90
th
percentile
|
|
50% - 200%
|
|
2,211 8,843
|
|
Below low end of range
|
|
|
0%
|
|
|
|
0
|
|
Relative TSR (2018 vesting)
|
|
25.0%
|
|
40
th
90
th
percentile
|
|
50% - 200%
|
|
2,211 8,843
|
|
NA
|
|
|
NA
|
|
|
|
NA
|
|
|
|
|
|
|
|
|
|
Total Eligible PSUs
|
|
|
14.6%
|
|
|
|
2,588
|
|
|
|
|
|
|
|
|
|
Total Actual PSUs
|
|
|
14.6%
|
|
|
|
2,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash-Based
Performance Awards
In 2016, the Compensation Committee granted
cash-based
performance awards to Mr. Rodriguez, Ms. Waters and
Mr. Hilger. Mr. Thiry and Ms. Zumwalt received all of their 2016 LTI awards in the form of equity.
The Compensation Committee determines the target
award value for NEOs
cash-based
performance awards in a manner similar to how it determines the amount of equity awards to grant; that is, based on individual and Company historical and expected
performance, including an executives ability to influence the targeted performance measure. The aggregate target value of
cash-based
performance awards available for allocation to our executives is
approved by the full Board for administration by the Compensation Committee along with the aggregate equity award pool.
The
cash-based
performance awards granted in 2016 will vest on April 1, 2019, subject to the
NEOs continued employment and the achievement of performance conditions relating to adjusted operating income of the Companys U.S. dialysis and related lab services operating segment
in 2018. Under the terms of the Incentive Award Plan, the maximum annual amount of any
cash-based
performance awards payable to any executive is $10,000,000 in a 12 month period. However, the Compensation
Committee established target award values for each of Mr. Rodriguez, Ms. Waters, Ms. Zumwalt, and Mr. Hilger at the time of grant, at amounts substantially lower than the maximum under the Incentive Award Plan. See
Determining LTI Program Award Amounts on page 41.
In early 2017, Mr. Rodriguez, Ms. Zumwalt and Mr. Hilger received payouts under the
2014
long-term
cash-based
performance awards granted under the Incentive Award Plan. Mr. Rodriguez earned $3,213,155, Ms. Zumwalt earned $584,210, and
Mr. Hilger earned $292,105 for performance representing 117% of the target payout level as a result of adjusted operating
40
|
|
|
Compensation Discussion and Analysis
|
|
|
income achieved for the U.S. dialysis and related lab services operating segment of $1,827 million for fiscal year 2016 compared to targets of $1,800 million at the 100% payout level
and $1,880 million at the 150% payout level, respectively.
Determining LTI Program Award Amounts
The Compensation Committee reviews the annual LTI program award recommendations for our NEOs and other executives in advance of the grant date with the input of our CEO
and the committees outside compensation consultant, Compensia. Based on a review of available equity award shares, their dilutive effect on stockholders,
long-term
share budgeting restrictions,
cash-based
performance award dollars available and recommendations from management, the Compensation Committee recommends for Board approval the aggregate equity and cash LTI program award pools for the year. In
considering how to distribute the equity-based and
cash-based
performance award units in the respective LTI program award pools, our CEO, together with a team that includes other senior executives, gives
differential attention to
high-potential
individuals whom the Company believes will be the future senior leaders of the Company, and to other
high-performing
individuals
whose performance in their current positions exceeded expectations.
Each such
high-potential
and/or
high-performing
employee is then individually reviewed from a holistic perspective, starting with a review of such employees historical compensation, including his or her initial base salary, any base salary
increases during his or her tenure with the Company, performance cash bonuses, and equity and
long-term
cash-based
incentive award grants over his or her career at the
Company. A determination is then made as to the amount and number of cash and equity LTI program award units that should be granted and the appropriate vesting schedules and performance conditions that should be implemented for such awards in order
to retain and continue to motivate these
high-potential,
high-performing
individuals. Our goal is to achieve fairness in compensation and motivate performance over the
course of multiple years, which is the reason we take into account all compensation that has been awarded to such individuals over their respective careers at the Company when making prospective award decisions.
The Compensation Committee also evaluates the market competitiveness of the Companys compensation for its NEOs and
other executive officers by analyzing its historical and proposed compensation changes in light of compensation practices among its comparator peer group as provided in an annual assessment by Compensia, the Compensation Committees independent
compensation consultant.
After taking into account the elements set forth above, the Compensation Committee approved LTI program award grants to our NEOs in 2016,
with the exception of Mr. Thiry, whose LTI program award grant was approved by the independent members of the Board, as required by the committees charter. The table below shows the aggregate number of shares subject to SSARs, RSUs and
PSUs, and the base target value of the
cash-based
performance awards granted to each of our NEOs in 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Long-term
Incentive Awards
|
|
Shares
Subject to
SSARs
(#)
|
|
|
Shares
Subject to
PSUs
(#)
|
|
|
Shares
Subject to
RSUs
(#)
|
|
|
Target
Cash-Based
Performance
Award Value
($)
|
|
Kent J.
Thiry
|
|
|
291,044
|
|
|
|
72,761
|
|
|
|
|
|
|
|
|
|
Javier J.
Rodriguez
|
|
|
124,091
|
|
|
|
15,280
|
|
|
|
|
|
|
|
3,500,000
|
|
Kathleen A.
Waters
|
|
|
28,164
(1)
|
|
|
|
|
|
|
|
7,041
(1)
|
|
|
|
533,000
(1)
|
|
LeAnne M.
Zumwalt
|
|
|
26,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James K.
Hilger
|
|
|
6,615
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|
|
|
|
|
|
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1,654
|
|
|
|
250,000
|
|
1
|
Ms. Waters was granted stock-settled stock appreciation rights, restricted stock units, and a performance-based cash award, in connection with the commencement of her employment in May 2016.
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With the exception of the SSAR and RSU awards made to Ms. Waters in connection with her commencement of employment with the Company, which vest on the second and
third anniversaries of the grant date, the 2016 SSAR and RSU awards above vest 50% in each of the third and fourth anniversaries of the grant date. The PSU awards above vest 31% on May 15, 2019 and 69% on May 15, 2020 for Mr. Thiry,
and 50% on each of May 15, 2019 and May 15, 2020 for Mr. Rodriguez. In each case, vesting is subject to the NEOs continued employment and, in the case of PSUs, the achievement of the underlying performance conditions. The
cash-based
performance awards vest 100% on April 1, 2019, subject to the NEOs continued employment and the achievement of performance conditions relating to adjusted operating income of the
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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41
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Companys U.S. dialysis and related lab services operating segment in 2018. At the time the targets were set, market and operating conditions were taken into account in determining the
target vesting levels, which were designed to be achievable with strong management performance.
Executive
Compensation Program for 2017
We are using performance metrics consistent with 2016 for our 2017 STI Program. We are currently in the process of
finalizing the 2017 LTI Program, and anticipate that the broad structure will remain the same as for 2016. However, partly based on feedback we received from our stockholders, the PSU criteria will be further simplified to reduce the number of
performance metrics to two: earnings per share targets and TSR targets. Consistent with our past practice, we also plan to reach out to our stockholders for feedback on compensation of our executive officers and consider any changes and adjustments
to our compensation policies and practices suggested by our stockholders.
Personal Benefits and Perquisites
As described above, our compensation program for NEOs emphasizes compensation based on performance and compensation which serves to align our NEOs
interests with those of our stockholders. As a result, the Compensation Committee has determined that the Company should provide few perquisites to NEOs. We believe that the perquisites and personal benefits that we provide support important
attraction and retention objectives. We also consider the extent to which the perquisite or personal benefit provided serves to enhance the performance of our NEOs in light of the demands on these individuals time. The perquisites and personal
benefits available to our NEOs are reviewed annually by the Compensation Committee.
The Compensation Committee has authorized the personal use of
fractionally-owned
or chartered corporate aircraft by some of our NEOs. The Compensation Committee believes that access to an aircraft for personal travel enables our NEOs to maximize their work hours, particularly
in light of their demanding business travel schedules. One of the Compensation Committees objectives is to ensure that our NEOs are afforded adequate
flexibility to allow for sufficient personal time in light of the significant demands of the Company. The Compensation Committee and our CEO allocate a fixed number of hours for personal use by
identified NEOs and consider the allocated amount as part of the NEOs total compensation. The Compensation Committee and our CEO use their discretion when determining the number of allocated hours and displace other forms of compensation that
otherwise would have been awarded to the NEO.
Our CEO is authorized by the Compensation Committee to use a
fractionally-owned
or chartered corporate aircraft for business purposes and for a fixed number of hours per year for personal use instead of additional cash compensation that would have otherwise been paid.
Other executives of the Company are authorized on a limited basis to use a
fractionally-owned
or chartered corporate aircraft for a fixed number of hours for business purposes and to a much lesser extent for a
fixed number of hours per year for personal use. As part of our CEOs aggregate compensation package, the Compensation Committee approves a fixed number of hours for personal use each year and unused hours from the prior year are available for
use the following year. When determining the number of hours of personal use of aircraft to award, the Compensation Committee takes into consideration Mr. Thirys overall compensation package. If Mr. Thiry were to exceed the fixed
number of hours for personal use that is unrelated to business in a given year, the excess hours of personal use would offset the number of hours approved by the Compensation Committee the following year for personal use, or Mr. Thiry would be
required to compensate us directly (although historically he has not exceeded the hours authorized for personal use). The Compensation Committee reviews all business and personal use of the aircraft annually, including detailed passenger logs with
special attention to mixed business and personal use and required reimbursements to the Company.
Deferred
Compensation Program
Our deferred compensation program permits certain employees, including our NEOs, to defer compensation at the election of the
participant or at the election of the Company. We do not utilize
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Compensation Discussion and Analysis
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deferred compensation as a significant component of compensation and there are no Company contributions thereto or
above-market
returns available
thereunder.
Severance and Change of Control Arrangements
We have entered into employment or severance arrangements with each of our NEOs. These arrangements, among other things, provide for severance benefits in the event of
a termination of employment in certain circumstances, including, with respect to certain NEOs, the departure of the NEO following a change of control of our Company. Each arrangement is individually negotiated and the terms vary. When entering into
employment or severance arrangements with our NEOs, we attempt to provide severance and change of control benefits which strike a balance between providing sufficient protections for the NEO while still providing
post-termination
compensation that we consider reasonable and in the interests of the Company and our stockholders.
The terms of individual agreements vary but under our current
stock-based
award
agreements, accelerated vesting of
stock-based
awards is generally triggered when a change of control event occurs and either the acquiring entity fails to assume, convert or replace the
stock-based
award or if the executive resigns for good reason or is terminated by the Company without cause as provided in his or her applicable employment agreement, all within a certain
period of time after the effective date of the change of control event. The additional acceleration provisions in our
stock-based
award agreements further serve to secure the continued employment and
commitment of our NEOs prior to or following a change of control. See Potential Payments Upon Termination or Change of Control beginning on page 55 of this Proxy Statement for a description of the severance and change in control
arrangements for our NEOs, and for more information regarding accelerated vesting under our
stock-based
award agreements.
Process for Determining NEO Compensation
Role of Independent Compensation Committee
Our executive compensation and benefits programs are designed and administered under the direction and control of the Compensation Committee. Our Compensation
Committee, composed solely of independent directors, reviews and approves our overall executive compensation program, strategy and policies and sets the compensation of our executive officers.
When recruiting new executives, the Compensation Committee and our CEO evaluate the comparative compensation of executives within the Company with similar levels of
responsibility, the prior experience of the executive and expected contributions to Company performance. Thereafter, each executives compensation is reviewed annually by the Compensation Committee and CEO, and considered for adjustment based
on individual performance and other factors.
When evaluating performance, we base compensation decisions on an assessment of Company and individual performance over
the year, taking individual accomplishments into consideration in light of the totality of circumstances together with individual potential to contribute to the Companys future growth. We believe that all of our NEOs have the ability to
influence overall Company policies and performance and, accordingly, should be accountable for
Company-wide
performance as well as the areas over which they have direct influence. The differences in total
annual compensation levels among the NEOs are based on their individual roles and responsibilities within the Company and their relative individual performance. The Compensation Committee uses its judgment in awarding compensation to our NEOs in
accordance with the overall objectives of the Companys compensation program.
The Compensation Committee takes into consideration a number of factors when
determining the elements and amounts of
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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43
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compensation awarded to our NEOs, including individual performance, overall financial and
non-financial
performance of the Company for the year, individual
skill sets and experience relative to industry peers, readiness for promotion, past and expected future performance, the importance and difficulty of achieving future Company and individual objectives, the value of each executives outstanding
equity awards, aggregate historical compensation, levels of responsibility and performance relative to other executives within the Company, importance to the Company and difficulty of replacement. The Compensation Committee also gives significant
weight to our clinical performance and quality of patient care. Accordingly,
Company-wide
patient clinical outcomes and improvements in quality of patient care, and each NEOs contributions in those
areas, can have a significant impact on NEO compensation.
The
Company-wide
factors taken into consideration by the
Compensation Committee to assess the NEOs related contributions include:
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overall revenue growth, increases in our treatment volume, market share increases, and improvements in controlling treatment costs;
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healthcare regulatory compliance initiatives;
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improved positioning of the Company for continued growth and diversification;
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improved organizational capabilities;
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patient growth and geographic expansion;
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relationships with private payors;
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improved clinical outcomes, vaccination rates and other measures of quality of care;
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relationships with medical directors and other physicians involved in our patient care;
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selection and implementation of improved financial, operating and clinical information systems;
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management performance in attracting and retaining
high-performing
employees throughout our organization and succession planning;
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implementation of successful public policy efforts;
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good corporate citizenship; and
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advancement of strategic business initiatives supporting our mission to be the provider, partner and employer of choice.
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The Compensation Committee retains discretion as to how to weigh these factors. There is no formal weighting of the individual elements considered and no particular
elements are required to be considered with respect to a given individual or in any particular year.
When determining annual compensation for our NEOs, other than
for our CEO, the Compensation Committee works closely with our CEO to review each individuals performance for the year and determine such NEOs compensation. Shortly following the end of each year, our CEO provides his assessment of each
NEOs performance during the year based on his personal experience with the individual, the NEOs achievement of success in areas determined to be significant to the Company, and any changes in responsibility levels. The Compensation
Committee also considers performance discussions that have taken place at the Board and Compensation Committee level regarding the NEOs, retention objectives and the future growth potential of the individual executive. Our CEO recommends to the
Compensation Committee the amounts of
cash-based
and
stock-based
compensation for each NEO. The Compensation Committee considers the recommendations made by the CEO
regarding the other NEOs but retains the discretion to deviate from those recommendations. Neither the CEO nor other members of management provide a recommendation to the Compensation Committee with regard to the CEOs compensation.
The Compensation Committee evaluates our CEOs performance at the same time it sets the compensation of the other NEOs. When evaluating the performance of our CEO
and making decisions about his compensation, the Compensation Committee considers overall Company performance as part of the assessment of our CEOs performance, in addition to the achievement of specific objectives to determine his
compensation. The Compensation Committee also considers a
self-assessment
prepared by our CEO. As part of this
self-assessment,
our CEO reviews with the Compensation
Committee the overall annual management objectives of the
44
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Compensation Discussion and Analysis
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Company and his participation in the attainment, or level of responsibility for the shortfall, of such objectives. Approximately every other year, the Compensation Committee engages an outside
independent consultant to conduct an
in-depth
analysis of our CEOs performance as a manager during the year. The most recent assessment took place in 2016. This evaluation involves a rigorous assessment
of our CEOs performance by members of the senior management team. This assessment is reviewed by the Board and the Compensation Committee, and is one of the many factors considered when making compensation decisions. As further described
below, the Compensation Committees independent compensation consultant provides the Compensation Committee with an analysis of comparative market data on the
cash-based,
stock-based
and total compensation for senior executives, including the CEO, at a group of comparable companies within our industry. The compensation package for our CEO is approved by the independent members
of the Board after the Compensation Committees recommendation for approval.
Role of Independent Compensation Consultant
The Compensation Committee has selected and directly retains the services of Compensia, an independent national compensation consulting firm. The Compensation Committee
has the sole authority to retain or replace Compensia in its discretion. Compensia does not provide consulting services to the Company and may not provide such services without prior approval of the Compensation Committee chair. Accordingly,
Compensia only provides compensation consulting services to the Compensation Committee, and works with the Companys management only on matters for which the Compensation Committee provides direction and is responsible. The Compensation
Committee has assessed the independence of Compensia pursuant to the rules of the SEC and NYSE, and concluded that Compensias work for the Compensation Committee does not raise any conflicts of interest. The Compensation Committee periodically
seeks input from Compensia on a range of external market factors, including evolving compensation trends, appropriate peer companies and market survey data. Compensia also provides general observations on the Companys compensation program, but
it does not determine or recommend the amount or form of compensation for the NEOs.
Market Competitiveness
We evaluate the overall competitiveness of our executives total direct compensation each year in order to assist in executive retention. For 2016, the
Compensation Committee retained Compensia to perform a comprehensive market analysis of our executive compensation programs and pay levels and based upon the recommendation of Compensia made no changes to the comparator peer group, which was used to
evaluate 2016 bonus payouts and 2017 compensation decisions.
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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45
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Compensia provided the Compensation Committee with an analysis of comparative market data on the
cash-based,
stock-based
and total compensation for senior executives at the companies within our comparator peer group. In addition to public executive compensation data, the
Compensation Committee reviewed the compensation practices of our comparator peer group for purposes of evaluating the competitive environment and understanding the general compensation practices of our peers. Our comparator peer group consists of
the following companies, which are all in the healthcare services, diagnostics, managed care and solutions markets:
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|
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Company
1
|
|
1-Year
TSR
2
|
|
|
3-Year
Compound
Annual
TSR
2
|
|
|
Market
Capitalization
(in millions)
2
|
|
|
Net Income
for Last
4
Quarters
(in millions)
3
|
|
|
Revenue for
Last
4
Quarters
(in millions)
3
|
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Abbott Laboratories
|
|
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(12%)
|
|
|
|
2%
|
|
|
|
$56,798
|
|
|
|
$1,400
|
|
|
|
$20,853
|
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Aetna
|
|
|
16%
|
|
|
|
23%
|
|
|
|
$44,915
|
|
|
|
$2,271
|
|
|
|
$63,155
|
|
Anthem
|
|
|
5%
|
|
|
|
18%
|
|
|
|
$38,116
|
|
|
|
$2,470
|
|
|
|
$84,863
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|
Baxter International
|
|
|
18%
|
|
|
|
7%
|
|
|
|
$24,168
|
|
|
|
$4,965
|
|
|
|
$10,163
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Centene Corp.
|
|
|
(14%)
|
|
|
|
24%
|
|
|
|
$9,810
|
|
|
|
$562
|
|
|
|
$40,412
|
|
Community Health Systems, Inc.
|
|
|
(74%)
|
|
|
|
(44%)
|
|
|
|
$637
|
|
|
|
($1,721)
|
|
|
|
$18,438
|
|
HCA Holdings, Inc.
|
|
|
9%
|
|
|
|
16%
|
|
|
|
$26,911
|
|
|
|
$2,890
|
|
|
|
$41,490
|
|
Laboratory Corporation of America
Holdings
|
|
|
4%
|
|
|
|
12%
|
|
|
|
$13,047
|
|
|
|
$732
|
|
|
|
$9,642
|
|
Molina Healthcare, Inc.
|
|
|
(10%)
|
|
|
|
16%
|
|
|
|
$3,066
|
|
|
|
$52
|
|
|
|
$17,782
|
|
Quest Diagnostics Incorporated
|
|
|
32%
|
|
|
|
22%
|
|
|
|
$12,353
|
|
|
|
$645
|
|
|
|
$7,515
|
|
Tenet Healthcare, Inc.
|
|
|
(51%)
|
|
|
|
(29%)
|
|
|
|
$1,518
|
|
|
|
($192)
|
|
|
|
$19,621
|
|
Thermo Fisher Scientific
|
|
|
0%
|
|
|
|
9%
|
|
|
|
$56,048
|
|
|
|
$2,022
|
|
|
|
$18,274
|
|
Universal Health Services, Inc.
|
|
|
(11%)
|
|
|
|
10%
|
|
|
|
$11,020
|
|
|
|
$702
|
|
|
|
$9,765
|
|
WellCare Health Plans
|
|
|
75%
|
|
|
|
25%
|
|
|
|
$6,077
|
|
|
|
$242
|
|
|
|
$14,237
|
|
Summary Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
th
Percentile
|
|
|
14%
|
|
|
|
21%
|
|
|
|
$35,315
|
|
|
|
$2,209
|
|
|
|
$35,522
|
|
50
th
Percentile
|
|
|
2%
|
|
|
|
14%
|
|
|
|
$12,700
|
|
|
|
$717
|
|
|
|
$18,356
|
|
25
th
Percentile
|
|
|
(12%)
|
|
|
|
8%
|
|
|
|
$7,010
|
|
|
|
$322
|
|
|
|
$11,182
|
|
DaVita
|
|
|
(8%)
|
|
|
|
0%
|
|
|
|
$12,535
|
|
|
|
$880
|
|
|
|
$14,745
|
|
DaVita Percentage Rank
|
|
|
40%
|
|
|
|
15%
|
|
|
|
48%
|
|
|
|
56%
|
|
|
|
32%
|
|
1
|
The Companys peer group was compiled by Compensia and approved by the Compensation Committee.
|
2
|
Data as of December 30, 2016.
|
3
|
Financial data generally publicly available as of December 30, 2016.
|
Our 2016 comparator peer group includes a diverse representation of various companies in the healthcare services,
diagnostics, managed care, and solutions markets because we compete in these broad industry groups for executive talent. The Compensation Committee, in conjunction with Compensia, reviews the composition of this group annually and makes adjustments
to the composition of the group as it deems appropriate in order to provide a fairly consistent measure for
comparing executive compensation. We believe that our
comparator peer companies are comparable to us in their size, as measured by market capitalization, net income and revenues. We believe compensation paid by this comparator peer group is representative of the compensation required to attract, retain
and motivate our executive talent.
The Compensation Committee considered the comparator peer group together with market data
information analysis from Compensia and other factors, in determining 2016 base salary amounts and LTI program awards granted in 2016. The comparator peer group together with market data and
analysis from Compensia and other factors were considered by the Compensation Committee in determining 2017 base salary amounts and 2016 performance bonuses, and will be used in determining LTI program awards expected to be granted in 2017.
The Compensation Committee considered Compensias analysis (based on publicly disclosed compensation practices) of the compensation of executives serving in
similar positions at comparable companies to obtain a general understanding of current compensation practices in our industry. The analysis provided by Compensia was used to provide context for the compensation decisions made by the Compensation
Committee, but the Compensation
46
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|
Compensation Discussion and Analysis
|
|
|
Committees decisions were not directly related to or otherwise based upon the comparative data. Instead, the Compensation Committee used this comparative data as one of many factors
considered to set the compensation for our NEOs. The Compensation Committee also used the analysis as a tool to assess how well the Company is implementing its core compensation objective of awarding compensation weighted heavily in favor of
variable compensation tied to performance.
In approving executive compensation, the Compensation Committee considered the Companys market capitalization,
which is at the 48th percentile of our comparator peer group, and the Companys size, in terms of net income and revenue, which is at the 56th and 32nd percentiles, respectively, of our comparator peer group. The Compensation Committee
also considered each NEOs role and responsibilities within the Company, individual performance, Company performance and internal pay equity in addition to the results of the competitive pay analysis.
Risk Considerations in Our Compensation Program
The Compensation Committee, with the assistance of Compensia, conducted a review of
the Companys material compensation policies and practices applicable to its employees, including its executive officers. Based on this review, the Compensation Committee concluded that
these policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. The key features of the executive compensation program that support this conclusion include:
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a balance between cash and equity compensation;
|
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|
a balance between
short-term
and
long-term
performance focus;
|
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short-term
incentive opportunities are capped and are not linked to any one specific goal;
|
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|
severance payments are limited to 3x base salary and bonus;
|
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equity awards have meaningful vesting requirements;
|
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|
a clawback policy that permits the Board to recover annual bonuses and
longer-term
incentive and
equity-based
compensation from executive
officers and members of the Board;
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stock ownership guidelines; and
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significant independent Compensation Committee oversight.
|
Compensation Policies and Practices
We are committed to strong governance standards with respect to our compensation program, procedures and practices. We believe that the following aspects of our
compensation program are indicative of this commitment.
Management Share Ownership Policy
We have a share ownership policy that applies to certain members of our management team at the executive level. The management share ownership policy is similar to our
share ownership policy that applies to all
non-employee
members of the Board described on page 19 of this Proxy Statement. The purpose of the policy is to ensure that those executives accumulate a
meaningful ownership stake in the Company over time by retaining a specified financial interest in our common stock. Both shares owned directly and shares underlying vested but unexercised SSARs
and RSUs are included in the determination of whether the share ownership guidelines are met. The total net realizable share value retained must have a current market value of not less than the
lower of 25% of the total equity award value in excess of $100,000 realized to date by the executive; or a specific multiple of the executives base salary. The salary multiple requirement for our current NEOs is 5.0 for Mr. Thiry and 3.0
for Mr. Rodriguez. Ms. Waters and Ms. Zumwalt are not currently subject to the requirements of this policy. Mr. Hilger is not subject to the requirements under this policy because, although the chief financial officer position is
one of the positions subject to this policy, he was serving as our chief
Continues on next page
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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47
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financial officer on an interim basis. As of December 31, 2016, Messrs. Thiry and Rodriguez met or exceeded the applicable guidelines under our share ownership policy.
Policy Regarding Clawback of Bonuses and Incentive Compensation
In 2010, the Board adopted a clawback policy that permits the Board to recover annual bonuses and
longer-term
incentive and
equity-based
compensation from executive officers and
non-employee
members of the Board whose fraud or intentional misconduct was a significant contributing factor to the
Company having to restate all or a portion of its financial statements. In December 2014, the policy was further amended to add significant misconduct as another possible clawback triggering event, in accordance with the executive financial
compensation recoupment requirements under the Corporate Integrity Agreement.
This provision applies to all senior vice presidents and above of the Companys
domestic dialysis business, in addition to the executive officers and
non-employee
members of the Board. The clawback policy allows for the recovery of any bonus or incentive compensation paid to those
executive officers or directors, the cancellation of restricted or deferred stock awards and outstanding stock awards granted to those executive officers or directors, and the reimbursement of
any gains realized that are attributable to such awards to the fullest extent permitted by law. The policy allows for the foregoing actions to the extent that the amount of incentive compensation was calculated based upon the achievement of certain
financial results that were subsequently reduced due to a restatement; the executive officer or director engaged in any fraud or intentional misconduct that was a significant contributing factor to the Company having to restate its financial
statements; where the amount of the bonus or incentive compensation that would have been awarded to the officer had the financial results been properly reported would have been lower than the amount actually awarded; and, where the amount of the
bonus or incentive compensation that was awarded to the officer would not have been awarded had any significant misconduct been known. The Company will not seek to recover bonuses or incentive or
equity-based
compensation paid or vested more than three years prior to the date the applicable restatement is disclosed or the significant misconduct is discovered.
Tax and Accounting Considerations
Deduction Limit
When reviewing compensation matters, the Compensation Committee considers the anticipated tax treatment of various payments and benefits to the Company and, when
relevant, to its executives. Section 162(m) of the Internal Revenue Code generally disallows a tax deduction for compensation in excess of $1 million paid to the chief executive officer and the three other most highly compensated NEOs
employed at the end of the year (other than the chief financial officer). Such executives are referred to as covered employees.
Certain compensation is
specifically exempt from the deduction limit to the extent that it is
performance-based
as defined in Section 162(m). While the Compensation Committee recognizes the desirability of preserving
and strives to maintain the deductibility of payments made to the NEOs, the
Compensation Committee believes that it must maintain flexibility in its approach in order to structure a program that it believes to be the most effective in attracting, motivating and retaining
the Companys key executives.
Accounting for
Stock-Based
Compensation
The Company accounts for
stock-based
compensation in accordance with FASB ASC Topic 718, which
requires the Company to recognize compensation expense for
share-based
payments (including SSARs, RSUs, PSUs and other forms of equity compensation). FASB ASC Topic 718 is taken into account by the
Compensation Committee in determining to issue various types of equity awards, considering the natural economic exchange ratios implied by their approximate respective fair values.
48
The Compensation Committee of the Board is currently composed of three independent directors. The Compensation Committee
oversees the Companys compensation program on behalf of the Board. The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis set forth in this Proxy Statement with management.
Based on the Compensation Committees review and discussion with management, the Compensation Committee recommended to the Board that the Compensation Discussion
and Analysis be included in the Companys Proxy Statement for the Companys 2017 Annual Meeting of Stockholders and the Companys Annual Report on
Form 10-K
for the year ended
December 31, 2016.
COMPENSATION COMMITTEE
Pamela M. Arway, Chair
Peter T. Grauer
Roger J. Valine
The information contained above under the caption
Compensation Committee Report will not be considered soliciting material or to be filed with the SEC, nor will that information be incorporated by reference into any future filing under the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into a filing.
Compensation Committee Report
|
|
|
DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
|
|
49
|
2016 Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
1
($)
|
|
|
Stock
Awards
2
($)
|
|
|
Option
Awards
3
($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
4
($)
|
|
|
All Other
Compensation
5
($)
|
|
|
Total
($)
|
|
Kent J. Thiry
Chairman and
Chief Executive Officer, DaVita,
and
Chief Executive Officer, DaVita Medical
Group
|
|
|
2016
|
|
|
|
1,273,077
|
|
|
|
|
|
|
|
4,531,740
|
|
|
|
4,082,358
|
|
|
|
1,705,153
|
|
|
|
704,343
|
|
|
|
12,296,671
|
|
|
|
2015
|
|
|
|
1,200,000
|
|
|
|
|
|
|
|
3,720,140
|
|
|
|
3,422,476
|
|
|
|
2,225,186
|
|
|
|
471,020
|
|
|
|
11,038,822
|
|
|
|
2014
|
|
|
|
1,200,000
|
|
|
|
|
|
|
|
4,905,159
|
|
|
|
4,558,730
|
|
|
|
2,610,000
|
|
|
|
517,134
|
|
|
|
13,791,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Javier J. Rodriguez
Chief Executive
Officer, DaVita Kidney
Care
|
|
|
2016
|
|
|
|
865,385
|
|
|
|
|
|
|
|
911,452
|
|
|
|
1,740,575
|
|
|
|
5,069,405
|
|
|
|
185,709
|
|
|
|
8,772,526
|
|
|
|
2015
|
|
|
|
800,000
|
|
|
|
|
|
|
|
967,239
|
|
|
|
889,850
|
|
|
|
9,013,661
|
|
|
|
164,816
|
|
|
|
11,835,566
|
|
|
|
2014
|
|
|
|
800,000
|
|
|
|
|
|
|
|
1,376,459
|
|
|
|
1,279,239
|
|
|
|
8,142,500
|
|
|
|
151,140
|
|
|
|
11,749,338
|
|
Kathleen A. Waters
Chief Legal Officer
|
|
|
2016
|
|
|
|
334,385
|
|
|
|
740,000
|
|
|
|
533,004
|
|
|
|
402,033
|
|
|
|
|
|
|
|
200
|
|
|
|
2,009,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LeAnne M. Zumwalt
Group Vice President, Purchasing and Public Affairs
|
|
|
2016
|
|
|
|
400,000
|
|
|
|
200,000
|
|
|
|
|
|
|
|
371,130
|
|
|
|
584,210
|
|
|
|
384
|
|
|
|
1,555,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James K. Hilger
Former Interim Chief Financial Officer
and
Chief Accounting Officer
|
|
|
2016
|
|
|
|
375,000
|
|
|
|
210,000
|
|
|
|
124,745
|
|
|
|
92,786
|
|
|
|
292,105
|
|
|
|
360
|
|
|
|
1,094,996
|
|
|
|
2015
|
|
|
|
366,635
|
|
|
|
195,000
|
|
|
|
125,059
|
|
|
|
114,082
|
|
|
|
309,375
|
|
|
|
360
|
|
|
|
1,110,511
|
|
|
|
2014
|
|
|
|
350,000
|
|
|
|
225,000
|
|
|
|
124,953
|
|
|
|
116,302
|
|
|
|
1,092,500
|
|
|
|
336
|
|
|
|
1,909,091
|
|
|
1
|
The amounts reported in this column for 2016 represent annual performance bonuses for
non-STIP
participants, namely Mr. Hilger, Ms. Waters and Ms. Zumwalt, earned
with respect to 2016. The cash component of our 2016
short-term
incentive program (the 2016 STI program) under the Incentive Award Plan is included in the
Non-Equity
Incentive Plan Compensation column.
|
|
2
|
The amounts shown in this column reflect RSU and PSU awards and represent the aggregate grant date fair value of all such awards granted to the executive during the year as estimated by the Company in accordance with
FASB ASC Topic 718. In accordance with SEC rules, the amounts included in the Stock Awards column for the PSU awards granted during 2016 are calculated based on the most probable outcome of the performance conditions for such awards on the grant
date. If the most probable outcome of the performance conditions as of grant date had been maximum performance, then the grant date fair value of the PSUs would have been as follows: Mr. Thiry $7,488,134 and Mr. Rodriguez
$1,160,516. See Note 19 to the Consolidated Financial Statements included in our Annual Report on Form
10-K
for the year ended December 31, 2016 for a discussion of the relevant assumptions used in
calculating these amounts pursuant to FASB ASC Topic 718.
|
|
3
|
The amounts shown in this column represent the aggregate grant date fair value of SSAR awards granted to the executive during the year as estimated by the Company in accordance with FASB ASC Topic 718. See Note 19 to
the Consolidated Financial Statements included in our Annual Report on Form
10-K
for the year ended December 31, 2016 for a discussion of the relevant assumptions used in calculating these amounts
pursuant to FASB ASC Topic 718.
|
|
4
|
The amounts shown in this column represent amounts earned for performance periods ending in 2014, 2015, and 2016, respectively. For 2016, these amounts include the 2016 STI program and 2014 Cash LTI program. In early
2017, Mr. Rodriguez, Ms. Zumwalt and Mr. Hilger received payouts under the 2014
long-term
cash-based
performance awards, all granted under the Incentive
Award Plan. Accordingly, Mr. Rodriguez earned $3,213,155, Ms. Zumwalt earned $584,210 and Mr. Hilger earned $292,105 for performance at the 117% payout level as a result of adjusted operating income achieved for the dialysis and
related lab services operating segment of $1,827 million for fiscal year 2016 compared to targets of $1,800 million at the 100% payout level and $1,880 million at the 150% payout level.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2016 STI
Program
|
|
|
2014 Cash LTI Program
|
|
|
Total Non-Equity
Incentive Plan
Compensation
|
|
Kent J. Thiry
|
|
|
$1,705,153
|
|
|
|
|
|
|
|
$1,705,153
|
|
Javier J. Rodriguez
|
|
|
$1,856,250
|
|
|
|
$3,213,155
|
|
|
|
$5,069,405
|
|
Kathleen A. Waters
|
|
|
|
|
|
|
|
|
|
|
|
|
LeAnne M. Zumwalt
|
|
|
|
|
|
|
$584,210
|
|
|
|
$584,210
|
|
James K. Hilger
|
|
|
|
|
|
|
$292,105
|
|
|
|
$292,105
|
|
|
|
The awards are reported for the year with respect to which they were earned, regardless of when the award is paid. Please see Compensation Discussion and Analysis Elements of Compensation
Short-Term
Incentive Program (STI Program) for 2016 in this Proxy Statement for a discussion of the performance criteria under the 2016 STI program.
|
Executive Compensation
50
|
|
|
Executive Compensation
|
|
|
|
5
|
Amounts included in this column are set forth by category below. The amounts disclosed, other than use of a
fractionally-owned
or chartered corporate aircraft, are the actual or
share of actual costs to the Company of providing these benefits. Because a
fractionally-owned
or chartered corporate aircraft is used primarily for business purposes, we do not include in incremental cost the
fixed costs that do not change based on usage. The incremental cost to us of personal use of a
fractionally-owned
or chartered corporate aircraft, including use for commuting, is calculated based on the
variable operating costs related to the operation of the aircraft, including fuel costs and landing fees,
trip-related
repairs and maintenance, catering and other miscellaneous variable costs. Fixed costs that
do not change based on usage, such as pilot salaries, training, utilities, depreciation, management fees, taxes and general repairs and maintenance are excluded. The value of the personal use of a
fractionally-owned
or chartered corporate aircraft by our NEOs is included in their personal income in accordance with applicable tax regulations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Year
|
|
|
Aircraft
Usage*
($)
|
|
|
Life
Insurance
Premiums
($)
|
|
|
Total All Other
Compensation
($)
|
|
Kent J. Thiry
|
|
|
2016
|
|
|
$
|
703,191
|
|
|
|
$1,152
|
|
|
|
$704,343
|
|
Javier J. Rodriguez
|
|
|
2016
|
|
|
$
|
184,941
|
|
|
|
$768
|
|
|
|
$185,709
|
|
Kathleen A. Waters
|
|
|
2016
|
|
|
|
|
|
|
|
$200
|
|
|
|
$200
|
|
LeAnne M. Zumwalt
|
|
|
2016
|
|
|
|
|
|
|
|
$384
|
|
|
|
$384
|
|
James K. Hilger
|
|
|
2016
|
|
|
|
|
|
|
|
$360
|
|
|
|
$360
|
|
|
*
|
For purposes of calculating the incremental costs to the Company of each NEOs personal use of Company aircraft, the total cost of the flight is allocated to personal use based upon the relative ratio of personal
mileage to total mileage. Costs for fuel, ground costs, catering costs, landing fees, domestic passenger fees and federal excise tax charges are also included, if applicable.
|
The following table sets forth information concerning awards made to each of the NEOs under the Companys equity compensation plans during 2016.
2016 Grants of
Plan-Based
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
Under
Non-Equity
Incentive Plan Awards
|
|
|
|
|
Estimated Future Payouts
Under Equity
Incentive Plan Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
1
|
|
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
|
|
All Other
Stock
Awards:
Number
of
Shares
of
Stock
or
Units
(#)
4
|
|
|
All Other
Options
Awards:
Number
of
Securities
Underlying
Options
(#)
5
|
|
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
|
|
Grant Date
Fair Value
of
Stock
and
Option
Awards
($)
6
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
1,705,153
|
|
|
|
3,900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kent J. Thiry
|
|
|
12/27/2016
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,384
|
|
|
|
72,761
|
|
|
|
136,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,531,740
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
291,044
|
|
|
|
75.42
|
|
|
|
4,082,358
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
1,856,250
|
|
|
|
2,250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/13/2016
2
|
|
|
|
|
|
1,750,000
|
|
|
|
3,500,000
|
|
|
|
10,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Javier J. Rodriguez
|
|
|
12/24/2016
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,640
|
|
|
|
15,280
|
|
|
|
26,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
911,452
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,091
|
|
|
|
75.42
|
|
|
|
1,740,575
|
|
|
|
|
5/13/2016
2
|
|
|
|
|
|
266,500
|
|
|
|
533,000
|
|
|
|
2,132,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen Waters
|
|
|
5/6/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,041
|
|
|
|
|
|
|
|
|
|
|
|
533,004
|
|
|
|
|
5/6/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,164
|
|
|
|
75.70
|
|
|
|
402,033
|
|
LeAnne M. Zumwalt
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,459
|
|
|
|
75.42
|
|
|
|
371,130
|
|
|
|
|
5/13/2016
2
|
|
|
|
|
|
125,000
|
|
|
|
250,000
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James K. Hilger
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,654
|
|
|
|
|
|
|
|
|
|
|
|
124,745
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,615
|
|
|
|
75.42
|
|
|
|
92,786
|
|
1
|
Represents applicable amounts for our 2016
short-term
incentive program (2016 STI program) under the Incentive Award Plan. The amount in the Maximum column represents
the maximum amount the executive was eligible to earn under the 2016 STI Program if all performance criteria were achieved at their highest payout level. Since 2016 is now complete, the amount in the Target column represents the payout
amounts awarded under the 2016 STI program, considering both the formulaic criteria and any negative discretion the Committee applied thereunder. Since the Committee may use discretion to reduce amounts awarded to zero, there are no fixed threshold
amounts under the 2016 STI Program. Accordingly this table reflects a zero amount in the Threshold column.
|
2
|
Represents
long-term
cash-based
performance awards granted in May 2016 (2016 cash LTI program awards) under the Incentive Award Plan. For a
description of these 2016 cash LTIP awards, see Compensation Discussion and Analysis Elements of Compensation
Long-term
Incentive Program (LTI Program) for 2016 in this Proxy
Statement.
|
3
|
This number represents PSUs awarded under the Incentive Award Plan. The PSU awards vest 31% on May 15, 2019 and 69% on
May 15, 2020 for Mr. Thiry and 50% on each of May 15, 2019 and 2020 for Mr. Rodriguez, subject to the NEOs continued
|
Continues on next page
|
|
|
DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
|
|
51
|
|
employment and the achievement of the underlying performance conditions. For a description of the PSUs, see Compensation Discussion and Analysis Elements of Compensation
Long-Term
Incentive Program (LTI Program) for 2016 Equity Awards Performance Stock Units in this Proxy Statement.
|
4
|
This number represents RSUs granted under the Incentive Award Plan. The RSUs granted to Ms. Waters in connection with her commencement of employment with the
Company vest 50% on each of the second and third anniversaries of the grant date, subject to her continued employment. The RSUs granted to Mr. Hilger vest 50% on each of the third and fourth anniversaries of the grant date, subject to his
continued employment.
|
5
|
This number represents SSARs awarded under the Incentive Award Plan. With the exception of the SSARs granted to Ms. Waters in connection with her commencement of employment with the Company, which vest 50% on each
of the second and third anniversaries of the grant date, the SSARs vest 50% each on the third and fourth anniversaries of the grant date, subject to the NEOs continued employment. For a description of the SSARs, see Compensation
Discussion and Analysis Elements of Compensation
Long-Term
Incentive Program (LTI Program) for 2016 Equity Awards
Stock-settled
Stock Appreciation Rights in this Proxy Statement.
|
6
|
The amounts for SSARs, RSUs and PSUs are the aggregate grant date fair values of each award determined pursuant to FASB ASC Topic 718 and, in the case of PSUs, are based upon the probable outcome of the applicable
performance conditions on the grant date. All options granted to Mr. Thiry have a five-year term. See Note 19 to the Consolidated Financial Statements included in our Annual Report on Form
10-K
for the year
ended December 31, 2016 for a discussion of the relevant assumptions used in calculating grant date fair value pursuant to FASB ASC Topic 718.
|
The following table sets forth information concerning outstanding SSARs and unvested stock awards held by each of the NEOs at December 31, 2016.
2016 Outstanding Equity Awards at Fiscal
Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
2
|
|
|
|
|
Stock Awards
|
|
Name
|
|
Grant
Date
|
|
|
|
|
Number
of Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
|
|
Number
of Shares
or Units of
Stock That
Have
Not Vested
(#)
|
|
|
Market Value
of Shares or
Units of Stock
That Have
Not
Vested
1
($)
|
|
|
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units,
or Other
Rights that
Have Not
Vested
(#)
4
|
|
|
Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units
or Other Rights
that Have
Not
Vested
($)
1
|
|
|
|
|
12/18/2012
|
|
|
|
|
|
1,000,000
5
|
|
|
|
|
|
|
|
$55.34
|
|
|
|
12/18/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/20/2013
|
|
|
|
|
|
450,000
2
|
|
|
|
450,000
2
|
|
|
|
$59.52
|
|
|
|
3/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/24/2014
|
|
|
|
|
|
|
|
|
|
282,339
2
|
|
|
|
$69.38
|
|
|
|
4/24/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kent J. Thiry
|
|
|
6/2/2015
|
|
|
|
|
|
|
|
|
|
179,041
2
|
|
|
|
$83.82
|
|
|
|
6/2/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
|
291,044
2
|
|
|
|
$75.42
|
|
|
|
5/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/24/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,612
6
|
|
|
|
$296,090
|
|
|
|
31,511
7
|
|
|
$
|
2,023,006
|
|
|
|
|
6/2/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,323
8
|
|
|
$
|
3,102,337
|
|
|
|
|
12/27/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,761
9
|
|
|
$
|
4,671,256
|
|
|
|
|
12/18/2012
|
|
|
|
|
|
112,500
5
|
|
|
|
|
|
|
|
$55.34
|
|
|
|
12/18/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/19/2013
|
|
|
|
|
|
140,000
2
|
|
|
|
140,000
2
|
|
|
|
$58.94
|
|
|
|
3/19/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/24/2014
|
|
|
|
|
|
|
|
|
|
79,228
2
|
|
|
|
$69.38
|
|
|
|
4/24/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Javier J. Rodriguez
|
|
|
6/2/2015
|
|
|
|
|
|
|
|
|
|
46,551
2
|
|
|
|
$83.82
|
|
|
|
6/2/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
|
124,091
2
|
|
|
|
$75.42
|
|
|
|
5/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/24/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,589
6
|
|
|
|
$166,214
|
|
|
|
8,842
7
|
|
|
$
|
567,656
|
|
|
|
|
6/2/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,564
8
|
|
|
$
|
806,609
|
|
|
|
|
12/24/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,280
10
|
|
|
$
|
980,976
|
|
Kathleen A. Waters
|
|
|
5/6/2016
|
|
|
|
|
|
|
|
|
|
28,164
3
|
|
|
|
$75.70
|
|
|
|
5/6/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/6/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,041
4
|
|
|
|
$452,032
|
|
|
|
|
|
|
|
|
|
|
|
|
12/18/2012
|
|
|
|
|
|
5,400
5
|
|
|
|
|
|
|
|
$55.34
|
|
|
|
12/18/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/19/2013
|
|
|
|
|
|
2,600
2
|
|
|
|
2,600
2
|
|
|
|
$58.94
|
|
|
|
3/19/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/24/2014
|
|
|
|
|
|
|
|
|
|
14,405
2
|
|
|
|
$69.38
|
|
|
|
4/24/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LeAnne M. Zumwalt
|
|
|
6/2/2015
|
|
|
|
|
|
|
|
|
|
11,936
2
|
|
|
|
$83.82
|
|
|
|
6/2/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
|
26,459
2
|
|
|
|
$75.42
|
|
|
|
5/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/24/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,601
11
|
|
|
$
|
231,184
|
|
|
|
|
|
|
|
|
|
|
|
|
6/2/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,984
12
|
|
|
$
|
191,573
|
|
|
|
|
|
|
|
|
|
|
|
|
12/18/2012
|
|
|
|
|
|
28,000
5
|
|
|
|
|
|
|
|
$55.34
|
|
|
|
12/18/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/19/2013
|
|
|
|
|
|
7,000
2
|
|
|
|
7,000
2
|
|
|
|
$58.94
|
|
|
|
3/19/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/24/2014
|
|
|
|
|
|
|
|
|
|
7,203
2
|
|
|
|
$69.38
|
|
|
|
4/24/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James K. Hilger
|
|
|
6/2/2015
|
|
|
|
|
|
|
|
|
|
5,968
2
|
|
|
|
$83.82
|
|
|
|
6/2/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
|
6,615
2
|
|
|
|
$75.42
|
|
|
|
5/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/24/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,801
11
|
|
|
|
$115,624
|
|
|
|
|
|
|
|
|
|
|
|
|
6/2/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,492
12
|
|
|
|
$95,786
|
|
|
|
|
|
|
|
|
|
|
|
|
5/13/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,654
13
|
|
|
|
$106,187
|
|
|
|
|
|
|
|
|
|
1
|
The market value of shares or units of stock that have not vested reflects the $64.20 closing price of our common stock on December 30, 2016, the last trading day of the year, as reported by the NYSE.
|
52
|
|
|
Executive Compensation
|
|
|
2
|
These SSARs vest 50% on the third and fourth anniversaries of the grant date.
|
3
|
These SSARs vest 50% on the second and third anniversaries of the grant date.
|
4
|
These RSUs vest 50% on the second and third anniversaries of the grant date.
|
5
|
These SSARs vested 50% on April 1, 2015 and 50% on April 1, 2016.
|
6
|
These PSUs vest 50% on May 15, 2017 and 50% on May 15, 2018
|
7
|
These PSUs vest 50% each on May 15, 2017 and May 15, 2018, subject to achievement of the performance conditions for PSUs. The amounts listed here are the target number of PSUs awarded.
|
8
|
These PSUs vest 50% each on the third and fourth anniversaries of the grant date, subject to the performance conditions for PSUs. The amounts listed here are the target number of PSUs awarded.
|
9
|
These PSUs vest 31% on May 15, 2019 and 69% on May 15, 2020 for Mr. Thiry, subject to the performance conditions for PSUs. The amounts listed here are the target number of shares awarded.
|
10
|
These PSUs vest 50% on each of May 15, 2019 and 2020 for Mr. Rodriguez, subject to the performance conditions for PSUs. The amounts listed here are the target number of shares awarded.
|
11
|
These RSUs vest 50% each on May 15, 2017 and May 15, 2018.
|
12
|
These RSUs vest 50% each on June 2, 2018 and June 2, 2019.
|
13
|
These RSUs vest 50% each on May 15, 2019 and May 15, 2020.
|
The following table sets forth information
concerning the exercise of stock options and SSARs and the vesting of stock awards held by each of the NEOs during 2016.
2016 Option Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
Stock Awards
|
|
Name
|
|
|
|
Number of
Shares
Acquired on
Exercise
(#)
|
|
|
Value
Realized on
Exercise
($)
1
|
|
|
|
|
Number of
Shares
Acquired on
Vesting
(#)
|
|
|
Value
Realized on
Vesting
($)
2
|
|
Kent J. Thiry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,064
|
|
|
|
$5,435,067
|
|
Javier J. Rodriguez
|
|
|
|
|
296,667
|
|
|
|
$8,798,510
|
|
|
|
|
|
36,466
|
|
|
|
$2,750,266
|
|
Kathleen A. Waters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LeAnne M. Zumwalt
|
|
|
|
|
44,000
|
|
|
|
$946,000
|
|
|
|
|
|
538
|
|
|
|
$40,576
|
|
James K. Hilger
|
|
|
|
|
12,000
|
|
|
|
$264,360
|
|
|
|
|
|
3,983
|
|
|
|
$300,398
|
|
1
|
Value realized on exercise is determined by subtracting the exercise or base price from the market price of our common stock at exercise, and multiplying the remainder by the number of shares exercised.
|
2
|
Value realized on vesting is determined by multiplying the number of shares underlying RSUs by the closing price for our common stock on the date of vesting, as reported by the NYSE.
|
No Pension Benefits
The Company does not have a defined benefit pension plan that allows participation by any employee, including the NEOs, and that provides for payments or other benefits
at, following, or in connection with retirement.
Continues on next page
|
|
|
DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
|
|
53
|
Nonqualified Deferred Compensation
The following table sets forth information concerning the Companys nonqualified deferred compensation plans.
2016 Nonqualified Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions
in Last
FY
($)
2,3
|
|
|
Registrant
Contributions
in Last FY
($)
|
|
|
Aggregate
Earnings in
Last FY
($)
1
|
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
|
Aggregate
Balance at
Last FYE
($)
|
|
Kent
J. Thiry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation Plan
|
|
|
$1,749,131
|
|
|
|
|
|
|
|
$99,655
|
|
|
|
|
|
|
|
$2,436,255
|
|
Voluntary Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
$709,032
|
|
|
|
|
|
|
|
$10,518,692
|
|
Javier
J.
Rodriguez
Voluntary Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
$85,597
|
|
|
|
|
|
|
|
$658,894
|
|
Kathleen A. Waters
4
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LeAnne M. Zumwalt
Deferred Compensation Plan
|
|
|
$50,658
|
|
|
|
|
|
|
|
$2,395
|
|
|
|
|
|
|
|
$53,053
|
|
Voluntary Deferral Plan
|
|
|
|
|
|
|
|
|
|
|
$2,667
|
|
|
|
$(1,686)
|
|
|
|
$26,271
|
|
James
K. Hilger
4
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
None of the earnings in this column are included in the 2016 Summary Compensation Table because they are not preferential or above market.
|
2
|
This amount is reported in the Salary column in the 2016 Summary Compensation Table.
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3
|
Mr. Thiry deferred $1,749,132 in 2016 and $1,928,077 in 2016 into the Deferred Compensation Plan, and $2,076,923 in 2014 into the Voluntary Deferral Plan. Ms. Zumwalt deferred $50,658 in 2016 into the Deferred
Compensation Plan.
|
4
|
Ms. Waters and Mr. Hilger did not participate in any of the Companys nonqualified deferred compensation plans in 2016.
|
Voluntary Deferral Plan and Deferred Compensation Plan
The 2016 Nonqualified Deferred Compensation Table presents amounts deferred under our Voluntary Deferral Plan and our Deferred Compensation Plan, which replaced the
Voluntary Deferral Plan effective January 1, 2015.
Contributions
Under the Deferred Compensation Plan (effective for deferrals in 2015 and later years), participants may defer (i) up to 50% of their base salary, and (ii) all or a
portion of their annual bonus payment that is earned in the same year as their base salary but payable in the following year. Under the Voluntary Deferral Plan (applicable for deferrals prior to 2015), participants could defer (i) up to 50% of
their base salary, (ii) all or a portion of their annual bonus payment that is earned in the same year as their base salary but payable in the following year and (iii) all or a portion of their other compensation as determined by the
Company.
Under both plans, deferred amounts are credited with earnings or losses based on the rate of return of one or more investment alternatives selected by the participant from among the investment
funds selected by the Company.
Participants may change their investment elections daily. We do not make company contributions to participants accounts under
either the Voluntary Deferral Plan or the Deferred Compensation Plan. All participant contributions are irrevocably funded into a rabbi trust for the benefit of those participants. Assets held in the trust are subject to the claims of the
Companys general creditors in the event of the Companys bankruptcy or insolvency until paid to the plan participants.
Payment
of benefits
Distributions are generally paid out in cash at the participants election. Under the Voluntary Deferral Plan, distributions can be
made commencing in the first or second year following retirement or in a specified year at least three to four years after the deferral election was effective, and participants
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Executive Compensation
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can elect to receive distributions in the form of one, five, ten, fifteen or twenty annual installments. Under the Deferred Compensation Plan, distributions can be made commencing in the second
year following the year to which the deferral election applies, after separation from service, or on any other scheduled payment date, and participants can elect to receive either a lump sum distribution or annual installments over any period from
two to twenty years; provided, that, if the Deferred Compensation Plan balance does not exceed $20,000, a lump sum will be paid. If the participant has not elected a specified year for payout and the participant has a separation from service,
distributions generally will be paid in a lump sum cash distribution after separation from service.
In the event of a participants unforeseeable emergency,
the plan administrator may, in its sole discretion, authorize the cessation of deferrals by a participant, provide for immediate distribution to a participant in the form of a lump sum cash payment to cover the unforeseeable emergency.
Potential Payments Upon Termination or Change of Control
General Terms and Definitions
For purposes of
the table below:
Cause
is defined in Mr. Thirys employment agreement as any of the following: (i) conviction of a felony;
(ii) any act of fraud or dishonesty resulting or intended to result directly or indirectly in personal enrichment at the expense of the Company; (iii) repeated failure or refusal by the executive to follow policies established by the Board
or written directives of the Board that goes uncorrected for a period of 30 consecutive days after notice of such failure or refusal, and that is material and willful and has a material adverse effect on the Companys business; or (iv) a
material breach of the executives employment agreement that goes uncorrected for a period of 30 consecutive days after written notice has been provided to the executive.
Involuntary termination for
Material Cause
occurs if the Company terminates employment for
any of the following reasons: (i) conviction of a felony or plea of no contest to a felony; (ii) any act of fraud or dishonesty in connection with the performance of the
executives duties; (iii) repeated failure or refusal by the executive to follow lawful policies or directives reasonably established by the CEO of the Company or his designee that goes uncorrected for a period of 10 consecutive days after
written notice has been provided to the executive; (iv) a material breach of the executives employment agreement; (v) any gross or willful misconduct or gross negligence by the executive in performance of the executives duties;
(vi) egregious conduct by the executive that brings the Company or any of its subsidiaries or affiliates into public disgrace or disrepute; (vii) an act of unlawful discrimination, including sexual harassment; (viii) a violation of
the duty of loyalty or of any fiduciary duty; or (ix) exclusion or notice of exclusion of the executive from participating in any federal healthcare program.
Except with respect to Mr. Thiry, as noted below, a
Change of Control
means (i) any transaction or series of transactions in which any
person or group (within the meaning of
Rule 13d-5
under the Exchange Act and Sections 13(d) and 14(d) of the Exchange Act) becomes the direct or indirect beneficial owner (as defined in
Rule 13d-3
under the Exchange Act), by way of a stock issuance, tender offer, merger, consolidation, other business combination or otherwise, of greater than 50% of the total voting power (on a fully diluted
basis as if all convertible securities had been converted and all warrants and options had been exercised) entitled to vote in the election of directors of the Company (including any transaction in which the Company becomes a
wholly-owned
or
majority-owned
subsidiary of another corporation), (ii) any merger or consolidation or reorganization in which the Company does not survive,
(iii) any merger or consolidation in which the Company survives, but the shares of the Companys common stock outstanding immediately prior to such merger or consolidation represent 40% or less of the voting power of the Company after such
merger or consolidation, and (iv) any transaction in which more than 40% of the Companys assets are sold. However, despite the occurrence of any of the
above-described
events, a Change of
Control will not have occurred if Mr. Thiry remains the CEO of the Company for at least one year after the Change of Control or
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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55
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becomes the CEO or executive chair of the surviving company with which the Company merged or consolidated and remains in that position for at least one year after the Change of Control.
Good Cause
means the occurrence of the following events without the executives express written consent: (i) the Company materially
diminishes the scope of the executives duties and responsibilities; or (ii) the Company materially reduces the executives base compensation. Notwithstanding the above, the occurrence of any such condition shall not constitute Good
Cause unless the executive provides notice to the Company of the existence of such condition not later than 90 days after the initial existence of such condition, and the Company shall have failed to remedy such condition within 30 days
after receipt of such notice.
With respect to Mr. Thirys employment agreement,
Good Reason
means during the employment period,
without the written consent of the executive, any one or more of the following (provided that an isolated, insubstantial or inadvertent action not taken in bad faith or failure not occurring in bad faith which is remedied by the Company promptly
after receipt of notice thereof given by the executive shall not constitute Good Reason): (i) the assignment to the executive of any duties inconsistent in any material and adverse respect with the executives then current duties and
responsibilities; (ii) the material and adverse change in the executives titles or positions; (iii) reduction in the executives base salary or target annual incentive opportunity, unless such reductions are part of an
across-the-board
reduction that applies to all senior executives of the Company and takes effect prior to a Change in Control (as defined below for Mr. Thiry); or
(iv) any material breach by the Company of the employment agreement, that is not corrected within 30 days after notice of such breach.
For purposes of
the definition of Good Reason in Mr. Thirys employment agreement above, a
Change of Control
means (i) any transaction or series of transactions in which any person or group (within the
meaning of
Rule 13d-5
under the Exchange Act and Sections 13(d) and 14(d) under the Exchange Act) becomes the direct or indirect
beneficial owner (as defined in
Rule 13d-3
under the Exchange Act), by way of a stock issuance, tender offer, merger, consolidation, other
business combination or otherwise, of greater than 40% of the total voting power (on a fully diluted basis as if all convertible securities had been converted and all warrants and options had been exercised) entitled to vote in the election of
directors of the Company (including any transaction in which the Company becomes a
wholly-owned
or
majority-owned
subsidiary of another corporation),
(ii) consummation of any merger or consolidation in which the shares of the Companys common stock outstanding immediately prior to such merger or consolidation represent 50% or less of the voting power of the corporation resulting from
such merger or consolidation, or, if applicable, the ultimate parent corporation of such corporation, (iii) during any
twenty-four
month period, individuals who, as of the beginning of such period,
constitute the Board (the Incumbent Board) cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company subsequent to the beginning of such period whose
election, or nomination for election by the Companys stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that
any individual who was initially elected as a director of the Company as a result of an actual or threatened solicitation by a person other than the Board for the purpose of opposing a solicitation by any other person with respect to the election or
removal of directors, or any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall not be deemed a member of the Incumbent Board, (iv) consummation of any transaction in which
all or substantially all of the Companys assets are sold, or (v) the approval by the Companys stockholders of a plan of complete liquidation or dissolution of the Company; provided, however, that no transaction contemplated by
clauses (i) through (iv) above shall constitute a Change of Control if the person acting as the CEO of the Company for the twelve months prior to such transaction continues as the CEO or executive chairman of the Board of Directors of the
Company or becomes the CEO or executive chairman of the Board of Directors of the entity that has acquired control of the
56
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Executive Compensation
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Company as a result of such transaction (the Acquiror) immediately after such transaction and remains the CEO or executive chairman of the Board of Directors of the Company or the
Acquiror for not less than twelve months following the transaction, and further provided, that in the event that the person acting as the CEO of the Company for the twelve months prior to such transaction
ceases to be CEO or executive chairman of the Board of Directors of the Company or of the Acquiror during the twelve months following the transaction, a Change of Control shall be deemed to have
occurred on the date on which such person ceases to be CEO or executive chairman of the Board of Directors of the Company or the Acquiror.
Severance Payments and
Benefits
The following tables and summary set forth the Companys payment obligations pursuant to the terms of the employment or severance
arrangements with each of our NEOs, under the circumstances described below, assuming that their employment was terminated on December 31, 2016. For a description of the value of
stock-based
awards held
by Messrs. Thiry, Rodriguez, and Hilger and Mses. Waters and Zumwalt that are subject to accelerated vesting upon a Change of Control, see Accelerated Vesting of
Stock-Based
Awards
below.
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Payment of Base
Salary (or multiple
thereof) in effect at
termination for a
specified
period
following
termination
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Bonus
1
|
|
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Continued
Health
Benefits for a
Specified
Period
Following
Termination
|
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Office and
Secretarial
Assistance
|
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Tax
Gross-
Up
|
|
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Total Value
|
|
Kent J. Thiry
|
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|
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|
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|
|
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|
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|
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|
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Death
|
|
|
|
|
|
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$1,705,153
2
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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$1,705,153
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|
Disability
|
|
|
|
|
|
|
$1,705,153
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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$1,705,153
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Involuntary Termination without Cause
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|
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$11,152,779
3
|
|
|
|
$1,705,153
4
|
|
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|
$48,498
5
|
|
|
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$332,235
6
|
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|
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$13,238,665
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Involuntary Termination without Cause
(prior to age 62)
7
|
|
|
$5,576,390
8
|
|
|
|
$1,705,153
4
|
|
|
|
$48,498
5
|
|
|
|
$332,235
6
|
|
|
|
|
|
|
|
$7,662,276
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|
Resignation for Good Reason
|
|
|
$11,152,779
3
|
|
|
|
$1,705,153
4
|
|
|
|
$48,498
5
|
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|
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$332,235
6
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|
|
|
|
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$13,238,665
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Javier J. Rodriguez
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|
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|
|
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|
|
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|
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|
|
|
|
|
|
|
|
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Involuntary Termination for Other than Material Cause
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|
|
$1,350,000
9
|
|
|
|
$1,700,000
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$3,050,000
|
|
Resignation for Good Cause
|
|
|
$1,350,000
9
|
|
|
|
$1,700,000
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$3,050,000
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Resignation Following a Good Cause Event after a Change of Control
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|
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$1,800,000
11
|
|
|
|
$1,700,000
10
|
|
|
|
|
|
|
|
|
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$3,500,000
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Kathleen A. Waters
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|
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Involuntary Termination for Other than Material Cause
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$540,000
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
$540,000
|
|
Resignation for Good Cause
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|
|
$540,000
13
|
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|
|
|
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|
|
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|
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$540,000
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LeAnne M. Zumwalt
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|
|
|
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|
|
|
|
|
|
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Involuntary Termination for Other than Material Cause
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|
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$400,000
14
|
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|
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|
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|
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|
|
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$400,000
|
|
Resignation for Good Cause
|
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|
|
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James K. Hilger
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Involuntary Termination for Other than Material Cause
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|
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$375,000
15
|
|
|
|
|
|
|
|
$23,219
16
|
|
|
|
|
|
|
|
|
|
|
|
$398,219
|
|
Resignation for Good Cause
|
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|
|
|
|
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|
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|
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1
|
Does not include any amounts payable to Mr. Thiry, Mr. Rodriguez or Ms. Zumwalt pursuant to our Deferred Compensation Plan or Voluntary Deferral Plan which amounts are included in the 2016 Nonqualified
Deferred Compensation Table. Such amounts are currently vested, but payment thereof may be accelerated in the event of death, disability or termination of employment.
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2
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Mr. Thiry (or his estate) will be entitled to receive the amount of any bonus earned and payable but not yet paid for the fiscal year prior to the year in which the termination occurs. On December 31, 2016,
Mr. Thiry had fully earned his bonus for 2016, so he would have received the full amount of his annual incentive bonus as reported in the 2016 Summary Compensation Table upon termination.
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3
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Mr. Thiry will be entitled to receive a
lump-sum
payment equal to the product of (x) three, and (y) the sum of his base salary in effect as of the date of
termination and the Prior Bonus. Prior Bonus means the average of the annual incentive bonus earned under the Incentive Award Plan (including any bonus earned and payable but not yet paid) for the last two fiscal years before the fiscal
year in which Mr. Thirys employment was terminated. The amount reported in the table above reflects the product of (x) three, and (y) the sum of Mr. Thirys base salary as of December 31, 2016, which was
$1,300,000, and the average of Mr. Thirys 2015 annual incentive bonus in the amount of $2,225,186 and Mr. Thirys 2014 annual incentive bonus in the amount of $2,610,000.
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4
|
Mr. Thiry will be entitled to receive the amount of any bonus earned and payable but not yet paid for the fiscal year
prior to the year in which the termination occurs. Mr. Thiry will also be entitled to receive a prorated annual incentive bonus (based on the actual bonus earned under the objective standards set forth under the Incentive Award Plan for the
fiscal year in which the termination occurs)
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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57
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through and including the date of termination. On December 31, 2016, Mr. Thiry had fully earned his annual incentive bonus for 2016, so he would have received the full amount of his
annual incentive bonus as reported in the 2016 Summary Compensation Table upon termination.
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5
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Mr. Thiry will continue to receive his health benefits for the
three-year
period following termination. The amount reported in the table above is the estimated actual cost of
COBRA insurance premiums for Mr. Thiry for the
three-year
period following termination.
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6
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Mr. Thiry will be entitled to the use of an office and services of an administrative assistant for three years or until he obtains other
full-time
employment. The amounts
above reflect the estimated costs to us of providing the office and secretarial services for three years.
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7
|
Mr. Thiry will be entitled to receive the payments set forth in this row in the event that, prior to the date on which Mr. Thiry attains age 62, the Board gives Mr. Thiry written notice that the term of
his employment agreement shall not be extended.
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8
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Mr. Thiry will be entitled to receive a lump sum payment equal to the product of (x) one and
one-half,
and (y) the sum of his base salary in effect as of the date
of termination and the Prior Bonus (as defined above). The amount reported in the table above reflects the product of (x) one and
one-half,
and (y) the sum of Mr. Thirys base salary as of
December 31, 2016, which was $1,300,000, and the average of Mr. Thirys 2015 annual incentive bonus in the amount of $2,225,186 and Mr. Thirys 2014 annual incentive bonus in the amount of $2,610,000.
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9
|
Mr. Rodriguez will be entitled to receive his salary for the
18-month
period following his termination without material cause or resignation for good cause. As of
December 31, 2016, Mr. Rodriguezs base salary was $900,000.
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10
|
If Mr. Rodriguez is terminated after April in a given year, he will be entitled to receive a
lump-sum
payment equal to the bonus paid in the year prior to the termination,
pro-rated
for the number of months served in the year his employment is terminated. The Company interprets this severance provision to mean the severance is based on the bonus paid for the year prior to
the year for which a bonus was most recently earned. This severance amount is reported as the bonus paid to Mr. Rodriguez for 2015, which was $1,700,000.
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11
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Mr. Rodriguez will be entitled to receive his salary for the
two-year
period following his resignation for good cause following a change in control.
|
12
|
Ms. Waters will be entitled to receive her salary for the
one-year
period following her termination. As of December 31, 2016, Ms. Waters base salary was
$540,000.
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13
|
Ms. Waters will be entitled to receive her salary for the
one-year
period following her resignation for good cause. As of December 31, 2016, Ms. Waters base
salary was $540,000.
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14
|
Ms. Zumwalt will be entitled to receive her salary for the
one-year
period following her termination, pursuant to the terms of the DaVita HealthCare Partners Severance Plan
for Directors and Above. As of December 31, 2016, Ms. Zumwalts base salary was $400,000.
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15
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Mr. Hilger will be entitled to receive payment in an amount equal to his salary for the
12-month
period following his termination. As of December 31, 2016
Mr. Hilgers base salary was $375,000. Such payment obligation will be reduced
dollar-for-dollar
by the amount of any compensation received by Mr. Hilger
from another employer during the severance payment period, and Mr. Hilger is obligated to use reasonable efforts to find employment during such period.
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16
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Mr. Hilger will continue to receive his health benefits for the
one-year
period following termination. The amount reported in the table above is the estimated actual cost of
COBRA insurance premiums for Mr. Hilger for the
one-year
period following termination.
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Other Severance Payments and Benefits
The Companys obligation to provide continued health benefits under the circumstances set forth in the tables above
is subject to earlier termination in the event that the executive accepts employment with another employer.
In the event of termination as a result of death, the
estates of the NEOs identified in the tables above will also receive the proceeds of the respective term life insurance policy for each NEO. The coverage amount for each NEO is as follows: $1,200,000 for Mr. Thiry, $800,000 for
Mr. Rodriguez, $500,000 for Ms. Waters, $400,000 for Ms. Zumwalt and $375,000 for Mr. Hilger.
Pursuant to the terms of his employment agreement, Mr. Thiry will be eligible to receive a
gross-up
payment to the extent that any payment or benefit received or to be received by him is reduced by tax obligations possibly imposed by Sections 280G or 4999 of the Internal Revenue Code.
Assuming a triggering event took place on December 31, 2016, there would not have been any tax
gross-up
amount payable. Moreover, no
gross-up
would have been
payable under his agreement in any of the prior five years if a change of control had occurred. Mr. Thiry has the only remaining legacy agreement that contains a tax
gross-up.
We have not provided for tax
gross-ups
in any employment agreements or amended employment agreements entered into after July 2008.
58
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Executive Compensation
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To receive the severance payments and benefits described above, each NEO must execute the Companys standard
severance and general release agreement. In addition, the existing employment agreements with each of our NEOs include confidentiality provisions that would apply until the confidential information becomes publicly available (other than through
breach by the NEO). These employment agreements also include
nonsolicitation provisions which prohibit each NEO from soliciting any patient or customer of the Company to patronize a competing dialysis facility or from soliciting any patient, customer,
supplier or physician to terminate their business relationship with the Company, for a period of two years following the termination of the NEOs employment.
Accelerated Vesting of
Stock-Based
Awards
For grants and awards of SSARs and/or RSUs to our NEOs, the
stock-based
award
agreements provide that in the event that either (i) in connection with a Change of Control (as defined below), the acquiring entity fails to assume, convert or replace the NEOs options or awards, or (ii) the NEOs employment is
terminated within the
twenty-four-month
period following a Change of Control by the Company (or the acquiring entity) other than for Cause (as defined below) or, if
applicable, by the NEO in accordance with the termination for Good Reason provisions of the NEOs employment agreement, if any, then, in any such case, the options or RSU awards shall automatically vest and become immediately
exercisable in their entirety, such vesting to be effective as of immediately prior to the effective date of the Change of
Control in the case of (i), and as of the date of termination of the NEOs employment in the case of (ii). For grants of PSUs, upon a Change of Control, all PSU awards immediately vest, and all PSU performance metrics are converted to the
relative TSR metric. The number of shares issuable are then determined based on the Companys relative TSR performance (as described in the Compensation Discussion and Analysis) through an ending average price period of the approximately 30
calendar days immediately preceding the Change of Control.
The table below sets forth the value of the
Companys obligations upon the automatic vesting of the
stock-based
awards of our NEOs as described above and assumes that the triggering event took place on December 31, 2016.
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Name
|
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Value of SSARs
1
|
|
|
Value of Stock
Awards
2
|
|
|
Tax
Gross-Up
|
|
Kent J. Thiry
3,4
|
|
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$2,106,000
|
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|
|
|
|
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|
|
Javier J. Rodriguez
|
|
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$736,400
|
|
|
|
|
|
|
|
N/A
|
|
Kathleen A. Waters
|
|
|
|
|
|
|
$452,032
|
|
|
|
N/A
|
|
LeAnne M. Zumwalt
|
|
|
$13,676
|
|
|
|
$422,757
|
|
|
|
N/A
|
|
James K. Hilger
|
|
|
$36,820
|
|
|
|
$317,597
|
|
|
|
N/A
|
|
1
|
Values are based on the aggregate difference between the respective base prices and the closing sale price of our common stock on December 30, 2016, which was $64.20 per share, as reported by the NYSE.
|
2
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Values are based on the aggregate number of shares underlying PSUs and RSUs multiplied by the closing sale price of our common stock on December 30, 2016, which was $64.20 per share, as reported by the NYSE. Based
on the terms of the PSU agreement, as of December 30, 2016, any accelerated PSUs would be valued at $0.
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Pursuant to the terms of his employment agreement entered into on July 25, 2008, Mr. Thiry would be entitled to receive a
gross-up
payment to the extent any
benefit received is reduced by tax obligations possibly imposed by Sections 280G or 4999 of the Internal Revenue Code. Any such tax
gross-up
amount would be calculated using a 20% excise tax rate and an
approximately 40% individual income tax rate and assumes that the base amount for purposes of Sections 280G and 4999 of the Internal Revenue Code has been allocated between the cash severance and equity components of the change of control
benefits in proportion to the amounts of each component. Assuming a triggering event took place on December 31, 2016, there would not be any tax
gross-up
amount payable.
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Since Mr. Thiry has been employed with the Company for over ten years as of December 31, 2016, 50% of any unvested equity awards vest upon any termination by Mr. Thiry without Cause or for Good Reason.
The value of such accelerated vesting is equal to 50% of the amounts set forth in the table.
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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Definitions Under
Stock-Based
Award Agreements
For purposes of the
stock-based
award agreements and the table above:
A
Change of Control
means (i) any transaction or series of transactions in which any person or group (within the meaning of
Rule 13d-5
under the Exchange Act and Sections 13(d) and 14(d) of the Exchange Act) becomes the direct or indirect beneficial owner (as defined in
Rule 13d-3
under the Exchange Act), by way of a stock issuance, tender offer, merger, consolidation, other business combination or otherwise, of greater than 50% of the total voting power (on a fully
diluted basis as if all convertible securities had been converted and all warrants and options had been exercised) entitled to vote in the election of directors of the Company (including any transaction in which the Company becomes a
wholly-owned
or
majority-owned
subsidiary of another corporation), (ii) any merger or consolidation or reorganization in which the Company does not survive,
(iii) any merger or consolidation in which the Company survives, but the shares of the Companys common stock outstanding immediately prior to such merger or consolidation represent 50% or less of the voting power of the Company after such
merger or consolidation, and (iv) any transaction in which more than 50% of the Companys assets are sold.
No transaction will constitute a Change of
Control under the
stock-based
award agreements if both (x) the person acting as the CEO of the Company for the six months prior to such transaction
becomes the CEO or executive chairman of the board of directors of the entity that has acquired control of the Company as a result of such transaction immediately after such transaction and
remains the CEO or executive chairman of the board of directors for not less than one year following the transaction and (y) a majority of the acquiring entitys board of directors immediately after such transaction consist of persons who
were directors of the Company immediately prior to such transaction.
Cause
means: (1) a material breach by the executive of those duties
and responsibilities of the executive which do not differ in any material respect from the duties and responsibilities of the executive during the
90-day
period immediately prior to a Change of Control (other
than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the executives part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of
the Company and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach; (2) willful misconduct or gross negligence which results in material harm to the Company; (3) the
conviction of the executive of, or a plea of nolo contendere by the executive to, a felony or other crime involving fraud or dishonesty; or (4) willful violation of Company policies which results in material harm to the Company.
60
The following table sets forth information concerning the compensation of our non-employee directors during 2016.
Mr. Thiry also serves as a member of the Board. As an executive officer of the Company, however, Mr. Thiry does not receive any additional compensation for his services as a member of the Board. Mr. Desroches is not included in the
table below, as he joined the Board in January 2017. Mr. Berg is included in the table, as he was a non-employee director until October 31, 2016.
2016 DIRECTOR COMPENSATION
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Name
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Fees Earned
($)
1
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Stock Awards
($)
2,3,4
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SSAR Awards
($)
5
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Total
($)
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Pamela M. Arway
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$155,000
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$94,985
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$57,974
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$
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307,959
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Charles G. Berg
6
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$249,701
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$79,256
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$57,974
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$
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386,931
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Carol Anthony (John) Davidson
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$165,000
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$94,985
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$57,974
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$
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317,959
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Barbara J. Desoer
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$103,288
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$23,775
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$83,733
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$
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210,796
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Paul J. Diaz
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$130,000
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$94,985
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$57,974
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$
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282,959
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Peter T. Grauer
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$132,500
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$138,781
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$84,678
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$
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355,959
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John M. Nehra
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$137,500
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$94,985
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$57,974
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$
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290,459
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Dr. William L. Roper
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$127,500
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$94,985
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$57,974
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$
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280,459
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Roger J. Valine
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$132,500
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$94,985
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$57,974
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$
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285,459
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Phyllis R. Yale
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$40,326
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$44,896
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$58,423
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$
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143,645
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1
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Consists of the amounts described below under Annual Retainers, Meeting Fees, and Expense Reimbursement and Per Diem Compensation. With respect to Mr. Grauer, includes the
$37,500 cash portion for service as lead independent director. With respect to Ms. Arway and Mr. Davidson, includes the $50,000 cash portion for service as chair of the Compensation Committee and Audit Committee, respectively. With respect
to Mr. Berg and Ms. Desoer, includes prorated cash portion of $41,712 and $8,288, respectively, for service as chair of the Compliance Committee, from January 1, 2016 through October 31, 2016, and November 1, 2016 through
December 31, 2016, respectively. With respect to Mr. Nehra and Dr. Roper, includes the $25,000 cash portion for service as chair of the Public Policy Committee and Clinical Performance Committee, respectively. With respect to
Mr. Berg, includes the $106,250 of additional fees in the aggregate paid to Mr. Berg as the chair of the Compliance Committee, and for his additional
Board-related
services outside of the scope of
his normal Board duties in overseeing, at the request of the Board, the Corporate Integrity Agreement and the subpoenas received by DMG.
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2
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With respect to Mr. Grauer, includes the $43,750 equity portion for the direct stock issuances (DSIs) for service as lead independent director.
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3
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The amounts shown in this column reflect the aggregate grant date fair value of all DSI awards granted to our directors during 2016 as estimated by the Company in accordance with FASB ASC Topic 718. See Note 19 to the
Consolidated Financial Statements included in our Annual Report on Form
10-K
for the year ended December 31, 2016 for a discussion of the relevant assumptions used in calculating grant date fair value
pursuant to FASB ASC Topic 718.
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4
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The amounts shown in this column reflect the aggregate grant date fair value of all SSAR awards granted to our directors during 2016 as estimated by the Company in accordance with FASB ASC Topic 718. With respect to
Mr. Grauer, includes the $43,750 equity portion denominated in SSARs for service as lead independent director. See Note 19 to the Consolidated Financial Statements included in our Annual Report on Form
10-K
for the year ended December 31, 2016 for a discussion of the relevant assumptions used in calculating grant date fair value pursuant to FASB ASC Topic 718.
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As of December 31, 2016, each director had the following number of SSARs outstanding: Ms. Arway, 39,091; Mr. Berg, 63,091; Mr. Davidson, 51,091; Ms. Desoer, 8,831; Mr. Diaz, 15,091;
Mr. Grauer, 94,042; Mr. Nehra, 87,091; Dr. Roper, 87,091; Mr. Valine, 75,091; and Ms. Yale, 4,579.
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Mr. Berg joined the Company as the executive chair of the Companys DMG division, and ceased receiving
non-employee
director compensation, effective November 1, 2016. Fees Earned and Stock Awards as shown for Mr. Berg, were prorated up to October 31, 2016. From November 1, 2016 through December 31, 2016, Mr. Berg received $724,999 in
compensation as executive chair of DMG. This includes $224,999 in salary and a $500,000 signing bonus.
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Our
Non-Employee
Director Compensation Policy (the Director Compensation
Policy) sets forth the terms of our director compensation. There is no
discretionary
decision-making
involved in director compensation. The Compensation Committee and the Board periodically review director
Continues on next page
Compensation of Directors
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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compensation, except with respect to occasional meetings or activities outside the scope of normal Board duties that are compensated on a
per diem
basis (see description below under
Per Diem Compensation). The following describes the compensation paid to our
non-employee
directors for service as a director during 2016 under the Director Compensation Policy as set forth in the
table above. Directors who are our employees or officers do not receive compensation for service on the Board or any committee of the Board.
Stock-Based
Compensation
Annual Grant.
Under the Director Compensation Policy, each of our
non-employee
directors is entitled to receive SSARs, granted on, and priced as of close of the market on, the date of our annual stockholder meeting. The number of SSARs to be granted was determined by dividing
$95,000 by 25% of the closing market price of our common stock on the grant date. Effective March 30, 2017, the number of SSARs to be granted shall be determined by dividing $95,000 by 20% of the closing market price of our common stock on the
grant date. The SSARs vest in full on the one year anniversary of the date of grant, with acceleration of vesting upon a Change of Control (as defined above under Definitions Under
Stock-Based
Award
Agreements), and expiring five years after the date of grant. Each of our
non-employee
directors is also entitled to receive direct stock issuances (DSIs) to be granted quarterly on the last
day of each fiscal quarter. The number of DSIs to be granted quarterly shall be determined by dividing $23,750 by the closing market price of our common stock on the last trading day of each fiscal quarter. The DSIs are 100% vested upon issuance.
The annual grant of SSARs and DSIs shall be prorated, as applicable, including for new directors, based on the days of service on the Board within a fiscal year or fiscal quarter, respectively. SSARs granted on a prorated basis shall be granted and
priced as of the close of market on the first day of service on the Board, which date shall be determined by the Board upon such individuals appointment as a director.
Additional Annual Grant to Lead Independent Director.
The lead independent director
is also entitled to receive additional SSARs, granted on,
and priced as of the close of the market on, the date of our annual stockholder meeting. The number of SSARs to be granted was determined by dividing $43,750 by 25% of the closing market price of
our common stock on the grant date. Effective March 30, 2017, the number of SSARs to be granted shall be determined by dividing $43,750 by 20% of the closing market price of our common stock on the grant date. The SSARs vest in full on the one year
anniversary of the date of grant, with acceleration of vesting upon a Change of Control (as defined above under Definitions Under
Stock-Based
Award Agreements), and expiring five years after the
date of grant. Vesting of these SSARs continues so long as the
non-employee
director continues to serve on the Board even if he or she is no longer lead independent director. The lead independent director is
also entitled to receive DSIs to be granted quarterly on the last day of each fiscal quarter. The number of DSIs to be granted quarterly shall be determined by dividing $10,938 by the closing market price of our common stock on the last trading day
of each fiscal quarter. The DSIs are 100% vested upon issuance. The annual grant of SSARs and DSIs shall be prorated, as applicable, based on the days of service as lead independent director within a fiscal year or fiscal quarter, as applicable.
SSARs granted on a prorated basis shall be granted and priced as of the close of market on the first day of service as lead independent director on the Board.
If
the lead independent director also serves as a chair of any committee of the Board, the lead independent director will also be entitled to receive the additional retainer for serving as the chair of any such committee, in addition to the retainers
and equity grants he or she is entitled to receive as the lead independent director.
Annual Retainers
Annual Retainer.
Pursuant to the Director Compensation Policy, each of our
non-employee
directors is entitled to receive an annual retainer of $80,000 in cash per year, paid quarterly in arrears.
Lead Independent Director Retainer.
Under the Director Compensation Policy, the lead independent director receives an additional retainer
of $37,500 in cash per year, paid quarterly in arrears.
62
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Compensation of Directors
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Committee Chairs Retainer.
Under the Director Compensation Policy, the chairs of the Audit, Compensation and Compliance Committees receive an additional retainer of $50,000 in cash per year, paid quarterly in arrears, and the chairs of the Public
Policy and the Clinical Performance Committees receive an additional retainer of $25,000 in cash per year, paid quarterly in arrears.
Proration of Quarterly Retainer Upon Appointment.
The quarterly retainer due to a director elected during a quarter is
prorated based on the date of such directors appointment.
Proration of Quarterly
Retainer Upon Termination.
The quarterly retainer due to a director terminating service during a quarter is prorated based on the date of such directors termination.
Meeting Fees
Board Meetings.
Under the Director Compensation Policy, our
non-employee
directors are not
entitled to receive any additional compensation for regularly scheduled Board meetings.
Special Board
Meetings.
Non-employee
directors are entitled to receive $2,500 in cash for attendance at a special meeting regardless of the duration of such
meeting, unless the meeting is held telephonically, in which case the meeting must last at least approximately one hour.
Committee Meetings.
For committee meetings,
non-employee
directors are entitled to receive
additional compensation of $2,500 in cash for attendance regardless of the duration of such
meetings, unless it is a special committee meeting held telephonically, in which case the meeting must last at least approximately one hour. In the case of Audit Committee meetings related to
quarterly earnings releases, additional compensation of $2,500 in cash for each such meeting is paid regardless of the duration of such meetings.
Expense Reimbursement and Per Diem Compensation
Expense
Reimbursement.
Under the Director Compensation Policy, we reimburse our directors for their reasonable
out-of-pocket
expenses incurred in connection with their travel to and attendance at meetings of the Board or any committee thereof and other
Board-related
business.
Per Diem
Compensation.
Additionally, under the Director Compensation Policy, we compensate our
non-employee
directors on a per diem, hourly or other
basis at a rate that is reasonable and fair to the Company as determined at the discretion of the lead independent director, the Board or the Compensation Committee, as applicable, for significant time spent outside of Board or committee meetings or
for meetings or activities outside the scope of normal board duties, including director training, meeting with Company management or external auditors, interviewing director candidates or other activities deemed necessary by the chairman of the
Board, the lead independent director or the entire Board. If time expended is less than the full unit of time for which a payment rate has been set, the payment shall be made on a pro rata basis.
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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63
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No member of the Compensation Committee has served as one of our officers or employees at any time. During 2016, none
of our executive officers served as a member of the compensation committee or board of directors of any other company whose executive officer(s) served as a member of our Compensation Committee or Board.
Compensation Committee Interlocks and Insider
Participation
64
We or one of our subsidiaries may occasionally enter into transactions with certain related persons. Related
persons include our executive officers, directors, nominees for directors, more than 5% beneficial owners of our common stock and immediate family members of these persons. We refer to transactions involving amounts in excess of $120,000 and in
which the related person has a direct or indirect material interest as related person transactions. Each related person transaction must be approved or ratified by our Audit Committee in accordance with the Companys written Related
Person Transactions Policy or, if our Audit Committee determines that the approval or ratification of such related person transaction should be considered by all disinterested members of the Board, by the vote of a majority of such disinterested
members.
The Audit Committee considers all relevant factors when determining whether to approve or ratify a related person transaction including, without
limitation, the following:
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the size of the transaction and the amount payable to a related person;
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the nature of the interest of the related person in the transaction;
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whether the transaction may involve a conflict of interest; and
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whether the transaction involves the provision of goods or services to the Company that are available from unaffiliated third parties and, if so, whether the transaction is on terms and made under circumstances that are
at least as favorable to the Company as would be available in comparable transactions with or involving unaffiliated third parties.
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The
Companys Related Person Transactions Policy is available under the Corporate Governance section of our website, located at
http://www.davita.com/about/corporate
-governance.
There were no related person transactions from January 1, 2016 through the date of this Proxy Statement required to be disclosed pursuant to Item 404(a) of
Regulation
S-K.
Certain Relationships and Related Transactions
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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65
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The Audit Committee of the Board of Directors is responsible for providing independent, objective oversight of the
Companys accounting functions and internal control over financial reporting. The audit committee is composed of four directors, each of whom is independent as defined by New York Stock Exchange listing standards. The audit committee operates
under a written charter approved by the board of directors.
The audit committee is directly responsible for the appointment and compensation of the Companys
independent registered public accounting firm, KPMG, as well as monitoring the independence, qualifications and performance of KPMG and the Companys internal audit function. In addition, the audit committee has considered whether the provision
of
non-audit
services to the Company by KPMG is compatible with maintaining KPMGs independence.
Management is
responsible for internal control over financial reporting and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of the Companys consolidated financial
statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and an audit of the effectiveness of internal controls over financial reporting. The audit committees responsibility is to monitor and
oversee these processes.
The audit committee has met and held discussions with the Companys internal auditors and KPMG, with and without management present,
to discuss the scope of their audit plans, results of their examinations, their evaluations of the Companys internal controls, and the overall quality of the Companys financial reporting.
The audit committee engaged the independent registered public accounting firm to conduct the independent audit. The audit
committee reviewed and discussed with management the December 31, 2016 audited consolidated financial statements. The audit committee also discussed with the independent registered public accounting firm the matters required to be reviewed
Auditing Standard 1301: Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board. In addition, the audit committee received the written disclosures and the letter from the independent registered public
accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firms communications with the audit committee concerning independence and has discussed
with the independent registered public accounting firm its independence.
Based upon the audit committees reviews and discussions with management and the
independent registered public accounting firm, referred to above, the audit committee recommended to the board of directors that the audited consolidated financial statements be included in the Companys Annual Report on Form
10-K
for the year ended December 31, 2016 for filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Carol Anthony (John) Davidson (Chairman)
Pamela M.
Arway
Pascal Desroches
Roger J. Valine
Audit Committee Report
66
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Audit Committee Report
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Stockholder Proposals for 2018 Annual Meeting
If you wish to present a proposal for action at the 2018 annual meeting of stockholders and wish to have it included in
the proxy statement and form of proxy that management will prepare, you must notify us no later than January 3, 2018 in the form required under the rules and regulations promulgated by the SEC. Otherwise, your proposal will not be included in
managements proxy materials.
Our bylaws include provisions permitting, subject to certain terms and conditions, stockholders owning at least 3% of the
outstanding shares of the Companys common stock for at least three consecutive years to use managements proxy materials to nominate a number of director candidates not to exceed the greater of two or 20% of the number of directors then
in office, subject to reduction in certain circumstances. If you wish to nominate a director for election at the 2018 annual meeting of stockholders and wish to have the nominee included in the proxy statement and form of proxy that management will
prepare, you must notify us no later than January 3, 2018, and no earlier than December 4, 2017. However, if we hold our 2018 annual meeting of stockholders more than 30 days before or more than 70 days after the
one-year
anniversary of the date that the Company first mailed this Proxy Statement, you must notify us: (i) not earlier than the close of business on the 150th day prior to the 2018 annual meeting and
(ii) not later than the close of business on the 120th day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of the 2018 annual meeting was first made. Otherwise, your nominee will not be included in managements proxy materials.
If you wish to present a proposal for action at the 2018 annual meeting of stockholders, even though it will not be included in managements proxy materials, or if
you wish to nominate a director for election at the 2018 annual meeting of stockholders outside of the proxy access provisions of our bylaws, our bylaws require that you must notify us no later than March 18, 2018, and no earlier than
February 16, 2018. However, if we hold our 2018 annual meeting of stockholders more than 30 days before or more than 70 days after the
one-year
anniversary of our Annual Meeting, you must notify
us: (i) not earlier than the close of business on the 120th day prior to the 2018 annual meeting and (ii) not later than the close of business on the 90th day prior to such annual meeting or the 10th day following the day on which public
announcement of the date of the 2018 annual meeting was first made.
We advise you to review our bylaws, which contain these and other requirements with respect to
advance notice of stockholder proposals and director nominations, including certain information that must be included concerning the stockholder and each proposal or nominee. Our bylaws are available under the Corporate Governance section of our
website, located at
http://www.davita.com/about/corporate
-governance
.
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DaVita Inc. Notice of 2017 Annual Meeting and Proxy Statement
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67
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The Board does not know of any other matters to be presented at the Annual Meeting but, if other matters do properly come
before the meeting, it is intended that the persons named as proxies in the proxy card will vote on them in accordance with their best judgment.
A copy of our 2016
Annual Report to Stockholders accompanies this Proxy Statement. The 2016 Annual Report to Stockholders includes our audited financial statements for the year ended December 31, 2016. Our Annual Report on
Form 10-K
includes these financial statements, as well as other supplementary financial information and certain schedules. The Annual Report on
Form 10-K
is
not part of our proxy soliciting material.
Copies of the Annual Report on Form
10
-K,
without
exhibits, can be obtained without charge by contacting Investor
Relations at the following address: Attn: Investor Relations, DaVita Inc., 2000 16th Street, Denver, Colorado 80202,
(888) 484-7505
or through our website, located at
http://www.davita.com.
By order of the Board of Directors,
Samantha A. Caldwell
Corporate Secretary
DaVita Inc.
May 3, 2017
Other Matters
68
DAVITA
INC. 2000 16TH STREET DENVER, CO 80202
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your
voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on Thursday, June 15, 2017. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an
electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and
annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials
electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on Thursday, June 15, 2017. Have your proxy card in hand when you call and then follow
the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE
OR BLACK INK AS FOLLOWS: E28147-P92710-Z69980 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY DAVITA INC. The Board of Directors recommends you vote FOR all nominees in
Proposal 1: 1. Election of Directors Nominees: For Against Abstain 1a. Pamela M. Arway 1b. Charles G. Berg 1c. Carol Anthony Davidson 1d. Barbara J. Desoer 1e. Pascal Desroches 1f. Paul J. Diaz 1g. Peter T. Grauer 1h. John M. Nehra 1i. William L.
Roper For address changes and/or comments, please check this box and write them on the back where indicated. Please indicate if you plan to attend this meeting. Yes No Please sign exactly as your name(s) appear(s) hereon. When signing as attorney,
executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
1j. Kent J. Thiry 1k. Phyllis R. Yale The Board of Directors recommends you vote FOR Proposals 2 and 3: 2. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2017. 3. To hold an advisory vote
to approve executive compensation. For Against Abstain The Board of Directors recommends you vote 1 YEAR on Proposal 4: 1 Year 2 Years 3 Years Abstain 4. To hold an advisory vote on the frequency of future advisory votes on executive compensation.
Note: Such other business as may properly come before the meeting or any adjournment thereof. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. E28148-P92710-Z69980 DAVITA INC. PROXY This Proxy is solicited on behalf of the Board
of Directors of DAVITA INC. The undersigned hereby appoints Kent J. Thiry, Kathleen A. Waters and Samantha A. Caldwell, or any of them, the true and lawful attorneys and proxies of the undersigned, with full power of substitution to vote all shares
of the Common Stock, $0.001 par value per share, of DAVITA INC., which the undersigned is entitled to vote at the Annual Meeting of the Stockholders of DAVITA INC., to be held at 4:00 p.m., Mountain Daylight Time, on June 16, 2017 at 2000 16th
Street, Denver, Colorado 80202, and any and all adjournments thereof, on the proposals set forth on the reverse side of this Proxy. Unless a contrary direction is indicated, this Proxy will be voted FOR all nominees listed in Proposal 1, FOR
Proposals 2 and 3, and FOR 1 YEAR on Proposal 4. If specific instructions are indicated, this Proxy will be voted in accordance therewith. In their discretion, Kent J. Thiry, Kathleen A. Waters and Samantha A. Caldwell, or any of them, are
authorized to vote upon such other matters as may properly come before the meeting. All Proxies to vote at said meeting or any adjournment heretofore given by the undersigned are hereby revoked. Receipt of the Notice of Annual Meeting and Proxy
Statement dated May 3, 2017 is hereby acknowledged. Address Changes/Comments: (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side
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