DEF 14A 1 d924771ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant                                      Filed by a Party other than the Registrant    

Check the appropriate box:

 

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

Brookdale Senior Living Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

 

No fee required.

 

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1)

Title of each class of securities to which transaction applies:

  (2)

Aggregate number of securities to which transaction applies:

  (3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

  (4)

Proposed maximum aggregate value of transaction:

  (5)

Total fee paid:

 

 

Fee paid previously with preliminary materials.

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

  (1)

Amount Previously Paid:

  (2)

Form, Schedule or Registration Statement No.:

  (3)

Filing Party:

  (4)

Date Filed:

 

 

 


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LOGO

 

 

2020

Notice of Annual Meeting

of Stockholders & Proxy Statement


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LOGO

May 18, 2020

Dear Fellow Stockholders:

On behalf of the Board of Directors, I am pleased to invite all of our stockholders to the 2020 Annual Meeting of Stockholders of Brookdale Senior Living Inc. (the “2020 Annual Meeting” or the “Annual Meeting”). The meeting will be held on Tuesday, June 30, 2020 at 10:00 a.m., Central time, at our principal executive offices located at 111 Westwood Place, Brentwood, Tennessee*. A notice of the 2020 Annual Meeting and a proxy statement containing information about the matters to be acted upon are included with this letter.

Since last year’s meeting, the Board has continued to evaluate and enhance its composition and to evolve its corporate governance practices. We are pleased to nominate Dr. Jordan R. Asher, who we recently appointed as our ninth director, for election to the Board. Already the Board and management have drawn on Dr. Asher’s deep healthcare experience, as Brookdale navigates through the COVID-19 pandemic and makes ready plans for emerging as a stronger company. The Board also determined to accelerate this year’s Annual Meeting to a date more typical of calendar year-end companies, which aligns with feedback we received from stockholders. For the first time, at this year’s Annual Meeting directors will be elected using the majority voting standard contained in our Bylaws. And, we continue the phased declassification of the Board, with six of nine directors up for election at this year’s meeting, and full declassification to be achieved at next year’s annual meeting.

Your vote is important to us. Whether or not you expect to attend the Annual Meeting, it is important that your shares be represented and voted at the Annual Meeting. Please promptly vote your shares by submitting your proxy by telephone or Internet or by completing, signing, dating, and returning your proxy card or voting instruction form.

We thank you for your continued investment in Brookdale.

Very truly yours,

 

LOGO

Guy P. Sansone

Chairman of the Board of Directors

 

*

As part of our precautions regarding the COVID-19 pandemic, the Board of Directors is evaluating the possibility of holding the Annual Meeting in a virtual meeting format on the same time and date. In the event that we elect to hold the Annual Meeting in a virtual meeting format, the Company will announce such decision on the Company’s internet website at www.brookdale.com/investor and issue a press release notifying stockholders of such decision.


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Brookdale Senior Living Inc.

Notice of 2020 Annual Meeting of Stockholders

May 18, 2020

The 2020 Annual Meeting of Stockholders (including any adjournments or postponements thereof, the “Annual Meeting” or the “2020 Annual Meeting”) of Brookdale Senior Living Inc. (“Brookdale” or the “Company”) will be held on Tuesday, June 30, 2020 at 10:00 a.m., Central time, at the Company’s principal executive offices located at 111 Westwood Place, Brentwood, Tennessee* for the purpose of voting on the following proposals:

 

1.

To elect three Class I directors and three Class II directors nominated by the Company’s Board of Directors (the “Board of Directors” or the “Board”), each to serve for a one-year term expiring at the 2021 annual meeting of stockholders (the “2021 Annual Meeting”);

 

2.

To approve, on an advisory basis, the Company’s named executive officer compensation;

 

3.

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2020; and

 

4.

To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

The close of business on May 11, 2020 has been fixed as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting. We are making this Notice of 2020 Annual Meeting and proxy statement first available on or about May 18, 2020.

Your vote is important. Unless you attend the Annual Meeting and vote in person, please vote as soon as possible by one of the methods shown below. Be sure to have your proxy card, voting instruction form, or Notice of Internet Availability of Proxy Materials in hand and follow the below instructions:

By Phone - You can vote your shares by calling (800) 690-6903 toll free through 11:59 p.m., Eastern time, on June 29, 2020

By Internet - You can vote your shares online at www.proxyvote.com through 11:59 p.m., Eastern time, on June 29, 2020

By Mail - You can complete, sign, date, and return your proxy card or voting instruction form in the postage-paid envelope provided

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 30, 2020: This proxy statement and our 2019 Annual Report to Stockholders (the “2019 Annual Report”) are available at www.proxyvote.com.

By Order of the Board of Directors

 

 

LOGO

Chad C. White

Executive Vice President, General Counsel and Secretary

 

 

 

*

As part of our precautions regarding the COVID-19 pandemic, the Board of Directors is evaluating the possibility of holding the Annual Meeting in a virtual meeting format on the same time and date. In the event that we elect to hold the Annual Meeting in a virtual meeting format, the Company will announce such decision on the Company’s internet website at www.brookdale.com/investor and issue a press release notifying stockholders of such decision.


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Brookdale Senior Living Inc.

2020 Proxy Statement

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Proxy Statement Summary      iii  
General Information about the Annual Meeting      1  
Proposal 1: Election of Directors      5  

Board Composition

     5  

Identifying Director Candidates

     5  

Evaluating Director Candidates

     6  

Board Diversity

     6  

Majority Voting for Director Elections

     7  

Class I and II Director Nominees

     8  

Continuing Class III Directors

     11  
Corporate Governance      13  

Corporate Governance Guidelines and Code of Business Conduct and Ethics

     13  

Director Independence

     13  

Meetings of the Board and Committees

     13  

Board Leadership Structure

     14  

Risk Oversight

     14  

Communications from Stockholders

     14  

Committees of the Board

     15  
Director Compensation      17  

Non-Employee Director Compensation Program

     17  

Compensation of Non-Executive Chairman of the Board

     18  

Director Stock Ownership Guidelines

     18  

Director Compensation for 2019

     19  
Executive Officers      20  
Executive Compensation      22  

Compensation Discussion and Analysis

     22  

Compensation Committee Report

     41  

Summary Compensation Table for 2019

     42  

Grants of Plan-Based Awards

     43  

Outstanding Equity Awards at Fiscal Year-End

     45  

Stock Vested for 2019

     46  

Pension Benefits

     46  

Nonqualified Deferred Compensation

     46  

Potential Payments Upon Termination or Change in Control

     47  

Compensation Committee Interlocks and Insider Participation

     55  

Pay Ratio

     55  
Proposal 2: Advisory Approval of Named Executive Officer Compensation      56  
Proposal 3: Ratification of Appointment of Independent Registered Public Accounting Firm for 2020      57  

Audit Committee Report

     59  

 

 

  

 

2020 PROXY STATEMENT

 

 

 

 

 

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Certain Relationships and Related Transactions      60  
Stock Ownership Information      61  
Additional Information      63  

Stockholder Proposals for 2021 Annual Meeting

     63  

Solicitation Costs

     63  

Accessing our SEC Filings

     64  
Appendix A: Reconciliations of Non-GAAP Financial Measures      A-1  

 

 

 

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Proxy Statement Summary  

 

 

Information about the Annual Meeting

Whether or not you expect to attend the Annual Meeting, we strongly encourage you to vote as soon as possible to ensure your shares are represented and voted at the meeting. See page 4 for more details about attending the Annual Meeting.

 

 

Date and Time

  

 

Location

  

 

Record Date

Tuesday, June 30, 2020
10:00 a.m. Central Time
   Brookdale Senior Living Inc.
111 Westwood Place,
Brentwood, Tennessee*
   May 11, 2020

 

*

As part of our precautions regarding the COVID-19 pandemic, the Board of Directors is evaluating the possibility of holding the Annual Meeting in a virtual meeting format on the same time and date. In the event that we elect to hold the Annual Meeting in a virtual meeting format, the Company will announce such decision on the Company’s internet website at www.brookdale.com/investor and issue a press release notifying stockholders of such decision.

2020 Proposals

The Board recommends that you vote as follows. If you properly submit your proxy and do not specify how your shares are to be voted, your shares will be voted in accordance with the recommendations of the Board.

 

Proposals

  

 

Unanimous
Recommendation of the
Board

  

Page Reference 

(for more detail) 

 

1. Election of three Class I and three Class II directors nominated by the Company’s Board of Directors, each for a one-year term expiring at the 2021 Annual Meeting

  

 

 FOR
each nominee

 

  

 

5

 

2.  Advisory approval of our named executive officer compensation

 

  

 

 

 FOR

  

 

 

56

 

3.  Ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm for 2020

 

  

 

 FOR

  

 

57

How to Vote

You can submit your proxy vote by any of the following methods:

 

 

LOGO

You can vote your shares
online at
www.proxyvote.com
through 11:59 p.m. Eastern
time on June 29, 2020

 

 

LOGO

You can vote your shares
by calling
(800) 690-6903 toll free
through 11:59 p.m. Eastern
time on June 29, 2020

 

 

LOGO

You can complete, sign,
date, and return your
proxy card or voting
instruction form in the
postage-paid envelope
provided

 

 

 

LOGO

You can vote your shares
by attending the 2020
Annual Meeting and
voting in person



 

 

  

 

2020 PROXY STATEMENT

 

 

 

 

 

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Director Nominees

 

Director Nominees

The Board has unanimously nominated Lucinda M. Baier, Frank M. Bumstead, and Lee S. Wielansky for election as Class I directors, and Jordan R. Asher, Victoria L. Freed, and Guy P. Sansone for election as Class II directors. Each of the nominees is currently a director. For more information regarding the Board’s nominees, and the Board’s and the Nominating and Corporate Governance Committee’s process for identifying and selecting these nominees, see “Proposal 1: Election of Directors” beginning on page 5 of this proxy statement.

The Board is comprised of nine directors who are divided into three classes. We are in the process of declassifying the Board using a phased approach. The Class I and Class II directors elected at the 2020 Annual Meeting will be elected for a one-year term expiring at the 2021 Annual Meeting. The terms of office of our incumbent Class III directors will also expire at the 2021 Annual Meeting. As a result, at the 2021 Annual Meeting and at each annual meeting thereafter, the Board will be declassified and all directors will be elected for a one-year term expiring at the subsequent annual meeting of stockholders.

Board Composition

During the past two years, the Nominating and Corporate Governance Committee has approached refreshment of the Board with a goal to ensure that the Board’s composition is appropriately tailored to support our business strategy and represent stockholder interests through the exercise of sound judgment, with a focus on identifying candidates with significant healthcare, finance, operational, and sales and marketing experience. The following information reflects the Board’s current composition.

LOGO



 

 

 

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Board Composition

 

BOARD EXPERIENCE AND CORE COMPETENCIES

 

 

Experience and Core
Competencies
  Asher   Baier   Bromley   Bumstead   Freed   Johnson-
Mills
  Sansone   Warren   Wielansky

Current or Former CEO

                       

Current or Former CFO

                           

Senior Living Operations

                               

Healthcare (Operations & Strategy)

                           

Healthcare (Clinical)

                                 

Hospitality

                                 

Sales & Marketing

                                 

Real Estate

                           

Finance

                       

Mergers & Acquisitions

                       

Risk Management

                       

Other Public Board Service

                     

 

Commitment to Governance Practices

 

Independent Non-Executive Chairman of the Board with robust authority, including to approve Board agendas and call and preside over meetings of the independent directors

 

Undergoing phased declassification of the Board approved in 2018 and accelerated annual elections of Class II directors approved in 2019

 

Bylaws contain majority voting standard for uncontested director elections, approved in 2019

 

Bylaws contain proxy access procedures approved in 2019, which became effective for 2020 Annual Meeting

 

Corporate Governance Guidelines limit service on other public company boards (no more than three for independent directors and no more than one for the CEO)

 

Annual evaluations of the Board and its committees

 

Meaningful director stock ownership guidelines (increased in 2020 to 5x annual retainer)

 

Insider trading policy prohibits directors from pledging or hedging Brookdale stock

 

No stockholder rights plan (poison pill) or similar plan

 



 

 

  

 

2020 PROXY STATEMENT

 

 

 

 

 

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General Information about the Annual Meeting  

 

 

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board of Directors” or the “Board”) of Brookdale Senior Living Inc. (“Brookdale” or the “Company”) to be voted at the 2020 Annual Meeting of Stockholders to be held on Tuesday, June 30, 2020, and at any adjournment or postponement of the meeting (the “Annual Meeting” or the “2020 Annual Meeting”).

Distribution of Proxy Materials

On or about May 18, 2020, we expect to start mailing to holders of our common stock (other than those who previously requested electronic or paper delivery of proxy materials) a Notice of Internet Availability of Proxy Materials (“Notice”), which explains how to access the proxy materials online and to make the materials available on www.proxyvote.com. If you receive a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice tells you how to access and review the proxy materials online. The Notice also tells you how to submit your proxy via the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, follow the instructions in the Notice explaining how to request printed materials on a one-time or ongoing basis. Our proxy materials include the notice of the Annual Meeting, this proxy statement, and our 2019 Annual Report. Copies of these documents also are available on our website at www.brookdale.com/proxy. Except to the extent specifically referenced herein, information contained or referenced on our website is not incorporated by reference into, and does not form a part of, this proxy statement.

Stockholders Entitled to Vote

Only stockholders of record at the close of business on May 11, 2020, the record date for the Annual Meeting, are entitled to receive notice of, attend, and vote at the Annual Meeting. As of the record date, there were outstanding and entitled to vote 183,164,490 shares of our common stock, excluding restricted shares and restricted stock units for which the holders have no voting rights. Each share of our common stock entitles the holder to one vote. A list of stockholders entitled to vote at the Annual Meeting will be available for examination at our principal executive offices for the ten days before the Annual Meeting between 9:00 a.m. and 5:00 p.m., Central time, and at the Annual Meeting for any purpose germane to the meeting.

Voting Choices and Recommendations of the Board

With respect to Proposal 1 (Election of Directors) you will have the choice to vote “FOR,” “AGAINST” or “ABSTAIN” with respect to each nominee. With respect to all other proposals you will have the choice to vote “FOR,” “AGAINST” or “ABSTAIN.” The Board recommends a vote:

 

1.

“FOR” the election of each of the three Class I directors and three Class II directors nominated by the Board, each for a one-year term expiring at the 2021 annual meeting of stockholders (the “2021 Annual Meeting”);

 

2.

“FOR” advisory approval of our named executive officer compensation; and

 

3.

“FOR” ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm for 2020.

 

 

  

 

2020 PROXY STATEMENT

 

 

 

 

 

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General Information about the Annual Meeting

 

Stockholders of Record and Beneficial Holders

If your shares of common stock are owned directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered a registered holder of those shares. If you are the beneficial owner of shares of common stock held by a broker or other custodian, you hold those shares in “street name” and are not a registered stockholder. If you hold your shares in “street name,” your broker or other custodian will vote your shares as you direct. However, if you do not give specific voting instructions to your broker, generally your broker will have discretion to vote your shares on routine matters but will not have discretion to vote your shares on non-routine matters. When the broker exercises its discretion to vote on routine matters in the absence of voting instructions from you, a broker non-vote occurs with respect to the non-routine matters since the broker will not have discretion to vote on such non-routine matters. The election of the three Class I directors and three Class II directors (Proposal 1) and the advisory approval of our named executive officer compensation (Proposal 2) will be considered non-routine matters. The ratification of the appointment of Ernst & Young LLP (Proposal 3) will be considered a routine matter. Therefore, if you hold your shares in “street name” and do not submit voting instructions to your broker or other custodian, they will only be authorized to vote your shares on Proposal 3.

Quorum Requirement

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the shares of our common stock issued and outstanding on the record date will constitute a quorum for the transaction of business. We will count abstentions and broker non-votes for the purpose of determining the presence of a quorum. If a quorum is not present, the Annual Meeting may be adjourned by the chairman of the meeting or by the vote of a majority of the shares represented at the Annual Meeting until a quorum has been obtained.

Voting Instructions and Information

 

 

 

 Voting Instructions

You may vote by proxy or in person at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, you are encouraged to vote as soon as possible to ensure that your shares are represented and voted at the Annual Meeting. If you hold your shares as a record holder, you may vote your shares by proxy via the phone or the Internet by following the instructions provided on your Notice or proxy card or, if you received a printed set of proxy materials by mail, by completing, signing, dating, and returning your proxy card in the postage-paid envelope provided. If you hold your shares through your broker or other custodian, please follow the instructions you received from the holder of record to vote your shares.

 

 

 

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Voting Instructions and Information

 

 

 

 

 Revoking or Changing Your Vote

Stockholders of record may revoke your proxy or change your vote at any time prior to its exercise at the Annual Meeting by:

 

 

Delivering a written notice of revocation to our Secretary at 111 Westwood Place, Suite 400, Brentwood, Tennessee 37027;

 

 

Submitting another properly completed proxy card with a later date;

 

 

Submitting another timely proxy via the phone or the Internet or by mailing a new proxy; or

 

 

Attending the Annual Meeting and voting in person.

Stockholders holding shares beneficially in street name should contact your broker or other custodian for instructions on how to revoke or change your voting instructions.

For all methods of voting, the last vote properly cast will supersede all previous votes. Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically make that request or vote in person at the Annual Meeting.

 

 

 

 Voting of Proxies

If you properly submit your signed proxy card or voting instruction form, or complete your proxy by telephone or the Internet, your shares will be voted as you direct or will be voted as specified in the above Board recommendations if you do not direct a particular vote. With respect to director elections, should any nominee be unable to serve, the persons designated as proxies reserve full discretion to vote for another person. The Board currently has no reason to believe that any nominee will be unable to serve if elected.

The Board does not intend to bring any other business before the Annual Meeting, and it does not know of any other matters that may come before the Annual Meeting. However, if any other matters are properly presented at the meeting, proxies will be voted in accordance with the judgment of the persons designated as proxies.

Vote Required to Approve Proposals

The following table summarizes the votes required for passage of each proposal and the effect of abstentions and broker non-votes.

 

Proposal

   Vote required for approval    Effect of
Abstentions
  

Effect of 
Broker Non- 

Votes 

1.  Election of directors

  

Majority of votes cast with respect to each director

  

No effect

  

No effect

2.  Advisory vote to approve named executive officer compensation (say-on-pay)

  

Majority of shares present and entitled to vote on the matter

  

Against

  

No effect

3.  Ratification of appointment of independent registered public accounting firm for 2020

  

Majority of shares present and entitled to vote on the matter

  

Against

  

N/A

 

 

  

 

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General Information about the Annual Meeting

 

Attending the Annual Meeting

Only stockholders as of the record date, or their duly appointed proxies, and invited guests of the Company may attend the Annual Meeting. Admission to the Annual Meeting will begin at approximately 9:30 a.m., Central time. In order to be admitted to the Annual Meeting, you should:

 

 

bring current, government-issued photo identification, such as a driver’s license, and proof of ownership of common stock on the record date. If you are a holder of record, your identity will be checked against a list of registered holders at the Annual Meeting. If you hold your shares in street name, a recent brokerage statement or a letter from your bank, broker, trustee, or other nominee are examples of proof of ownership. If you want to vote your shares held in street name in person, you must obtain a legal proxy in your name from the broker, bank, trustee, or other nominee that holds your shares of common stock;

 

 

leave your camera at home because cameras, transmission, broadcasting, and other recording devices, including smartphones, will not be permitted in the meeting room;

 

 

be prepared to comply with security requirements, which may include, among other security measures, security guards searching all bags and attendees passing through a metal detector; and

 

 

arrive shortly after 9:30 a.m., Central time, to ensure that you are seated by the start of the Annual Meeting at 10:00 a.m., Central time.

Any holder of a proxy from a stockholder must present a properly executed legal proxy and a copy of the proof of ownership. If you do not provide photo identification and comply with the other procedures outlined above for attending the Annual Meeting in person, you will not be admitted to the Annual Meeting.

 

 

 

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Proposal 1: Election of Directors  

 

 

The Board is comprised of nine directors, divided into three classes. We are in the process of declassifying the Board using a phased approach. The current terms of the three Class I directors and three Class II directors will expire at the 2020 Annual Meeting, and the current terms of the three Class III directors will expire at the 2021 Annual Meeting. At the 2021 Annual Meeting and at each annual meeting thereafter, the Board will be declassified and all directors will be elected for a one-year term expiring at the subsequent annual meeting of stockholders.

The Board has unanimously nominated Lucinda M. Baier, Frank M. Bumstead, and Lee S. Wielansky for election as Class I directors and Jordan R. Asher, Victoria L. Freed, and Guy P. Sansone for election as Class II directors, each to hold office for a one-year term expiring at the 2021 Annual Meeting. Each of the nominees is currently a director. If any of the nominees becomes unavailable or unwilling to serve, an event that the Board does not presently expect, the named proxies will vote the shares represented by proxies for the election of directors for the election of such other person(s) as the Board may recommend.

The Company’s Bylaws provide that the election of director nominees at the 2020 Annual Meeting will be by the vote of the majority of the votes cast with respect to each director’s election. Accordingly, each director nominee will be elected if he or she receives more votes “FOR” his or her election than “AGAINST” his or her election. Shares that are not voted in the election of directors, including abstentions and broker non-votes, have no direct effect in the election of directors. Those shares, however, are taken into account in determining whether a sufficient number of shares are present to establish a quorum.

 

           

 

The Board unanimously recommends that you vote “FOR” the election of each of the three Class I directors and three Class II directors nominated by the Board. Unless otherwise instructed, the named proxies will vote all proxies we receive “FOR” the election of the Board’s nominees.

 

Board Composition

At least annually the Nominating and Corporate Governance Committee seeks input from each director regarding the composition of the Board. The Nominating and Corporate Governance Committee uses these results to assess with the Board whether the Board’s composition reflects an appropriate balance of knowledge, experience, skills, expertise, and diversity in order to support our business strategy. The Nominating and Corporate Governance Committee may seek and receive input from certain stockholders regarding the skills, experience, and other characteristics that stockholders believe would be beneficial to our Board composition. The Nominating and Corporate Governance Committee also reviews the size of the Board and, if deemed appropriate, will recommend to the Board any changes to its size.

Identifying Director Candidates

The Nominating and Corporate Governance Committee may engage an independent search firm to conduct targeted searches to identify well-qualified candidates who meet the needs of the Board. When an independent search firm is used, the Nominating and Corporate Governance Committee retains the firm and approves payment of its fees. Potential director candidates may also be identified by the Nominating and Corporate Governance Committee by asking current directors and executive officers to notify the committee if they become aware of candidates who possess skills, experience, or other characteristics needed for the Board. Dr. Asher was identified as a director candidate by one of our non-CEO executive officers.

 

 

  

 

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Proposal 1: Election of Directors

 

The Nominating and Corporate Governance Committee also will consider candidates recommended by stockholders, and its process for evaluating stockholder-recommended candidates is no different than its process for evaluating candidates suggested by search firms, directors, or executive officers. To make a formal nomination of a director candidate, a stockholder must comply with either the proxy access or advance notice provisions of our Bylaws. Proxy access permits a stockholder, or a group of up to 20 stockholders, owning at least three percent of our outstanding common stock continuously for at least three years, to nominate and include in our annual meeting proxy materials director nominees constituting up to the greater of two director nominees or 20% of the number of directors in office (rounded down to the nearest whole number), provided that the stockholders and nominees satisfy the requirements specified in our Bylaws. See “Stockholder Proposals for 2021 Annual Meeting” in this proxy statement for further information regarding the process for stockholders to formally nominate director candidates and the deadlines for making such nominations. Stockholders who wish to submit a nomination are encouraged to seek independent counsel about requirements under our Bylaws.

Evaluating Director Candidates

The Nominating and Corporate Governance Committee is responsible for evaluating director candidates and recommending nominees to the Board for Board membership. The Nominating and Corporate Governance Committee evaluates biographical and background information relating to director candidates and interviews candidates selected by the committee and by the Board in making its decisions whether to recommend director candidates to the Board. When evaluating director candidates, the Nominating and Corporate Governance Committee considers whether candidates have demonstrated, by significant accomplishment in their field, an ability to make a meaningful contribution to the Board’s oversight of our business, and the candidates’ reputation for honesty and ethical conduct in their personal and professional activities. The Nominating and Corporate Governance Committee also thoroughly examines a candidate’s senior housing, real estate, finance, operations, sales, marketing, healthcare, and other relevant experience, understanding of our business, educational and professional background, and contributions to diversity on the Board. In order to ensure that director candidates are able to commit the substantial time required to fulfill their Board responsibilities, the Nominating and Corporate Governance Committee also considers the number of public company boards and other boards on which the candidate is a member. Our Corporate Governance Guidelines limit the number of outside public company boards on which a director may serve (three for independent directors and one for the CEO). In determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee also considers the director’s tenure, past attendance at meetings, and participation in and contributions to the activities of the Board. Although the Nominating and Corporate Governance Committee considers directors’ tenure and age as part of its overall evaluation process, the Board does not believe that term limits or a mandatory retirement age are appropriate and removed the retirement age from our Corporate Governance Guidelines in 2020. The committee evaluates each candidate, including existing directors, in the context of the Board as a whole, with the objective of recommending director nominees who can best support our business strategy and represent stockholder interests through the exercise of sound judgment.

Board Diversity

Although the Nominating and Corporate Governance Committee has not adopted a formal diversity policy with respect to the selection of director nominees, diversity is one of the characteristics the committee considers in identifying and evaluating director candidates. The Board seeks directors who have different backgrounds, experiences, and perspectives, including race and gender characteristics, which the Board believes will enhance the quality of its deliberations and decisions. The Nominating and Corporate Governance Committee considers and assesses these contributions and the effectiveness of its nominating criteria in connection with nominating individuals to serve on the Board.

 

 

 

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Majority Voting for Director Elections

 

Majority Voting for Director Elections

Our Bylaws provide for a majority voting standard in uncontested director elections. Each director will be elected by a vote of the majority of votes cast with respect to that director’s election at any meeting for the election of directors at which a quorum is present. For these purposes, a majority of votes cast means that the number of votes cast for a director’s election exceeds the number of votes cast against that director’s election, with abstentions and broker non-votes not counted as a vote cast either for or against. An election will be considered contested if as of the tenth day preceding the date we first mail our notice of meeting for such meeting to stockholders, the number of nominees exceeds the number of directors to be elected. Since the number of director nominees for election at the 2020 Annual Meeting does not exceed the number of directors to be elected, the director elections at the 2020 Annual Meeting will be subject to the majority voting standard.

In order for any person to be nominated by the Board for election as a director, such nominee must submit an irrevocable resignation, contingent on that nominee not receiving a majority of the votes cast in an election that is not a contested election and acceptance of that resignation by the Board in accordance with the policies and procedures adopted by the Board for such purpose. In the event a nominee fails to receive a majority of the votes cast in an election that is not a contested election, the Nominating and Corporate Governance Committee will make a recommendation to the Board as to whether to accept or reject the resignation of such nominee, or whether other action should be taken. The Board will act on the resignation, taking into account the Nominating and Corporate Governance Committee’s recommendation, and publicly disclose (by a press release and filing an appropriate disclosure with the SEC) its decision regarding the resignation and, if such resignation is rejected, the rationale behind the decision within ninety (90) days following certification of the election results. The Nominating and Corporate Governance Committee in making its recommendation and the Board in making its decision each may consider any factors and other information that it considers appropriate and relevant. Any nominee who tenders his or her resignation as described herein will not participate in the deliberations of the Nominating and Corporate Governance Committee or the Board regarding whether to accept the resignation. If the Board accepts a nominee’s resignation, then the Nominating and Corporate Governance Committee will recommend to the Board whether to fill the resulting vacancy or vacancies or to reduce the size of the Board. Each of the nominees for election as a Class I or Class II director at the 2020 Annual Meeting has submitted the irrevocable resignation described above.

 

 

  

 

2020 PROXY STATEMENT

 

 

 

 

 

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Proposal 1: Election of Directors

 

Class I and II Director Nominees

Biographical information for the six nominees for election as Class I and II directors is set forth below.

 

Guy P. Sansone

Non-Executive Chairman & Class II Independent Director

   

Lucinda M. Baier

Class I Director, President and Chief Executive Officer

 

LOGO

 

Director Since: October 2019

 

Age: 55

 

Public Company Directorships:

•   Magellan Health, Inc.

(2019 – current)

•   Civitas Solutions, Inc.

(2009 – 2019)

•   Rotech Healthcare Inc.

(2004 – 2005)

   

LOGO

 

Director Since: February 2018

 

Age: 55

 

Public Company Directorships:

•  The Bon-Ton Stores, Inc. (2007-2016)

Mr. Sansone joined Brookdale’s Board in October 2019 and became Non-Executive Chairman of the Board in January 2020. For more than 25 years, he has led efforts to optimize the performance of healthcare and senior housing companies. Mr. Sansone has served as Chairman and CEO of H2 Health, a leading regional provider of physical rehabilitation services and clinician staffing solutions, since February 2020. Prior to that, he served as a Managing Director of Alvarez & Marsal, a global professional services firm specializing in performance improvement for large, high profile businesses, where he served as Chairman of the firm’s Healthcare Industry Group, which he founded in 2004. Mr. Sansone also served as interim Chief Executive Officer of the Visiting Nurse Service of New York, the largest non-profit home and community-based health care organization in the United States, from November 2014 to December 2016 and, prior to that, served in various executive roles at numerous healthcare companies. His prior experience in the senior housing industry includes having served as Chief Restructuring Officer and a member of the Board of Erickson Retirement Communities and as a senior consultant to Sunrise Senior Living. He also serves and has served on the Boards of Directors of numerous investor-owned and not-for-profit companies, primarily in the healthcare industry. Mr. Sansone earned a B.S. in Economics from the State University of New York at Albany.

 

   

Ms. Baier has served as Brookdale’s President and Chief Executive Officer and as a member of the Board since February 2018, after having served as Brookdale’s Chief Financial Officer since December 2015. Ms. Baier joined Brookdale from Navigant Consulting, Inc., a specialized global expert services firm, where she served as Executive Vice President and Chief Financial Officer since 2013. In addition, Ms. Baier has had multi-billion dollar operations responsibility, been the chief executive officer for a publicly-traded retailer, and served as an executive officer of a Fortune 30 company. Ms. Baier currently serves as a member of the Board of Directors of the National Investment Center for the Seniors Housing & Care Industry (NIC), the Board of the Nashville Health Care Council where she chairs its finance and investment committee, and the New York Stock Exchange Board Advisory Council. Ms. Baier is a Certified Public Accountant and a graduate of Illinois State University, with B.S. and M.S. degrees in Accounting.

Mr. Sansone’s executive, senior advisory, and board leadership of public and private organizations, including his extensive service to companies in the healthcare, and senior housing industries, led to the conclusion that he should serve as a member of the Board.

 

   

Ms. Baier’s continued leadership as the Company’s President and Chief Executive Officer after demonstrating her abilities as a change-oriented executive as our Chief Financial Officer and in multiple leadership roles at other companies led to the conclusion that she should serve as a member of the Board.

 

 

 

 

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Jordan R. Asher, MD

Class II Independent Director

   

Frank M. Bumstead

Class I Independent Director

LOGO

 

Director Since: February 2020

 

Age: 55

 

Brookdale Board Committees:

•  Investment

     

LOGO

 

Director Since: August 2006

 

Age: 78

 

Brookdale Board Committees:

•   Compensation (Chair)

•   Nominating and Corporate Governance

 

Public Company Directorships:

•   Syntroleum Corporation

(1993 – 2014)

•   American Retirement Corp.

(1997 – 2006)

Dr. Asher brings more than 20 years of expertise and a history of success in large matrixed, mission-based, national healthcare systems. Since 2018, he has served as the Chief Physician Executive and Senior Vice President of Sentara Healthcare, a large integrated delivery health system including a clinically integrated network and insurance company serving Virginia and North Carolina, where he has a wide range of responsibilities, including a focus on growth strategies for clinical care and development and implementation of value-based care and payment models. Prior to Sentara, Dr. Asher served in several executive roles with Ascension since 2006, including Chief Clinical Officer of its Ascension Care Management subsidiary from 2016 to 2018 with responsibility for network development and population and risk management, Chief Clinical Officer and Chief Innovation Officer of Ascension’s MissionPoint Health Partners subsidiary from 2015 to 2016, and Chief Medical Officer and Chief Integration Officer of MissionPoint Health Partners from 2011 to 2015. Dr. Asher earned a B.S. in Biology from Emory University, an M.D. from Vanderbilt University School of Medicine, and an M.S. in Medical Management from the University of Texas at Dallas and Southwestern Medical Center.

 

   

Mr. Bumstead has over 40 years’ experience in the field of business and investment management and financial and investment advisory services, including representing buyers and sellers in a number of merger and acquisition transactions. Mr. Bumstead is a principal shareholder of Flood, Bumstead, McCready & McCarthy, Inc., a business management firm that represents artists, songwriters and producers in the music industry as well as athletes and other high net worth clients, and has been with the firm since 1989. From 1993 to December 1998, Mr. Bumstead served as the Chairman and Chief Executive Officer of FBMS Financial, Inc., a registered investment advisor. He served in 2015 as Chairman of the Board of Directors of the Country Music Association and is also Vice Chairman of the Board of Directors and Chairman of the Finance and Investment Committee of the Memorial Foundation, Inc., a charitable foundation. In addition, he previously served as a member of the Board of Advisors of United Supermarkets of Texas, LLC and was Chairman of its Finance and Audit Committee. Mr. Bumstead received a B.B.A. degree from Southern Methodist University and a Masters of Business Management from Vanderbilt University’s Owen School of Management.

 

Dr. Asher’s deep experience in the evolving healthcare landscape, including a combination of clinical training and executive leadership experience, particularly in light of the healthcare industry’s transition to more integrated, value-based delivery and payment models as we continue to grow and integrate our healthcare services business, led to the conclusion that he should serve as a member of the Board.

   

Mr. Bumstead’s experience in business management and as a director of several public companies, along with his knowledge of the senior housing industry (through his prior service as a director of ARC), led to the conclusion that he should serve as a member of the Board.

 

 

 

  

 

2020 PROXY STATEMENT

 

 

 

 

 

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Class I and II Director Nominees


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Proposal 1: Election of Directors

 

Victoria L. Freed

Class II Independent Director

   

Lee S. Wielansky

Class I Independent Director

LOGO

 

 

 

Director Since: October 2019

 

Age: 63

 

Brookdale Board Committees:

•   Compensation

•   Nominating & Corporate Governance

 

Public Company Directorships:

•   ILG, Inc. (f/k/a Interval Leisure Group, Inc.) (2012 – 2018)

     

LOGO

 

Director Since: April 2015

 

Age: 68

 

Brookdale Board Committees:

•   Audit

•   Investment (Chair)

 

Public Company Directorships:

•   Acadia Realty Trust

(2000 – current)

•   Isle of Capri Casinos, Inc.

(2007 – 2017)

•   Pulaski Financial Corp.

(2005 – 2016)

 

Ms. Freed brings more than 25 years of executive leadership in the areas of sales, customer service, and marketing, and has earned numerous awards for outstanding achievement in sales and marketing during her career. Ms. Freed is Senior Vice President of Sales, Trade Support and Service for Royal Caribbean International, having served in that role since 2008, where she oversees the largest sales team in the cruise line industry and also manages the company’s consumer outreach, reservations, group sales, and customer service functions. Prior to her service with Royal Caribbean, Ms. Freed worked for 29 years with Carnival Cruise Lines, where she served as Senior Vice President of Sales and Marketing during the last 15 years of her tenure. She is a trustee of the United Way of Miami-Dade County and serves as a member of the board of Jewish Adoption and Foster Care Options (JAFCO). Ms. Freed earned a bachelor’s degree in business with an emphasis in marketing from the University of Colorado.

 

   

Mr. Wielansky has more than 40 years of commercial real estate investment, management, and development experience. He currently serves as Chairman and CEO of Opportunistic Equities, which specializes in low income housing. He has also served as Chairman and CEO of Midland Development Group, Inc., which he re-started in 2003 and focused on the development of retail properties in the midwest and southeast. Prior to Midland, he served as President and CEO of JDN Development Company, Inc. and as a director of JDN Realty Corporation. Before joining JDN, he served as Managing Director–Investments of Regency Centers Corporation, which in 1998 acquired Midland Development Group, a retail properties development company co-founded by Mr. Wielansky in 1983. Mr. Wielansky served as Brookdale’s Non-Executive Chairman of the Board from February 2018 through December 2019. He received a bachelor’s degree in Business Administration, with a major in Real Estate and Finance, from the University of Missouri—Columbia, where he is currently a member of the Strategic Development Board of the College of Business. He also serves on the Board of Directors of The Foundation for Barnes-Jewish Hospital.

 

Ms. Freed’s decades of executive leadership in sales, customer service, and marketing in the hospitality industry led to the conclusion that she should serve as a member of the Board.

   

Mr. Wielansky’s real estate investment, management, and development experience, as well as his service as a director of several public companies, led to the conclusion that he should serve as a member of the Board.

 

 

 

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Continuing Class III Directors

 

Continuing Class III Directors

Biographical information for our Class III directors, whose terms of office will expire at the annual meeting of stockholders to be held in 2021 is set forth below.

 

Marcus E. Bromley

Class III Independent Director

   

Rita Johnson-Mills

Class III Independent Director

 

 

LOGO

 

Director Since: July 2017

 

Age: 70

 

Brookdale Board Committees:

•  Audit

•  Investment

 

Public Company Directorships:

•  Cole Credit Property Trust V, Inc. (2015 – current)

•  Cole Corporate Income Trust, Inc. (2011 – 2015)

•  Cole Credit Property Trust II, Inc. (2005 – 2013)

•  Cole Credit Property Trust III, Inc. (2008 – 2012)

•  Gables Residential Trust
(1993 – 2005)

 

     

LOGO

 

Director Since: August 2018

 

Age: 61

 

Brookdale Board Committees:

•  Nominating and Corporate Governance (Chair)

•  Investment

 

   

Mr. Bromley brings more than 35 years of real estate industry leadership experience. He served as Chairman of the Board and Chief Executive Officer of Gables Residential Trust from 1993 until 2000, and then as a member of its Board until the company was acquired in 2005. Prior to joining Gables Residential Trust, Mr. Bromley was a division partner for the Southeast operation of Trammell Crow Residential Company. Mr. Bromley has served as a member of the Board of Cole Credit Property Trust V, Inc., a non-listed real estate investment trust, since March 2015 and served as its Non-Executive Chairman from June 2015 to August 2018. Mr. Bromley also currently serves as a member of the advisory board of Nancy Creek Capital Management, LLC, a private mezzanine debt and equity investment firm, and Sealy Industrial Partners, a private partnership specializing in the acquisition and operation of various industrial real estate properties. Mr. Bromley holds a B.S. in Economics from Washington & Lee University and an M.B.A. from the University of North Carolina.

 

   

Ms. Johnson-Mills is an experienced healthcare executive, with more than 20 years of experience in the broader healthcare industry, including experience in the public sector. She is founder and CEO of RJM Enterprises. Ms. Johnson-Mills served from August 2014 to December 2017 as President and Chief Executive Officer of UnitedHealthcare Community Plan of Tennessee, a health plan serving more than 500,000 government sponsored healthcare consumers with over $2.5 billion of annual revenue, after having previously served as Senior Vice President, Performance Excellence and Accountability for UnitedHealthcare Community & State since 2006. Ms. Johnson-Mills also previously served as the Director of Medicaid Managed Care for the Centers for Medicare and Medicaid Services and as Chief Executive Officer of Managed Health Services Indiana and Buckeye Health Plan, wholly owned subsidiaries of Centene Corporation. Ms. Johnson-Mills earned a B.S. degree from Lincoln University and an M.A. degree in Labor and Human Resource Management and M.P.A. degree in Public Policy and Management from The Ohio State University.

 

 

Mr. Bromley’s significant executive, leadership, and advisory experience in the real estate industry led to the conclusion that he should serve as a member of the Board.

   

Ms. Johnson-Mills’ experience as an executive in the healthcare space, including her expertise in healthcare operations and strategy, led to the conclusion that she should serve as a member of the Board.

 

 

 

  

 

2020 PROXY STATEMENT

 

 

 

 

 

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Proposal 1: Election of Directors

 

Denise W. Warren

Class III Independent Director

 

 

LOGO

 

Director Since: October 2018

 

Age: 58

 

Brookdale Board Committees:

•  Audit (Chair)

•  Compensation

 

Public Company Directorships:

•  Computer Programs and Systems, Inc. (2017 – current)

 

 

Ms. Warren brings more than 30 years of operational, financial, and healthcare experience. Since October 2015, she has served as Executive Vice President and Chief Operating Officer of WakeMed Health & Hospitals, where she is responsible for the strategic, financial, and operational performance of the organization’s network of facilities in the North Carolina Research Triangle area. Prior to that, from 2005 to September 2015, Ms. Warren served as Chief Financial Officer of Capella Healthcare, Inc., an owner and operator of general acute-care hospitals, as well as its Executive Vice President since January 2014, and as its Senior Vice President prior to that. Before joining Capella, she served as Senior Vice President and Chief Financial Officer of Gaylord Entertainment Company from 2000 to 2001, as Senior Equity Analyst and Research Director for Avondale Partners LLC, and as Senior Equity Analyst for Merrill Lynch & Co. Ms. Warren earned a B.S. degree in Economics from Southern Methodist University and an M.B.A. from Harvard University.

 

Ms. Warren’s extensive executive, financial, and operational experience in the healthcare and other industries led to the conclusion that she should serve as a member of the Board.

 

 

 

 

 

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Corporate Governance  

 

 

Corporate Governance Guidelines and Code of Business Conduct and Ethics

The Board has adopted Corporate Governance Guidelines setting forth the expectations and standards the Board has with respect to the role, size, and composition of the Board and its committees, the functioning of the Board and its committees, evaluation of the Board and its committees, director compensation, succession planning, and other matters. The Board also has adopted a Code of Business Conduct and Ethics that applies to all employees, directors, and officers, as well as a Code of Ethics for Chief Executive and Senior Financial Officers, which applies to our President and Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and Treasurer. These guidelines and codes are available on our website at www.brookdale.com/investor. Any amendment to, or waiver from, a provision of such codes of ethics granted to a principal executive officer, principal financial officer, principal accounting officer, or controller, or person performing similar functions, or to any executive officer or director, will be posted on our website.

Director Independence

Our Corporate Governance Guidelines and the listing standards of the New York Stock Exchange (the “NYSE”) require that the Board be comprised of a majority of independent directors. The Board has affirmatively determined that eight of our nine directors, Mses. Freed, Johnson-Mills, and Warren, Dr. Asher, and Messrs. Sansone, Bromley, Bumstead, and Wielansky are “independent” under Section 303A.02 of the listing standards of the NYSE, and that former directors Jackie M. Clegg and James R. Seward were independent prior to the expiration of their terms as a director at the 2019 annual meeting of stockholders. In each case, the Board affirmatively determined that none of such individuals had a material relationship with the Company. In making these determinations, the Board considered all relevant facts and circumstances, as required by applicable NYSE listing standards. There were no transactions, relationships, or arrangements not disclosed pursuant to Item 404(a) of Regulation S-K that were considered by the Board in making the required independence determinations. None of the directors or nominees that were deemed independent had any relationship with us (other than as a director or stockholder). The Board also determined that each member of the Audit, Compensation, and Nominating and Corporate Governance Committees is independent, including that each member of the Audit Committee is independent under the listing standards of the NYSE and under section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Ms. Baier is not independent due to her employment as our President and Chief Executive Officer.

Meetings of the Board and Committees

 

 

 

 

 Board and Committee Attendance

 

The Board met 13 times in 2019. Each incumbent director attended at least 75% of the total number of meetings of the Board and committees of the Board on which he or she served during 2019.

 

 

  

 

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Corporate Governance

 

 

 

 Executive Sessions of the Independent Directors

 

Our non-management directors, i.e., those who are not executive officers, meet in regularly scheduled executive sessions without management. Any non-management director may request that additional executive sessions be scheduled. Under our Corporate Governance Guidelines, our Non-Executive Chairman of the Board presides at executive sessions of our non-management directors.

 

 

 

Stockholder Meeting Attendance

 

The Board has not adopted a formal policy that requires directors to attend our annual stockholders’ meetings, although they are invited and encouraged to attend. Seven of the eight then-incumbent members of the Board attended the 2019 annual meeting of stockholders.

Board Leadership Structure

Our Corporate Governance Guidelines do not require the separation of the positions of Chairman of the Board and Chief Executive Officer and provide that the Board is free to choose its Chairman in any way that it deems best for the Company at any given time. However, since the date of our formation, the Board has separated the positions of Chairman and Chief Executive Officer in the belief that this structure improves management’s accountability to the Board. Mr. Sansone currently serves as Non-Executive Chairman of the Board, and Ms. Baier serves as President, Chief Executive Officer and director.

Risk Oversight

The business of the Company is managed with the oversight of the Board. As contemplated by the NYSE listing standards and as reflected in the charter of the Audit Committee, the Board has delegated to the Audit Committee the responsibility to discuss guidelines and policies governing the process by which our senior management and the relevant departments and functions of the Company (including our internal audit function) assess and manage our exposure to risk. To that end, the Audit Committee regularly reviews our processes for risk assessment and risk management, as well as our major financial risk exposures and the steps management has taken to monitor and control such exposures. In addition, the Board regularly receives reports from management regarding our risk exposures and monitors our risk management activities.

Communications from Stockholders

The Board has in place a process for security holders to send communications to the Board. Specifically, the Board will review and give appropriate attention to written communications submitted by stockholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as otherwise contemplated by committee charters, the Chairperson of the Nominating and Corporate Governance Committee will, with the assistance of our General Counsel, (1) be primarily responsible for monitoring communications from stockholders and (2) provide copies or summaries of such communications to the other directors as he or she considers appropriate. Communications will generally be forwarded to all directors if they relate to substantive matters and include suggestions or comments that the Chairperson of the Nominating and Corporate Governance Committee considers to be important for the directors to consider. Stockholders and other interested parties who wish to send communications on any topic to the Board should address such communications to Chairperson of the Nominating and Corporate Governance Committee, c/o General Counsel, Brookdale Senior Living Inc., 111 Westwood Place, Suite 400, Brentwood, Tennessee 37027. Stockholders who wish to contact any non-management director, including

 

 

 

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Communications from Stockholders

 

the Non-Executive Chairman of the Board, or the non-management directors as a group, should address such communications to the non-management director (or group of directors) they wish to contact (or if any, to “Any Non-Management Director”), c/o General Counsel, Brookdale Senior Living Inc., 111 Westwood Place, Suite 400, Brentwood, Tennessee 37027.

Committees of the Board

The Board has four separate standing committees: the Audit Committee, the Compensation Committee, the Investment Committee, and the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee is responsible for making recommendations to the Board with respect to committee membership assignments after consultation with the Chairman of the Board and the Chief Executive Officer. The Board is responsible for appointing committee chairs and members following review of such recommendations. The Board has adopted written charters for the standing committees, copies of which are available on our website located at www.brookdale.com/investor.

The following table identifies the members of the Board’s standing committees and the number of meetings held by each committee during 2019. The Non-Executive Chairman is invited to attend, and generally attends, the regularly scheduled meetings of the standing committees.

 

     Audit Committee    Compensation
Committee
   Investment
Committee
   Nominating and  
Corporate  
Governance  
Committee  

Jordan R. Asher

            

    

Marcus E. Bromley

  

       

    

Frank M. Bumstead

       

Chair

       

Victoria L. Freed

       

       

Rita Johnson-Mills

            

  

Chair

Denise W. Warren

  

Chair

  

         

Lee S. Wielansky

  

       

Chair

    

Number of Meetings in 2019

  

5

  

6

  

7

  

19

 

 

  

 

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Corporate Governance

 

The following table provides information about the key responsibilities and functions of the Board’s standing committees.

 

Committee

  

Key Functions and Additional Information

 

Audit Committee

  

 

•   Reviews the audit plans and findings of the independent registered public accounting firm and our internal audit and compliance functions, as well as the results of regulatory examinations, and tracks management’s corrective action plans where necessary

 

•   Reviews our financial statements (and related regulatory filings), including any significant financial items and/or changes in accounting policies, with our senior management and independent registered public accounting firm

 

•   Reviews our risk and control issues, compliance programs, and significant tax and legal matters

 

•   Appoints annually, in its sole discretion, the independent registered public accounting firm and evaluates its independence and performance, as well as sets clear hiring policies for our hiring of employees or former employees of the independent registered public accounting firm

 

•   Reviews our risk management processes

 

•   The Board has determined that each of the current members of the Audit Committee is an “audit committee financial expert” as defined by the rules of the SEC. No member of the Audit Committee simultaneously serves on the audit committees of more than three public companies.

 

 

Compensation Committee

  

 

•   Reviews and approves restricted stock and other equity-related grants for our directors, officers, key employees, and consultants

 

•   Reviews and approves corporate goals and objectives relevant to our Chief Executive Officer’s and other executive officers’ compensation, evaluates the Chief Executive Officer’s and other executive officers’ performance in light of those goals and objectives, and determines the Chief Executive Officer’s and other executive officers’ compensation based on that evaluation

 

•   Recommends to the Board the compensation of our non-employee directors

 

•   Oversees our compensation and employee benefit and incentive compensation plans, and administers our 2014 Omnibus Incentive Plan and Associate Stock Purchase Plan

 

 

Investment Committee

  

 

•   Reviews and approves (or recommends that the Board approve, as applicable) certain investments and proposed transactions on behalf of the Board

 

•   Reviews and evaluates (and makes recommendations to the Board regarding) our capital structure and financial strategies, our material capital allocation plans, and our dividend and share repurchase policies and programs

 

•   Performs such other responsibilities as may be delegated to it by the Board from time to time

 

 

Nominating and Corporate Governance Committee

  

 

•   Reviews the performance of the Board and incumbent directors and makes recommendations to the Board regarding the selection of candidates, qualification, and competency requirements for service on the Board and the suitability of proposed nominees as directors

 

•   Advises the Board with respect to our Corporate Governance Guidelines

 

•   Oversees the evaluation of the Board and our management

 

 

 

 

 

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Director Compensation  

 

 

Non-Employee Director Compensation Program

The table below sets forth the elements of the non-employee director compensation program. During 2019, the Compensation Committee reviewed the program, including receiving a market compensation study from the Consultant (as defined below) regarding the practices of the compensation peer group approved by the Committee for 2019 annual compensation decisions. The Committee made no changes to the program at that time. Later during the year, the Committee recommended, and the Board approved, a change to the program such that if a director retires prior to the date of the annual grant of immediately vested stock or concludes his or her service at the expiration of his or her term of office, a pro-rata cash amount will be payable to the director at the time of retirement or expiration in lieu of the annual grant of immediately vested shares, in recognition of the partial year of service. The Committee also recommended, and the Board approved, an increase to the retainer for service as chair of the Investment Committee from $10,000 to $15,000 effective October 29, 2019.

In 2020, the Compensation Committee again reviewed the non-employee director compensation program, including receiving a market compensation study from the Consultant related to the peer group approved by the Committee for 2020 annual compensation decisions. Following such review, the Committee recommended, and the Board approved, the changes to the program noted below.

 

Cash Fees

   2019      Changes for 2020    Description

Annual Retainer

  

$

  100,000

  

No change

   Cash retainers are payable quarterly in arrears and are pro-rated for service less than the full year. Cash meeting fees are payable quarterly in arrears for attendance by the director or committee member in person or telephonically. Each director has the opportunity to elect to receive either immediately vested shares or restricted stock units in lieu of up to 50% of quarterly cash compensation, as described below.

Annual Committee Chair Retainers:

     

Audit

  

$

  20,000

 

  

No change

Compensation/NCG

  

$

  15,000

 

  

No change

Investment (1)

  

$

  15,000

 

  

No change

Meeting Attendance Fees:

     

Per Board Meeting

  

$

  3,000

 

   Applicable only to
meetings in excess
of 6 per year

Per Committee Meeting
(Members Only)

  

$

  2,000

 

   Applicable only to
meetings in
excess of 8 per
director per year

Equity Awards

                

Annual Grant of Immediately Vested Stock under 2014 Omnibus Incentive Plan

   $   100,000    Increased to
$135,000
(applicable to
2021 award for
2020 service)
   Typically granted in February each year for service in the prior year and pro-rated for service less than the full year. Directors may elect to receive restricted stock units (as described below) in lieu of the immediately vested shares. If a director retires prior to the annual grant date or concludes his or her service at the expiration of his or her term of office, a pro-rata cash amount will be payable to the director at the time of retirement or

 

 

  

 

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Director Compensation

 

         expiration in lieu of the annual grant of immediately vested shares, in recognition of the partial year of service.

Initial Grant of Restricted Shares under 2014 Omnibus Incentive Plan

   $ 100,000    No change    Granted to each new non-employee director upon joining the Board. The restricted shares awarded during 2019 are eligible to vest on the earlier to occur of the 2020 Annual Meeting or the first anniversary of our 2019 annual meeting, subject to the director’s continued service. The restricted shares awarded during 2020 are eligible to vest on the first anniversary of the director’s appointment to the Board, subject to the director’s continued service.

 

(1)

The retainer payable to the chair of the Investment Committee was increased from $10,000 to $15,000 effective October 29, 2019.

Each non-employee director has the opportunity to elect to receive either immediately vested shares or restricted stock units in lieu of up to 50% of the director’s quarterly cash compensation, and to elect to receive restricted stock units in lieu of the annual grant of immediately vested shares. Immediately vested shares are issued under our Director Stock Purchase Plan, and restricted stock units are issued under our 2014 Omnibus Incentive Plan. With respect to quarterly cash elections, the number of shares or restricted stock units to be issued is based on the closing price of our common stock on the date of issuance, or if such date is not a trading date, on the previous trading day’s closing price. Each restricted stock unit will be payable in the form of one share of our common stock following the director’s termination of service as a member of the Board.

Compensation of Non-Executive Chairman of the Board

Mr. Wielansky served as our Non-Executive Chairman of the Board through December 31, 2019. His compensation arrangements for service as Non-Executive Chairman remained unchanged from 2018 when he was appointed to serve in the role. Under such arrangements Mr. Wielansky received compensation applicable generally to non-employee directors described above and received an additional annual cash retainer of $250,000 for his service as Non-Executive Chairman through 2019. All cash amounts were payable as noted in the table above.

The Board appointed Mr. Sansone as Non-Executive Chairman of the Board effective January 1, 2020. In connection with his appointment, the Committee recommended, and the Board approved, a reduction to the retainer for service as Non-Executive Chairman. Such reduction reflected the Committee’s view that the time commitment of the Non-Executive Chair role had reduced since we initiated a turnaround strategy under new leadership in 2018. As a result, Mr. Sansone receives compensation applicable generally to non-employee directors described above and receives an additional annual cash retainer of $100,000 for his service as Non-Executive Chairman. All cash amounts are payable as noted in the table above.

Director Stock Ownership Guidelines

The Board has adopted Stock Ownership Guidelines that require each of our non-employee directors to maintain ownership of a multiple of the non-employee director’s annual cash retainer for service on the Board, exclusive of any retainers for service as chairman of the Board or any of its committees and any cash meeting fees. In 2020, the Board amended the guidelines to increase the multiple from 3.0x to 5.0x of the annual cash retainer after reviewing the practices of the compensation peer group approved by the Committee for 2020.

 

 

 

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Director Stock Ownership Guidelines

 

Unvested equity awards do not generally count toward satisfaction of the guidelines. Stock ownership levels are required to be achieved by the fifth anniversary of the director’s initial appointment or election to the Board (or, if later, the fifth anniversary of adoption of the guidelines). Until the expected ownership level is achieved, each director is expected to retain at least 50% of any shares obtained through our stock incentive plans.

As of May 11, 2020, each of our non-employee directors is in compliance with the guidelines, but each other than Mr. Bumstead holds fewer shares than required by the increased 5.0x guideline. Therefore, each of the non-employee directors other than Mr. Bumstead will be expected to retain at least 50% of any shares obtained through our stock incentive plans until the required holding level is met.

Director Compensation for 2019

The following table sets forth the compensation awarded to, earned by, or paid to our directors for the year ended December 31, 2019, other than Ms. Baier whose compensation information is set forth under “Executive Compensation”. Each of the directors included in the table served for the full-year 2019, except that Ms. Freed and Mr. Sansone joined the Board at the Company’s 2019 annual meeting of stockholders held on October 29, 2019 as successors to former directors Jackie M. Clegg and James R. Seward, whose terms expired at the annual meeting.

 

Name

   Fees Earned or
Paid in Cash
   

Stock       

Awards (1)(2)

     All Other
Compensation
     Total    

Marcus E. Bromley

  

$

  157,000

 

  $   99,995 (3)        

$

      –

 

  

$

  256,995  

 

Frank M. Bumstead

   $   190,000     $   99,995 (3)        

$

  –

 

  

$

  289,995  

 

Victoria L. Freed

  

$

  24,391

 

  $   99,996 (4)        

$

  –

 

  

$

  124,387  

 

Rita Johnson-Mills

  

$

  170,609

 (5) 

  $   41,367 (3)        

$

  –

 

  

$

  211,976  

 

Guy P. Sansone

  

$

  20,391

 

  $   99,996 (4)        

$

  –

 

  

$

  120,387  

 

Denise W. Warren

  

$

  172,500

 

  $   24,382 (3)        

$

  –

 

  

$

  196,882  

 

Lee S. Wielansky

  

$

  406,609

 

  $   99,995 (3)        

$

  –

 

  

$

  506,604  

 

Jackie M. Clegg

  

$

  249,052

 (6) 

  $   99,995 (3)        

$

  –

 

  

$

  349,047  

 

James R. Seward

  

$

  227,408

 (6) 

  $   99,995 (3)        

$

  –

 

  

$

  327,403  

 

 

(1)

Represents the aggregate grant date fair value of awards of immediately vested stock and/or restricted shares computed in accordance with Accounting Standards Codification 718, Stock Compensation (“ASC 718”). See Note 2 to our Consolidated Financial Statements included in our 2019 Annual Report for a summary of the assumptions made in the valuation of these awards.

 

(2)

As of December 31, 2019, (i) none of the directors held any unvested stock awards, except that each of Ms. Freed and Mr. Sansone held 14,727 time-based restricted shares, and (ii) Ms. Johnson-Mills held 3,580 vested restricted stock units.

 

(3)

Represents the grant date fair value of the annual grant of unrestricted shares for the previous year served awarded on February 11, 2019, consisting of: 12,722 immediately vested shares for each of Messrs. Bromley, Bumstead, Wielansky, and Seward and Ms. Clegg; 5,263 immediately vested shares for Ms. Johnson-Mills; and 3,102 immediately vested shares for Ms. Warren.

 

(4)

Represents the grant date fair value of the initial grant of 14,727 time-based restricted shares awarded on December 13, 2019 to each of Ms. Freed and Mr. Sansone in connection with their joining the Board on October 29, 2019.

 

(5)

Ms. Johnson-Mills elected to receive vested restricted stock units in lieu of a portion of her cash compensation for service during 2019. The reported amount includes: 1,060 vested restricted stock units issued on April 1, 2020 for service during the first quarter of 2019 with a grant date fair value of $6,996; 1,338 vested restricted stock units issued on July 1, 2019 for service during the second quarter of 2019 with a grant date fair value of $9,995; 1,182 vested restricted stock units issued on October 1, 2019 for service during the third quarter of 2019 with a grant date fair value of $9,196; and 1,089 vested restricted stock units issued on January 1, 2020 for service during the fourth quarter of 2019 with a grant date fair value of $7,917.

 

(6)

Includes $82,740 of cash paid to each of Ms. Clegg and Mr. Seward, representing the cash amount paid in lieu of the pro-rata annual grant of immediately vested stock for service through the expiration of their terms of office at the Company’s 2019 annual meeting of stockholders held on October 29, 2019.

 

 

  

 

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  Executive Officers

 

 

 

The following table sets forth certain information concerning our executive officers. See “Class I and II Director Nominees” above for biographical information for Ms. Baier.

 

  Name

  

Age

  

Position

  Lucinda M. Baier

  

55

  

President, Chief Executive Officer and Director

  George T. Hicks

  

62

  

Executive Vice President–Finance and Treasurer

  Diane Johnson May

  

61

  

Executive Vice President–Human Resources

  H. Todd Kaestner

  

64

  

Executive Vice President–Asset Management and Division President–Entry Fee

  Cindy R. Kent

  

51

  

Executive Vice President and President of Senior Living

  Anna-Gene O’Neal

  

53

  

Division President–Health Care Services

  Mary Sue Patchett

  

57

  

Executive Vice President–Strategic Operations

  Steven E. Swain

  

52

  

Executive Vice President and Chief Financial Officer

  Chad C. White

  

44

  

Executive Vice President, General Counsel and Secretary

George T. Hicks became our Executive Vice President–Finance in July 2006 and our Treasurer in January 2016. Prior to July 2006, Mr. Hicks served as Executive Vice President–Finance and Internal Audit, Secretary and Treasurer of American Retirement Corp. (“ARC”) since September 1993. Mr. Hicks had served in various capacities for ARC’s predecessors since 1985, including Chief Financial Officer from September 1993 to April 2003 and Vice President–Finance and Treasurer from November 1989 to September 1993. He received a bachelor’s degree with distinction in philosophy from Stanford University and an M.B.A. in finance from the University of Tennessee.

Diane Johnson May joined Brookdale as Executive Vice President–Human Resources in May 2019. Prior to joining Brookdale, Ms. Johnson May served as Executive Vice President, Human Resources of Kraft Foods Group, Inc. from October 2012 to October 2015, after having served in a number of key leadership roles for Kraft Foods Inc. since joining in 1980, including Senior Vice President of Human Resources, Kraft Foods International, and Vice President, Human Resources at various Kraft units. Ms. Johnson May also served as Managing Vice President of The Deli Source Inc. from September 2017 to April 2019 and was principal of Diane May Consulting, LLC from January 2016 to September 2017. She earned a bachelor’s degree in business administration and management from Elmhurst College.

H. Todd Kaestner became our Executive Vice President–Asset Management and Division President–Entry Fee in June 2019. Prior to that, Mr. Kaestner served as Executive Vice President–Corporate Development since July 2006. Mr. Kaestner served as Executive Vice President–Corporate Development of ARC since September 1993 and served in various capacities for ARC’s predecessors since 1985, including Vice President–Development from 1988 to 1993 and Chief Financial Officer from 1985 to 1988. He is an honors graduate of Vanderbilt University, where he studied economics, and holds an M.B.A. in finance and economics from University of Louisville

Cindy R. Kent joined Brookdale as Executive Vice President and President of Senior Living in January 2020. Prior to joining Brookdale, Ms. Kent served as President and General Manager of 3M’s Infection Prevention Division from 2016 to 2018 and President and General Manager of 3M’s Drug Delivery Systems Division from 2014 and 2016. Prior to that, she held senior leadership roles at Medtronic from 2007 to 2013. Ms. Kent earned an MBA in marketing and a Master of Divinity from Vanderbilt University. She also holds a BS in industrial engineering and management sciences from Northwestern University, earned a certification in Strategic Finance from the Harvard Business School, and is Six Sigma green belt trained. Ms. Kent has been appointed to serve as a trustee on the Vanderbilt University Board of Trust beginning July 2020.

 

 

 

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Executive Officers

 

Anna-Gene O’Neal became our Division President–Health Care Services in August 2019, after having joined the Company as Division Vice President–BHS Hospice in June 2019. Prior to that, Ms. O’Neal served as President and Chief Executive Officer of Alive Hospice, a large non-profit hospice provider in Tennessee, since 2012. From 2007 to 2012, Ms. O’Neal served in quality and performance improvement leadership roles, including Senior Vice President, of CogentHMG, an industry leader in developing and managing hospital medicine programs nationwide, and from 2001 to 2007 she served as Vice President, Hospital Operations and Clinical Quality for Essent Healthcare, Inc., a multistate for-profit hospital system. Ms. O’Neal is a Registered Nurse and received B.S.N., M.S.N. and M.B.A. degrees from Vanderbilt University.

Mary Sue Patchett became our Executive Vice President–Strategic Operations in March 2020 after serving as Executive Vice President–Community Operations since November 2015 and, prior to that, Division President for one of our senior housing divisions since February 2013 and Divisional Vice President since joining Brookdale in September 2011 in connection with our Horizon Bay acquisition. Ms. Patchett has over 30 years of senior care and housing experience serving in leadership roles. Previously, Ms. Patchett served as Chief Operating Officer of Horizon Bay from January 2011 through August 2011 and as Senior Vice President of Operations from March 2008 through December 2011. Prior to joining Horizon Bay, she was President and owner of Patchett & Associates, Inc., a management consulting firm for senior housing and other healthcare companies, from 2005 until March 2008. Ms. Patchett had previously served as Divisional Vice President for Alterra for over six years and started in senior living with nine years in numerous leadership positions at Sunrise Senior Living. Ms. Patchett has served on numerous industry boards and is serving on the Board of Directors of Argentum and the Board of Directors of Florida Senior Living Association as its past chair. She holds a Bachelor of Business Administration degree from George Mason University.

Steven E. Swain joined Brookdale as Executive Vice President and Chief Financial Officer in September 2018. Prior to joining Brookdale, Mr. Swain served as Senior Vice President and Chief Financial Officer of DISH Network Corporation from October 2014 to August 2018, after having served as its Senior Vice President of Programming from April 2014 to October 2014, and as its Vice President of Corporate Financial Planning and Analysis since joining the company in 2011. Prior to DISH Network, Mr. Swain spent more than 15 years working in the telecommunications sector, most recently at CenturyLink, Inc. and Qwest Communications International, Inc. (acquired by CenturyLink), where he served in multiple leadership roles in finance, including corporate financial planning and analysis, treasury, and investor relations, as well as in network engineering. Mr. Swain earned his B.S. degree in Chemical Engineering from the University of Wisconsin–Madison and his M.B.A. degree from the University of Chicago Booth School of Business.

Chad C. White joined Brookdale in February 2007 and has served as our Executive Vice President since January 2018, our General Counsel since March 2017 and our Secretary since March 2013. He previously served as our Senior Vice President and General Counsel from March 2017 until January 2018, our Senior Vice President and Co-General Counsel from July 2014 to March 2017, our Vice President and Co-General Counsel from March 2013 to July 2014, and our Associate General Counsel and Assistant Secretary prior to that. Before joining Brookdale, Mr. White served in legal roles with Dollar General Corporation and Bass, Berry & Sims PLC. Mr. White received his law degree from the Vanderbilt University School of Law where he was elected to the Order of the Coif, and a B.S. in Mass Communication and Political Science from Middle Tennessee State University.

 

 

  

 

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  Executive Compensation

 

 

 

Compensation Discussion and Analysis

This Compensation Discussion and Analysis explains the key elements of our executive compensation program and compensation decisions regarding the following named executive officers (NEOs) for 2019:

 

Name

   Position

Lucinda M. Baier

   President and Chief Executive Officer

Steven E. Swain

   Executive Vice President and Chief Financial Officer

Mary Sue Patchett

   Executive Vice President–Strategic Operations

Chad C. White

   Executive Vice President, General Counsel and Secretary

H. Todd Kaestner

   Executive Vice President–Asset Management and Division President–Entry Fee

Each of the named executive officers served in the roles indicated for the full-year 2019, except that Ms. Patchett served as Executive Vice President–Community Operations prior to being appointed to her current role on March 23, 2020, and Mr. Kaestner served as Executive Vice President–Corporate Development prior to being appointed to his current roles on June 30, 2019.

 

 

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Compensation Discussion and Analysis

 

 

Executive Summary

 

Executive Compensation Program Highlights

 

LOGO What We Do

Pay for Performance A significant portion of our NEOs’ target direct compensation is awarded in the form of variable, at-risk compensation based on company performance.

Clawback Policy (New for 2020) Clawback policy provides the Committee the ability to recover or require the forfeiture of performance-based compensation paid as a result of any material financial restatement or material miscalculation of a financial metric used to determine the vesting or payment of performance-based compensation.

Caps on Annual Incentive Payouts Payouts under our annual cash incentive plan are capped.

RevPAR and Relative TSR Performance Goals Performance goals for 2019 performance-based restricted shares are 3-year compound annual growth rate of same community RevPAR and our 3-year relative TSR.

Annual Say on Pay “Say-on-pay” advisory vote conducted annually to solicit stockholders’ views on our executive compensation programs. 2019 results were 94% in favor. (1)

Robust Stock Ownership Guidelines Ownership guidelines require 5x, 4x, and 3x base salary for our CEO, CFO, and other executive officers, respectively.

LOGO What We Do NOT DO

No Above Median Benchmarking The Committee aims to provide target total direct compensation for NEOs that is at or below the market median identified in the independent compensation consultant’s market study.

No Defined Benefit Plans/SERPs We do not sponsor any defined benefit pension or supplemental executive retirement plans (SERPs).

No Tax Gross Ups Tax gross-ups are not provided except in the limited circumstance of certain relocation expenses.

No Excessive Perquisites Minimal perquisites are provided, other than certain re-location expenses.

No Excessive Guaranteed Compensation Our 2019 annual incentive plan and performance-based restricted stock awards do not have minimum guaranteed payout levels–this compensation is “at risk.”

No Pledging or Hedging Our insider trading policy prohibits all our directors and executive officers from pledging or hedging Brookdale stock.

No Stock Options We have never granted stock options.

 

 

2019 CEO and Other NEOs Pay Mix (2)

 

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Executive Compensation

 

Annual Cash Incentive Plan

 

2019 Incentive Plan Design and Achievement

Performance goals were chosen to focus our leaders on execution of our operational turnaround strategy and were generally cascaded to our corporate, divisional, and community leadership. Target levels were generally reflective of our 2019 budget approved by the Board. Actual 2019 achievement reflects progress made on our strategy, though overall performance was below our expectations.

 

Measure

   Weighting     Achievement  
/ Payout

Resident Fee Revenue

  

10%

 

106%

Facility Operating Income

  

40%

 

29%

Combined Adjusted Free Cash Flow

  

10%

 

103%

Strategic Objectives

  

40%

 

52%

Aggregate Achievement/Payout

    

54%

 

2017–2019 Annual Incentive Plan Achievement (3)

 

LOGO

 

 

(1)

Represents percentage of votes cast.

 

(2)

Represents elements of 2019 target total direct compensation and, for other NEO’s, the average of such other NEO’s pay mix elements. See “Summary of 2019 Compensation Program” below for more information.

 

(3)

Represents weighted average payout for the named executive officers for the applicable year who were serving at the end of such year.

 

 

 

 

Compensation Philosophy

The Compensation Committee (the “Committee”) intends to ensure market-competitive executive compensation opportunities through a program designed to:

 

 

emphasize pay for performance by linking a significant portion of target total direct compensation to variable, at-risk components measured by our short- and long-term financial performance and other objectives designed to focus executives on key strategic initiatives;

 

 

align our executives’ long-term interests with those of our stockholders; and

 

 

attract and retain key executives to execute on our strategy.

In determining the appropriate level and mix of compensation for each executive officer, the Committee takes into account the officer’s experience, scope of responsibility, individual performance, and retention risk; the Committee’s independent consultant’s market compensation studies; management input; internal equity; and other information as it deems necessary and appropriate. No pre-determined weighting is assigned to any factor, and the emphasis placed on a specific factor may vary among executive officers, reflecting market practice, business needs, and retention and succession considerations at the time compensation decisions are made.

 

 

 

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Compensation Discussion and Analysis

 

 

 

Principal Elements of Compensation

 

 

Our executive compensation program generally consists of these principal elements:

 

Element

  

Form

  

Description

  

Link to Stockholder Value

 

Base Salary

  

 

Cash

  

 

Amount intended to reflect the level and scope of responsibility, experience, and skills of an executive, the individual performance of the executive, retention risks, and competitive market practices.

  

 

Assists us in attracting, and encourages retention of, key executives through an amount of fixed income paid throughout the year.

 

Annual Incentive Plan

  

 

Cash

  

 

Opportunity is at-risk with no guaranteed payout. Level of payout tied to achievement of company financial objectives and strategic objectives approved by the Committee each year, which generally are reflective of, or support, our annual budget and business plan.

  

 

Focuses executives on taking steps necessary to meet expectations set forth in the annual budget and business plan, which the Committee believes will in turn drive longer-term performance results.

 

Long- Term Incentive Awards

  

 

50%–Time-Based Restricted Shares

  

 

Awards granted in 2019 are eligible to vest ratably in four annual installments beginning approximately one year following the grant date, subject to continued employment.

  

 

Promotes retention, stock ownership, and alignment of executives’ long-term goals with those of our stockholders.

  

 

50%–Performance-Based Restricted Shares

  

 

Opportunity is at-risk with no guaranteed vesting. 75% of the award is eligible to vest in February 2022 based on our 3-year compound annual growth rate (“CAGR”) of same community RevPAR performance, and 25% of the award is eligible to vest in February 2023 based on our 3-year relative TSR performance.

  

 

Encourages executives to achieve long-term goals, including RevPAR (a key performance metric factoring occupancy and rate) and increasing the market value of our common stock.

 

 

 

Process for Determining Executive Compensation

 

The Committee’s process for determining executive compensation is outlined below, including the role of the Committee, results of our annual say-on-pay advisory vote and other stockholder feedback, the Committee’s independent consultant, our management, and our compensation peer group.

Role of the Committee

The Committee, which is comprised solely of independent directors, is responsible for developing, reviewing annually, and administering our compensation program and plans applicable to our executive officers. The Committee meets regularly, typically at least five times per year, to approve all decisions regarding the compensation of our executive officers. Compensation decisions regarding our President and Chief Executive Officer are also approved by the

 

 

  

 

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independent members of the Board. The Committee reports on its actions to the full Board following each Committee meeting. In fulfilling its responsibilities with respect to executive compensation, the Committee reviews and approves:

 

 

Any changes to our executive compensation philosophy;

 

 

The base salary, levels of incentive-based compensation, and all other compensation or perquisites of our executive officers;

 

 

The design and framework of our incentive-based compensation plans and awards, including the applicable performance objectives and targets;

 

 

Levels of achievement under such performance objectives and targets;

 

 

Updates to our compensation peer group;

 

 

Any employment agreements or severance arrangements with our executive officers; and

 

 

Compliance with, and any changes to, our officer stock ownership and retention guidelines.

Role of Say-on-Pay Vote and Stockholder Feedback

The Committee considers the results of our annual say-on-pay advisory vote and other feedback received from stockholders throughout the year when making executive compensation decisions. At our 2019 annual meeting of stockholders, more than 94% of the votes cast on the say-on-pay advisory vote were in favor of our executive compensation program. The Committee believes this vote affirmed our stockholders’ support of our executive compensation approach and provided assurance the program is reasonable and aligned with stockholder expectations.

Role of Independent Compensation Consultant

As a best practice, the Committee periodically evaluates its selection of an independent compensation consultant. During 2019, the Committee conducted this evaluation, including reviewing proposals of several potential consultants, and determined to continue to engage F.W. Cook & Co., Inc. (the “Consultant”) as its independent compensation consultant. The Consultant reports directly to the Committee, which has the direct responsibility for appointment, compensation, and oversight of the work of the Consultant. The Consultant does not provide any services to the Company other than services provided to the Committee. From time to time at the request of the Committee, the Consultant provides recommendations regarding the design and framework of, and amounts awarded under, our executive compensation programs, recommends updates to our compensation peer group and conducts independent market compensation studies using that peer group and other published survey information, attends meetings of the Committee, and communicates with one or more members of the Committee outside of such meetings. For 2019, the Consultant provided each of these services. The Committee conducted a specific review of its relationship with the Consultant and determined that the Consultant’s work for the Committee did not raise any conflicts of interest, consistent with the guidance provided under the Dodd-Frank Act of 2010 by the SEC and by the NYSE.

Role of Management

When making compensation decisions, the Committee considers input from our President and Chief Executive Officer and certain of our other executive officers. Such input generally includes providing information and analyses for review and advising the Committee concerning compensation decisions (other than when their own compensation is determined) and the design, framework, and performance objectives of our incentive-based compensation plans and awards. Our President and Chief Executive Officer provides compensation recommendations related to our other executive officers for the Committee’s consideration.

 

 

 

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Compensation Discussion and Analysis

 

Compensation Peer Group

Typically annually, the Committee reviews and approves a compensation peer group comprised of companies recommended by the Consultant. The compensation peer group data is then used by the Consultant when preparing independent market compensation studies for the Committee. The Committee generally uses such peer group data and the Consultant’s studies:

 

 

As inputs when determining amounts of base salaries and the target amounts of annual and long-term incentive compensation;

 

 

To assess the competitiveness of the target direct compensation and underlying pay mix awarded to our executive officers; and

 

 

To evaluate the design, framework, and performance objectives of our incentive-based compensation plans and awards.

The Committee, as advised by the Consultant, generally considered target total direct compensation within a range of +/- 25% of median as reported in the Consultant’s market compensation studies to be competitive.

For 2019 compensation decisions, the Consultant recommended updates to our compensation peer group used for 2018 compensation decisions. The peer group used in competitive comparisons to inform 2019 target compensation opportunities included 15 companies in the health care facilities, healthcare services, managed healthcare, healthcare REIT, hospitality, and restaurant industries. The Committee believes that inclusion of companies from these industries is reflective of the talent market for our business. The peer group companies chosen from the various industries are intended to be reasonably comparable to Brookdale in terms of their median levels of revenue, market capitalization, enterprise value, EBITDA, and number of employees. For 2019, the Committee determined to remove Kindred Healthcare, Inc. due to its going private and to replace Laboratory Corporation of America Holdings, Centene Corporation and Darden Restaurants, Inc. with Amedysis, Inc., Magellan Health, Inc. and Bloomin’ Brands, Inc. to more closely align the median levels of financial metrics and number of employees of the peer group with ours.

 

    

 

2019 Peer Group

    
     
Acadia Healthcare Company, Inc.    Hyatt Hotels Corporation    Select Medical Holdings Corporation
Amedysis, Inc.    LifePoint Hospitals, Inc.    The Ensign Group, Inc.
Bloomin’ Brands, Inc.    Magellan Health, Inc.    Universal Health Services, Inc.
Community Health Systems, Inc.    National Healthcare Corp.    Welltower Inc.
Encompass Health Corporation    Quest Diagnostics Incorporated    Wyndham Destinations (f/k/a Wyndham Worldwide Corporation)

 

 

 

2019 Compensation Decisions

Context to Decisions

When making annual decisions for 2019, the Committee conducted a comprehensive review of our executive compensation program that included, among other considerations, external market compensation practices, our recent overall performance and 2019 business plan, our performance objectives under our incentive plans, and the responsibilities and individual performance of each of our named executive officers. The Committee reviewed the Consultant’s market compensation study based on the revised peer group adopted by the Committee for 2019, which indicated that each element of Ms. Baier’s target total direct compensation was below or at the low end of the market range. It further indicated that each of the other named executive officers’ base salaries, target long-term equity awards, and target total direct compensation were at the low end, or below, the market range, and that their target annual incentive opportunities were high relative to the market range.

 

 

  

 

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Following the completion of its review, the Committee approved the principal elements of compensation of our named executive officers for 2019 as shown in the “Summary of 2019 Compensation Program” table below. With the 2019 changes, the target total direct compensation of each of our named executive officers fell within the market ranges shown in the market compensation study, but continues to be below the market median.

Summary of 2019 Compensation Program

The table below sets forth the target total direct compensation (base salary, target annual incentive opportunity, and target long-term incentive awards) for the named executive officers. The table excludes the amounts reported in the All Other Compensation column of the Summary Compensation Table (generally employer matching on our 401(k) plan, employer-paid premiums on life and disability insurance, and the incremental cost to us of relocation expenses) and special performance bonuses in the aggregate amount of $40,000 paid to Mr. White for his service as interim leader of human resources until May 9, 2019 following the departure of the former Chief People Officer on December 31, 2018.

 

     Base Salary      Target Annual
Incentive
Opportunity
     Grant Value of
Long-Term
Incentive Awards (1)
     2019
Target Total
Direct Compensation
 

Ms. Baier

  

 

$910,000

 

  

 

135%

 

  

 

$4,750,002

  

 

$6,888,502

Mr. Swain

  

 

$515,000

 

  

 

100%

 

  

 

$1,300,005

  

 

$2,330,005

Ms. Patchett

  

 

$467,750

 

  

 

100%

 

  

 

$   900,001

  

 

$1,835,501

Mr. White

  

 

$397,500

 

  

 

70%

 

  

 

$   450,001

  

 

$1,125,751

Mr. Kaestner

  

 

$344,500

 

  

 

70%

 

  

 

$   350,006

  

 

$   935,656

 

(1)

Represents the grant value of time- and performance-based restricted shares (i.e., number of shares granted at target performance multiplied by the stock price on the date of grant). The aggregate ASC 718, grant date fair values of such awards were approximately 0.5% greater than the grant values included in the table due to the ASC 718 valuation of the relative TSR component of the performance-based restricted shares being 4% greater than the grant value.

Base Salaries

The Committee determined that the base salaries of each of the named executive officers were below or at the low end of the market ranges identified in the Consultant’s market compensation study. Consistent with its compensation philosophy, the Committee determined to increase the named executive officers’ base salaries to bring them within the identified market ranges and towards the market medians. After making such changes, each of the named executive officers’ base salaries continued to be below the market medians. The following table shows the base salaries approved for 2019 compared to the prior year base salaries in effect as of December 31, 2018.

 

     2019      2018      % Change  

Ms. Baier

  

 

$   910,000

 

  

 

$  825,000

 

  

 

10%

 

Mr. Swain

  

 

$   515,000

 

  

 

$  500,000

 

  

 

3%

 

Ms. Patchett

  

 

$   467,750

 

  

 

$    437,750

 

  

 

7%

 

Mr. White

  

 

$  397,500

 

  

 

$  350,000

 

  

 

14%

 

Mr. Kaestner

  

 

$  344,500

 

  

 

$   325,000

 

  

 

6%

 

Annual Incentive Plan

The named executive officers were eligible to participate in our 2019 annual incentive plan established by the Committee. Amounts payable under the plan were to be determined by the Committee following conclusion of the

 

 

 

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2019 performance period based on our results relative to company financial objectives and strategic objectives approved by the Committee. There were no guaranteed payout levels utilized in the 2019 annual incentive plan.

The table below shows the target annual incentive opportunity available to our named executive officers expressed as a percentage of base salary earned during 2019. The target opportunities were consistent with the prior year, except that Ms. Baier’s target opportunity was increased from 125% of her base salary, and Messrs. White’s and Kaestner’s target opportunities were reduced from 80% of their base salaries. The Committee made such changes after finding that Ms. Baier’s target opportunity was below market median, and that Messrs. White’s and Kaestner’s target opportunities were high relative to the market ranges provided by the Consultant.

 

    Target Opportunity as a % of
Base Salary
              Minimum Payout as a %
of Target Opportunity
              Maximum Payout as a %
of Target Opportunity
 

President and CEO

 

135%

 

 

 

 

 

 

 

 

 

0%

 

 

 

 

 

 

 

 

 

180%

Mr. Swain & Ms. Patchett 

 

100%

       

Messrs. White & Kaestner

 

70%

                               

For 2019, the Committee determined to use company financial objectives and objectively-measured strategic objectives that were developed to focus our leaders on execution of our operational turnaround strategy. Such strategic objectives were generally cascaded to our corporate, divisional, and community leadership. The weighting of each objective, the performance targets applicable to the objectives, and our actual results for 2019 are shown in the table below. The weighting of each company financial objective and the aggregate strategic objectives were consistent with the prior year’s weighting, except that the weighting of Combined Adjusted Free Cash Flow was reduced from 20% to 10%, and the weighting of the strategic objectives was increased from 30% to 40%. In order to emphasize the importance of meeting target-level move-ins at our consolidated comparable communities, the 2019 annual incentive plan included a move-in multiplier that would have increased the overall strategic objectives payout by between 10% and 50% had 2019 move-in performance been 1% to 5% in excess of the 2019 targeted number of move-ins. The target performance levels of the objectives were generally reflective of our 2019 budget approved by the Board. Performance below the threshold level would result in no payout for the performance objective, and payout percentages were to be interpolated between the steps shown in the table below.

 

 

  

 

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Executive Compensation

 

   

 

Measure

 

 

 

Weighting

 

   

 

Description and Link to Strategy and Business Plan

 

               

Financial Objectives

 

Resident Fee Revenue

    10%     Resident fee revenue was defined as our 2019 consolidated resident fee revenue, which excludes management fee revenue and reimbursed costs incurred on behalf of managed communities. This measure focused management on improving top-line revenue of our seniors housing portfolio and Health Care Services segment, which is a critical component of our strategy. The Board and management use this measure in the budgeting process and when evaluating our results.   Level     Payout        

Target / Actual

($ in MM)

 

 

  Maximum     200%     $ 3,331  
  Actual     105.5%     $ 3,210  
  Target     100%     $ 3,203  
  Threshold     25%     $ 3,107  
         
         
                                   
 

Facility Operating Income (“FOI”) (1)

    40%     FOI was defined as our 2019 consolidated resident fee revenue less facility operating expense. FOI reflects the net result of our revenue and the facility operating expenses of our consolidated senior housing portfolio and Health Care Services segment, which are the largest drivers of our financial results and which management has the ability to impact on a day-to-day basis. The Board and management use this measure in the budgeting process and when evaluating our results.   Level     Payout        

Target / Actual

($ in MM)

 

 

  Maximum     200%     $ 938  
  Target     100%     $ 868  
  Actual     29.3%     $ 819  
  Threshold     25%     $ 816  
     
     
                                   
           
 

Combined Adjusted Free Cash Flow (“CAFCF”) (1)

    10%     CAFCF was defined as the sum of our consolidated Adjusted Free Cash Flow plus our proportionate share of unconsolidated ventures’ Adjusted Free Cash Flow for 2019. The measure reflects the cash generated through our operations and our proportionate share of cash generated at our unconsolidated ventures after non-development capital expenditures and certain other adjustments. The Board and management use this measure in the budgeting process and when evaluating our ability to service indebtedness or engage in share repurchases, and to make additional capital investments. In addition, the constituent parts of CAFCF were used in our forward-looking guidance and in our quarterly reporting.   Level     Payout        

Target / Actual

($ in MM)

 

 

  Maximum     200%     $ (30
  Actual     103.3%     $ (59
  Target     100%     $ (60
  Threshold     25%     $ (83
         
         
         
         
         
         
           
                                     

Strategic Objectives (2)

 

Move-Ins

    7.5%     Move-ins reflect the number of new residents at our comparable consolidated community portfolio for 2019, and move-outs reflect the percentage of our residents who move out of our comparable consolidated community portfolio for controllable reasons. Our Board and management team focus on such metrics, and the objectives reinforced our 2019 strategy to win locally and leverage scale effectively through maintaining and improving the quality of our communities and aligning our sales, marketing, and operations teams to drive top line performance. The target levels of performance represented move-in growth of 3% compared to 2018 performance and maintaining prior-year levels of controllable move-outs.   Level     Payout         Target / Actual  
      Target/Max      100%       3% growth  
      Threshold     25%      

Maintaining
2018
performance
 
 
 
      Actual     0%      
< 2018
performance
 
 
         
         
 

Move-Outs

    7.5%     Level     Payout         Target / Actual  
      Target/Max      100%       26.3
      Actual     78.6%       26.5
      Threshold     25%       27.1
                                   
           
 

NPS Survey Participation

    2%     As part of our 2019 business plan, we conducted a net promotor score (NPS) survey among our residents and their families to understand our customers’ engagement and satisfaction levels. The NPS survey and strategic objectives reinforced management’s focus on our strategic priority to provide excellent customer service and expand referral development programs in order to earn the trust of our customers and the communities in which we operate and ultimately increase our move-ins and reduce our controllable move-outs. The target levels of performance represented 40% participation in the NPS survey and approximately 15% improvement on our NPS score versus the score from our last survey completed in 2017.   Level     Payout         Target / Actual  
  Actual     100%       > 50
  Target/Max     100%       40
  Threshold     25%       35
                       
         
 

NPS Score Improvement

    8%     Level     Payout         Target / Actual  
      Actual     100%      
> 20%
improvement
 
 
      Target/Max       100%      
~ 15%
improvement
 
 
                  Threshold     25%       ~ 10% decrease  

 

 

 

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Compensation Discussion and Analysis

 

   

 

Measure

 

 

 

Weighting

 

   

 

Description and Link to Strategy and Business Plan

 

               
 

Community Key Leader Retention

    5   Brookdale’s culture is based on servant leadership, and we believe engaged associates lead to an enhanced resident experience and lower turnover, leading to improved operations. These strategic objectives focused management on attracting, engaging, developing, and retaining the best associates by maintaining a compelling value proposition in the areas of compensation, leadership, career growth, and meaningful work. The community key leader retention objective applied to the three key positions at our consolidated comparable communities (executive directors, sales directors, and health and wellness/nursing directors). The community associate turnover objective applied to the other positions at our consolidated comparable communities. The corporate associate objective applied to our non-community-level associates. Each of the objectives were set to pay out at 50% for repeating 2018 performance.   Level     Payout         Target / Actual  
  Target/Max       100%       70
  Threshold     25%       68
  Actual     0%       < 68
         
         
 

Community Associate Turnover

    5   Level     Payout         Target  /  Actual  
    Target/Max     100%       48
    Threshold     25%       50
      Actual     0%       > 50
         
         
 

Corporate Associate Retention

    5   Level     Payout         Target  /  Actual  
    Actual     100%       > 83
    Target/Max       100%       80
                    Threshold     25%       78

 

(1)

FOI and CAFCF are financial measures that are not calculated in accordance with generally accepted accounting principles (“GAAP”). Appendix A to this proxy statement shows how we calculated FOI and CAFCF, including reconciliations to the closest GAAP financial measures.

 

(2)

The target/max payout levels for the strategic objectives do not reflect application of the move-in multiplier, which would have increased the overall strategic objectives payout by between 10% and 50% had 2019 move-in performance been 1% to 5% in excess of the 2019 targeted number of move-ins.

Long-Term Incentive Awards

Annual Review and Decisions

For the 2019 compensation program, the Committee resumed its historical practice of using a 50/50 grant value mix of time- and performance-based restricted shares for awards to the named executive officers. Based on the Consultant’s market compensation study, the Committee determined that Mses. Baier’s and Patchett’s and Messrs. Swain’s and White’s target long-term equity awards were at the low end, or below, the market ranges identified in the study. Consistent with its compensation philosophy, the Committee increased the target grant values of long-term incentive awards as noted in the table below. After making such changes, each of the named executive officers’ target long-term incentive awards fell within the market ranges shown in the Consultant’s market compensation study, but continued to be below the market medians.

 

     2019 Grant Value
of Long-Term
Incentive Awards
     Change
v. 2018
     No. of
Time-Based
Restricted
Shares
(50% Weight)
     No. of
Performance-Based
Restricted Shares
(at Target
Performance)
(50% Weight)
 

Ms. Baier

   $ 4,750,002      6%        302,163        302,163  

Mr. Swain

   $ 1,300,005      30%        82,698        82,697  

Ms. Patchett

   $ 900,001      13%        57,252        57,252  

Mr. White

   $ 450,001      29%        28,626        28,626  

Mr. Kaestner

   $ 350,006      0%        22,265        22,265  

Time-Based Restricted Shares

The time-based restricted shares are eligible to vest ratably in four annual installments beginning February 27, 2020, subject to continued employment.    

 

 

  

 

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Executive Compensation

 

Performance-Based Restricted Shares

Seventy-five percent of the performance-based restricted shares are eligible to vest on February 27, 2022 and twenty-five percent are eligible to vest on February 27, 2023, in each case subject to continued employment and achievement of performance goals established by the Committee. Performance below the threshold level of achievement will result in forfeiture of all shares in the applicable tranche, performance at the targeted level of achievement will result in the vesting of 100% of the applicable tranche, and performance at or above the target level of achievement will result in vesting of up to 125% of the first tranche and up to 150% of the second tranche, with vesting percentages to be interpolated between the levels. The weighting, performance measures, and performance targets for the performance-based restricted shares are outlined below.

 

Performance Measure

  Weighting    

Description and Link to Strategy

and Business Plan

  Vesting
Date
  Performance Targets  

3-Year CAGR of Same Community RevPAR for 2021 compared to 2018 (1)

    75%     Revenue per available room (“RevPAR”) is a key performance metric utilized by the Board and management to measure both occupancy and rate performance on a monthly basis. This objective focuses our management on delivering long-term top-line growth through increasing occupancy while maintaining rate discipline.   2/27/2022   Level   % of Target
Shares
Vesting
   



3-Year
CAGR of
Same
Community
RevPAR
 
 
 
 
 
      Maximum   125%     4.0%  
      Target   100%     3.5%  
      Threshold   25%     1.5%  
                   

 

   

 

   

 

 

 

 

 

       

 

 

 

 

 

 

 

3-Year Relative TSR Compared to S&P Midcap 400 Index Companies (2)

    25%     The relative total shareholder return (“TSR”) objective aligns our management’s priorities with those of our stockholders to establish and achieve long-term goals designed to increase the market value of our common stock relative to the constituent companies of a broad-based comparable index of companies.   2/27/2023   Level   % of Target
Shares
Vesting
   
Relative
TSR Rank
 
 
      Maximum   150%     75th %ile  
      Target   100%     50th %ile  
              Threshold   50%     25th %ile  

 

(1)

Same community RevPAR means the average monthly senior housing resident fee revenues per available unit of the same community portfolio, calculated as resident fee revenues, excluding Health Care Services segment revenue and entrance fee amortization, of the same community portfolio for the applicable fiscal year, divided by the weighted average number of available units in the same community portfolio for the applicable fiscal year, divided by twelve. For purposes of measuring the Company’s performance, principles of revenue recognition will be consistently applied when calculating same community RevPAR.

 

(2)

3-Year Relative TSR compares our compound annual TSR to the constituent companies of the S&P Midcap 400 index for the period beginning January 1, 2019 and ending December 31, 2021, assuming reinvestment of dividends or distributions. The award agreement provides that no additional shares beyond the target number of shares will be issued if our compound annual TSR is negative for the performance period.

Other Terms of 2019 Restricted Share Awards

The restricted share agreements associated with the awards described above contain non-competition, non-solicitation, non-disparagement, and confidentiality covenants and set forth the treatment of such awards in connection with termination of employment and a change in control (as described below under “Potential Payments Upon Termination or Change in Control”). Although we do not currently maintain a dividend program on our common stock, the Committee determined to eliminate the right to receive immediate payment of declared dividends for the 2019 awards. To the extent we declare dividends on our shares of common stock in the future, the restricted shares awarded in 2019 will accrue such dividends to be paid in cash only to the extent the underlying restricted shares ultimately vest.

Other 2019 Decisions

Severance Arrangements for Mr. Kaestner

Mr. Kaestner serves as Executive Vice President–Asset Management and Division President–Entry Fee. On October 1, 2019, we announced that we had entered into definitive agreements with Healthpeak Properties, Inc. (f/k/a HCP, Inc.)

 

 

 

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pursuant to which we agreed to, among other things, sell our interests in 16 entry fee continuing care retirement communities (CCRCs) held in an unconsolidated venture in which we held a 51% interest, which constitutes our entry fee CCRCs division. In light of our decision to dispose of our interest in the division led by Mr. Kaestner, and to incentivize him to manage the portfolio through the closing of such transactions, the Committee determined to enter into a letter agreement with Mr. Kaestner to amend and supplement the Amended and Restated Tier I Severance Pay Policy (the “Severance Policy”) as it applies to Mr. Kaestner. Under the letter agreement, if we complete the dispositions of our interests in all 16 entry fee CCRCs before January 1, 2021, such completion will be deemed to be a change in control under the Severance Policy if Mr. Kaestner is not offered continued acceptable employment with us or the acquiror of at least a majority of the entry fee CCRCs. An offer of continued acceptable employment means any offer of employment by us or the acquiror accepted by Mr. Kaestner, employment with us with compensation that is not materially and significantly reduced, or employment with the acquiror with responsibilities, duties, and compensation that are not materially and significantly reduced. In addition, we agreed to request that the Committee approve the acceleration and vesting of Mr. Kaestner’s outstanding equity upon consummation of such transactions. If the sale of our interests in all 16 entry fee CCRCs does not occur before January 1, 2021, the Severance Policy will continue to apply to Mr. Kaestner without modification by the 2019 letter agreement. As of May 11, 2020, we continued efforts to complete the sale of two entry fee CCRCs held in an unconsolidated venture with Healthpeak Properties, Inc.

Special Performance Bonuses for Mr. White

During 2019, the Committee determined to pay Mr. White special performance bonuses in the aggregate amount of $40,000 for his service as interim leader of human resources until May 9, 2019, following the departure of the former Chief People Officer on December 31, 2018.

 

 

 

 

2019 Compensation Results

Summary of Compensation Results

To provide a better understanding of the results of our executive compensation program, the table below sets forth the amount of compensation realized in 2019 by our named executive officers. The value of restricted shares that vested is based on the closing price per share of our stock on the applicable vesting dates. The table excludes the amounts reported in the All Other Compensation column of the Summary Compensation Table (generally employer matching on our 401(k) plan, employer-paid premiums on life and disability insurance, and the incremental cost to us of relocation expenses).

 

     Base Salary Earned      Annual Incentive
Opportunity Earned
     Value of Restricted
Shares that Vested
     Special
Performance
Bonus
Earned
     Total
Compensation
Realized
 

Ms. Baier

   $   910,000      $   657,295      $   668,971      $ –        $   2,236,266  

Mr. Swain

   $   515,000      $   275,545      $   94,382      $ –        $   884,927  

Ms. Patchett

   $   467,750      $   250,264      $   172,439      $ –        $   890,453  

Mr. White

   $   397,500      $   148,874      $   82,353      $   40,000      $   668,727  

Mr. Kaestner

   $   344,500      $   129,024      $   90,010      $ –        $   563,534  

Although we made significant progress on our operational turnaround strategy during 2019, our performance for the year was below our budgeted expectations. As a result, consistent with our pay-for-performance philosophy, such named executive officers’ realized compensation was significantly less than the amounts targeted by the Committee

 

 

  

 

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Executive Compensation

 

(see “Summary of 2019 Compensation Program” above) and the amounts reported in the Summary Compensation Table for 2019. Such named executive officers earned 53.5% of the target annual incentive opportunity, and the majority of performance-based restricted shares eligible to vest in 2019 were forfeited as a result of failure to achieve the threshold level of performance for the 3-year CAGR of Adjusted Cash From Facility Operations (“Adjusted CFFO”) per share measure included in 2016 long-term incentive awards.

Annual Incentive Plan Results

A summary of the achievement and payment to our named executive officers under the 2019 annual incentive plan is provided below. See “2019 Compensation Decisions–Annual Incentive Plan” above for the performance goals and targets, and our actual performance, for each of the financial objectives and strategic objectives.

 

     Financial Objectives
(60% Weighting)
            Strategic Objectives
(40% Weighting)
            Total  
     Achieved    Payout             Achieved    Payout             Achieved    Payout  

Ms. Baier

   54.4%    $   400,626         52.2%    $   256,669         53.5%    $   657,295  

Mr. Swain

   $   167,947         $   107,598         $   275,545  

Ms. Patchett

   $   152,538         $   97,726         $   250,264  

Mr. White

   $   90,740         $   58,134         $   148,874  

Mr. Kaestner

   $   78,641               $   50,383               $   129,024  

Long-Term Incentive Awards Results

Summary of Vesting and Forfeitures

During 2019, the named executive officers realized the compensation shown in the table below with respect to vesting of restricted shares granted prior to 2019. The value of shares that vested is based on the closing price per share of our stock on the vesting date.

 

     Vesting of Time-Based
Restricted Shares
Granted in 2015–2018
     Vesting of Performance-Based
Restricted Shares Granted in
2015–2016 (1)
            Total Vesting of Restricted
Shares in 2019
 
     No. of Shares      Value      No. of Shares      Value            No. of Shares      Value  

Ms. Baier

     96,812    $ 668,971           $                96,812      $ 668,971

Mr. Swain

     13,312    $ 94,382           $                13,312      $ 94,382

Ms. Patchett

     23,653    $   163,442      1,302    $   8,997              24,955      $   172,439

Mr. White

     11,596    $ 80,217      309    $ 2,135              11,905      $ 82,352

Mr. Kaestner

     11,756    $ 81,234      1,270    $ 8,776              13,026      $ 90,010

 

(1)

Details regarding our performance relative to the applicable performance targets are provided in the section below.

 

 

 

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Compensation Discussion and Analysis

 

Results of Performance-Based Restricted Shares Eligible to Vest in 2019

During 2019, performance-based restricted shares awarded in 2015 and 2016 were eligible to vest, subject to continued employment and achievement of performance goals established for each award by the Committee. The table below sets forth information regarding the performance goals and targets, our actual results, and the number of shares that vested on February 27, 2019 based on our actual results. The value of shares that vested is included in the summary table above and is based on the closing price per share of our stock on the vesting date. Performance below the threshold level of achievement would have resulted in forfeiture of all shares in the applicable tranche, achievement of the targeted level of performance (or above) would have resulted in the vesting of 100% of the applicable tranche, and vesting percentages were to be interpolated between the steps shown in the table below.

 

 Award
 Year
 

Performance

Goal

  % of Shares
Eligible to Vest
  Targets   Actual
Results
  Percent
that
Vested
              No. and Value of
Shares that Vested (1)
 

 

 2015

 

 

2018 Return on Investment (“ROI”) on Program Max Projects approved in 2015 and completed prior to the end of 2016 (2)

 

100% (Target/Max)

20% (Threshold)

 

³12%

8%

  >14%   100%                
 

 

Ms. Patchett

 

 

 

 

1,302

 

 

 

 

$

 

  8,997

 

 

 

 

Mr. White

 

 

 

 

309

 

 

 

 

$

 

  2,135

 

 

 

 

Mr. Kaestner

 

 

 

 

    1,270

 

 

 

 

$

 

  8,776

 

 

                           
 
 2016  

 

3-Year CAGR of Adjusted CFFO per Share comparing 2018 results versus a 2015 base year (3)

 

 

100% (Target/Max)

20% (Threshold)

 

³8%

4%

  <0%   0%                
 

 

Ms. Baier

 

 

 

 

 

 

 

 

$

 

 

 

 

 

Ms. Patchett

 

 

 

 

 

 

 

 

$

 

 

 

 

 

Mr. White

 

 

 

 

 

 

 

 

$

 

 

 

         

 

Mr. Kaestner

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

(1)

With respect to the 2016 awards eligible to vest on February 27, 2019, the following number of shares were forfeited as a result of failure to achieve the threshold level of performance: Ms. Baier–38,820 shares; Ms. Patchett–18,245 shares; Mr. White–2,211 shares; and Mr. Kaestner–9,057 shares.

 

(2)

Program Max is our development capital expenditures initiative through which we expand, renovate, reposition, or redevelop selected existing senior living communities where economically advantageous.

 

(3)

Adjusted CFFO per share was defined as Adjusted Cash From Facility Operations per share as reported by the Company, excluding federal income taxes to the extent we had become a federal income taxpayer during the performance period.

 

 

  

 

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Status of Outstanding Performance-Based Restricted Shares Granted in Prior Years

As of December 31, 2019, the named executive officers held the number of performance-based restricted shares awarded in prior years as outlined in the table below. Vesting of the performance-based restricted shares is subject to continued employment and achievement of performance goals established by the Committee. The table below sets forth information regarding the performance goals and targets and the number of shares subject to such awards. Performance below the threshold level of achievement has resulted or will result in forfeiture of all shares in the applicable tranche, achievement of the targeted level of performance (or above) has resulted or will result in the vesting of 100% of the applicable tranche, and vesting percentages will be interpolated between the steps shown in the table below.

 

 Award 
Year
  Vesting
Date
    Performance Goal   % of Shares
Eligible to Vest
  Targets          

Shares at Target

 
 
 2016     2/27/2020    

 

2019 ROI on Program Max Projects approved in 2016 and completed prior to the end of 2017 or approved prior to 2016 and completed during 2017 (1)

 

100% (Target/Max)

 

20% (Threshold)

 

³ 12%

 

8%

            Ms. Baier     12,940   
      Ms. Patchett     6,082   
      Mr. White     737   
      Mr. Kaestner     3,020   
 
2017     2/27/2020     3-Year CAGR of CAFCF comparing 2019 results versus a 2016 base year (2)  

 

100% (Target/Max)

 

80%

 

60%

 

40%

 

20% (Threshold)

 

 

³ 23.1%

 

14.3%

 

11.8%

 

9.3%

 

3.8%

     

 

Ms. Baier

 

 

 

 

37,904 

 

 

      Ms. Patchett     17,814   
      Mr. White     2,158   
      Mr. Kaestner     8,844   
    2/27/2021    

 

2020 ROI on Program Max Projects approved in 2017 and completed prior to the end of 2018 or approved prior to 2017 and completed during 2018

 

100% (Target/Max)

 

60%

 

20% (Threshold)

 

³ 11.0%

 

9.0%

 

8.0%

      Ms. Baier     12,635   
      Ms. Patchett     5,939   
      Mr. White     720   
      Mr. Kaestner     2,948   
 
2018     2/27/2021    

 

Compound annual TSR, comparing our share price of $6.53 to the volume-weighted average price for the 15 trading days ending December 31, 2020 (3)

 

100% (Target/Max)

 

75%

 

50% (Threshold)

 

³ 23.91%

 

20.17%

 

16.20%

       
     

 

Ms. Baier

    207,469   
     

 

Mr. Swain

 

 

 

 

53,248 

 

 

       
                   

 

(1)

Based on our actual ROI results of 13.6% for the year ended December 31, 2019, all of the shares awarded in 2016 and eligible to vest on February 27, 2020 vested at target/maximum.

 

(2)

Based on our actual CAGR results of less than 3.8% for the three-year period ended December 31, 2019, all of the shares awarded in 2017 and eligible to vest on February 27, 2020 were forfeited. For purposes of these performance-based restricted shares, CAFCF is defined as the sum of our Adjusted Free Cash Flow and our proportionate share of Adjusted Free Cash Flow of unconsolidated ventures, in each case as reported by the Company, excluding transaction, transaction-related, and severance costs and federal income taxes to the extent we had become a federal income taxpayer during the performance period.

 

(3)

Compound annual TSR is calculated assuming reinvestment in our common stock of any dividends or distributions paid during the period. The $6.53 beginning share price represents our closing price per share on February 28, 2018, the date that Ms. Baier became President and Chief Executive Officer.

 

 

 

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Compensation Discussion and Analysis

 

Other Compensation Policies

Annual Risk Assessment

In accordance with its charter, the Committee conducts an assessment annually of the relationship between our risk management policies and practices, corporate strategy, and our compensation arrangements. As part of this assessment, the Committee evaluates whether any incentive and other forms of pay encourage unnecessary or excessive risk taking. For our 2019 executive compensation program, the Committee concluded that the program, including the performance goals and targets used for incentive compensation, is appropriately structured not to encourage unnecessary or excessive risk taking, and that any risks arising from the program are not reasonably likely to have a material adverse effect on us.

Stock Ownership and Retention Guidelines

 

 

Our stock ownership and retention guidelines are applicable to certain of our officers, including our named executive officers, and are intended to further align the interests of our executives with those of our stockholders. Our named executive officers are expected to hold a number of shares with a minimum market value expressed as a     
      

 

Multiple of Base Salary     

 

 

Chief Executive Officer

  

 

5.0x

 

 

Chief Financial Officer

  

 

4.0x

 

 

Executive Vice Presidents                                                 

  

 

3.0x

    

multiple of their base salary as shown in the table below. Unvested equity awards do not count toward the expected level of ownership, except that the estimated number of after-tax time-based restricted shares scheduled to vest within 90 days may be counted towards compliance. The expected level of ownership must be achieved by the fifth anniversary of such officer’s becoming subject to the guidelines. Until the expected ownership level is achieved, each officer is expected to retain at least 50% of after-tax shares obtained through our equity compensation plans. This retention requirement also applies in situations where an officer has achieved the expected stock ownership level but changes in the market price of our stock or the officer’s base salary result in such officer’s failure to maintain the expected stock ownership level. All of our current named executive officers are in compliance with our stock ownership and retention guidelines and will be expected to retain at least 50% of their after-tax shares obtained through our equity compensation plans until they meet their applicable required holdings.

Policy on Derivatives, Hedging and Pledging

Our insider trading policy provides that no one subject to the policy, which includes all our directors, officers, employees and their immediate family members and controlled entities, may engage in short sales, puts, calls or other derivative transactions, or in any hedging or monetization transactions (i.e., prepaid variable forward contracts, equity swaps, collars, and exchange funds), involving our securities. It also provides that our directors and officers may not pledge our securities as collateral for a loan, or hold our securities in a margin account.

Clawback Policies

In February 2020, the Committee adopted a Clawback and Forfeiture Policy, which applies to our current and former officers as defined in Rule 16a-1 of the Exchange Act. By its terms, the policy will apply to all short-term and long-term cash or equity-based incentive compensation paid, earned, vested, or otherwise awarded based on performance measures, beginning with the 2020 annual incentive plan and the performance-based restricted stock units (“RSUs”) awarded to such officers in February 2020. The policy provides that in the event of any material financial restatement of our reported consolidated financial statements, or that the Committee otherwise determines that a financial metric used to determine the vesting or payment of any such performance-based compensation was calculated incorrectly in any material respect, the Committee, in its discretion, may require reimbursement of an amount equal to all or a portion of such performance-based compensation previously vested or paid for any

 

 

  

 

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performance periods which include any of the three full fiscal years immediately preceding the announcement of any financial restatement or the determination of any inaccuracy regarding calculation of a financial metric. The amount of the recoupment will be determined by the Committee in its discretion, up to the amount of such performance-based compensation previously paid or vested with respect to such officer that is in excess of the performance-based compensation that would have been received based on the correct financial metric or restated results. To the extent the Committee determines that any such amount should be recouped, the Committee may seek recovery by, among other things, requiring reimbursement of performance-based compensation previously paid, canceling or rescinding outstanding equity awards, adjusting or withholding unpaid compensation, or setting off against future grants of equity-based awards.

In February 2020, the Board adopted an amendment to our 2014 Omnibus Incentive Plan that provides that any award thereunder shall be subject to forfeiture, reduction, or recoupment to the extent provided in our Clawback and Forfeiture Policy or any other future recoupment or clawback policy adopted by us. Awards thereunder continue to be subject to forfeiture, reduction, or recoupment to the extent we adopt a policy to comply with the requirements of any applicable laws, rules, regulations, or stock exchange listing requirements, including pursuant to final SEC rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act and to the extent provided under applicable legal requirements which impose recoupment, including the Sarbanes-Oxley Act of 2002.

The RSU award agreements used in connection with the February 2020 awards to the named executive officers provide that in the event of a breach by the named executive officer of the non-competition, non-solicitation, non-disparagement, or confidentiality covenants contained in the agreements, we will have the authority to cancel all such outstanding RSUs, cancel all shares of stock beneficially owned by the named executive officer that were issued in settlement of the RSUs within 12 months on or prior to, or at any time after, the termination of the named executive officer’s employment, and recoup from the named executive officer any proceeds from such officer’s sale, transfer, or other disposition of any such cancellable shares.

To the extent the named executive officers are eligible to receive severance pay and benefits under Ms. Baier’s employment agreement and the Severance Policy, as applicable, such agreement and policy provide that any breach of a restrictive covenant applicable to the named executive officer will result in the immediate and permanent cessation of payment of severance pay and benefits, the obligation of the named executive officer to repay to us upon our demand 90% of the amount or cost of such severance pay and benefits, and the obligation of the named executive officer to pay our costs and expenses to enforce such obligation.

Tax Considerations

Section 162(m) of the Internal Revenue Code places a limit of $1 million on the amount that a company may deduct in any one year with respect to compensation paid to any “covered employee.” Prior to the enactment of the Tax Cuts and Jobs Act in December 2017, Section 162(m) provided an exemption from this deduction limitation for compensation that qualified as “performance-based compensation.” However, the exemption for performance-based compensation was repealed, effective for taxable years beginning after December 31, 2017, subject to transition relief for certain arrangements in place as of November 2, 2017. These and other changes cause more elements of our compensation to be non-deductible under Section 162(m) and eliminated the Company’s ability to structure performance-based awards to be exempt from Section 162(m). While the Committee will continue to consider tax implications in making compensation decisions, the Committee will not necessarily limit executive compensation to that which is or may be deductible under Section 162(m). The Committee believes that the interests of our stockholders are best served if it maintains flexibility in compensating executive officers in a manner designed to promote varying corporate goals even though some compensation awards may result in non-deductible compensation expense. In making decisions about executive compensation, the Committee also considers the impact of other tax laws, including Section 409A of the Internal Revenue Code regarding non-qualified deferred compensation and Section 280G of the Internal Revenue Code regarding compensation in connection with a change in control.

 

 

 

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Compensation Discussion and Analysis

 

 

 

 Employment Agreement and Severance Policies Applicable to Named Executive Officers

We are party to an employment agreement dated March 1, 2018 with Ms. Baier, which we entered into in connection with her promotion to President and Chief Executive Officer effective February 28, 2018. The employment agreement has a three year term, subject to automatic extensions for additional one year periods, unless either we or Ms. Baier gives written notice to the other party no less than 90 days prior to the expiration of the term that the term will not be extended. Ms. Baier’s initial base salary was $825,000 per year, which may not be reduced without Ms. Baier’s approval. In addition, Ms. Baier is eligible to receive an annual cash incentive opportunity with a target of at least 125% of base salary paid during the calendar year, subject to the terms of our annual incentive plan for senior executive officers. Ms. Baier is eligible to participate in various benefit plans that we make available to our senior executive officers (other than our severance policies). In addition, we will provide Ms. Baier with basic term life insurance benefits of at least 100% of her base salary at no cost to Ms. Baier. Under her employment agreement, Ms. Baier is entitled to severance payments if her employment is terminated by us without cause or by her for good reason. Severance payments in connection with a change in control are “double trigger,” which requires the occurrence of a change in control followed by termination of employment within 18 months of the change in control by us without cause or by Ms. Baier for good reason. Under Ms. Baier’s employment agreement, any payments that are not deductible by us under Section 280G of the Internal Revenue Code will be cut back only to the extent that the cutback results in a better after-tax position for Ms. Baier. The employment agreement contains non-competition, non-solicitation, confidentiality, and mutual non-disparagement covenants. The non-competition restrictions will continue in effect during Ms. Baier’s employment and for one year following termination of employment. The non-solicitation restrictions will continue in effect during her employment and for two years following her termination of employment. The confidentiality and mutual non-disparagement obligations will apply during her employment and thereafter.

Our other named executive officers do not have employment agreements, but are eligible to participate in the Severance Policy. Ms. Patchett participates in the Severance Policy as a “Designated Officer” as defined therein, and each of Messrs. Swain, White, and Kaestner participates in the Severance Policy as a “Selected Officer” as defined therein. Mr. Kaestner is also party to separate letter agreements with us dated effective as of August 6, 2010 and September 25, 2019, which provide for certain modifications of the Severance Policy as it applies to Mr. Kaestner. Under the Severance Policy, the participating named executive officers are entitled to severance payments if their employment is terminated by us without cause (or by Mr. Kaestner for good reason) or, following a change in control, by the executive for good reason. The severance payments under the Severance Policy applicable in connection with a change in control are “double trigger,” which require the occurrence of a change in control followed by termination of employment by us without cause or by the executive for good reason. If payments pursuant to the Severance Policy and other arrangements are not deductible by us under Section 280G of the Internal Revenue Code, such payments shall be reduced (or repaid) in order to ensure our deduction of payments in connection with a change in control.

A detailed description of potential severance payments pursuant to the foregoing employment agreement and the Severance Policy, as well as the effect of certain terminations and a change in control pursuant to outstanding equity award agreements, is set forth under “Potential Payments Upon Termination or Change in Control” below.

 

 

 

2020 Compensation Decisions

When making annual compensation decisions for 2020, the Committee conducted a comprehensive review of our executive compensation program similar to the review conducted for 2019 annual compensation decisions. With respect to market compensation practices, the Consultant reviewed our compensation peer group and recommended that it be updated to replace LifePoint Hospitals, Inc., Magellan Health, Inc., and Wyndham Destinations with LHC Group, Inc., Norwegian Cruise Line Holdings Ltd., Wyndham Hotels & Resorts, Inc., and

 

 

  

 

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Chemed Corporation to reflect mergers and acquisitions activity and to more closely align the median levels of financial metrics and number of employees of the peer group with ours.

The Consultant also completed a market compensation study. The Committee, as advised by the Consultant, considered target total direct compensation within a range of +/- 20% of median as reported in the Consultant’s study to be competitive. The Committee found that Ms. Baier’s target total direct compensation was slightly below the market median, and that Messrs. Swain’s and White’s base salaries, target total cash compensation, target long-term equity awards, and target total direct compensation were at the low end, or below, the median market ranges. Following completion of its review, the Committee approved the principal elements of compensation of our named executive officers for 2020 as summarized in the table below. With the 2020 changes, the elements of Messrs. Swain’s and White’s compensation fell within the market ranges shown in the market compensation study, but continued to be below the market medians.

 

    2020 Base
Salary
    Change v.
2019
    2020 Target
Annual
Incentive
Opportunity
    Change v.
2019
   

 

2020 Grant
Value of
Long-Term
Incentive
Awards (1)

    Change v.
2019 (1)
    2020 Target
Total Direct
Compensation
    Change v.
2019
 

 

 Ms. Baier

 

 

 

 

$   938,000

 

 

 

 

 

 

3%

 

 

 

 

 

 

135%

 

 

 

 

 

 

–%

 

 

 

 

 

 

$  4,900,000

 

 

 

 

 

 

3%

 

 

 

 

 

 

$    7,104,300

 

 

 

 

 

 

3%

 

 

 

 Mr. Swain

 

 

 

 

$   575,000

 

 

 

 

 

 

12%

 

 

 

 

 

 

100%

 

 

 

 

 

 

–%

 

 

 

 

 

 

$  1,700,000

 

 

 

 

 

 

31%

 

 

 

 

 

 

$    2,850,000

 

 

 

 

 

 

22%

 

 

 

 Ms. Patchett

 

 

 

 

$   467,750

 

 

 

 

 

 

–%

 

 

 

 

 

 

100%

 

 

 

 

 

 

–%

 

 

 

 

 

 

$     900,000

 

 

 

 

 

 

–%

 

 

 

 

 

 

$    1,835,500

 

 

 

 

 

 

–%

 

 

 

 Mr. White

 

 

 

 

$   425,000

 

 

 

 

 

 

7%

 

 

 

 

 

 

70%

 

 

 

 

 

 

–%

 

 

 

 

 

 

$     550,000

 

 

 

 

 

 

22%

 

 

 

 

 

 

$    1,272,500

 

 

 

 

 

 

13%

 

 

 

 Mr. Kaestner

 

 

 

 

$   355,000

 

 

 

 

 

 

3%

 

 

 

 

 

 

70%

 

 

 

 

 

 

–%

 

 

 

 

 

 

$     350,000

 

 

 

 

 

 

–%

 

 

 

 

 

 

$       953,500

 

 

 

 

 

 

2%

 

 

 

(1)

The dollar amount of the 2020 long-term incentive awards, and the percentage change versus 2019, is based on the grant value of such awards (i.e., number of restricted stock units granted at target performance, multiplied by the stock price on the date of grant).

The 2020 annual incentive plan, as approved by the Committee, continues to be based on company financial objectives and strategic objectives weighted consistently with 2019, with the target levels of performance generally reflective of our 2020 budget approved by the Board at the beginning of 2020. The performance objectives are generally consistent with the 2019 annual incentive opportunity, except a quality measure will be used in lieu of the NPS-related objectives. The Committee is assessing the performance objectives and targets of the 2020 annual incentive plan in light of the COVID-19 pandemic.

For the 2020 long-term incentive awards, a 50/50 grant value mix of time- and performance-based equity was used for the named executive officers, consistent with the 2019 program. The performance objectives for the performance-based equity awards continue to be weighted at 75% using the 3-year CAGR of same community RevPAR objective and 25% using the 3-year relative TSR objective. The Committee determined to utilize restricted stock units for the 2020 program on substantially the same terms as the 2019 restricted share awards, except that the 2020 awards no longer provide for partial single-trigger acceleration of equity upon a change in control unless the awards are not assumed, continued, or substituted with an award relating to a publicly-traded security of the acquiror (or the Company) on the same terms and conditions that were applicable to the outstanding awards immediately prior to the change in control, in which case such awards would vest and be settled upon the change in control.

 

 

 

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Compensation Committee Report

 

Compensation Committee Report

The Compensation Committee has reviewed and discussed the disclosure set forth above under the heading “Compensation Discussion and Analysis” with management and, based on the review and discussions, it has recommended to the Board that the “Compensation Discussion and Analysis” be included herein.

Respectfully submitted by the Compensation Committee of the Board,

COMPENSATION COMMITTEE

Frank M. Bumstead, Chairman

Victoria L. Freed

Denise W. Warren

 

 

  

 

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Executive Compensation

 

Summary Compensation Table for 2019

The following summary compensation table sets forth information concerning the compensation earned by, awarded to, or paid to our named executive officers for the periods indicated.

 

 Name and Principal Position (1)

 

 

Year

 

   

Salary
($)

 

   

Bonus
($) (2)

 

   

Stock
Awards
($) (3)

 

   

 

Non-Equity
Incentive Plan
Compensation
($) (4)

 

   

All Other
Compensation
($) (5)

 

   

    Total    

($)

 

 

 

Lucinda M. Baier

President and

Chief Executive Officer

 

 

 

 

2019

 

 

 

 

 

 

910,000

 

 

 

 

 

 

 

 

 

 

 

 

4,773,420

 

 

 

 

 

 

657,295

 

 

 

 

 

 

10,186

 

 

 

 

 

 

6,350,901

 

 

 

 

2018

 

 

 

782,248

 

 

 

50,000

 

 

 

3,551,872

 

 

 

281,023

 

 

 

9,112

 

 

 

4,674,255

 

 

 

2017

 

 

 

550,000

 

 

 

 

 

 

1,500,013

 

 

 

196,150

 

 

 

161,025

 

 

 

2,407,188

 

 

Steven E. Swain

Executive Vice President and

Chief Financial Officer

 

 

 

 

2019

 

 

 

 

 

 

515,000

 

 

 

 

 

 

 

 

 

 

 

 

1,306,414

 

 

 

 

 

 

275,545

 

 

 

 

 

 

20,490

 

 

 

 

 

 

2,117,449

 

 

 

 

2018

 

 

 

161,538

 

 

 

100,000

 

 

 

802,324

 

 

 

46,038

 

 

 

162,235

 

 

 

1,272,135

 

                                                       

Mary Sue Patchett

Executive Vice President –

Strategic Operations

 

 

 

 

2019

 

 

 

 

 

 

467,750

 

 

 

 

 

 

 

 

 

 

 

 

904,438

 

 

 

 

 

 

250,264

 

 

 

 

 

 

9,037

 

 

 

 

 

 

1,631,489

 

 

 

 

2018

 

 

 

437,750

 

 

 

450,000

 

 

 

800,004

 

 

 

62,905

 

 

 

7,783

 

 

 

1,758,442

 

 

 

2017

 

 

 

425,000

 

 

 

 

 

 

705,004

 

 

 

134,995

 

 

 

7,026

 

 

 

1,272,025

 

 

Chad C. White

Executive Vice President,

General Counsel and Secretary  

 

 

 

 

 

2019

 

2018

 

 

 

 

 

 

 

 

 

397,500

 

350,000

 

 

 

 

 

 

 

 

 

40,000

 

300,000

 

 

 

 

 

 

 

 

 

452,219

 

350,009

 

 

 

 

 

 

 

 

 

148,874

 

81,396

 

 

 

 

 

 

 

 

 

7,807

 

7,198

 

 

 

 

 

 

 

 

 

1,046,400

 

1,088,604

 

 

 

 

 

H. Todd Kaestner

Executive Vice President

Asset Management and

Division President–Entry Fee

 

 

 

 

2019

 

 

 

 

 

 

344,500

 

 

 

 

 

 

 

 

 

 

 

 

351,731

 

 

 

 

 

 

129,024

 

 

 

 

 

 

9,134

 

 

 

 

 

 

834,389

 

 

 

(1)

The named executive officers served in the positions noted in the table at all times during the years presented, except that: Ms. Baier served as Chief Financial Officer until being appointed as our President and Chief Executive Officer effective February 28, 2018; Mr. Swain joined the Company as Executive Vice President and Chief Financial Officer effective September 4, 2018; Ms. Patchett previously served as Executive Vice President–Community Operations until March 23, 2020, and Mr. Kaestner previously served as Executive Vice President–Corporate Development until June 30, 2019.

 

(2)

The 2019 amount for Mr. White consists of special performance bonuses paid to Mr. White for his service as interim leader of human resources until May 9, 2019 following the departure of the former Chief People Officer on December 31, 2018.

 

(3)

Represents the aggregate grant date fair value of time- and performance-based restricted shares computed in accordance with ASC 718. See Note 2 to our Consolidated Financial Statements included in our 2019 Annual Report for a summary of the assumptions made in the valuation of these awards. See footnotes 2 and 3 to the Grants of Plan-Based Awards Table for the grant values of performance-based restricted shares awarded in 2019 assuming maximum levels of performance.

 

(4)

Represents the payout of each named executive officer’s annual cash incentive opportunity with respect to performance in the applicable year.

 

(5)

For each of the named executive officers, the 2019 amount includes the employer matching contribution to our 401(k) Plan and premiums on Company-provided life and disability insurance. For Mr. Swain, the 2019 amount also includes the incremental cost to the Company of $12,457 for relocation assistance provided to Mr. Swain, including associated tax gross ups of $4,902.

 

 

 

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Table of Contents

 

Grants of Plan-Based Awards

 

Grants of Plan-Based Awards

The following table summarizes grants of plan-based awards made to our named executive officers in 2019. To the extent we declare dividends on our shares of common stock, the restricted shares awarded in 2019 will accrue such dividends to be paid in cash only to the extent the underlying restricted shares ultimately vest.

 

Name

 

Grant Date

   

 

Estimated Possible Payouts

Under Non-Equity Incentive

Plan Awards

         

 

Estimated Possible Payouts

Under Equity Incentive Plan

Awards

   

 

All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)

   

Grant
Date

Fair

Value of
Stock
Awards

($)

 
 

Threshold

($)

   

Target

($)

   

Maximum

($)

         

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

 

 

Ms. Baier

 

 

 

 

 

–  (1)

 

 

 

 

 

 

 

 

 

307,125

 

 

 

 

 

 

 

 

 

1,228,500

 

 

 

 

 

 

 

 

 

2,211,300

 

 

 

 

           
 

 

 

 

 

2/11/2019  (2)

 

 

 

 

         

 

 

 

 

56,656

 

 

 

 

 

 

 

 

 

226,622

 

 

 

 

 

 

 

 

 

283,277

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,781,249

 

 

 

 

 

 

 

 

 

2/11/2019  (3)

 

 

 

 

         

 

 

 

 

37,770

 

 

 

 

 

 

 

 

 

75,541

 

 

 

 

 

 

 

 

 

113,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

617,170

 

 

 

 

 

 

 

 

 

2/11/2019  (4)

 

 

 

 

                                 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

302,163

 

 

 

 

 

 

 

 

2,375,001

 

 

 

 

 

Mr. Swain

 

 

 

 

 

–  (1)

 

 

 

 

 

 

 

 

 

128,750

 

 

 

 

 

 

 

 

 

515,000

 

 

 

 

 

 

 

 

 

927,000

 

 

 

 

           
 

 

 

 

 

2/11/2019  (2)

 

 

 

 

         

 

 

 

 

15,506

 

 

 

 

 

 

 

 

 

62,023

 

 

 

 

 

 

 

 

 

77,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

487,501

 

 

 

 

 

 

 

 

 

2/11/2019  (3)

 

 

 

 

         

 

 

 

 

10,337

 

 

 

 

 

 

 

 

 

20,674

 

 

 

 

 

 

 

 

 

31,011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

168,907

 

 

 

 

 

 

 

 

 

2/11/2019  (4)

 

 

 

 

                                 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

82,698

 

 

 

 

 

 

 

 

 

650,006

 

 

 

 

 

Ms. Patchett

 

 

 

 

 

–  (1)

 

 

 

 

 

 

 

 

 

116,938

 

 

 

 

 

 

 

 

 

467,750

 

 

 

 

 

 

 

 

 

841,950

 

 

 

 

           
 

 

 

 

 

2/11/2019  (2)

 

 

 

 

         

 

 

 

 

10,735

 

 

 

 

 

 

 

 

 

42,939

 

 

 

 

 

 

 

 

 

53,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

337,501

 

 

 

 

 

 

 

 

 

2/11/2019  (3)

 

 

 

 

         

 

 

 

 

7,157

 

 

 

 

 

 

 

 

 

14,313

 

 

 

 

 

 

 

 

 

21,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

116,937

 

 

 

 

 

 

 

 

 

2/11/2019  (4)

 

 

 

 

                                 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57,252

 

 

 

 

 

 

 

 

450,001

 

 

 

 

 

Mr. White

 

 

 

 

 

–  (1)

 

 

 

 

 

 

 

 

 

69,563

 

 

 

 

 

 

 

 

 

278,250

 

 

 

 

 

 

 

 

 

500,850

 

 

 

 

           
 

 

 

 

 

2/11/2019  (2)

 

 

 

 

         

 

 

 

 

5,368

 

 

 

 

 

 

 

 

 

21,470

 

 

 

 

 

 

 

 

 

26,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

168,754

 

 

 

 

 

 

 

 

 

2/11/2019  (3)

 

 

 

 

         

 

 

 

 

3,578

 

 

 

 

 

 

 

 

 

7,156

 

 

 

 

 

 

 

 

 

10,734

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58,465

 

 

 

 

 

 

 

 

 

2/11/2019  (4)

 

 

 

 

                                 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,626

 

 

 

 

 

 

 

 

225,000

 

 

 

 

 

Mr. Kaestner

 

 

 

 

 

–  (1)

 

 

 

 

 

 

 

 

 

60,288

 

 

 

 

 

 

 

 

 

241,150

 

 

 

 

 

 

 

 

 

434,070

 

 

 

 

           
 

 

 

 

 

2/11/2019  (2)

 

 

 

 

         

 

 

 

 

4,175

 

 

 

 

 

 

 

 

 

16,699

 

 

 

 

 

 

 

 

 

20,873

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

131,254

 

 

 

 

 

 

 

 

 

2/11/2019  (3)

 

 

 

 

         

 

 

 

 

2,783

 

 

 

 

 

 

 

 

 

5,566

 

 

 

 

 

 

 

 

 

8,349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45,474

 

 

 

 

 

 

 

 

 

2/11/2019  (4)

 

 

 

 

                                 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,265

 

 

 

 

 

 

 

 

175,003

 

 

 

 

 

(1)

Amounts represent the threshold, target, and maximum payout levels under our 2019 annual incentive plan. The actual payouts are reported in the Summary Compensation Table as Non-Equity Incentive Plan Compensation in the following amounts: Ms. Baier–$657,295; Mr. Swain–$275,545; Ms. Patchett–$250,264; Mr. White–$148,874; and Mr. Kaestner–$129,024.

 

(2)

Represents performance-based restricted shares granted under our 2014 Omnibus Incentive Plan which are eligible to vest on February 27, 2022, subject to continued employment and the achievement of 3-year CAGR of same community RevPAR performance targets as described above. The values reported in the table represent the grant date fair values computed in accordance with ASC 718, which are equivalent to the grant values (i.e., number of shares granted at target performance level, multiplied by the closing price on the date of grant). Achievement at the threshold, target, and maximum or above performance levels will result in vesting of 25%, 100%, and 125% of the target number of shares, respectively, and vesting percentages will be interpolated between threshold and target, and target and maximum performance levels. Failure to achieve the threshold

 

 

  

 

2020 PROXY STATEMENT

 

 

 

 

 

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Table of Contents

 

Executive Compensation

 

  performance level will result in forfeiture of all such shares. The grant values of the awards (i.e., number of shares granted multiplied by the closing price on the date of grant) assuming achievement at or above the maximum performance level are: Ms. Baier–$2,226,557; Mr. Swain–$609,370; Ms. Patchett–$421,870; Mr. White–$210,939; and Mr. Kaestner–$164,062.

 

(3)

Represents performance-based restricted shares granted under our 2014 Omnibus Incentive Plan which are eligible to vest on February 27, 2023, subject to continued employment and the achievement of 3-year relative TSR performance targets as described above. The values reported in the table represent the grant date fair values computed in accordance with ASC 718, which were 4% more than the grant values (i.e., number of shares granted at target performance level, multiplied by the closing price on the date of grant). Achievement at the threshold, target, and maximum or above performance levels will result in vesting of 50%, 100%, and 150% of the target number of shares, respectively (provided that no additional shares beyond the target number of shares will be issued if our compound annual TSR is negative for the performance period), and vesting percentages will be interpolated between threshold and target, and target and maximum performance levels. Failure to achieve the threshold performance level will result in forfeiture of all such shares. The grant values of the awards (i.e., number of shares granted multiplied by the closing price on the date of grant) assuming achievement at or above the maximum performance level are: Ms. Baier–$890,624; Mr. Swain–$243,746; Ms. Patchett–$168,746; Mr. White–$84,369; and Mr. Kaestner–$65,623.

 

(4)

Represents time-based restricted shares granted under our 2014 Omnibus Incentive Plan which are eligible to vest ratably in four annual installments beginning on February 27, 2020, subject to continued employment.

 

 

 

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Table of Contents

 

Outstanding Equity Awards at Fiscal Year-End

 

Outstanding Equity Awards at Fiscal Year-End

The following table summarizes the outstanding equity awards held by each of our named executive officers as of December 31, 2019. The market values of such awards are based on $7.27 per share, the closing market price of our stock on December 31, 2019.

 

          Stock Awards  

Name

  Grant Date     Number of Shares
or Units of Stock
That Have Not
Vested (#) (1)
    Market Value of
Shares or Units of
Stock That Have
Not Vested ($)
    Equity Incentive Plan
Awards: Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested (#)
    Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares, Units
or Other Rights That
Have Not Vested ($)
 

Ms. Baier

 

   

 

2/26/2016

 

 

 

   

 

12,940

 

 

 

   

 

94,074

 

 

 

   

 

12,940  (2)

 

 

 

   

 

94,074

 

 

 

   

 

2/13/2017

 

 

 

   

 

25,270

 

 

 

   

 

183,713

 

 

 

   

 

20,215  (3)

 

 

 

   

 

146,963

 

 

 

   

 

1/5/2018

 

 

 

   

 

77,479

 

 

 

   

 

563,272

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

1/5/2018

 

 

 

   

 

58,110

 

 

 

   

 

422,460

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

3/5/2018

 

 

 

   

 

155,602

 

 

 

   

 

1,131,227

 

 

 

   

 

103,735  (4)

 

 

 

   

 

754,150

 

 

 

   

 

2/11/2019

 

 

 

   

 

302,163

 

 

 

   

 

2,196,725

 

 

 

   

 

264,392  (5)

 

 

 

   

 

1,992,130

 

 

 

Mr. Swain

 

   

 

9/10/2018

 

 

 

   

 

39,937

 

 

 

   

 

290,342

 

 

 

   

 

26,624  (4)

 

 

 

   

 

193,556

 

 

 

   

 

2/11/2019

 

 

 

   

 

82,698

 

 

 

   

 

601,214

 

 

 

   

 

72,360  (5)

 

 

 

   

 

526,057

 

 

 

Ms. Patchett

 

   

 

2/26/2016

 

 

 

   

 

6,082

 

 

 

   

 

44,216

 

 

 

   

 

6,082  (2)

 

 

 

   

 

44,216

 

 

 

   

 

2/13/2017

 

 

 

   

 

11,877

 

 

 

   

 

86,346

 

 

 

   

 

9,501  (3)

 

 

 

   

 

69,072

 

 

 

   

 

1/5/2018

 

 

 

   

 

41,322

 

 

 

   

 

300,411

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

1/5/2018

 

 

 

   

 

30,993

 

 

 

   

 

225,319

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

2/11/2019

 

 

 

   

 

57,252

 

 

 

   

 

416,222

 

 

 

   

 

50,095  (5)

 

 

 

   

 

364,191

 

 

 

Mr. White

 

   

 

2/26/2016

 

 

 

   

 

2,212

 

 

 

   

 

16,081

 

 

 

   

 

737  (2)

 

 

 

   

 

5,358

 

 

 

   

 

2/13/2017

 

 

 

   

 

4,319

 

 

 

   

 

31,399

 

 

 

   

 

1,151  (3)

 

 

 

   

 

8,368

 

 

 

   

 

5/4/2017

 

 

 

   

 

1,780

 

 

 

   

 

12,941

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

1/5/2018

 

 

 

   

 

18,079

 

 

 

   

 

131,434

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

1/5/2018

 

 

 

   

 

13,560

 

 

 

   

 

98,581

 

 

 

   

 

–      

 

 

 

   

 

 

 

 

   

 

2/11/2019

 

 

 

   

 

28,626

 

 

 

   

 

208,111

 

 

 

   

 

25,048  (5)

 

 

 

   

 

182,099