Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.)
Filed by the Registrant  X
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))
X
 
Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material under §240.14a-12
DAVITA INC.
 
(Name of Registrant as Specified In Its Charter)
 
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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X
 
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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.
 
 
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Notice of 2020 Annual Meeting and Proxy Statement
 
 
 
 



 
 
 
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April 27, 2020
Dear Fellow Stockholders:
On behalf of DaVita Inc. ("DaVita" or the "Company") and the Board of Directors (the "Board"), we are pleased to invite you to attend the DaVita Inc. 2020 Annual Meeting of Stockholders (the "Annual Meeting"), which will be held on Thursday, June 11, 2020, at 10:00 a.m. Mountain Time. Due to the public health impact of the coronavirus (COVID-19) pandemic and to support the health and well-being of our stockholders and teammates, we have adopted a virtual format for our Annual Meeting. The Annual Meeting will be webcast live at www.virtualshareholdermeeting.com/DVA2020, during which time you will be able to vote your shares electronically and submit any questions. The attached Notice of Annual Meeting and Proxy Statement will serve as your guide to the business to be conducted at the Annual Meeting and provide detail on the virtual meeting format.
In this time of public health crisis, DaVita is taking significant steps to continue to provide high-quality care for more than 235,000 patients in eleven countries in the world whose lives depend on receiving dialysis treatment multiple times each week, while also protecting our front line caregivers. DaVita's unique and broad platform supporting in-center, hospital and home dialysis care not only has benefited patients in this crisis as patients often require more than one site of care as their needs evolve, but also has benefited the communities in which we serve by relieving hospitals from treating COVID-19 positive patients. In the United States, DaVita has worked collaboratively with the U.S. Department of Health and Human Services (HHS), the Centers for Medicare and Medicaid Services (CMS), the Centers for Disease Control (CDC), the American Society of Nephrology, and dialysis providers nationwide to ensure the dialysis community is able to support each other.
Now, more than ever, I offer heartfelt thanks to all our 65,000 teammates around the world, especially to our caregiving teammates and physician partners working heroically to provide life-sustaining therapy to our patients. Their strength, tenacity, and compassion is truly inspiring. I have never been more proud to be a part of DaVita.
Respectfully submitted,
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Javier J. Rodriguez
Director and Chief Executive Officer, DaVita Inc.









 
 
 

April 27, 2020

Dear Fellow Stockholders:
I am proud to be succeeding Kent J. Thiry as Chair of the Board of Directors of DaVita Inc. on June 1, 2020. On behalf of the Board and my fellow stockholders, I would like to thank Kent for his leadership and commitment in his nearly 20 years as Chairman and Chief Executive Officer ("CEO"). During Kent’s tenure, DaVita’s stock price increased approximately 30-fold; revenues increased 8-fold from $1.4 billion to $11.4 billion; and we grew from 12,000 to approximately 65,000 teammates. DaVita also achieved significant operational and clinical milestones under Kent's leadership.
Thoughtful Approach to Board Composition with a Demonstrated Commitment to Refreshment. Your Board of Directors is committed to creating a balanced and effective Board with diverse, fresh viewpoints and skills, as well as deep industry expertise related to DaVita. Three long-serving directors are retiring from the Board in 2020 and three new directors were appointed from 2015 to 2017, bringing our average tenure to 8.7 years and gender diversity to 38% female. The Board is currently engaged in an ongoing process to select one or more new directors.
Ongoing Dialogue with Stockholders through Proactive Engagement. We believe that engaging with investors is fundamental to our commitment to good governance and essential to maintaining strong corporate governance and executive compensation practices. Since our 2019 Annual Meeting of Stockholders, members of the Board and management proactively reached out to stockholders owning approximately 80% of DaVita’s outstanding shares and met with stockholders representing approximately 69% of DaVita's outstanding shares. In my role as Compensation Committee Chair, I was pleased to personally speak directly with a number of our investors. Over the past several years, feedback received from these discussions has helped inform changes to our executive compensation program and further enhance our disclosures.
CEO Transition. Effective June 1, 2019, after nearly 20 years of dedicated service to DaVita and its patients, teammates, physician partners, stockholders, and communities, Kent stepped down as CEO and Javier J. Rodriguez assumed that role. We believe that Javier’s broad range of experience and exceptional leadership skills make him the right person to lead a successful next chapter for the enterprise. We applaud the work Javier and his talented team have already accomplished and thank Kent for his role in developing a leadership bench of such depth. We believe Javier’s promotion to CEO demonstrates DaVita’s robust management succession and talent management programs, which help ensure that DaVita develops its executives to assume greater responsibility and provide continuity of management. We are proud to have a team of such strength and commitment to DaVita’s values, mission, and vision.
Corporate Citizenship and Sustainability. DaVita supports programs dedicated to creating positive, sustainable change in communities around the world. For its efforts in the field of corporate responsibility, DaVita was named to the Dow Jones Sustainability Index World List. This honor comes after being analyzed for the Company's performance in regards to environmental, social and governance practices. As a testament to the Company's dedication to its teammates, DaVita has been recognized as a top workplace in Colorado for the seventh time. DaVita was also distinguished as a member of the 2019 Bloomberg Gender-Equality Index, a metric that provides companies across the globe an opportunity to disclose and showcase their efforts in gender equality. DaVita is among only 10 health care companies and one of two Colorado-based companies to receive this honor.
I would like to say a special thank you to our stockholders. We recognize and greatly appreciate the trust and confidence you have placed in us. As 2020 continues, we will continue to represent your interests through our strong independent oversight of management.
In closing, I would like to echo Javier's thoughts and thank our teammates and physician partners for their incredible devotion to our patients and each other during this time of crisis.
On behalf of your Board of Directors,
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Pamela M. Arway
Chair, Compensation Committee
Incoming Chair of the Board



 
Notice of 2020 Annual Meeting of Stockholders
 
Thursday, June 11, 2020
10:00 a.m. Mountain Time
Webcast live at www.virtualshareholdermeeting.com/DVA2020
The 2020 Annual Meeting of the Stockholders (the "Annual Meeting") of DaVita Inc., a Delaware corporation, will be a virtual-only meeting to be held as a live audio webcast over the Internet at www.virtualshareholdermeeting.com/DVA2020 on Thursday, June 11, 2020 at 10:00 a.m. Mountain Time, for the following purposes, which are further described in the accompanying Proxy Statement:
To vote upon the election of the eight director nominees identified in the accompanying Proxy Statement to the Board of Directors, each to serve until the Company's 2021 Annual Meeting of Stockholders or until their respective successors are duly elected and qualified;
To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2020;
To approve, on an advisory basis, the compensation of our named executive officers;
To approve the DaVita Inc. 2020 Incentive Award Plan;
To consider and vote upon a stockholder proposal regarding political contributions disclosure, if properly presented at the Annual Meeting; and
To transact such other business as may properly be brought before the Annual Meeting and any adjournment or postponement thereof by the presiding person of the Annual Meeting.
We will mail, on or about April 27, 2020, a Notice of Internet Availability of Proxy Materials to stockholders of record and beneficial owners as of the close of business on April 13, 2020. On the date of mailing of the Notice of Internet Availability of Proxy Materials, the proxy materials will be available free of charge at www.proxyvote.com.
The Notice of Internet Availability of Proxy Materials will identify a toll-free telephone number, an e-mail address and a website where stockholders can request a paper or e-mail copy of the Proxy Statement, our 2019 Annual Report to Stockholders, and a form of proxy relating to the Annual Meeting; and information on how to access the form of proxy over the Internet and how to vote. If you virtually attend the Annual Meeting and previously used the telephone or Internet voting systems, or mailed your completed proxy card, you may vote during the Annual Meeting if you wish to change your vote in any way.
Please note that all votes cast via telephone or the Internet must be cast prior to 11:59 p.m. Eastern Time on Wednesday, June 10, 2020. Be aware that earlier voting deadlines apply for shares held through the DaVita Retirement Savings Plan. Additional information on voting deadlines and voting instructions are set out in the Proxy Statement under the heading "How to Vote."
We will make a list of stockholders entitled to vote at the Annual Meeting available electronically on the virtual meeting website on the date of the Annual Meeting. In addition, during the ten days prior to the Annual Meeting, you may contact Investor Relations at 1-888-484-7505 to request the list of stockholders entitled to vote at the Annual Meeting.
 
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE 2020 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON June 11, 2020:

The Notice of Annual Meeting of Stockholders, Proxy Statement and Annual Report are available at www.proxyvote.com.
 
By order of the Board of Directors,
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Samantha A. Caldwell 
Corporate Secretary
April 27, 2020 



 
Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 







 
Proxy Statement
 

 
General Information
We are delivering this Proxy Statement in connection with the solicitation of proxies by the Board of Directors (the “Board”) of DaVita Inc. ("DaVita" or the "Company"), for use at our 2020 Annual Meeting of Stockholders (the “Annual Meeting”) that will be held on Thursday, June 11, 2020 at 10:00 a.m. Mountain Time. The Annual Meeting will be webcast live at www.virtualshareholdermeeting.com/DVA2020. We are committed to ensuring that stockholders will be afforded the same rights and opportunities to participate in our virtual meeting as they would at an in-person meeting. You will be able to attend the Annual Meeting online, vote your shares electronically and submit any questions by visiting www.virtualshareholdermeeting.com/DVA2020.
The proxies will remain valid for use at any meetings held upon adjournment or postponement thereof by the presiding person of the Annual Meeting. The record date for the Annual Meeting is the close of business on April 13, 2020 (the "Record Date"). All holders of record of our common stock ("Common Stock") on the Record Date are entitled to notice of the Annual Meeting and to vote at the Annual Meeting and any meetings held upon adjournment or postponement of that meeting by the presiding person of the Annual Meeting.
The virtual meeting platform is fully supported across web browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and web-enabled mobile phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong internet or Wi-Fi connection wherever they intend to participate in the Annual Meeting. Participants should also give themselves sufficient time to log in and ensure that they can hear audio prior to the start of the Annual Meeting.
To participate in the virtual Annual Meeting, you will need the 16-digit control number included on your Notice of Internet Availability ("e-proxy notice"), proxy card or voting instruction form. The webcast will begin promptly at 10:00 a.m. Mountain Time. Online check-in will begin at 9:45 a.m. Mountain Time, and you should allow ample
 
time for the check-in procedures. If you encounter any technical difficulties with the virtual meeting platform on the meeting day, please call the technical support number that will be posted on the Annual Meeting log in page at www.virtualshareholdermeeting.com/DVA2020.
If you wish to submit a question during the Annual Meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/DVA2020 beginning at 9:45 a.m. Mountain Time on the meeting day, type your question into the “Ask a Question” field, and click “Submit.” We intend to answer questions submitted by stockholders during the Annual Meeting that comply with the Annual Meeting rules of conduct, which will be posted on www.virtualshareholdermeeting.com/DVA2020.
We are using the "e-proxy" rules adopted by the U.S. Securities and Exchange Commission (the “SEC”) to furnish proxy materials to our stockholders over the Internet. Under these e-proxy rules, we will mail an e-proxy notice to our stockholders of record and beneficial owners of our Common Stock. This e-proxy notice will be mailed in lieu of a printed copy of our proxy materials. We believe using this notice model allows us to reduce costs and helps reduce our carbon footprint.
If you receive an e-proxy notice by mail, you will not receive a printed copy of the proxy materials unless you have previously made a permanent election to receive these materials in paper copy. The e-proxy notice provides instructions on how you may access and review our proxy materials, including this Proxy Statement, the accompanying Notice of 2020 Annual Meeting of Stockholders and the Company's 2019 Annual Report to Stockholders, as well as instructions on how you may submit your vote. If you received an e-proxy notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the e-proxy notice.
The e-proxy notice will be first mailed on or about April 27, 2020 to our stockholders of record as of the Record Date.

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Whether or not you plan to virtually attend the Annual Meeting, we encourage you to vote prior to the Annual Meeting by telephone, Internet, or by requesting a proxy card to complete, sign, date and return by mail. Voting in advance will help ensure that your shares will be voted at the Annual Meeting.
Unless you instruct otherwise in your proxy, any proxy that is given and not revoked will be voted at the Annual Meeting: 
For the election of the eight director nominees identified in this Proxy Statement each to serve until the 2021 Annual Meeting of Stockholders (the "2021 Annual Meeting") or until their respective successors are duly elected and qualified;
For the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2020;
 
For the approval, on an advisory basis, of the compensation of our named executive officers ("NEOs");
For the approval of the DaVita Inc. 2020 Incentive Award Plan (the "2020 Plan");
Against the stockholder proposal regarding political contributions disclosure, if properly presented at the Annual Meeting; and
As determined by the proxy holders named in the proxy card in their discretion, with regard to all other matters as may properly be brought before the Annual Meeting and any adjournment or postponement thereof by the presiding person of the Annual Meeting.
 
Voting Information 
Our only voting securities are the outstanding shares of our Common Stock. As of the Record Date, we had approximately 121,805,763 shares of Common Stock outstanding. Each stockholder is entitled to one vote per share on each matter that we will consider at the Annual Meeting. Stockholders are not entitled to cumulate votes. Under the rules of the New York Stock Exchange (“NYSE”), your broker, bank or other nominee may not vote your uninstructed shares in the election of directors and certain other matters on a discretionary basis. Accordingly, brokers holding shares of record for their customers generally are not entitled to vote on these matters unless their customers give them specific voting instructions. If the broker does not receive specific instructions, the broker will note this on the proxy form or otherwise advise us that it lacks voting authority. Thus, if you hold your shares in “street name,” meaning that your shares are registered in the name of your broker, bank or other nominee, and you do not instruct your broker, bank or other nominee how to vote, no votes will be cast on your behalf on any proposal other than the
 
proposal for the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2020. The votes that the brokers would have cast if their customers had given them specific instructions are commonly called “broker non-votes.” If the stockholders of record present at the Annual Meeting or represented by their proxies and entitled to vote at the Annual Meeting hold at least a majority of our shares of Common Stock outstanding as of the Record Date, a quorum will exist for the transaction of business at the Annual Meeting. Stockholders virtually attending the Annual Meeting or represented by proxy at the Annual Meeting who abstain from voting and broker non-votes are counted as present for quorum purposes. We will make a list of stockholders as of the Record Date available electronically on the date of the Annual Meeting on the virtual meeting website, and during the ten days prior to the Annual Meeting you may contact Investor Relations at 1-888-484-7505 to request the list of stockholders as of the Record Date.

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Notice of 2020 Annual Meeting and Proxy Statement
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Proxy Statement
 


 
How to Vote
Stockholders
Shares of our Common Stock may be held directly in your own name or may be held beneficially through a broker, bank or other nominee in street name. We have summarized below the distinctions between shares held of record and those owned beneficially.
Stockholder of Record — If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the stockholder of record with respect to those shares and we are providing proxy materials directly to you. As the stockholder of record, you have the right to vote online during the Annual Meeting or to grant your voting proxy to the persons designated by us or a person you select.
Beneficial Owner — If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of the shares held in street name, and you have been provided proxy materials from your broker, bank or other nominee who is considered the stockholder of record with respect to the shares. As the beneficial owner, you have the right to direct the broker, bank or nominee on how to vote your shares and are also invited to virtually attend the Annual Meeting. Your broker, bank or nominee is
 

obligated to provide you with a voting instruction form for you to use. This voting instruction form will also include a 16-digit control number that will allow you to access the Annual Meeting webcast and vote your shares during the Annual Meeting. For additional information regarding attending and voting at the Annual Meeting, see the information under the heading “General Information.”
Voting
Whether you hold our shares as a stockholder of record or as a beneficial owner, you may vote before the Annual Meeting. Most stockholders will have a choice of voting through the Internet or by telephone or, if you received a printed copy of the proxy materials, by completing a proxy card or voting instruction form and returning it in a postage-prepaid envelope. Please refer to the instructions below and in the e-proxy notice. Please note that if you are a Company employee, or "teammate," who holds our shares through the DaVita Retirement Savings Plan (the "401(k) Plan"), certain earlier voting deadlines apply as indicated below under the heading "— Teammate 401(k) Stockholders."
Through the Internet
:
 
Prior to the Annual Meeting, you may vote through the Internet by going to www.proxyvote.com and following the instructions. You will need to have the e-proxy notice, or if you received a printed copy of the proxy materials, your proxy card or voting instruction form, available when voting through the Internet. If you want to vote through the Internet, you must do so prior to 11:59 p.m., Eastern Time, on Wednesday, June 10, 2020. If you vote through the Internet, you do not need to return a proxy card.
During the Annual Meeting, you may vote through the Internet by following the instructions at www.virtualshareholdermeeting.com/DVA2020. You will need to have your e-proxy notice, proxy card or voting instruction form available when you access the virtual Annual Meeting web page. Whether or not you plan to virtually attend the Annual Meeting, we encourage you to vote prior to the Annual Meeting by telephone, Internet, or by mail.
By Telephone
)
 
You may vote by touchtone telephone by calling 1-800-579-1639. You will need to have your e-proxy notice, or if you received a printed copy of the proxy materials, your proxy card or voting instruction form, available when voting by telephone. If you want to vote by telephone, you must do so prior to 11:59 p.m., Eastern Time, on Wednesday, June 10, 2020. If you vote by telephone, you do not need to return a proxy card.
By Mail
*
 
If you are a beneficial owner, you may vote by mail by signing and dating your voting instruction form provided by your broker, bank or nominee and mailing it in a postage-prepaid envelope. If you are a stockholder of record and you received a printed copy of our proxy materials, you may vote by signing and dating your proxy card and mailing it in a postage-prepaid envelope. If you are a stockholder of record and received the e-proxy notice, in order to obtain a proxy card, please follow the instructions on the e-proxy notice. If you want to vote by mail, the proxy card or voting instruction form must be received prior to 11:59 p.m. Eastern Time, on Wednesday, June 10, 2020.

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Teammate 401(k) Stockholders — If you participate in the 401(k) Plan and you are invested in our Common Stock fund in your account, you may give voting instructions to the 401(k) Plan trustee, Voya Institutional Trust (the "plan trustee"), as to the number of shares of Common Stock equivalent to the interest in our Common Stock fund credited to your account as of the most recent valuation date coincident with or preceding the Record Date. The plan trustee will vote your shares in accordance with your instructions received by June 8, 2020 at 11:59 p.m. Eastern Time. You may also revoke previously given voting instructions by June 8, 2020 at 11:59 p.m. Eastern Time, by filing with the plan trustee either written notice of revocation or a properly completed and signed voting instruction form bearing a later date. If you do not send instructions for a proposal, the plan trustee will vote the number of shares equal to the
 
share equivalents credited to your account in the same proportion that it votes shares for which it did receive timely instructions.
Changing Your Vote — If you are a stockholder of record or beneficial owner, you may change your vote at any time prior to the applicable voting deadline with your 16-digit control number. If you virtually attend the Annual Meeting you will also be given the opportunity to vote or change your vote during the Annual Meeting through the virtual meeting platform at: www.virtualshareholdermeeting.com/DVA2020.
 
Votes Required for Proposals
The table below details the proposals to be voted on at the Annual Meeting, the Board's recommendation on how to vote on each proposal, the votes required to approve each proposal and the effect of abstentions and broker non-votes.
Proposal
Voting Options
Board Recommendation
Vote Required to Adopt the Proposal
Effect of Abstentions
Effect of Broker Non-Votes*
Proposal 1: Election of the eight director nominees identified in this Proxy Statement to serve until our 2021 Annual Meeting.
For, Against or Abstain on each nominee
FOR each nominee
Majority of votes cast with respect to each such nominee
No effect
No effect
Proposal 2: Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2020.
For, Against or Abstain
FOR
Majority of shares represented virtually or by proxy and entitled to vote
Treated as votes Against
Brokers have discretion to vote
Proposal 3: Approval, on an advisory basis, of the compensation of our NEOs.
For, Against or Abstain
FOR
Majority of shares represented virtually or by proxy and entitled to vote
Treated as votes Against
No effect
Proposal 4: Approval of the 2020 Plan.
For, Against or Abstain
FOR
Majority of votes cast on the proposal

Treated as votes Against
No effect
Proposal 5: Stockholder proposal regarding political contributions disclosure.
For, Against or Abstain
AGAINST
Majority of shares represented virtually or by proxy and entitled to vote
Treated as votes Against
No effect
*
See "Voting Information" for additional information on broker non-votes.

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Notice of 2020 Annual Meeting and Proxy Statement
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Proxy Statement
 


 
Proxy Solicitation Costs
We will pay for the cost of preparing, assembling, printing and mailing to our stockholders the e-proxy notice, this Proxy Statement and the accompanying Notice of Annual Meeting, and the Annual Report to Stockholders, as well as the cost of our solicitation of proxies relating to the Annual Meeting. We may request banks and brokers to solicit their customers who beneficially own our Common Stock listed of record in names of nominees. We will reimburse these banks and brokers for their reasonable out-of-pocket expenses relating to these solicitations. We have also retained MacKenzie Partners, Inc. (“MacKenzie”) to assist in the distribution and solicitation of proxies and
 
to verify records related to the solicitation at a fee of $15,000, plus reimbursement for all reasonable out-of-pocket expenses incurred during the solicitation. MacKenzie and our officers, directors and employees may supplement the original solicitation by mailing of proxies, by telephone, e-mail and personal solicitation. We have agreed to indemnify MacKenzie against liabilities and expenses arising in connection with the proxy solicitation unless caused by MacKenzie’s gross negligence, willful misconduct or bad faith.
 
Delivery of Proxy Statement and Annual Report
Beneficial owners, but not record holders, of Common Stock who share a single address may receive only one copy of the e-proxy notice and, as applicable, an Annual Report to Stockholders and Proxy Statement, unless their broker has received contrary instructions from any beneficial owner at that address. This practice, known as “householding,” is designed to reduce printing and mailing costs for DaVita. If any beneficial owner at such an address wishes to discontinue householding and receive a separate copy of the e-proxy notice and, if applicable, an Annual Report to Stockholders and Proxy Statement, they should notify their broker. Beneficial owners sharing an address to which a single copy of the e-proxy notice and, if applicable, an Annual Report to Stockholders
 
and Proxy Statement was delivered can also request prompt delivery of a separate copy of the e-proxy notice and, if applicable, an Annual Report to Stockholders and Proxy Statement by contacting Investor Relations at the following address or phone number: DaVita Inc., Attn: Investor Relations, 2000 16th Street, Denver, Colorado 80202, 1-888-484-7505. Additionally, stockholders who share the same address and receive multiple copies of the e-proxy notice and, if applicable, an Annual Report to Stockholders and Proxy Statement, can request a single copy by contacting us at the address or phone number above.
 
Electronic Availability of Proxy Materials for the 2020 Annual Meeting
This Proxy Statement and the Annual Report to Stockholders for fiscal year 2019 are available electronically at www.proxyvote.com.

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Proposal 1 Election of Directors
At the Annual Meeting you will elect eight directors each to serve until the 2021 Annual Meeting or until their respective successors are duly elected and qualified, subject to such director’s earlier death, resignation, disqualification or removal.
The Amended and Restated Bylaws of the Company (the "Bylaws") require that each director be elected by the majority of votes cast by the holders of shares present virtually or represented by proxy and entitled to vote on the election of directors with respect to such director in uncontested elections. In a contested election, where the number of nominees for director exceeds the number of directors to be elected, directors are elected by a plurality of shares represented virtually or by proxy at any such meeting and entitled to vote on the election of directors. If a nominee for director who was in office prior to the election is not elected by a majority of votes cast, the director must promptly tender his or her resignation from the Board, and the Nominating and Governance Committee of the Board will make a recommendation to the Board about whether to accept or reject the resignation, or whether to take other action. The Board, excluding the director in question, will act on the recommendation of the Nominating and Governance Committee and publicly disclose its decision and its rationale within 90 days (or, if so extended by the Board in certain circumstances, within 180 days) from the date the election results are certified. If a nominee for director who was not already serving as a director does not receive a majority of votes cast in an uncontested election at the Annual Meeting, the nominee is not elected to the Board. All 2020 nominees are currently serving on the Board.
As previously announced, Kent J. Thiry is serving under an Executive Chairman Agreement until June 1, 2020. Upon the expiration of the term of Mr. Thiry's Executive Chairman Agreement, Mr. Thiry will step down as Executive Chairman and a member of the Board.
In November 2019, Peter T. Grauer, a member of the Board since 1994 and the Company’s Lead Independent Director since 2003, notified the Board that he planned to retire from the Board and therefore will not stand for re-election at the Annual Meeting. On March 11, 2020, the Board appointed Pamela M. Arway as the Chair of the Board, effective on June 1, 2020, after Mr. Thiry steps down as the Company's Executive Chair.
As previously announced, in March 2020, Dr. William L. Roper, a member of the Board since 2001, notified the
 
Board that he planned to retire from the Board and therefore will not stand for re-election at the Annual Meeting.
In connection with these Board changes, in March 2020, the Board approved a reduction in the size of the Board from 11 to ten, effective as of June 1, 2020, and from ten to eight, effective as of the date of the Annual Meeting. The Board is engaged in an ongoing process to select one or more new directors.
None of the nominees has any family relationship with any other nominee or with any of our executive officers and no arrangement or understanding exists between any nominee and any other person or persons pursuant to which a nominee was or is to be selected as a director or nominee.
After a thorough evaluation and assessment, the Nominating and Governance Committee has recommended, and the Board has re-nominated, Pamela M. Arway, Charles G. Berg, Barbara J. Desoer, Pascal Desroches, Paul J. Diaz, John M. Nehra, Javier J. Rodriguez, and Phyllis R. Yale for election as directors. Please see the section titled “Corporate Governance — Selection of Directors” below for more information about the nomination process.
Six of the eight director nominees have been determined to be independent under the NYSE listing standards. Please see the section titled “Corporate Governance — Director Independence” below for more information. Each director nominee has consented to being named in this Proxy Statement as a nominee and has agreed to serve as a director if elected.
Unless a stockholder has made a contrary direction via its proxy, the persons named as proxies in the accompanying proxy have advised us that at the Annual Meeting they intend to vote the shares covered by the proxies for the election of each of the director nominees named above. If one or more of the director nominees are unable or unwilling to serve, the persons named as proxies may vote for the election of the substitute nominees that the Board may propose. The accompanying proxy contains a discretionary grant of authority with respect to this matter. The persons named as proxies may not vote for a greater number of persons than the number of director nominees named above.

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Board of Directors Information
A biography of each director nominee, current as of April 27, 2020, setting forth his or her age, and describing his or her business experience during the past five years, including other prior relevant business experience, is presented below.

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Former President of the Japan, Asia-Pacific, Australia Region, American Express International, Inc.

Director Since: 2009
Independent

Committee Service: Compensation Committee, Chair; Audit Committee; Nominating and Governance Committee

Other Public Company Boards:
The Hershey
       Company (NYSE: HSY)
Iron Mountain Inc.
       (NYSE: IRM)
 
Pamela M. Arway, 66, will assume the role of Chair of the Board on June 1, 2020. From 2005 to 2008, Ms. Arway served as the President of the Japan, Asia-Pacific, Australia region for American Express International, Inc., a global payment services and travel company. Ms. Arway joined the American Express Company in 1987, and subsequently served in various capacities, including as Chief Executive Officer ("CEO") of American Express Australia Limited from 2004 to 2005 and as Executive Vice President of Corporate Travel, North America from 2000 to 2004. Prior to her retirement in October 2008, she also served as advisor to the American Express Company’s Chairman and CEO. Since May 2010, Ms. Arway has been a member of the Board of Directors of The Hershey Company, a chocolate and confectionery company. She currently serves as a member of the Compensation and Finance and Risk Management Committees of The Hershey Company's Board. Since March 2014, Ms. Arway has been a member of the Board of Directors of Iron Mountain Incorporated, an enterprise information management services company and currently serves as Chair of its Compensation Committee and as a member of the Nominating and Governance Committee. Since May 2019, Ms. Arway has served on the Board of Directors of the Carlson Companies, a family-owned corporate travel and private capital company, and is a member of its Compensation and Finance Committees. Ms. Arway brings significant leadership experience as a global executive, with extensive management experience in the areas of marketing, international business, finance and government affairs. With her service as a director on the boards of other large public companies, Ms. Arway also brings significant experience in corporate governance and executive compensation related matters.
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Former Executive Chair, DaVita Medical Group

Director Since: 2007

Other Public Company Boards: None




 
Charles G. Berg, 62, served as Executive Chair of our integrated healthcare business, DaVita Medical Group ("DMG") from November 2016 until December 2017. In 2019, Mr. Berg joined the Board of Directors of Turn-Key Health, a private company, serving health plans, provider organizations and their members who experience a serious or advanced illness. From 2008 to 2013, Mr. Berg served as Executive Chairman of WellCare Health Plans, Inc. (“WellCare”), a provider of managed care services for government-sponsored healthcare programs. Mr. Berg served as Non-Executive Chairman of the Board of Directors of WellCare from January 2011 until his retirement in May 2013. From January 2007 to April 2009, Mr. Berg was a Senior Advisor to Welsh, Carson, Anderson & Stowe, a private equity firm. From April 1998 to July 2004, Mr. Berg held various executive positions, including Executive Vice President - Medical Delivery, President and Chief Operating Officer ("COO") with Oxford Health Plans, Inc. (“Oxford”), a health benefit plan provider. He was the CEO when Oxford was acquired by UnitedHealth Group. He then became an executive of UnitedHealth Group and was primarily responsible for integrating the Oxford business. Mr. Berg currently serves as a member of the Operating Council & Senior Advisory Board of Consonance Capital Partners, a private equity firm, and the Board of Directors of Justworks, Inc., a private human resources and payment company. Mr. Berg is an experienced business leader with significant experience in the healthcare industry and brings an understanding of the operational, financial and regulatory aspects of our industry and business.



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Former Chief Executive Officer, Citibank, N.A.

Director Since: 2015
Independent

Committee Service: Compliance and Quality Committee, Chair

Other Public Company Boards:
Citigroup Inc.
       (NYSE: C)
 
Barbara J. Desoer, 67, served as the CEO and a member of the Board of Directors of Citibank, N.A., a wholly owned subsidiary of Citigroup Inc. and a diversified global financial services company, both positions she held from April 2014 through April 2019. In April 2019, Ms. Desoer joined the Board of Directors of Citigroup Inc. Ms. Desoer previously served as the COO of Citibank, N.A. from October 2013 to April 2014. Prior to Citibank, Ms. Desoer spent 35 years at Bank of America, a diversified global financial services company, most recently as President, Bank of America Home Loans, where she led the integration of Countrywide, the largest mortgage originator and servicer in the United States. In previous Bank of America roles, Ms. Desoer served as a Global Technology & Operations executive, an international market-focused position leading teams in the United Kingdom, Asia and Latin America, and President, Consumer Products. She serves on the Board of Visitors at the University of California at Berkeley. Ms. Desoer also has served on the Board of Directors of various non-profit and privately held corporations. Ms. Desoer is an experienced business leader with extensive management and international experience, and brings a deep understanding of regulated businesses.
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Executive Vice President and Chief Financial Officer, WarnerMedia Inc.

Director Since: 2017
Independent

Committee Service: Audit Committee, Chair; Compensation Committee

Other Public Company Boards: None

 
Pascal Desroches, 56, is the Executive Vice President and Chief Financial Officer ("CFO") of WarnerMedia Inc. (“WarnerMedia”). WarnerMedia is one of four distinct business units operating under AT&T Inc., a leading provider of telecommunications, media and technology services globally. Mr. Desroches is responsible for all of WarnerMedia’s financial operations, facilities and technology organizations. Prior to his current role, Mr. Desroches was the Executive Vice President and CFO of Turner Broadcasting System, Inc., a subsidiary of Time Warner Inc. ("Time Warner"), a global media and entertainment company, a position he had held since 2014. Mr. Desroches was also responsible for Turner’s global technology, security and facilities organizations. Prior to joining Turner, from December 2007 to December 2014, Mr. Desroches was the Senior Vice President and Controller of Time Warner, where he was responsible for overseeing internal and external financial reporting, financial planning and analysis, procurement services, shared services program management, and worked on the management team responsible for mergers and acquisitions and other transactions. Prior to joining Time Warner, Mr. Desroches was a Partner in KPMG LLP’s Department of Professional Practice Assurance & Advisory Services in New York from 2000 to 2001. Prior to being admitted into KPMG LLP’s partnership, Mr. Desroches was a professional accounting fellow with the Office of the Chief Accountant of the SEC. Mr. Desroches is a CPA with more than 30 years of experience, and brings significant finance experience to the Board as a current CFO and former Controller of a major media company. 
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General Partner, Cressey & Company

Director Since: 2007
Independent

Committee Service: Compensation Committee;
Compliance and Quality Committee

Other Public Company Boards: None

 
Paul J. Diaz, 58, currently serves as a General Partner of Cressey & Company, a private equity firm focused exclusively on investing in and building healthcare businesses, a position he has held since September 2017. Mr. Diaz was an Operating Partner at Cressey & Company from March 2016 to September 2017. Since August 2014, Mr. Diaz has served as a Partner at Guidon Partners LP, a private investment partnership. He served as Executive Vice Chairman of Kindred Healthcare, Inc. (“Kindred”), a post-acute provider in the United States, which includes transitional care and rehabilitation hospitals, sub-acute units, and home healthcare and hospice agencies, from March 2015 to March 2016, CEO from January 2004 to March 2015, President from January 2002 to May 2012 and COO from January 2002 to December 2003. Prior to joining Kindred, Mr. Diaz was the Managing Member of Falcon Capital Partners, LLC, a private investment and consulting firm, and from 1996 to July 1998, Mr. Diaz served in various executive capacities, including as Executive Vice President and COO, with Mariner Health Group, Inc., a national provider of long-term care facilities, rehabilitation services and institutional pharmacies. Mr. Diaz serves on the Board of Directors of Performance Health, a private medical supply distribution company, the Board of Trustees of Johns Hopkins Medicine, where he also serves as Chair of Johns Hopkins Healthcare, its affiliated managed care subsidiary, and the Board of Visitors of the Georgetown University Law Center. Mr. Diaz also previously served on the Board of Directors of PharMerica Corporation, and from May 2002 until July 2018, served on the Board of Directors of Kindred. Mr. Diaz is an experienced business leader with significant experience in the healthcare industry and brings a deep understanding of the operational, financial and regulatory aspects of our industry and business.

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Former General Partner, New Enterprise Associates

Director Since: 2000
Independent

Committee Service: Nominating and Governance Committee

Other Public Company Boards: None
 
John M. Nehra, 71, was, from 1989 until his retirement in August 2014, affiliated with New Enterprise Associates (“NEA”), a venture capital firm, including, from 1993 until his retirement, as General Partner of several of its affiliated venture capital limited partnerships. Mr. Nehra also served as Managing General Partner of Catalyst Ventures, a venture capital firm, from 1989 to 2013. Mr. Nehra served on the boards of a number of NEA’s portfolio companies until his retirement in August 2014 and remains a retired Special Partner of NEA. Mr. Nehra is an experienced business leader with approximately 44 years of experience in investment banking, research and capital markets and he brings a deep understanding of our business and industry through his nearly 20 years of service as a member of the Board as well as significant experience in the healthcare industry through his involvement with NEA’s healthcare-related portfolio companies.
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Chief Executive Officer, DaVita Inc.

Director Since: 2019

Other Public Company Boards: None
 
Javier J. Rodriguez, 49, has served as our CEO since June 2019. From March 2014 until June 2019, he served as the CEO of DaVita Kidney Care. Since joining the Company in 1998, Mr. Rodriguez has served in a number of different capacities. From February 2012 to March 2014, he served as our President. From April 2006 through February 2012, he served as our Senior Vice President. Before that, from 2000 to 2006 he served as a Vice President of Operations and Payor Contracting. Mr. Rodriguez joined the Company in 1998 as a Director of Value Management. Prior to joining the Company, Mr. Rodriguez worked for Baxter Healthcare Corporation in Finance from 1995 to 1996. He also previously served as Director of Operations for CBS Marketing Inc. in Mexico City. Mr. Rodriguez provides extensive knowledge of our industry, business, regulatory environment and operations as well as significant executive leadership and management experience.
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Advisory Partner, Bain & Company, Inc.

Director Since: 2016
Independent

Committee Service: Compliance and Quality Committee

Other Public Company Boards:
Bristol-Myers Squibb
       Company (NYSE: BMY)
 
Phyllis R. Yale, 62, has been an Advisory Partner with Bain & Company, Inc. (“Bain”), a global management consulting firm, since July 2010. Ms. Yale was a Partner with Bain from 1987 to July 2010, and was a leader in building Bain’s healthcare practice. In her role at Bain, Ms. Yale works with healthcare payors, providers, and medical device companies, and frequently advises the world’s leading private equity firms on their investments in the healthcare sector. She has served as a member of the Board of Directors of several public and private companies in the healthcare sector, and currently serves as a member of the Board of Directors of Blue Cross Blue Shield of Massachusetts, a not-for-profit health plan headquartered in Boston and serves on the Board of Directors of Bristol-Myers Squibb Company, a global biopharmaceutical company headquartered in New York City. Ms. Yale previously served as Chair of the Board of Directors of Kindred Healthcare, Inc., a provider of long-term healthcare services in the United States, from January 2010 until July 2018; a Director of National Surgical Hospitals, a privately held specialty hospital operator, which was acquired by Surgery Partners in 2017; and a Director of ValueOptions, Inc., a behavioral health improvement management company specializing in mental and emotional wellbeing and recovery, which merged with Beacon Health Strategies in 2014. Ms. Yale has a deep knowledge base and experience in several segments of the healthcare industry including corporate strategies, marketing and cost and quality management, as well as mergers and acquisitions.

The Board recommends a vote FOR the election of each of the named nominees as directors.

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Corporate Governance
 
The general governance framework for the Company is provided by its Bylaws, Corporate Governance Guidelines, the charters for each of the Board’s committees, the Code of Ethics and Code of Conduct. The Board adopted the Corporate Governance Guidelines to assist the Board and its
 
committees in performing their duties and serving the best interests of the Company and our stockholders. These governance documents are available under the Corporate Governance section of our website, located at www.davita.com/about/corporate-governance.
Governance Highlights
The Board believes that strong corporate governance is key to long-term stockholder interests. The Board continues to monitor evolving governance standards and enhance our governance practices to serve the
 
long-term interests of the DaVita stockholders. Key features of the Company’s corporate governance program include:

ü
Annual election of all directors.
ü
Proxy access. Our Bylaws permit qualifying stockholders or groups of qualifying stockholders who have continuously owned at least 3% of the Company’s Common Stock for at least three consecutive years to use management’s proxy materials to nominate a number of director candidates not to exceed the greater of two or 20% of the number of directors then in office, subject to reduction in certain circumstances.
ü
Robust stockholder engagement, including regular engagement by independent directors. We maintain a practice of routinely meeting with our stockholders in a number of forums to encourage an ongoing, meaningful dialogue on corporate governance, executive compensation and corporate responsibility matters, as well as other items of interest to our stockholders.
ü
Stockholder right to call special meetings of stockholders at 10% ownership threshold.
ü
No stockholder rights plan/poison pill.
ü
Robust code of conduct. DaVita is committed to operating its business with honesty and integrity and maintaining the highest level of ethical conduct.
ü
Independent non-executive chair. Effective June 1, 2020 the Chair of the Board will be a non-executive, independent female director.
ü
Independent Board Committees. Each of the Audit, Compensation and Nominating and Governance Committees is made up solely of independent directors.
ü
Independent advisors. Each Board Committee has the authority to retain independent advisors.
ü
Majority vote standard in uncontested elections.
ü
Majority independent Board. Six of eight director nominees are independent.
ü
Robust stock ownership guidelines for senior executives and directors that link the interests of management and the Board with those of stockholders.
ü
Commitment to corporate social responsibility practices.
ü
Significant risk oversight practices.

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Corporate Governance
 

 
Selection of Directors
Our Board views diversity in a broad sense, taking into consideration not only racial, ethnic and gender diversity, but also the mix of qualifications of our directors including tenure, experience levels and types of experience, including both industry and subject matter expertise, and re-evaluates these qualifications from time to time to ensure continued diversity. While the Company does not have a formal policy on Board diversity, we believe that a Board that collectively reflects a diversity of background and experience enhances the Board's effectiveness. Effective June 1, 2020, Pamela Arway will assume the role of the Company’s Chair of the Board, putting DaVita among the 5% of S&P 500 companies with a female, non-employee director serving in such a role.1 
In making its recommendations to the Board, the Nominating and Governance Committee considers a number of factors and assesses the overall mix of qualifications, individual characteristics, experience level, and diverse perspectives and skills that are most beneficial to our Company. The Nominating and Governance Committee also seeks to ensure an appropriate mix of tenures of the directors, taking into account the benefits of directors with longer tenures, including greater board stability and continuity of organizational knowledge, and the benefits of directors with shorter tenures, including fresh perspectives and viewpoints. With this in mind, the Nominating and Governance Committee takes steps as may be appropriate to ensure that the Board maintains an openness to new ideas and a willingness to re-examine the status quo. In connection with the nomination or re-nomination of directors, it is the Nominating and Governance Committee's responsibility to determine in each case whether nomination or re-nomination is appropriate. The Nominating and Governance Committee assesses
 
each director’s performance and contributions to the Board, as well as his or her skills, experience and qualifications, including the continued value to the Company of a director’s experience and background in light of current and anticipated future needs. If the incumbent director has not performed or contributed in a meaningful way, the Nominating and Governance Committee would take into consideration whether nomination or re-nomination is appropriate in light of any other relevant facts and circumstances. An integral part of this process are the individual director, Board and committee self-evaluation processes, which are performed on a regular basis, as required by NYSE rules, and as further described under the section titled "Regular Board and Committee Evaluations."
The Nominating and Governance Committee will consider nominees for director recommended by stockholders upon submission in writing to our Corporate Secretary of the names and qualifications of such nominees at the following address: Corporate Secretary, DaVita Inc., 2000 16th Street, Denver, Colorado 80202. The Nominating and Governance Committee will evaluate candidates based on the same criteria regardless of whether the candidate was recommended by the Company or a stockholder.
In connection with the previously announced Board changes, in March 2020, the Board approved a reduction in the size of the Board from 11 to ten, effective as of June 1, 2020, and from ten to eight, effective as of the date of the Annual Meeting. In consideration of these changes, the Nominating and Governance Committee has recommended the eight candidates named in this Proxy Statement standing for election at the Annual Meeting.
1 2019 Spencer Stuart Board Index
We believe that our Board reflects an effective mix of tenure, skills, experience and diversity. As of June 11, 2020, our Board will have the mix of tenure and diversity as set forth below:

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Our Board possesses a deep and broad set of skills and experiences that facilitate strong oversight and strategic direction. The following chart summarizes some of the competencies represented by the director nominees. The details of each director nominee's competencies are included in each director's profile under the section titled "— Board of Directors Information."
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Corporate Governance
 

 
Regular Board and Committee Evaluations
The Board is committed to continuous improvement and annual self-evaluations are an important tool. We have recently enhanced our evaluation process to include both written questionnaires and live interviews with directors on a rotating cycle, an overview of which is set forth below. Rigorous self-evaluations of the
 
performance of the Board as a whole and each of its committees are conducted by the Board on an annual basis, and individual directors on a biennial basis, to evaluate performance and effectiveness.

 
Overview
 

•  Rotating cycle with anonymous written evaluations each year and live interviews with each director every other year, which includes individual director evaluations

•  Process is overseen by the Nominating and Governance Committee

 
Evaluation 
and 
Assessment
 
•  Directors provide feedback regarding performance and effectiveness
 
Review
 
• The Board reviews the results, including in executive session
 
• The Lead Independent Director (for pre-2020 evaluations), or Chair of the Board, as applicable, speaks with each member of the Board for one-on-one discussion, as appropriate
 
Incorporation of Feedback
 

•  Follow-up items are addressed at subsequent Board or committee meetings, as appropriate, and committee actions are reported back to the full Board

•  The Nominating and Governance Committee considers the effectiveness of the self-evaluation process

 
Director Independence
Under the listing standards of the NYSE, a majority of the members of the Board must satisfy the NYSE criteria for “independence.” No director qualifies as independent under the NYSE listing standards unless the Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company).
The Board evaluates the independence of our directors annually and will review the independence of individual directors on an interim basis as needed to consider changes in employment, relationships and other factors. The Board evaluated the nature of any executive officer’s or director’s personal investment interest in director affiliated entities (active or passive), the level of involvement by the director or executive officer as a partner in any such director affiliated entities, any special arrangements or relationships
 
between the parties which would lead to a personal benefit, any personal benefits derived as a result of business relationships with the Company, any other personal benefit derived by any director or executive officer as a result of the disclosed relationships or any other relevant factors. The Board has determined that all of the director nominees, as well as each individual who served as a director at any time during 2019, other than Messrs. Berg, Rodriguez and Thiry, are independent under the NYSE listing standards at this time.
The Board considered Mr. Desroches’ independence in view of the services his brother provides to the Company as a Medical Director. After consideration of relevant factors, the Board determined that the Company’s engagement of Mr. Desroches’ brother as a Medical Director did not present a conflict of interest and did not compromise Mr. Desroches’ independence.

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Under the NYSE listing standards, a director is deemed not independent if the director is or has been employed by the Company within the last three years. Mr. Berg was employed by the Company from November 1, 2016 through December 15, 2017. Although Mr. Berg is no longer an employee of the Company, he may not be deemed independent under the NYSE listing standards.
Messrs. Rodriguez and Thiry are not deemed independent because they are employed by the Company.
Our Corporate Governance Guidelines require the Board to evaluate the appropriateness of the director’s continued service on the Board in the event that the director retires from his or her principal job, changes his or her principal job responsibility or experiences a
 
significant event that could negatively affect his or her service to the Board. In such event, the Corporate Governance Guidelines provide that the affected director shall promptly submit his or her resignation to the Board Chair or the Lead Independent Director, as applicable. The members of the Board, excluding the affected director, will determine whether the affected director’s continued service on the Board is in the best interests of our stockholders and will decide whether or not to accept the resignation of the director. In addition, the Corporate Governance Guidelines provide that prior to accepting an invitation to serve on the board of directors of another public company, a director must advise the Board Chair or the Lead Independent Director, as applicable, so that the remaining members of the Board may evaluate any potential conflicts of interest.
 
Leadership Structure and Meetings of Independent Directors
Pursuant to the terms of his Executive Chairman Agreement, Mr. Thiry will serve as our Executive Chairman of the Board until June 1, 2020. The Board believes that Mr. Thiry’s breadth of experience and depth of knowledge gained during his tenure as our CEO are highly beneficial to the Executive Chairman role and are counterbalanced appropriately by the significant role of our Lead Independent Director. In addition, independent directors meet regularly in executive sessions without management, as executive sessions are held in conjunction with each regularly scheduled meeting of the Board.
Our Lead Independent Director, Mr. Grauer, who was elected by and from the independent Board members, takes a substantial role in Board leadership and meetings of the independent directors. Mr. Grauer also chairs our Nominating and Governance Committee.
As Lead Independent Director, Mr. Grauer among other things serves as the liaison between the Executive Chairman and the independent directors, together with the Executive Chairman, approves meeting agendas for the Board, approves meeting schedules to assure that there is sufficient time for discussion of all agenda items, and presides at all meetings of the Board at which the Executive Chairman is not present, including executive sessions of independent directors. Additionally, Mr. Grauer facilitates discussions outside of scheduled Board meetings among the independent directors on key issues as appropriate. Mr. Grauer, in his capacity as Lead Independent Director, also has the authority to call meetings of the Board and the independent
 
directors and, if requested by major stockholders, makes himself available for consultation and direct communication with them.
As previously announced, Mr. Grauer has decided to step down from the role of Lead Independent Director effective June 1, 2020 and does not intend to stand for re-election at the Annual Meeting. In connection with the foregoing, the Board appointed Pamela M. Arway, an independent director and member of the Board since May 2009, to serve as the Chair of the Board, effective as of June 1, 2020.
The Board believes that this leadership structure is appropriate for the Company at this time because it allows for independent oversight of management, increases management accountability, and encourages an objective evaluation of management’s performance relative to compensation. The independent directors have historically evaluated and reconsidered the Board’s leadership structure, typically on an annual basis, and expect to continue to do so.

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Corporate Governance
 

 
Corporate Citizenship, Social Responsibility and Sustainability
Corporate Citizenship and Social Responsibility
Being a leader in American healthcare means being a responsible corporate citizen. The Trilogy of Care—caring for our patients, each other, and the world—is DaVita’s vision for social responsibility and is our philosophy for balancing our business responsibilities with our social, economic and environmental ones. For more than a decade, we have had a vision for creating a true community—one in which we care for each other with the same intensity with which we care for our patients. This has inspired our teammates to realize their full potential and to continue to deliver quality care to our patients. Our leadership recognizes the importance of these responsibilities, and the Nominating and Governance Committee, in coordination with our Board, oversees DaVita's environmental, social and governance ("ESG") initiatives, which include both the corporate philanthropy and volunteer efforts described below in this section, the environmental efforts described below under the heading "—Sustainability", as well as our diversity and belonging initiatives, among other things. During 2020, among other things, we are undertaking a materiality assessment and engaging with internal and external stakeholders on ESG topics to help further inform our future direction and priorities.
Through the DaVita Way of Giving program, $2.1 million of company donations were directed to locally-based charities across the United States. In addition, DaVita donated more than $1.40 million to local nonprofits in our home state of Colorado in 2019, spreading ripples across local communities.
DaVita was named a distinguished member of the 2019 Bloomberg Gender-Equality Index, a metric that provides companies across the globe an opportunity to disclose and showcase their efforts in gender equality. DaVita is among only ten healthcare companies and one of two companies headquartered in Colorado to receive this honor.
DaVita was listed on the 2019 Corporate Equality Index, a national benchmarking survey and report on corporate policies and practices related to lesbian, gay, bisexual, transgender and queer (LGBTQ) workplace equality administered by the Human Rights Campaign.
 
In honor of Earth Day 2019, approximately 2,800 DaVita teammates, their families and friends volunteered over 9,300 hours through 231 environmental service projects across 7 countries.
In 2019, more than 540 riders participated in Tour DaVita, DaVita’s annual charity bike ride, which raised over $1.2 million to support Bridge of Life, a non-profit organization founded by DaVita to serve thousands of men, women and children around the world through kidney care, primary care, education and prevention and medically supported camps for kids.
Through Village Service Days, groups of three or more teammates plan and execute a service project with a local nonprofit. DaVita teammates, friends and family have contributed more than 160,000 volunteer hours through this program since 2014.
Sustainability
2019 marked the 12th anniversary of Village Green, DaVita's sustainability program created with the goal of reducing the environmental impact of the Company's operations in field facilities and in business offices. Village Green also educates teammates and patients on the potential positive environmental impact of our sustainability program and what they can do to help. 
DaVita was recognized by the Dow Jones Sustainability Indices ("DJSI") for its corporate responsibility program and is one of only eight U.S.- based companies in the Health Care Equipment and Services category on this year's DJSI World Index after being analyzed for its performance in regards to environmental, social and governance practices.
DaVita has diverted approximately 621,500 pounds of electronic waste from landfills since 2015.
93% of DaVita's centers have adopted reusable sharp containers, diverting more than 1.5 million pounds of plastic from landfills in 2019.
DaVita’s second headquarter building received LEED Platinum certification in June 2019, achieving a LEED Platinum campus in

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Downtown Denver. This certification exceeded DaVita's previously-announced goal to achieve a certification of at least LEED Silver for its headquarters.
For the sixth year in a row, DaVita’s World Headquarters participated in Denver’s Bike to Work Day. Approximately 230 teammates pedaled their way to work, and DaVita placed No. 1 in Denver for highest participation among the large business category.
DaVita installed energy saving building management systems in 62 additional locations in 2019, for a total of 1,955 DaVita locations.
By 2022, DaVita’s agreements to purchase energy from wind and solar farm developments in Texas are expected to create as much clean energy annually as the amount of electricity we use to operate our U.S. centers.
In 2019, DaVita retrofitted 210 locations with high-efficiency LED lighting, which can save up to 15% of a center's electricity use.
DaVita has measured, and is verifying, carbon emission equivalency totals for all dates occurring on and after January 1, 2018. These emission totals include Scope 1, 2 and 3 emissions. The data will be used to identify and prioritize carbon reduction opportunities and targets, and inform DaVita’s 2025 Environmental goals.
Our 2020 Environmental Goals, announced in 2016, include:
Reducing energy use and carbon emissions by 10% per treatment.
Adding solid waste recycling to at least 45% of kidney care locations.
 
Conducting an annual sustainability review with all national vendors and increasing the availability of environmentally preferable products and equipment and reducing packaging.
Ensuring our new central business offices are certified as at least LEED Silver.
Reducing paper use by 15% per treatment.
Reducing water use by 30% per treatment.
Our 2019 Community Care social responsibility report, which includes updates on our progress towards these goals, is available at www.davita.com/communitycare.

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Corporate Governance
 

 
Ongoing Stockholder Outreach
Engaging with investors is fundamental to our commitment to good governance and essential to maintaining strong corporate governance practices. Our Board and management take a long-term view toward stockholder engagement. As a result, we have maintained a practice of routinely meeting with our stockholders in a number of forums to encourage an ongoing, meaningful dialogue on corporate governance, executive compensation and corporate responsibility matters, as well as other items of interest to our stockholders.
Following our 2019 Annual Meeting of Stockholders, certain members of our management team and Board, including our Lead Independent Director and the Chair of our Compensation Committee, undertook an engagement effort to solicit feedback from stockholders both at our 2019 Capital Markets Day and through individual meetings, to discuss various key corporate governance related matters, including corporate social responsibility and sustainability initiatives, our executive compensation program, our long-term business strategy and other industry-specific issues. Then, in connection with Mr. Rodriguez's transition to the CEO role in 2019, and leading up to the decision to grant a premium-priced stock-settled stock appreciation rights ("SSAR") award (the "Premium-Priced SSAR Award") to him, the Company
 
and the Board received and proactively sought feedback from the Company’s largest stockholders on the structure of the executive compensation program as part of its ongoing stockholder engagement program. We were pleased to see that stockholders overwhelmingly supported our proposal for CEO compensation, with approximately 88% of the shares present in person or by proxy and entitled to vote on the proposal voted in favor of amending our 2011 Incentive Award Plan (the “2011 Plan”) to permit the grant of the Premium-Priced SSAR Award. The Compensation Committee's response to stockholder feedback is described in further detail in the subsection titled "— Consideration of Say-on-Pay Results and Pay for Performance."
Key Items Discussed with
Stockholders in
2019 and 2020
Corporate Governance
Executive Compensation
Corporate Responsibility
Board Leadership and Succession Planning
Pay-for-Performance
Social Responsibility Report
Board Tenure and Refreshment
CEO Compensation
Workforce Development and Diversity
Board Diversity
Long-Term Incentive Compensation
Sustainability
Our 2019-2020 Year Round Stockholder Engagement Program
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Outreach statistics
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Stockholder Responsiveness
What We Heard
What We Did
Executive Compensation Program
•    
There should be more intense focus on stockholder value creation as reflected in a sustained increase in stock price over the longer-term

•    
Awarded the Premium-Priced SSAR Award, a multi-year premium-priced SSAR grant to our CEO intended to replace five years of future equity grants, and re-introduced SSARs as a component of executive compensation (2020)

•    
The Company should consider adding a cash flow metric to the short-term incentive program

•    
Added free cash flow metric to the annual incentive program (2020)

•    
PSUs earned under the relative TSR metric should be benchmarked against a more specific peer group than the S&P 500 Index
•    
Relative TSR representing a performance metric for PSUs is measured compared to the S&P Healthcare Services Select Industry Index (2020)
•    
Executive officers should not have excise tax gross-up in case of a change of control

•    
No change of control excise tax gross-ups in any employment agreements or compensation plans

•    
The Company should use a “target-based” annual incentive structure rather than a “maximum-based” annual incentive structure to be more in-line with peer companies

•    
Switched to “target-based” annual incentive structure (2018)

•    
The Company should have a long-term metric tied to return on capital
•    
Introduced long-term EPS as PSU target for then-CEO (2016) and more broadly for executive officers (2017)

Board Leadership
•    
Some investors expressed a preference for a separation of Chairman and CEO roles

•    
Pamela Arway, an independent director, has been appointed Chair of the Board (2020)

Board Refreshment and Composition
•    
Average board tenure is above average with several long-serving directors and should be refreshed

•    
Three long-serving directors are retiring from the Board in 2020 and three new directors were appointed from 2015 to 2017, lowering our average tenure to 8.7 years. The Board is engaged in an ongoing process to select one or more new directors (2020)

ESG
•    
Investors are generally pleased with the Company's sustainability and social responsibility programs and want to see the Company continue to focus on these initiatives

•    
The Company continues to advance sustainability and social responsibility initiatives and disclosures
 

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Corporate Governance
 

Communications with the Board
Any interested party who desires to contact the Lead Independent Director, or Board Chair, as applicable, may do so by sending an email to independentchair@davita.com. In addition, any interested party who desires to contact the Board or any member(s) of the Board may do so by writing to: Board of Directors, c/o Corporate Secretary, DaVita Inc., 2000 16th Street, Denver, Colorado
 
80202. Copies of any such written communications received by the Corporate Secretary will be provided to the full Board or the appropriate member(s) depending on the facts and circumstances described in the communication unless they are considered, in the reasonable judgment of the Corporate Secretary, to be improper for submission to the intended recipient(s).
 
Annual Meeting of Stockholders Attendance
We do not have a policy requiring that directors attend the Annual Meeting of Stockholders. Last year, our CEO and Director, Mr. Rodriguez, and our Executive
 
Chairman, Mr. Thiry, were each in attendance at the 2019 Annual Meeting.
 
Information Regarding the Board and its Committees
The Board has established the following committees: the Audit Committee, the Nominating and Governance Committee, the Compensation Committee, and the Compliance and Quality Committee. As required by the NYSE listing standards and SEC rules, all members of the Audit Committee, the Compensation Committee and the Nominating and Governance
 
Committee are independent. The Board met 13 times during 2019. Each of our directors attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by all committees of the Board on which he or she served during the period in which he or she served during 2019.
 
Committees of the Board
The following chart sets out our current Board committees and membership, and describes the principal functions of each committee of our Board. In 2019, the Board dissolved the Clinical Performance Committee and the Public Policy Committee and reassigned their respective duties and responsibilities to either the full Board or another existing committee. Prior to their dissolution, the Clinical Performance Committee and the Public Policy Committee each met one time during 2019. The charter for each of our current committees is available under the Corporate Governance section of our website, located at www.davita.com/about/corporate-governance.

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Name of Committee and Members
Principal Functions of the Committee
Meetings in 2019
  Audit
  Pascal Desroches Chair
  Pamela M. Arway
  William L. Roper

•      Monitors and oversees the quality and integrity of our consolidated financial statements and related footnotes and other related disclosures.
•      Oversees the independence, qualifications and performance of our independent registered public accounting firm, including a review of the scope and results of their audit, as well as the performance of our internal audit function.
•      Appoints and engages our independent registered public accounting firm, and pre-approves the firm’s annual audit services, including related fees, audit-related services, and all other services in accordance with our pre-approval policy and rules and regulations promulgated by the SEC.
•      Together with the Compliance and Quality Committee, assists the Board with overseeing compliance with legal and regulatory requirements.
•      Oversees the effectiveness of our disclosure controls and procedures and compliance with ethical standards.
•      Oversees our policies and programs with respect to enterprise risk assessment and enterprise risk management, including the risks related to privacy and data security.
•      Provides an avenue of communication among the independent registered public accounting firm, management, internal audit department and the Board.
•      Prepares the committee report required to be included in our annual report or proxy statement.
•      Considers related party transactions for approval or ratification, or recommends that such approval or ratification come from the disinterested members of the Board.

All members of the Audit Committee are “independent” under the listing standards of the NYSE and “financially literate” under the listing standards of the NYSE. Mr. Desroches and Ms. Arway each qualify as an “audit committee financial expert” within the meaning of the rules of the SEC.
9
Nominating and Governance
  Peter T. Grauer Chair
  Pamela M. Arway
  John M. Nehra
•      Oversees the composition, structure, operation and evaluation of the Board and its committees.
•      Oversees the process for evaluating the independence, contribution and effectiveness of incumbent Board members.
•      Oversees procedures for stockholder communications with the Board.
•      Reviews and makes recommendations to the Board about our governance principles and policies, and monitors compliance with adopted principles and policies.
•      In coordination with the Board, identifies, evaluates and recommends candidates for nomination, appointment or election to the Board and candidates to fill Board vacancies.
•      Makes recommendations to the Board regarding the membership and chairs of the committees of the Board.
•      Oversees our activities, policies and programs related to corporate, environmental and social responsibility.
•      Oversees continuing education of the Board and orientation of new Board members to the Company and its business.

All members of the Nominating and Governance Committee are “independent” under the listing standards of the NYSE.
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Corporate Governance
 

Name of Committee and Members
Principal Functions of the Committee
Meetings in 2019
  Compensation
  Pamela M. Arway Chair
  Pascal Desroches
  Paul J. Diaz
  Peter T. Grauer
  
•      Establishes an executive compensation philosophy that is aligned with our long-term interests and those of our stockholders.
•      Reviews the results of advisory stockholder votes and other stockholder feedback on our executive compensation program and considers whether to make adjustments to our executive compensation policies and practices as a result.
•      Evaluates and approves compensation plans, programs and policies related to our executive officers.
•      Reviews and approves all elements of the total compensation of our executive officers.
•      Annually reviews and approves the goals and objectives and summary performance of our executive officers, other than the CEO, and makes compensation decisions that are aligned with the performance of each executive officer.
•      Annually reviews and approves the annual and long-term corporate goals and objectives applicable to compensation for our CEO, evaluates our CEO’s performance in light of those goals and objectives, and determines and approves, subject to approval by the independent members of the Board, all elements of our CEO’s total compensation, including the CEO’s compensation level, based on this evaluation.
•      Oversees the administration by the Board of our equity or other incentive award plans, including the stock ownership requirements applicable to our CEO, senior executives and directors.
•      Oversees the administration by the Board of our non-employee director compensation program to ensure that the Board is compensated in a competitive and fair manner, and that such compensation is aligned with the long-term interests of our stockholders.
•      Reviews and discusses with management our annual Compensation Discussion and Analysis disclosures to determine whether to recommend to the Board that it be included in our annual report on Form 10-K and the proxy statement.
•      Has sole authority and discretion to retain or replace its independent compensation consultant, legal counsel and other advisors, and is directly responsible for hiring, overseeing and compensating such advisors.
•      Oversees our compliance with SEC rules and regulations regarding stockholder approval of certain executive compensation matters.
•      Oversees the Company's assessment of risk related to the Company's compensation plans, programs and policies.
•      May form and delegate any responsibilities, including those described above, to a subcommittee of one or more members.
All members of the Compensation Committee are (a) "independent" under the listing standards of the NYSE and (b) a “nonemployee director” under Rule 16b-3 of the Securities Exchange Act of 1934 (the “Exchange Act”).
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 Compliance and Quality  Committee1
  Barbara J. Desoer Chair
  Paul J. Diaz
  Dr. William L. Roper
  Phyllis R. Yale
•      Reviews and oversees compliance with Federal healthcare regulatory program requirements.
•      Oversees and monitors the effectiveness of our healthcare regulatory compliance program, reviews healthcare regulatory compliance risk, and reviews the steps management is taking to monitor, control and report these risk exposures.
•      Together with the Audit Committee, assists the Board with oversight of enterprise risk management and healthcare, legal, regulatory, and anti-corruption compliance.
•      Has primary responsibility for oversight of healthcare regulatory compliance requirements and ensuring proper communication of healthcare regulatory compliance issues to the Board.
•      Meets regularly in executive sessions with our Chief Compliance Officer ("CCO") to discuss, among other things, our compliance program and to receive an update on compliance activities initiated or completed during the quarter.
•      Assists the Board with the general oversight of the Company’s patient safety and clinical quality of care programs and monitors the Company’s performance in this regard.
•      Reviews clinical quality, safety and clinical services metrics and priorities.
•      Reviews processes relating to scientific, clinical and regulatory quality performance benchmarks.
•      Meets regularly in executive session with the Chief Medical Officer to discuss, among other things, the clinical quality of care program and to receive an update on quality activities initiated or completed during the quarter.
5
1In March 2020, the Compliance Committee and the Board approved an amendment to the Compliance Committee's charter and scope to add clinical quality-related responsibilities.

In March 2020, the Nominating and Governance Committee recommended, and the Board approved, the following Board committee assignments, all to be effective following the Annual Meeting.
Audit Committee
Nominating and Governance Committee
Compensation Committee
Compliance and Quality Committee
Pascal Desroches (c)
Phyllis Yale (c)«
Barbara Desoer (c)«
Paul Diaz (c)«
Barbara Desoer«
Pamela Arway
Pamela Arway
Charles Berg«
John Nehra«
John Nehra
Pascal Desroches
Phyllis Yale
 
 
Paul Diaz
 
(c) Committee Chair     « New Role

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Risk Oversight
Our Board oversees an enterprise-wide approach to risk management with a fundamental belief that the key components of risk management are (i) identifying potential risks that we face, (ii) evaluating the likelihood and potential impact of the risks, (iii) adopting strategies and assessing the controls designed to mitigate the risks to be within an acceptable level, and (iv) monitoring these risks on a regular basis.
While the Board and its committees oversee our risk management strategy, management is responsible for implementing and supervising day-to-day risk management processes and reporting to the Board and its committees.
Our Enterprise Risk Management ("ERM") Committee is comprised of members of senior management who meet on a regular basis to perform these risk management functions. The ERM process extends to a Company-wide effort designed to identify, assess, manage, report and monitor enterprise risks and risk areas. As part of the ERM process, key leaders across the enterprise are interviewed to identify potential risks and assist with the monitoring of those identified risks.
Under its charter, the Audit Committee has responsibility to monitor and oversee our ERM processes, and both the Audit Committee and the Board receive and discuss ERM reports on these activities on a regular basis and no less than annually.
 
The Compliance and Quality Committee is also tasked with assisting the Audit Committee and the Board in oversight of our ERM processes, primarily as it relates to identification and management of legal and compliance enterprise risks. The Audit Committee and Compliance and Quality Committee meet regularly with our Chief Legal Officer ("CLO") and CCO in connection with these responsibilities.
Management has also designed and implemented a corporate compliance program, administered by our CCO, as part of our commitment to comply fully with applicable criminal, civil and administrative laws and regulations and to maintain the high standards of conduct we expect from all of our teammates. We continuously review this program and enhance it as may be appropriate. Oversight of our corporate compliance program is performed by the Compliance and Quality Committee of the Board.
Our Board considers specific risk topics throughout the year informed by our ERM processes and corporate compliance program. Our Board has also been actively engaged with management in preparing for, responding to, and monitoring the impacts of the evolving novel coronavirus (COVID-19) pandemic. Management is in regular communication with the Board about the assessment and management of the significant risks to the Company and strategy decisions related to the impact of COVID-19 on our business.

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Corporate Governance
 

In addition, various committees of the Board are structured to oversee specific risks, as follows:
 
 
 
 
 
 
 
 
 
 
BOARD OF DIRECTORS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AUDIT
COMMITTEE
Oversees the financial reporting process, the system of internal control over financial reporting, the audit process and, in coordination with the Compliance and Quality Committee, the Company’s process for monitoring compliance with laws and regulations.
At each regularly scheduled meeting, the Audit Committee receives reports from our (i) external auditor on the status of audit activities and findings; and (ii) the executive responsible for internal audit (who reports directly to the Audit Committee) on the status of the internal audit plan, audit results and any corrective action taken in response to audit findings, in addition to (iii) reports from the CLO on matters related to compliance with laws and regulations. The ERM Committee provides regular reports to the Audit Committee.
Oversees the Company’s Code of Ethics, and risks related to privacy and data security.
    
COMPLIANCE AND QUALITY COMMITTEE
Oversees non-financial compliance risk, including that associated with healthcare and anti-corruption related requirements. Included is oversight of the Company’s compliance program(s) inclusive of its policies and procedures, training/education, auditing and monitoring, responses to detected deficiencies, enforcement of disciplinary standards and overall culture of compliance.
Oversees the Company’s Code of Conduct.
Oversees development and implementation of practices, policies and procedures designed to optimize quality and safety of care.
 
 
COMPENSATION COMMITTEE
Evaluates whether the right management talent is in place. Also oversees our compensation policies and practices, including whether such policies and practices balance risk-taking and rewards in an appropriate manner as discussed further below.
    
NOMINATING AND GOVERNANCE COMMITTEE
Oversees the assessment of the Board’s composition and structure, and each member of the Board’s independence, as well as the effectiveness of our Corporate Governance Guidelines.
Considers the impact on the Company, teammates and communities of the Company’s activities, policies and programs related to corporate environmental and social responsibility.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Board regularly receives reports from each of the committees set forth above, which reports may provide additional detail on risk management issues and management’s response. The Board discusses the risk exposures, if any, involved in the reports or recommendations of the committees, as necessary.
 
Succession Planning
Management
We believe that effective executive leadership is critical for the Company’s long-term success. Our Board’s principal responsibilities include oversight of the development of a management succession plan and overseeing the development of the appropriate executive talent to achieve our strategic objectives and enhance stockholder value. Our Board believes that management succession planning should be done in consultation with the CEO and that the full Board should have oversight of the succession planning process.
As part of this process, our CEO provides the Board with recommendations for potential successors for the position of CEO and other senior management positions and reviews development plans for potential succession candidates with the Board. The Board also works with the CEO to ensure that directors have the
 

opportunity to engage directly with potential succession candidates for the CEO role and other senior management positions. The Board regularly reviews short- and long-term as well as emergency succession plans for the CEO and other senior management positions.
DaVita maintains a robust development process for its senior leaders, managing and developing talent by providing employees with training, mentoring and career development and, when possible, promoting from within with a focus on supporting diversity. As such, following a robust search process, aided by the use of a search firm, and consideration of both internal and external candidates, the Board appointed Javier J. Rodriguez, formerly the CEO of DaVita Kidney Care and with the Company in various roles for over 20 years, as CEO of the Company effective June 1, 2019.

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Board
The Board also regularly considers its own composition and succession plans. Discussion of these topics is an important part of the annual Board evaluation process. In director succession planning, the Nominating and Governance Committee and the Board take into account, among other things, the current and expected needs of the Board and the Company in light of the overall composition of the Board towards achieving a balance of the skills, experience, attributes and tenure that are viewed to be essential to the Board’s oversight role.
As of a result of the changes discussed in the subsection titled “— Selection of Directors,” the Board
 

is engaged in an ongoing process to select one or more new directors.
Our Corporate Governance Guidelines also include a mandatory retirement policy whereby a director who has reached the age of 75 shall not be re-nominated to our Board at the next annual meeting of stockholders; however, the Nominating and Governance Committee may recommend, and the Board may approve, the nomination for reelection of a director at or after the age of 75, if, in light of all the circumstances, the Board determines it to be in the best interests of the Company and its stockholders.
 
Non-Employee Director Share Ownership Policy
We have a share ownership policy that applies to all non-employee members of the Board. The purpose of the policy is to align the financial interests of our non-employee Board members with those of our stockholders.
Both shares owned directly and the 'in-the-money' value of shares underlying vested but unexercised equity awards are included in the determination of whether the guidelines established by the share ownership policy have been met. In 2019, our Board members received equity awards in the form of shares of the Company's stock. The total net realizable share value retained (the "Ownership Threshold") must have a market value (as defined in the policy) of not less than the lower of:
25% of the total pretax equity award value realized by the Board member from the time the Board member becomes subject to the policy to date in excess of $100,000; or
 
five times the annual Board cash retainer of $80,000, or $400,000.
Effective April 19, 2019, we amended our Board share ownership policy to, among other things, increase the cash retainer multiple component of the Ownership Threshold from three times to five times as indicated above. Directors that have not achieved their applicable Ownership Threshold are required to retain future acquired shares until the applicable threshold is met, subject to certain limited exceptions. As of December 31, 2019, all of our non-employee members of the Board were in compliance with our share ownership policy. See the section titled “Compensation Discussion and Analysis — Compensation Policies and Practices — Management Share Ownership Policy” for information regarding the share ownership policy applicable to management.
 
Code of Ethics and Code of Conduct
We have a Code of Ethics that applies to our CEO, CFO, Controller or Chief Accounting Officer ("CAO"), CLO, and all professionals involved in the accounting and financial reporting functions. We also have a Code of Conduct that applies to all of our employees, officers, the Board and third parties conducting business on behalf of the Company. The Code of Ethics and the Code of Conduct are each available under the Corporate Governance section of our website, located at www.davita.com/about/corporate-governance. If the Company amends or waives the Code of Ethics or the Code of Conduct with respect to
 
our CEO, CFO, Controller and CAO, CLO, or persons performing similar functions, we will disclose the amendment or waiver at the same location on our website.

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Corporate Governance
 

 
Insider Trading Policy
We have adopted an Insider Trading Policy applicable to our directors, executive officers and other employees that prohibits the violation of the U.S. securities laws by transacting in our Common Stock, other Company securities or the securities of other companies while in the possession of material non-public information.
Under our Insider Trading Policy, except in accordance with approved Exchange Act Rule 10b5-1 trading plans, pre-clearance by our CLO is required for equity and certain benefit plan transactions entered into by our executive officers and Board members, such as an option or stock appreciation right exercise, or electing to invest in or divest shares of our Common Stock, as well as certain other transactions involving our Common Stock.
In addition, quarterly trading blackouts are imposed under the Insider Trading Policy upon our directors,
 
executive officers and certain other employees who are deemed to have access to the Company’s financial results prior to their becoming final and being publicly disclosed. The Insider Trading Policy also permits the Company to institute additional trading blackout periods or other pre-clearance requirements as deemed appropriate.
Hedging and Pledging
The Insider Trading Policy also restricts certain other lawful conduct that may not be aligned with our stockholders’ best interest. For example, the Insider Trading Policy strictly prohibits hedging transactions for all those subject to the policy, which includes all directors, executive officers and DaVita teammates. Moreover, our directors, executive officers and all other employees at the Vice President level and above are prohibited from pledging Company securities as collateral for a loan.


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Proposal 2 Ratification of the Appointment of our Independent Registered Public Accounting Firm
Independent Registered Public Accounting Firm
The Audit Committee has appointed KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020. Representatives of KPMG LLP are expected to virtually attend the Annual Meeting and will be available to respond to appropriate questions and to make a statement if they so desire. If KPMG LLP should decline to act or otherwise become incapable of acting, or if KPMG LLP’s engagement is discontinued for any reason, the Audit Committee will appoint another independent registered public accounting firm to serve as our independent registered public accounting firm for fiscal year 2020. Although we are not required to seek stockholder ratification of this appointment, the Board believes that doing so is consistent with corporate governance best practices. If the appointment is not ratified, the Audit Committee will explore the reasons for the unfavorable vote and will reconsider the appointment.
The Audit Committee and the Board recommend a vote FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2020.
The following table sets forth the aggregate professional fees billed to us for the years ended
 
December 31, 2019 and 2018 by KPMG LLP, our independent registered public accounting firm:
 
2019
2018
    Audit fees1

$5,593,126


$5,331,851

    Audit-related fees2

$833,010


$1,837,357

    Tax fees3

$2,339,657


$1,313,665

All other fees


Total

$8,765,793


$8,482,873

1
Includes aggregate fees for the audit of our consolidated financial statements and the effectiveness of our internal control over financial reporting included in our Form 10-K and the three quarterly reviews of our consolidated financial statements included in our Form 10-Q and other SEC filings. In addition, audit fees include statutory audits in several countries outside of the U.S. where we conduct operations through our international subsidiaries.
2
Includes fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported as “Audit Fees.” The audit-related fees in 2019 and 2018 include fees for audits of our employee benefit plans, an audit of a majority-owned entity, audits of DMG’s risk bearing organizations and fees for due diligence services relating to potential acquisitions.
3
Includes fees for professional services rendered for tax compliance totaling $2,082,163 and $1,000,292 for 2019 and 2018, respectively, with the remainder primarily for tax technical advice.


 
Pre-approval Policies and Procedures
The Audit Committee is required to pre-approve the audit, audit-related, tax and all other services provided by our independent registered public accounting firm in order to ensure that the provision of such services does not impair the auditor’s independence. The Audit Committee’s pre-approval policy provides that the Audit Committee must pre-approve all audit, audit-related, tax and all other services provided by the
 
independent registered public accounting firm, KPMG LLP. The Audit Committee pre-approved all such services in 2019 and concluded that such services performed by KPMG LLP were compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.

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Proposal 3 Advisory Vote to Approve Named Executive Officer Compensation
As required by Section 14A of the Exchange Act, we are providing stockholders with a proposal to approve, on an advisory basis, the compensation of our NEOs as disclosed in this Proxy Statement in accordance with SEC rules. The advisory vote to approve NEO compensation described in this proposal is commonly referred to as a “say-on-pay" vote.
Since the initial say-on-pay vote of stockholders at our 2011 annual meeting of stockholders, we have held a say-on-pay vote annually. Accordingly, after this say-on-pay vote at our 2020 Annual Meeting, the next say-on-pay vote will be held at our 2021 Annual Meeting.
We believe that our executive compensation program is reasonable, competitive and strongly focused on pay-for-performance principles. Our executive compensation program is designed to align the interests of our executives with the long-term interests of our stockholders. Our incentive criteria focus on performance-based compensation that aligns with strategic, operational and financial objectives that we believe support the creation of stockholder value. To that end, 91% of our CEO’s 2019 target total direct compensation, and 83% of our other NEOs’ target total direct compensation, was linked to short- and long-term incentives and therefore meaningfully “at-risk.”  See subsection “— Executive Summary-NEO Pay Elements” for details. Our ability to effectively recruit, engage, motivate and retain highly-qualified executives is essential to our long-term success.
We believe that our NEOs were instrumental in achieving our 2019 results, including the following achievements and financial and operating performance indicators in 2019, as compared to 2018:
improved key clinical outcomes in our U.S. dialysis business, including our recognition as an industry leader for the seventh consecutive year in CMS’ Quality Incentive Program and for the last six years under the CMS Five-Star Quality Rating system;
23.5% é growth in our integrated care patient population (patients enrolled in special needs plans, ESCOs and value-based contracts), while continuing to develop integrated care capabilities and advocate for availability of integrated care on a broader scale, either through new legislation or the mandatory and
 
voluntary payment model demonstrations being developed by CMS;
4x home modalities growth in 2019 versus in-center growth, and innovation in the use of home remote monitoring;
closed on the previously announced sale of DMG, on June 19, 2019, at a price of $4.34 billion, subject to customary purchase price adjustments;
2.2% é U.S. dialysis revenue growth;
13.6% é international revenue growth;
2.5% é U.S. dialysis treatment growth;
89 é net increase of U.S. dialysis centers and a net increase of 18 international dialysis centers;
$2.0 billion operating cash flows from continuing operations;
repurchased over 41 million shares of our common stock for approximately $2.4 billion (including through a modified "Dutch auction" tender) and reduction of our outstanding share count by approximately 24.4% year-over-year;
a $174 million or 19.3% reduction in routine maintenance and development capital expenditures from continuing operations, consistent with our capital efficient growth strategies; and
entry into a new $5.5 billion senior secured credit agreement and redemption of our 5.75% senior notes.
As a care-giving company, we focus on not just improving clinical outcomes, but also improving our patients' quality of life through clinical initiatives. One specific example of this has been our continued focus on reducing infections in our patients. Dialysis patients are prone to infection, which can often lead to lengthy hospitalization stays and increased mortality. In 2019, we reduced the rate of bloodstream infections by 13% and reduced the rate of peritonitis (inflammation of the

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tissue covering the inside of the abdominal cavity, which is more common in patients undergoing peritoneal dialysis) by 20% versus the prior year. These are meaningful improvements that we believe kept many of our patients out of the hospital.
This proposal gives our stockholders the opportunity to express their views on the overall compensation of our NEOs and the philosophy, policies and practices described in this Proxy Statement.
For the reasons discussed above, we are asking our stockholders to indicate their support for our NEO compensation by voting FOR the following resolution at the Annual Meeting:
 
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the NEOs, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC (which disclosure includes the sections titled "Compensation Discussion and Analysis," "Executive Compensation — 2019 Summary Compensation Table" and the other related tables and disclosure).”
The say-on-pay vote is an advisory vote only, and therefore it will not bind the Company or the Board. However, the Board and the Compensation Committee will consider the voting results as appropriate when making future decisions regarding executive compensation, as they did following the 2019 annual meeting of stockholders and each annual meeting of stockholders going back to 2011.
The Board recommends a vote FOR the approval of the advisory resolution relating to the compensation of our NEOs as disclosed in this Proxy Statement.



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Proposal 4 Approval of the DaVita Inc. 2020 Incentive Award Plan
We are asking you to vote for approval of the proposed 2020 Plan. The 2020 Plan will replace the DaVita Healthcare Partners, Inc. 2011 Incentive Award Plan (the "2011 Plan"), although the Company intends to use the 2020 Plan in a manner consistent with the Company’s prior use of the 2011 Plan in order to incentivize and retain its employees, consultants and non-employee directors.
The Board believes that an equity-based compensation award program is an important incentive tool for the employees and consultants of the Company and its affiliates and the Company’s non-employee directors. As a result, the Board has adopted, subject to stockholder approval, the 2020 Plan to continue to provide a means by which such persons may be given an opportunity to benefit from the increases in the value of the Company’s Common Stock and to attract and retain the services of such persons.
The 2020 Plan will become effective upon approval of the 2020 Plan by our stockholders at the Annual Meeting. If the stockholders do not approve the 2020 Plan, the 2011 Plan will continue in full force and effect until June 6, 2021, when it will expire in accordance with its terms. Unless the stockholders approve a replacement equity plan, after June 6, 2021, the Company would no longer be able to grant equity-based compensation to its employees, consultants, and non-employee directors, and the Company would lose an important incentive tool for such persons.
Introduction
Equity-based compensation has been a major component of our compensation programs. The Board believes that our capacity to grant equity-based compensation has been a significant factor in our ability to achieve our business objectives and support stockholder value creation. The principal features of the 2020 Plan are summarized below, but the summary is qualified in its entirety by reference to the 2020 Plan itself, which is attached to this Proxy Statement as Appendix A.
Purpose
The purpose of the 2020 Plan is to promote our success and enhance our value by linking the individual interests of the members of the Board and our employees and consultants to those of our stockholders and by providing such individuals with an incentive for outstanding performance in order to generate superior returns for our stockholders. The 2020 Plan is further intended to provide us flexibility in
 
our ability to motivate, attract, and retain the services of members of the Board, our employees and our consultants upon whose judgment, interest, and special effort the successful conduct of our operation is largely dependent.
The 2020 Plan is intended to allow for a continuation of the equity-based compensation program established under the 2011 Plan. Notwithstanding the foregoing, the 2020 Plan includes several notable changes from the 2011 Plan that reflect commonly viewed governance best practices, including the following:
Inclusion of a “Change of Control” definition (as described below) as compared to our prior practice of defining Change of Control in the underlying award agreements;
Implementation of a one-year minimum vesting period that generally applies to all awards granted under the 2020 Plan, with an exception for 5% of shares initially available under the 2020 Plan and the ability of the administrator to waive or accelerate vesting in an award agreement or as otherwise determined by the administrator, as compared to the 2011 Plan, which only included a minimum vesting provision with respect to full value awards;
Implementation of an annual limitation for annual cash and equity retainers payable to non-employee directors of $700,000 per person, in the aggregate;
Removal of provisions relating to the performance-based compensation exception under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), in order to reflect the repeal of such exception pursuant to the Tax Cuts and Jobs Act of 2017, although still maintaining a list of performance goals for use by the administrator; and
Implementation of a uniform prohibition on the payment of dividends or dividend equivalents on unearned awards.
Compensation and Governance Best Practices
The 2020 Plan authorizes the Compensation Committee of the Board (the “Compensation Committee”) or, if the Board determines, another committee of the Board to provide equity-based compensation in the form of stock options, stock

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appreciation rights, restricted stock units, restricted stock, performance awards, dividend equivalents, stock payments, deferred stock unit awards and deferred stock awards structured by the Compensation Committee within parameters set forth in the 2020 Plan for the purpose of providing the members of the Board, our employees and our consultants with equity compensation, incentives and rewards for performance. The 2020 Plan reflects a broad range of compensation and commonly viewed governance best practices, with some of the key features of the 2020 Plan as follows:
One-year minimum vesting provision, with exception for 5% of shares initially available under the 2020 Plan and the ability the 2020 Plan administrator to waive or accelerate vesting in an award agreement or as otherwise determined by the administrator;
Annual director compensation limit;
No discounting of stock options or stock appreciation rights;
No repricing or replacement of underwater stock options or stock appreciation rights without stockholder approval;
No dividend equivalents on stock options or stock appreciation rights;
No dividends or dividend equivalents on unearned full value awards; and
No liberal definition of “Change of Control.”
Administration
The 2020 Plan will be administered by the Compensation Committee. Unless otherwise determined by the Board, the Compensation Committee will consist solely of two or more directors appointed by the Board, each of whom is intended to qualify as a “non-employee director” within the meaning of the rules under Section 16 of the Exchange Act and an “independent director” under the rules of any securities market on which shares of our Common Stock are traded. The Compensation Committee may delegate to a committee of one or more members of the Board or one or more of our officers the authority to grant or amend awards to participants other than (i) individuals who are subject to Section 16 of the Exchange Act or (ii) officers to whom authority has been delegated under the 2020 Plan to grant or amend awards.
The Board, acting by a majority of its members in office, will have authority to administer the 2020 Plan with respect to awards granted to non-employee members of the Board, and the Compensation Committee will have authority to administer the 2020 Plan with respect to all other eligible individuals.
 
References to Administrator in this Proposal 4 mean, as applicable, the full Board or the Compensation Committee as the entity to which the administration of the 2020 Plan has been delegated within the limits described in the 2020 Plan. Unless otherwise limited by the Board, the Administrator will have the authority to administer the 2020 Plan with respect to grants of equity awards, including the power to determine eligibility, the types and sizes of awards, the price and timing of awards and the acceleration or waiver of any vesting restriction, as well as the authority to delegate such administrative responsibilities.
Eligibility
Employees and consultants of the Company and its affiliates and non-employee directors of the Company are eligible to participate in the 2020 Plan. As of March 31, 2020, nine non-employee directors and approximately 65,000 employees would be eligible to participate in the 2020 Plan if selected by the Administrator for participation. While consultants are eligible to participate in the 2020 Plan, the Company has not historically granted awards to consultants.
Shares Available
The number of shares authorized for issuance under the 2020 Plan consists of (i) 5,000,000 shares plus (ii) the number of shares that remain available for issuance under the 2011 Plan as of the 2020 Plan’s effective date divided by 3.5, the share deduction ratio in the 2011 Plan. We have converted the available shares under the 2011 Plan to reflect a Full Value Award (as described below) denominated plan. Shares will be reduced from the 2020 Plan as follows: (i) to the extent the Company grants an option or stock-settled, free-standing stock appreciation right under the 2020 Plan, the number of shares that remain available for future grants under the 2020 Plan will be reduced by a number equal to one-quarter (0.25) times the number of shares subject to such option or stock appreciation right and (ii) to the extent the Company grants a share-denominated award, other than an option or stock appreciation right (“Full Value Award”) or settles a Full Value Award in shares, the number of shares that remain available for future grants under the 2020 Plan will be reduced by a number equal to one (1.0) times the number of shares subject to such Full Value Award. Shares of our Common Stock issued under the 2020 Plan may be shares in treasury, authorized but unissued shares, or shares purchased in the open market.
To the extent that an award granted under the 2020 Plan or the 2011 Plan is forfeited or expires or such award is settled for cash, the shares subject to such award will again be available for new grants under the 2020 Plan. In addition, any shares that are delivered to or withheld by the Company to satisfy the purchase

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price or tax withholding obligation with respect to a Full Value Award, including such an award under the 2011 Plan, will be again available for grant under the 2020 Plan. Any shares added to the 2020 Plan in accordance with this paragraph will be added back (i) in the case of awards granted under the 2020 Plan, based on the share deduction ratio described above, and (ii) in the case of awards granted under the 2011 Plan, the share conversion ratio applicable to such awards under the 2011 Plan. The following shares may not be used again for new grants under the 2020 Plan: (i) shares repurchased by the Company on the open market with the proceeds of a stock option exercise, (ii) shares that were subject to a stock option or stock appreciation right but not issued or delivered upon the net settlement or net exercise of such stock option or stock appreciation right, including a stock option or stock appreciation right granted under the 2011 Plan, and (iii) shares that were delivered to or withheld by the Company to satisfy the purchase price or tax withholding obligation with respect to a stock option or stock appreciation right.
The payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2020 Plan.
Awards granted under the 2020 Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by an entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock (but not awards made in connection with the cancellation and repricing of an option or stock appreciation right) will not reduce the shares authorized for grant under the 2020 Plan. Additionally, in the event that a company acquired by us or any of our affiliates or with which we or any of our affiliates combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan may be used for awards under the 2020 Plan and will not reduce the shares authorized for grant under the 2020 Plan, and will only be made to individuals who were not employed by or providing services to us or any of our affiliates immediately prior to such acquisition or combination.
Determination of Number of Shares Authorized for Issuance Under the 2020 Plan
Under the 2011 Plan, shares available for grant are denominated in stock option or stock appreciation right equivalents and Full Value Awards count as 3.5 shares against the plan. Based on our current annual equity grant practices, we expect to deliver more equity grants in the form of Full Value Awards (restricted stock units or performance stock units). As a result, we
 
have chosen to denominate shares authorized for issuance under the 2020 Plan in Full Value Award equivalents, with stock options or stock appreciation rights counting as 25% of a Full Value Award. When we determine the amount of an equity grant to be awarded to our teammates, we typically conceptualize the amount of the grant initially as a dollar value, and then convert that dollar value to a number of Full Value Awards by dividing the dollar value by the stock price at the time of grant, or to a number of stock appreciation rights by dividing the dollar value by 25% of the stock price at the time of grant. We use 25% of the stock price as the imputed value of a stock appreciation right based on the approximate fair market value of our stock appreciation rights at time of grant using the Black Scholes valuation methodology.
We are requesting 5,000,000 incremental shares for issuance under the 2020 Plan for the following reasons:
Creating a "pay for performance" culture: We have a pay for performance compensation culture that emphasizes long-term incentives as an important element of total compensation. This applies not just to our executive officers, but teammates throughout our organization.
Estimated duration of 2020 Plan: We believe that the incremental shares authorized for issuance under the 2020 Plan together with shares available for issuance under the 2011 Plan will cover annual equity grants and off-cycle grants for specific retention and/or incentive objectives for approximately five years. By comparison, we last requested stockholder approval of an incentive plan nine years ago. Shares authorized for issuance under the 2011 Plan covered a longer period of time because from 2012 through 2017, a component of the annual long-term incentive program consisted of cash-based incentives, reducing the number of shares that were granted as long-term incentive compensation. In order to further align the interests of our teammates with our stockholders, we replaced the cash-based incentive component of our long-term incentive program with stock awards in 2018.
Historical and projected burn rate: We calculate burn rate in accordance with the methodology utilized by Institutional Shareholder Services ("ISS"), on an option equivalent basis. Based on the ISS methodology and our historical stock price volatility, a 2.5x fungible ratio is applied to convert Full Value Awards to option equivalents. Based on this methodology, our

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burn rate was 2.7% in 2018 and 4.7% in 2019. Our burn rate in 2019 was significantly higher than in prior years as a result of our repurchase of approximately 41.0 million shares of our Common Stock in 2019, representing a reduction of our outstanding share count by approximately 24.4% year-over-year.
We expect our burn rate to be higher than 4% again in 2020 due to the grant of the CEO Premium-Priced SSAR Award, which was subject to an amendment to the 2011 Plan that was approved by stockholders on January 23, 2020 (described in the subsection — Executive Summary — CEO Premium-Priced SSAR Award of the Compensation Discussion and Analysis), which is intended to replace five years' worth of equity grants to the CEO. The full number of shares subject to the CEO Premium-Priced SSAR Award is included in the 2020 burn rate even though it is intended to represent the next five years’ worth of annual equity grants. However, if we normalize the CEO Premium-Priced SSAR Award by dividing its burden on our burn rate over five years, we would expect the 2020 burn rate to be below our most recent ISS cap of 2.65%. We expect normalized burn rates beyond 2020 to be similar to the 2020 normalized burn rate.
Expectations regarding future burn rate are based on a number of factors such as future growth in the population of eligible participants; the actual number of shares granted to eligible participants; the rate at which shares are returned to the 2020 Plan through forfeitures, cancellations and the withholding of shares to satisfy tax withholding obligations; the level of payout on performance stock units; future stock price performance (which impacts the number of Full Value Awards and SSARs granted); and future stock price volatility (which impacts ISS's fungible ratio to covert Full Value Awards to option equivalents).
Peer group comparison: The 50th and 75th percentile of 3-year average burn rate for the comparator peer group at the time we developed the terms of the proposed 2020 Plan was 2.2% and 2.6%, respectively. While we did not target the specific amount of shares requested for issuance under the 2020 Plan based on any specific peer group comparison, we believe that the number of shares requested will accommodate a normalized burn rate in line with market practice for our peer group.
 
Minimum Vesting Requirements
No award granted under the 2020 Plan will become exercisable or vested prior to the one-year anniversary of the date of grant, except that such restriction will not apply to awards granted under the 2020 Plan with respect to the number of shares which, in the aggregate, does not exceed five percent (5%) of the total number of shares initially available for awards under the 2020 Plan. The 2020 Plan’s minimum vesting requirement does not restrict the right of the Administrator to provide in an award agreement or otherwise for the continued or accelerated vesting or exercisability of an award, including upon or after a termination of service or a change of control.
Director Compensation Limit
The aggregate value of cash compensation paid and the grant date fair value of share-based awards granted during any fiscal year to any Non-Employee Director, as an annual Board or Board committee retainer or for meeting fees in respect of his or her service as a director will not exceed $700,000, determined without regard to any deferrals in accordance with any deferred compensation arrangement of the Company or any of its subsidiaries. Notwithstanding the foregoing limitation, the Board may at any time provide any Non-Employee Director with a retainer or other fee, grant or payment for service on a specific purpose committee or for any other special service of the Non-Employee Director, in each case, as determined in the discretion of the Board and without regard to and outside of the limit set forth in the prior sentence.
Awards
The 2020 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock units, restricted stock, performance awards, dividend equivalents, stock payments, deferred stock unit awards and deferred stock awards.
Stock options. A stock option entitles the holder, upon exercise of all or a portion of the stock option and the payment of the related exercise price, to receive from us the number of shares purchased upon exercise of the option. Options granted pursuant to the 2020 Plan may be incentive stock options (also known as “ISOs”) within the meaning of Section 422 of the Code, or nonqualified stock options, with a maximum of 7,500,000 shares that may be granted as ISOs under the 2020 Plan. The option exercise price of all stock options granted pursuant to the 2020 Plan may not be less than 100% of the fair market value of our Common Stock on the date of grant. In general, the fair market value will be the closing sales price for a share of our Common Stock as quoted on the principal

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securities market on which shares of our Common Stock are traded on the date of grant, which as of April 13, 2020 was $73.59. Stock options may vest and become exercisable as determined by the Administrator, but in no event may a stock option have a term extending beyond the 10th anniversary of the date of grant. Incentive stock options (“ISOs”) granted to any person who owns, as of the date of grant, stock possessing more than 10% of the total combined voting power of all classes of our stock, however, may not have an exercise price that is less than 110% of the fair market value of our Common Stock on the date of grant and may not have a term extending beyond the fifth anniversary of the date of grant. The aggregate fair market value of the shares with respect to which options intended to be ISOs are exercisable for the first time by an employee in any calendar year may not exceed $100,000, or such other amount as Section 422 of the Code provides.
Stock appreciation rights. A stock appreciation right entitles its holder, upon exercise of all or a portion of the stock appreciation right (the number of shares of which are the “base shares”), to receive from us an amount determined by multiplying the difference obtained by subtracting the exercise or base price per share of the stock appreciation right from the fair market value on the last trading day prior to the exercise of the stock appreciation right by the number of shares with respect to which the stock appreciation right is exercised (in the event the stock appreciation right is settled in shares, the shares obtained are the “gain shares”), subject to any limitations imposed by the Administrator. The exercise or base price per share subject to a stock appreciation right will be set by the Administrator, but may not be less than 100% of the fair market value on the date the stock appreciation right is granted. The Administrator determines the period during which the right to exercise the stock appreciation right vests in the holder, but in no event may a stock appreciation right have a term extending beyond the 10th anniversary of the date of grant. No portion of a stock appreciation right that is unexercisable at the time the holder’s service with us terminates will thereafter become exercisable, except as may be otherwise provided by the Administrator. Payment pursuant to the stock appreciation right awards may be in cash, shares, or a combination of both, as determined by the Administrator and set forth in the award agreement.
Restricted stock units. A restricted stock unit award provides for the issuance of our Common Stock or cash at a future date upon the satisfaction of specific conditions set forth in the applicable award agreement. The Administrator will specify the dates on which the restricted stock units will become fully vested and nonforfeitable, and the Administrator may specify such conditions to vesting as it deems appropriate,
 
including conditions based on achieving one or more performance criteria, or other specific criteria, including service to us or any of our affiliates. Restricted stock units may not be sold, or otherwise hypothecated or transferred, and a holder of restricted stock units will not have voting rights or dividend rights prior to the time when the vesting conditions are satisfied and the shares of Common Stock are issued. Restricted stock units generally will be forfeited, and the underlying shares of our Common Stock will not be issued, if the applicable vesting conditions are not met. The Administrator will specify, or permit the restricted stock unit holder to elect, the conditions and dates upon which the shares underlying the vested restricted stock units will be issued (subject to compliance with the deferred compensation requirements of Section 409A of the Code). Restricted stock units may be paid in cash, shares, or both, as determined by the Administrator and set forth in the award agreement. On the distribution dates, we will transfer to the participant one unrestricted, fully transferable share of our Common Stock (or the fair market value of one such share in cash) for each restricted stock unit scheduled to be paid out on such date and not previously forfeited. Restricted stock units may constitute or provide for a deferral of compensation subject to Section 409A of the Code, and there may be certain tax consequences if the requirements of Section 409A of the Code are not met.
Restricted stock. A restricted stock award is the grant of shares of our Common Stock at a price determined by the Administrator, if any, to be paid by the holder to us with respect to any restricted stock award, with cash, services or any other consideration that the Administrator deems acceptable, subject to the requirements of law, and that is nontransferable and may be subject to substantial risk of forfeiture until specific conditions are met. Conditions may be based on continuing service to us or any of our affiliates or achieving one or more performance criteria, or other specific criteria. During the period of restriction, participants holding shares of restricted stock have full voting and dividend rights with respect to such shares unless otherwise provided by the Administrator, except that dividends will be subject to the same vesting conditions as the underlying restricted stock and will be paid only to the extent that the underlying restricted stock vests. Restricted stock generally will be forfeited, if the vesting conditions and other restrictions are not met. The restrictions will lapse in accordance with a schedule or other conditions determined by the Administrator.
Dividend equivalents. Dividend equivalents represent the right to receive an amount equal to the dividends paid on the underlying shares if such shares had been outstanding and had received such dividends. No dividend equivalents may be payable with respect to

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options or stock appreciation rights. Dividend equivalents that are granted by the Administrator are credited as of dividend payments dates during the period between the date an award is granted and the date such award vests, is exercised, is distributed or expires, as determined by the Administrator. Such dividend equivalents will be converted to cash or additional shares of our Common Stock by such formula, at such time and subject to such limitations as may be determined by the Administrator. Dividend equivalents with respect to an award subject to vesting conditions will be subject to the same vesting conditions as the underlying award and will be paid only to the extent that the underlying award vests.
Stock payments. A stock payment is a payment in the form of shares of our Common Stock or an option or other right to purchase shares, as part of a bonus, deferred compensation or other arrangement. The number or value of shares of any stock payment will be determined by the Administrator and may be based on continuing service with us or any of our affiliates or achieving one or more performance criteria, or other specific criteria. Except as otherwise determined by the Administrator, shares underlying a stock payment that is subject to a vesting schedule or other conditions set by the Administrator will not be issued until those conditions have been satisfied. Stock payments may, but are not required to, be made in lieu of base salary, bonus, fees or other cash compensation otherwise payable to any individual who is eligible to receive awards.
Deferred stock units. The number of deferred stock units will be determined by the Administrator and may be based on continuing service with us or any of our affiliates or achieving one or more performance criteria, or other specific criteria determined by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Each deferred stock unit entitles its holder to receive one share of Common Stock or the equivalent in cash on the date the deferred stock unit becomes vested or upon a specified settlement date thereafter. Except as otherwise determined by the Administrator, shares underlying a deferred stock unit award that is subject to a vesting schedule or other conditions set by the Administrator will not be issued until those conditions have been satisfied. Unless otherwise provided by the Administrator, a holder of deferred stock units will have no rights as a stockholder with respect to such deferred stock units until the award of deferred stock units has vested and any other applicable conditions and/or criteria have been satisfied and the shares of Common Stock underlying the award have been issued to the holder.
Deferred stock. Deferred stock provides for the deferred issuance to the holder of shares of our
 
Common Stock. The number of shares of deferred stock will be determined by the Administrator and may be based on continuing service with us or any of our affiliates or achieving one or more performance criteria, or other specific criteria determined by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Except as otherwise determined by the Administrator, shares underlying a deferred stock award that is subject to a vesting schedule or other conditions set by the Administrator will not be issued until those conditions have been satisfied. Deferred stock may constitute or provide for a deferral of compensation subject to Section 409A of the Code, and there may be certain tax consequences if the requirements of Section 409A of the Code are not met.
Performance awards. Performance awards may be granted in the form of cash bonus awards, stock bonus awards or incentive awards that are paid in cash, shares, equity awards or a combination of cash, shares or equity awards. The value and vesting of performance awards may be linked to the attainment of performance goals based on any one or more performance criteria (which may but need not be one or more of the performance criteria listed below) or other specific criteria determined by the Administrator. The goals are established and evaluated by the Administrator and may relate to performance over any periods as determined by the Administrator
Performance criteria. The performance criteria used to establish performance goals may include, but are not limited to, any of the following: 
net earnings (either before or after one or more of the following: (A) interest, (B) taxes, (C) depreciation and (D) amortization);
gross or net sales or revenue;
net income (either before or after taxes);
adjusted net income;
operating earnings or profit;
cash flow (including, but not limited to, operating cash flow and free cash flow);
return on assets;
return on capital;
return on stockholders’ equity;
total stockholder return;
return on sales;
gross or net profit or operating margin;
costs;
funds from operations;

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expenses;
working capital;
earnings per share;
adjusted earnings per share;
price per share;
regulatory body approval for commercialization of a product;
implementation or completion of critical projects or strategic initiatives;
market share;
economic value;
non-acquired growth;
new market entries;
acquisition targets;
treatment growth;
patient growth;
center growth;
clinical objectives, outcomes (including mortality rates) and processes;
physician recruitment;
physician retention;
physician relations;
employee turnover;
employee relations;
patient retention and satisfaction;
improvements in reimbursement economics;
commercial payor relationships and contract related targets;
public policy efforts; and
legal proceedings and litigation outcomes.
The Administrator may, in its sole discretion, provide that one or more adjustments will be made to one or more of the performance goals. Such adjustments may include, but are not limited to, one or more of the following: 
items related to a change in accounting principles;
items relating to financing activities;
expenses for restructuring or productivity initiatives;
other non-operating items;
items related to acquisitions;
 
items attributable to the business operations of any entity acquired by us during the performance period;
items related to the disposal of a business or segment of a business;
items related to discontinued operations;
items attributable to any stock dividend, stock split, combination or exchange of shares occurring during the performance period;
any other items of significant income or expense which are determined to be appropriate adjustments;
items relating to unusual, infrequently occurring, or extraordinary corporate transactions, events or developments;
items related to amortization of acquired intangible assets;
items that are outside the scope of our core, on-going business activities;
items related to acquired in-process research and development;
items relating to changes in tax laws;
items relating to major licensing or partnership arrangements;
items relating to asset impairment charges;
items relating to gains or losses for litigation, arbitration and contractual settlements; or
items relating to any other unusual, infrequently occurring, or nonrecurring events or changes in applicable laws, accounting principles or business conditions.
For the avoidance of doubt, modality selections and decisions related to a patient's care are always made by the attending nephrologist and patient, and provided pursuant to a physician's order.
Payment Methods. The Administrator will determine the methods by which payments by any award holder with respect to any awards granted under the 2020 Plan may be made, including, without limitation, by: (1) cash or check; (2) shares of our Common Stock issuable pursuant to the award or held for such period of time as may be required by the Administrator and having a fair market value at the time of delivery equal to the aggregate payments required; (3) delivery of a notice that the award holder has placed a market sell order with a broker with respect to shares of our Common Stock then issuable upon exercise or vesting of an award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to us in satisfaction of the aggregate payments required; provided that payment of such proceeds is

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then made to us upon settlement of such sale; or (4) other form of legal consideration acceptable to the Administrator. However, no participant who is a member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act will be permitted to make payment with respect to any awards granted under the 2020 Plan, or continue any extension of credit with respect to such payment, in any method that would violate the prohibitions on loans made or arranged by us as set forth in Section 13(k) of the Exchange Act. Only whole shares of Common Stock may be purchased or issued pursuant to an award. No fractional shares will be issued, and the Administrator will determine, in its sole discretion, whether cash will be given in lieu of fractional shares or whether such fractional shares will be eliminated by rounding.
Vesting and Exercise of an Award. The applicable award agreement governing an award will contain the period during which the right to exercise the award in whole or in part vests, including the events or conditions upon which the vesting of an award will occur or may accelerate. No portion of an award that is not vested at the holder’s termination of service with us will subsequently become vested, except as may be otherwise provided by the Administrator in the agreement relating to the award or by action following the grant of the award.
Generally, an option or stock appreciation right may be exercised only while the holder remains an employee or non-employee director of us or one of our affiliates or for a specified period of time (up to the remainder of the award term) following the holder’s termination of service with us or one of our affiliates. Upon the grant of an award or following the grant of an award, the Administrator may provide that the period during which the award will vest or become exercisable will accelerate, in whole or in part, upon the occurrence of one or more specified events, including a change in control or a holder’s termination of employment or service with us or otherwise.
Transferability. No award under the 2020 Plan may be transferred other than by will or the then-applicable laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a domestic relations order, unless and until such award has been exercised or the shares underlying such award have been issued and all restrictions applicable to such shares have lapsed. No award will be subject to the debts or contracts of the holder or his or her successors in interest or will be subject to disposition by any legal or equitable proceedings. During the lifetime of the holder of an award granted under the 2020 Plan, only such holder may exercise such award unless it has been disposed of pursuant to a domestic relations order. After the holder’s death, any
 
exercisable portion of an award may be exercised by his or her personal representative or any person empowered to do so under such holder’s will or the then-applicable laws of descent and distribution until such portion becomes unexercisable under the 2020 Plan or the applicable award agreement. Notwithstanding the foregoing, the Administrator may permit an award holder to transfer an award other than an ISO to any “family member” of the holder, as defined under the instructions for use of the Form S-8 Registration Statement under the Securities Act of 1933, subject to certain terms and conditions. Further, an award holder may, in a manner determined by the Administrator, designate a beneficiary to exercise the holder’s right and to receive any distribution with respect to any award upon the holder’s death, subject to certain terms and conditions.
Forfeiture, Recoupment and Clawback Provisions. Pursuant to its general authority to determine the terms and conditions applicable to awards under the 2020 Plan, the Administrator will have the right to provide, in an award agreement or otherwise, or to require a holder to agree by separate written instrument, that (a) (i) any economic benefit received by the holder upon any receipt or exercise of the award, or upon the receipt or resale of any shares of Common Stock underlying the award, must be paid to the Company, and (ii) the award will terminate and any unexercised portion of the award will be forfeited, if (x) a termination of service occurs within a specific time period following receipt or exercise, (y) the holder at any time, or during a specified time period, engages in any activity in competition with the Company, or that is contrary to the interests of the Company, or (z) the holder incurs a termination of service for “cause” (as determined in the Administrator’s discretion or as set forth in a written agreement between the Company and the holder); and (b) all awards (including any economic benefit received by the holder upon any receipt or exercise of any award or upon the receipt or resale of any shares of Common Stock underlying the award) will be subject to the provisions of any recoupment or clawback policies implemented by the Company, including, without limitation, any recoupment or clawback policies adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such recoupment or clawback policies and/or in the applicable award agreement.
Adjustment Provisions
Certain transactions with our stockholders not involving our receipt of consideration, such as stock splits, spin-offs, stock dividends or certain recapitalizations may affect the shares or the share price of our Common Stock (which transactions are

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referred to collectively as equity restructurings). In the event that an equity restructuring occurs, the Administrator will equitably adjust the class of shares issuable and the maximum number and kind of shares of our Common Stock subject to the 2020 Plan, and will equitably adjust outstanding awards as to the class, number of shares and price per share of our Common Stock. The Administrator will also adjust the number and kind of shares for which automatic grants are subsequently to be made to new and continuing non-employee directors pursuant to the 2020 Plan. Other types of transactions may also affect our Common Stock, such as a dividend or other distribution, reorganization, merger or other changes in corporate structure. In the event that there is such a transaction, such transaction is not an equity restructuring, and the Administrator determines that an adjustment to the 2020 Plan and any outstanding awards would be appropriate to prevent any dilution or enlargement of benefits under the 2020 Plan, the Administrator will equitably adjust the 2020 Plan as to the class of shares issuable and the maximum number of shares of our Common Stock subject to the 2020 Plan, and will adjust any outstanding awards as to the class, number of shares, and price per share of our Common Stock in such manner as the Administrator may deem equitable.
In addition, if there is a “Change of Control” of the Company, the Administrator may, in its discretion: 
provide for the termination of any award in exchange for an amount of cash (if any) and/or other property equal to the amount that would have been attained upon the exercise of such award or realization of the participant’s rights;
provide for the replacement of any award with other rights or property selected by the Administrator in its sole discretion having an aggregate value not exceeding the amount that could have been attained upon exercise of such award or realization of the participant’s rights;
provide that any surviving corporation (or its parent or subsidiary) will assume awards outstanding under the 2020 Plan or will substitute similar awards for those outstanding under the 2020 Plan, with appropriate adjustment of the number and kind of shares, prices, and performance criteria of such awards;
make adjustments (i) in the number and type of shares of Common Stock (or other securities or property) subject to outstanding awards or in the number and type of shares of restricted stock or deferred stock or (ii) to the terms and conditions of (including the grant or
 
exercise price) and the criteria included in, outstanding awards or future awards;
provide that awards may be exercisable, payable or fully vested as to shares of Common Stock covered thereby; or
provide that any outstanding award cannot vest, be exercised or become payable after such event.
Under the terms of the 2020 Plan, a “Change of Control” is generally defined as: (i) certain acquisitions of more than 35% of the Company’s then outstanding securities eligible to vote for the election of our Board (provided that if Berkshire Hathaway Inc., together with its affiliates (“Berkshire”) acquires ownership of greater than 35% but 50% or less of the then-outstanding shares as a result of repurchases of shares by the Company, it shall not be deemed a Change of Control unless Berkshire proactively acquires shares after it has passively become a greater than 35% owner or Berkshire becomes a greater than 50% owner); (ii) the consummation of certain mergers, consolidations or reorganizations of the Company; (iii) the sale of all or substantially all of the Company’s assets; (iv) a complete liquidation or dissolution of the Company; or (v) a change in our Board resulting in the incumbent directors ceasing to constitute at least a majority of our Board over a 24-month period.
Term, Amendment and Termination
The 2020 Plan will continue until terminated by the Board or there are no more shares available for grant. The Board of Directors may terminate, amend or modify the 2020 Plan at any time; however, except to the extent permitted by the 2020 Plan in connection with certain changes in capital structure, stockholder approval must be obtained for any amendment to (i) increase the number of shares available under the 2020 Plan, (ii) reduce the per share exercise price of the shares subject to any option or stock appreciation right below the per share exercise price as of the date the option or stock appreciation right was granted, (iii) cancel any option or stock appreciation right in exchange for cash or another award when the option or stock appreciation right price per share exceeds the fair market value of the underlying shares; or (iv) increase the 2020 Plan’s director compensation limit.
New Plan Benefits
The Compensation Committee has the discretion to grant awards under the 2020 Plan and, therefore, it is not possible as of the date of this proxy statement to determine future awards that will be received by NEOs or others under the 2020 Plan. Please see the section entitled “Compensation Discussion and Analysis” for

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grants made to each of the NEOs under the 2011 Plan during 2019.
Federal Income Tax Consequences
The following is a brief summary of certain United States federal income tax consequences generally arising with respect to awards under the 2020 Plan. This discussion does not address all aspects of the United States federal income tax consequences of participating in the 2020 Plan that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-United States tax consequences of participating in the 2020 Plan. Each participant is advised to consult his or her particular tax advisor concerning the application of the United States federal income tax laws to such participant’s particular situation, as well as the applicability and effect of any state, local or non-United States tax laws before taking any actions with respect to any awards.
If an optionee is granted a non-qualified stock option under the 2020 Plan, the optionee should not have taxable income on the grant of the option. Generally, the optionee should recognize ordinary income at the time of exercise in an amount equal to the fair market value of a share of our Common Stock at such time, less the exercise price paid. The optionee’s basis in the Common Stock for purposes of determining gain or loss on a subsequent sale or disposition of such shares generally will be the fair market value of our Common Stock at the time the optionee exercises such option. Any subsequent gain or loss will generally be taxable as a capital gain or loss. We or our affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount and at the same time as the optionee recognizes ordinary income, subject to Section 162(m) of the Code.
A participant receiving ISOs will not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant will not recognize taxable income at the time of exercise. However, the excess of the fair market value of our Common Stock received over the exercise or base
 
price is an item of tax preference potentially subject to the alternative minimum tax. If stock acquired upon exercise of an ISO is held for a minimum of two years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the difference between the fair market value at the time of sale and the exercise or base price) upon disposition of the stock will be treated as a long-term capital gain or loss, and we will not be entitled to any deduction. If the holding period requirements are not met, the ISO will be treated as one that does not meet the requirements of the Code for ISOs and the tax consequences described for nonqualified stock options will apply.
The current federal income tax consequences of other awards authorized under the 2020 Plan generally follow certain basic patterns: stock appreciation rights are taxed and deductible in substantially the same manner as nonqualified stock options; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); restricted stock units, stock-based performance awards, dividend equivalents and other types of awards are generally subject to tax at the time of payment based on the fair market value of the award at such time. Compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, we will generally have a corresponding deduction at the time the participant recognizes ordinary income, subject to Section 162(m) of the Code.
Section 162(m) of the Code denies a deduction to any publicly held corporation for compensation paid to any “covered employee” in a taxable year to the extent that compensation to such covered employee exceeds $1,000,000. It is possible that compensation attributable to awards under the 2020 Plan may cause this limitation to be exceeded in any particular year.


The Board recommends a vote FOR the approval of the DaVita Inc. 2020 Incentive Award Plan.

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Equity Compensation Plan Information
The following table provides information about our Common Stock that may be issued upon the exercise of stock-settled stock appreciation rights, restricted stock units and other rights under all of our existing equity compensation plans as of December 31, 2019, which
 

consisted of our 2011 Plan and our Employee Stock Purchase Plan. The material terms of these plans are described in Note 18 to the consolidated financial statements, which are part of our Annual Report on Form 10-K for the year ended December 31, 2019.
 
Number of shares to be issued upon exercise of outstanding options, warrants and rights(1)(2)
Weighted-average exercise price of outstanding options, warrants and rights(3)
Number of shares remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Total of shares reflected in columns (a) and (c)
Plan Category
(a)
(b)
(c)
(d)
Equity compensation plans approved by stockholders
10,606,446
$64.10
21,958,174
32,564,620
Equity compensation plans not approved by stockholders
__
__
__
__
TOTAL
10,606,446
$64.10
21,958,174
32,564,620
(1) Does not include the Premium-Priced SSAR Award granted to our CEO during 2019, as described in the “Compensation Discussion and Analysis” and Note 18 to the consolidated financial statements, which are part of our Annual Report on Form 10-K for the year ended December 31, 2019, as that Board-approved award remained contingent on stockholder approval of an amendment to our 2011 Plan which did not occur until January 2020.
(2) Includes 1,073,051 shares of Common Stock reserved for issuance in connection with performance share units at the maximum number of shares issuable thereunder.
(3) This weighted-average excludes full value awards such as restricted stock units and performance share units.




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Proposal 5 Stockholder Proposal Regarding Political Contributions Disclosure
We expect the following proposal, sponsored by Friends Fiduciary Corporation, 1700 Market Street, Suite 1535, Philadelphia, PA 19103 and holder of at least 1,800 shares of the Company’s Common Stock, to be presented at the Annual Meeting. The Board has recommended a vote AGAINST this proposal for the reasons set forth following the proposal.
As required by the Exchange Act, the text of the stockholder proposal and supporting statement appear exactly as submitted to the Company by the proponent. The Board and the Company accept no responsibility for the contents of the proposal or the supporting statement.
Stockholder Proposal and Supporting Statement
DaVita Inc. Political Disclosure Shareholder Resolution
Resolved, that the shareholders of DaVita Inc. (“DaVita” or “Company”) hereby request that
the Company provide a report, updated semiannually, disclosing the Company’s:
1.
Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in any campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum.
2.
Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including:
a.
The identity of the recipient as well as the amount paid to each; and
b.
The title(s) of the person(s) in the Company responsible for decision-making.
The report shall be presented to the board of directors or relevant board committee and posted on the Company’s website within 12 months from the date of
 
the annual meeting. This proposal does not encompass lobbying spending.
Supporting Statement
As long-term shareholders of DaVita, we support transparency and accountability in corporate electoral spending. This includes any activity considered intervention in a political campaign under the Internal Revenue Code, such as direct and indirect contributions to political candidates, parties, or organizations, and independent expenditures or electioneering communications on behalf of federal, state, or local candidates.
Disclosure is in the best interest of the company and its shareholders. The Supreme Court recognized this in its 2010 Citizens United decision, which said, “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”
Although DaVita publicly discloses a policy on corporate political spending, this is deficient because the Company does not disclose any of its corporate political expenditures. Publicly available records show DaVita has contributed at least $71,300,000 in corporate funds since the 2010 election cycle (CQMoneyLine: http://moneyline.cq.com; National Institute on Money in State Politics: http://www.followthemoney.org).
However, relying on publicly available data does not provide a complete picture of the Company’s electoral spending. For example, the Company’s payments to trade associations that may be used for election-related activities are undisclosed and unknown. This proposal asks the Company to disclose all of its electoral spending, including payments to trade associations and other tax-exempt organizations, which may be used for electoral purposes. This would bring our Company in line with a growing number of leading companies, including WellCare Health Plans, Inc., Walgreens Boots Alliance Inc., and Baxter International, which present this information on their websites.
The Company’s Board and shareholders need comprehensive disclosure to fully evaluate the use of corporate assets in elections. We urge your support for this critical governance reform.

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The Board of Directors' Statement in Opposition of Proposal 5
The Board believes it is necessary and appropriate for the Company to participate in the political process to further the long-term interests of the Company and its stockholders. While the Board supports the proposal’s stated objectives of transparency and accountability, after careful consideration of the proposal, the Board concluded that the implementation of the additional disclosures contemplated by the proposal would not be in the best interest of the Company and its stockholders in light of the detailed oversight process the Company currently follows, the reporting already provided both to the Board and externally and the cost to attempt to implement this vague proposal. Accordingly, the Board recommends that you vote AGAINST the proposal.
DaVita Has Modified its Political Contributions Policy
The Company engaged the proponent in a dialogue to better understand and address its concerns. Following such engagement, we made certain modifications to our disclosures, including to provide more detailed reporting of the Company’s political spending and related Board and management oversight processes
on the DaVita website at www.davita.com/about/corporate-governance. Our website provides robust information about our policies, processes and activities related to our political spending.
Company Follows Policies and Procedures Governing Corporate Contributions
The Company’s operations are comprehensively regulated at local, state, and federal levels. Government regulation of the provision of healthcare products and services is a changing area of law that varies from jurisdiction-to-jurisdiction and proposed changes to these laws, rules and regulations can have a significant effect on the Company’s operating results and stockholder value. Permitted political contributions play an important role in the Company’s public policy engagement efforts. The Company engages in the political process to support issues of central importance
to our business by taking action to ensure federal and state officials hear from our patients and the Company. Our public policy priorities and lobbying efforts advance the interests of our patients, align with the public policy goals of the Company, and are made without regard for the private political preferences of any of our officers or executives. The Company believes its current practices, described below, including certain enhancements made following
 
engagement with the proponent, provide ample transparency and accountability with respect to the Company’s political spending.
The Company’s political contributions are governed by extensive federal, state and local laws and regulations, including detailed disclosure requirements. The Company is committed to complying with all applicable federal, state and local laws in connection with the Company’s political spending. Our political spending includes corporate expenses related to federal and state regulatory and legislative efforts, lobbying, corporate political donations to state candidates for office, and political donations to federal candidates from the Company’s Political Action Committee (“DaPAC”). We have a Government Affairs team that is subject to established written internal policies and procedures regarding our corporate political giving and lobbying expenses as reflected in part in our Code of Conduct. Key management members of our Government Affairs team are involved in developing the annual funding goals for corporate political and lobbying spending, including our Group Vice President, Government Affairs, Vice President, Federal Government Affairs, and Vice President, State Government Affairs. The DaPAC board of directors along with our senior management team are also asked to review and provide their concurrence with these corporate annual funding goals.
Robust Board and Management Oversight of Political Spending Activities
Our Board oversees activities of the Government Affairs team and political spending, and receives semi-annual reports from senior management on these matters. Among other things, these reports cover the status of the Company’s public policy priorities, including the political spending by the Company and DaPAC. The Company’s Policies and Procedures Related to Political and Lobbying Expenditures, available on the Company’s website, require that all political spending made by the Company and DaPAC must comply with applicable laws and regulations.
Conclusion
The Company is committed to being transparent and accountable when participating in the political process. However, given the existing comprehensive regulation applicable to the Company at local, state, and federal levels, and the Company’s existing robust Board and management oversight of political activities, the detailed report requested by the proposal would require significant time and expense with little added benefit to stockholders. If adopted, it could also result

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in a competitive disadvantage for the Company by diverting valuable resources. We believe that any additional political contribution reporting requirements that go beyond those required under existing law should be applicable to all participants engaged in the political process. The Board believes that the time and
 
expense involved in preparing the detailed report requested by this vague and overbroad proposal could be better utilized to move the Company’s business forward and, consequently, does not support the proposal.
For all of the foregoing reasons, the Board recommends a vote AGAINST Proposal 5.



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Security Ownership of Certain Beneficial
Owners and Management
 
The following table sets forth information regarding the ownership of our Common Stock as of March 31, 2020 by (a) all persons known by us to own beneficially more than 5% of our Common Stock, (b) each of our directors and NEOs, and (c) all of our directors and Executive Officers as a group. We know of no agreements among our stockholders which relate to voting or investment power over our Common Stock or any arrangement the operation of which may at a subsequent date result in a change of control of the Company.
Name and address of beneficial owner1
 
Number of
shares
beneficially
owned

 
Percentage of    
shares    
beneficially    
owned    

Warren E. Buffett2
Berkshire Hathaway Inc.
3555 Farnam St.
Omaha, NE 68131
 
 
38,095,570

 
31.28
%
The Vanguard Group3
100 Vanguard Blvd.
Malvern, PA 19355
 
 
10,481,457

 
8.61
%
BlackRock, Inc.4
55 East 52nd St.
New York, NY 10055
 
 
7,302,299

 
6.00
%
Directors and Officers:
 
 
 
 
Javier J. Rodriguez5
 
138,163

 
*

Joel Ackerman6
 
13,244

 
*

Michael D. Staffieri7
 
60,796

 
*

Kathleen A. Waters8
 
14,867

 
*

LeAnne M. Zumwalt9
 
7,303

 
*

Kent J. Thiry10
 
759,296

 
*

Pamela M. Arway11
 
21,111

 
*

Charles G. Berg12
 
18,870

 
*

Barbara J. Desoer13
 
10,379

 
*

Pascal Desroches14
 
8,636

 
*

Paul J. Diaz15
 
17,022

 
*

Peter T. Grauer16
 
70,923

 
*

John M. Nehra17
 
56,942

 
*

Dr. William L. Roper18
 
17,234

 
*

Phyllis R. Yale19
 
8,977

 
*

All directors and executive officers as a group (17 persons)20
 
1,226,728

 
1.00
%
*
Amount represents less than 1% of our Common Stock.
1
Unless otherwise set forth below, the address of each beneficial owner is 2000 16th Street, Denver, Colorado, 80202.
2
The number of shares beneficially owned as reported for Mr. Buffet and Berkshire Hathaway, Inc. is based solely on information contained in (i) Amendment No. 4 to Schedule 13D filed with the SEC on November 12, 2019 and (ii) the Form 4 filed with the SEC on March 18, 2020, in each case by Berkshire Hathaway Inc., a diversified holding company which Mr. Buffett may be deemed to control. Such filings indicated that, as of November 7, 2019, Mr. Buffett and Berkshire Hathaway Inc. shared voting and dispositive power over 38,565,570 shares of the Company’s Common Stock, which included shares beneficially owned by certain subsidiaries of Berkshire Hathaway Inc. as a result of being a parent holding company or control person and that, on March 16, 2020, the reporting persons disposed of 470,000 shares of the Company’s Common Stock. The percentage of shares beneficially owned as reported for Mr. Buffett and Berkshire Hathaway, Inc. was calculated by the Company as of March 31, 2020, using the total shares outstanding as of that date.

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3
Based solely upon information contained in Amendment No. 9 to Schedule 13G filed with the SEC on February 12, 2020, as of December 31, 2019, The Vanguard Group has sole voting power with respect to 143,478 shares, shared voting power with respect to 33,270 shares, sole dispositive power with respect to 10,317,549 shares and shared dispositive power with respect to 163,908 shares. The percentage of shares beneficially owned as reported for The Vanguard Group was calculated by the Company as of March 31, 2020, using the total shares outstanding as of that date.
4
Based solely upon information contained in Amendment No. 4 to Schedule 13G filed with the SEC on February 5, 2020, as of December 31, 2019, BlackRock, Inc., an investment advisor, has sole voting power with respect to 6,190,043 shares and sole dispositive power with respect to 7,302,299 shares. The percentage of shares beneficially owned as reported for BlackRock, Inc. was calculated by the Company as of March 31, 2020, using the total shares outstanding as of that date.
5
Includes 4,053 performance stock units, which are scheduled to vest, as of or within 60 days after March 31, 2020, and 6,601 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excludes 46,551 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.
6
Includes 1,116 performance stock units, which are scheduled to vest, as of or within 60 days after March 31, 2020, and 6,841 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020.
7
Includes 4,093 restricted stock units which are scheduled to vest, as of or within 60 days after March 31, 2020 and 5,719 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excludes 40,284 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.
8
Includes 307 performance stock units, which are scheduled to vest, as of or within 60 days after March 31, 2020, and 1,588 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020.
9
Includes 307 performance stock units, which are scheduled to vest, as of or within 60 days after March 31, 2020, and 1,677 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excludes 11,936 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.
10
Includes 672,653 shares held in a family trust and 55,084 performance stock units, which are scheduled to vest, as of or within 60 days after March 31, 2020. Also included are 31,559 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excludes 179,041 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.
11
Includes 1,872 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excludes 4,662 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.
12
Includes 1,418 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excludes 4,662 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.
13
Includes 2,267 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020.
14
Includes 2,213 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020.
15
Includes 1,872 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excludes 4,662 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.
16
Includes 2,734 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excludes 6,809 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.
17
Includes 1,872 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excludes 4,662 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.
18
Includes 1,872 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excludes

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Security Ownership of Certain Beneficial Owners and Management
 



4,662 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.
19
Includes 1,853 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excludes 4,579 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.
20
Includes 4,735 restricted stock units and 60,867 performance stock units, which are scheduled to vest, in each case, as of or within 60 days after March 31, 2020. Also includes 72,143 shares issuable upon the exercise of SSARs, which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020, as determined based on the closing price per share of our Common Stock of $76.06 on March 31, 2020. Excluded from this number are 312,510 SSARs which are exercisable (or will become exercisable), as of or within 60 days after March 31, 2020 as the stock price was below the base price on March 31, 2020.

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Information About Our Executive Officers
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* Effective June 1, 2019, Mr. Thiry stepped down as Chairman of the Board and CEO of the Company and DMG and assumed the position of Executive Chairman of the Board.
** On November 1, 2019, the Board appointed Mr. Winstel as CAO of the Company, effective February 22, 2020. Jim Hilger stepped down as CAO as of such date and continued as a Senior Advisor to the Company until April 2, 2020.
Our executive officers are appointed by, and serve at the discretion of, the Board. Set forth below is a brief description of the business experience of all executive officers other than Mr. Rodriguez, who is also a director nominee and whose business experience is set forth above in the section of this Proxy Statement titled “Board of Directors Information.”
Kent J. Thiry became the Executive Chairman of the Board in June 2019 and is expected to serve in such role until June 1, 2020 pursuant to the terms of his Executive Chairman Agreement. Prior to his service as Executive Chairman, he served as our Chairman of the Board since June 2015 and from October 1999 until November 2012. Mr. Thiry also served as our CEO from October 1999 through June 2019. Mr. Thiry also served as CEO of our former integrated care business, DMG, from October 2014 to June 2019. From November 2012 until June 2015, Mr. Thiry served as our Co-Chairman of the Board. From June 1997 until he joined us in October 1999, Mr. Thiry was
 
Chairman of the Board and CEO of Vivra Holdings, Inc., which was formed to operate the non-dialysis business of Vivra Incorporated (“Vivra”) after Gambro AB acquired the dialysis services business of Vivra in June 1997. From September 1992 to June 1997, Mr. Thiry was the President and CEO of Vivra, a provider of renal dialysis services and other healthcare services. From April 1992 to August 1992, Mr. Thiry was President and Co-CEO of Vivra, and from September 1991 to March 1992, he was President and COO of Vivra. From 1983 to 1991, Mr. Thiry was associated with Bain & Company, first as a consultant, and then as Vice President. Mr. Thiry previously served on the Board of Varian Medical Systems, Inc. from August 2005 to February 2009 and served as the Non-Executive Chairman of Oxford Health Plans, Inc. until it was sold to UnitedHealth Group in July 2004.

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Information About Our Executive Officers
 


Michael D. Staffieri became our COO, DaVita Kidney Care, in March 2014. From July 2011 to March 2014, he served as a Senior Vice President, Kidney Care. Mr. Staffieri initially joined us in July 2000 and served in several different roles in that time, including as our Vice President of Operations and New Center Development from March 2008 to July 2011. Prior to joining us, Mr. Staffieri worked as a consultant for Arthur Andersen LLP from 1999 to 2000.
Joel Ackerman became our CFO in February 2017. Effective April 2019, Mr. Ackerman was also appointed to serve as our Treasurer. Prior to joining us, Mr. Ackerman was the CEO and a member of the Board of Directors of Champions Oncology, Inc., a company engaged in the development of advanced technology solutions and services to personalize the development and use of oncology drugs, since October 2010. Mr. Ackerman is currently the Chairman of the Board of Champions Oncology. Mr. Ackerman served as a Managing Director at Warburg Pincus, a global private equity firm, where he led the healthcare services team for nearly 10 years from January 1999 to September 2008. He served on the Board of Directors at Kindred Healthcare, Inc. from December 2008 to July 2018 and served on the Board of Directors of Coventry Health Care, Inc. a national managed care company, from September 1999 until its acquisition by Aetna Inc. in May 2013. Mr. Ackerman is also Chairman of the Board of One Acre Fund, a not-for-profit organization that focuses on smallholder agriculture, and served more than 1,000,000 subsistence farmers in Africa in 2019.
John D. Winstel became our CAO in February 2020. Prior to joining the Company in October 2019, Mr. Winstel was the Vice President of Finance and Accounting and Corporate Controller at Cooper Tire & Rubber Company (“Cooper”), a publicly traded tire manufacturer, from June 2015 to October 2019. Prior to joining Cooper, Mr. Winstel served from May 2010 to June 2015 as the Senior Vice President of Finance and Global Controller of General Cable Corporation, a then-publicly traded wire and cable manufacturer, and prior to that served in finance and accounting positions at Chiquita Brands International and The Procter & Gamble Company. Mr. Winstel began his career as a certified public accountant with Deloitte & Touche.
Kathleen A. Waters became our CLO in May 2016, where she oversees all legal and regulatory functions for the enterprise. Prior to joining the Company, Ms. Waters was Senior Vice President, General Counsel and Secretary of Health Net, Inc., a publicly traded managed care organization, from 2015 to 2016. Prior to Health Net, Inc., Ms. Waters was a Partner in Morgan, Lewis & Bockius LLP’s litigation practice from
 
2003 to 2015, where she was the co-chair of the healthcare group.
James O. Hearty became our CCO in March 2018. From September 2015 to March 2018, he served as our Senior Vice President and CCO - Kidney Care, and, prior to that, from February 2012 to August 2015, he served as Vice President, Associate General Counsel. Prior to joining us, he was a prosecutor and trial attorney with the U.S. Department of Justice ("DOJ") for 14 years. He started in the Civil Division of the DOJ in Washington D.C. and four years later became an Assistant U.S. Attorney in the U.S. Attorney’s Office for the District of Colorado. Mr. Hearty held several leadership positions at the U.S. Attorney’s Office, including Deputy Chief of the criminal division. Mr. Hearty also serves on the board of Urban Peak, a Denver non-profit that serves homeless youth.
LeAnne M. Zumwalt has served as our Group Vice President, Government Affairs since July 2011, and from July 2011 to October 2019 also led our purchasing operations. From January 2000 to July 2011, Ms. Zumwalt served as our Vice President in many capacities. From January 2000 to October 2009, she served as our Vice President, Investor Relations while having other responsibilities. From 1997 to 1999, Ms. Zumwalt served as CFO of Vivra Specialty Partners, Inc. a privately held healthcare service and technology firm. From 1991 to 1997, Ms. Zumwalt held various executive positions, including CFO, at Vivra Incorporated, a publicly-held provider of renal dialysis services and other healthcare services. Prior to joining Vivra Incorporated, Ms. Zumwalt was a Senior Manager at Ernst & Young LLP. In March 2018, Ms. Zumwalt was appointed to the Board of Directors of ADPT Holdings, LLC, a privately held healthcare services company and successor in interest to Adeptus Health, Inc., which was a publicly traded company.
None of the executive officers has any family relationship with any other executive officer or with any of our directors.

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Compensation Discussion
and Analysis
 
Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 

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Compensation Discussion and Analysis
 

 
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (the “CD&A”) describes our executive compensation program for the following NEOs:
  NEO
TITLE
Javier J. Rodriguez
Chief Executive Officer*
  Kent J. Thiry
Executive Chairman*
  Joel Ackerman
Chief Financial Officer and Treasurer
  Michael D. Staffieri
Chief Operating Officer, Kidney Care
  Kathleen A. Waters
Chief Legal Officer
  LeAnne M. Zumwalt
Group Vice President, Government Affairs
* Effective June 1, 2019, Mr. Rodriguez assumed the position of CEO of the Company and Mr. Thiry stepped down as Chairman of the Board and CEO of the Company and DMG and assumed the position of Executive Chairman of the Board (the "2019 management transition"). Please see the “— Management Transition” section later in this CD&A for a description of the compensation arrangements entered into in connection with the 2019 management transition.
Pay and Performance Outcomes
Our executive compensation program is designed to align the interests of our executive officers with those of our stockholders by, among other things, linking short-term and long-term compensation with financial and operating performance. We believe that this alignment was manifested in the following features of our executive compensation program in 2019:
Payout under the 2019 Short-Term Incentive Program ("STI Program") was above target driven by (a) above guidance results for the year on adjusted operating income, (b) individual performance on various strategic objectives, generally above the 100% level, and (c) partially offset by underperformance on the clinical objective. See "— Elements of Compensation — Short-Term Incentive Program (STI Program) for 2019."
Under our Long-Term Incentive Program ("LTI Program") we had several cycles that ended in 2019, with mixed outcomes based on company performance, with the majority of the opportunities being earned below target. See "—Realized LTI" for further information regarding how we review realized compensation.
 
Fifty percent of the Performance Stock Units ("PSUs") granted in 2015 vested in 2019. The 2015 PSUs were earned at 28% of the target share amount for Messrs. Rodriguez and Staffieri and 14% of the target share amount for Mr. Thiry, due to no shares being earned under the relative TSR metric and performance below threshold on most of the other metrics.
Fifty percent and 36% of the PSUs granted in 2016 to Mr. Rodriguez and Mr Thiry, respectively, vested in 2019. The 2016 PSUs were earned at 38% and 84% of the target share amount for Mr. Rodriguez and Mr. Thiry, respectively. Amounts were earned below target share amounts due to no shares being earned under the relative TSR metric and performance below threshold or target on some of the other metrics.
All Stock-Settled Appreciation Rights ("SSARs") that vested in 2019 were out-of-the-money at the time of vesting due to the decline in stock price between the date of grant and the date of vesting in 2019.

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No payouts were earned under the cash-based long-term incentive ("Cash LTI") granted in 2016 that vested in 2019 for Messrs. Rodriguez and Staffieri and for Ms. Waters due to not meeting the Adjusted Dialysis & Lab Operating Income threshold for the 2018 performance year.
The Cash LTI granted in 2017 that vested in 2020 was earned at 188% for Messrs. Rodriguez and Staffieri, Ms. Waters and Ms. Zumwalt due to Adjusted Dialysis & Lab Operating Income exceeding the target performance level for the 2019 performance year.
When combining the prior performance-based outcomes vesting in 2019 along with our share price performance through early 2019 at the time of vesting, Mr. Rodriguez, our CEO, has realized 3% of the originally intended grant date fair value of long-term incentives granted in prior years that vested in 2019. Mr. Thiry, our Executive Chairman, has realized 10% of the originally intended grant date fair value of long-term incentives granted in prior years that vested in 2019. See "— Executive Summary — Realized LTI."

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Compensation Discussion and Analysis
 

 
Executive Summary 
Our Business
DaVita is a leading healthcare provider focused on transforming care delivery to improve quality of life for patients globally. The Company is comprised of our U.S. dialysis and related lab services business, our various ancillary services and strategic initiatives, including our international operations (collectively, our ancillary services), and our corporate administrative support. Our U.S. dialysis and related lab services business is our largest line of business and is a leading provider of kidney dialysis services in the U.S. for patients suffering from chronic kidney failure, also known as end stage renal disease ("ESRD").
As of December 31, 2019, we provided dialysis and administrative services in the U.S. through a network of 2,753 outpatient dialysis centers in 46 states and the District of Columbia, serving a total of approximately 206,900 patients and provided acute inpatient dialysis services in approximately 900 hospitals. In 2019, our overall network of U.S. outpatient dialysis centers increased by 89 dialysis centers primarily as a result of opening new centers and acquisitions. In addition, the overall number of patients that we served as of December 31, 2019 in the U.S. increased approximately 2.1% from December 31, 2018.
Our executive compensation program is best understood within the context of the business environment in which we currently operate. For example, we face various types of external risks in the healthcare industry, including among other things public policy uncertainty such as implementation of federal healthcare reform legislation and similar measures that may be enacted at the state level; potential changes to and increases in regulation by numerous federal, state and local government entities; potential reductions in reimbursements under federal and state healthcare programs, including Medicare and Medicaid; and the recent decline in the rate of growth of the ESRD patient population. As a result, we believe that in certain circumstances it is appropriate to have performance measures that provide a target, or near-target, level of performance-based compensation for maintaining, rather than improving, certain results, in light of the headwinds and downward pressures referenced above.
 
Our Executive Compensation Structure
Our executive compensation program is designed to be aligned with our strategic, operational and financial objectives, and to align the interests of our executives with the long-term interests of our stockholders. Our executive compensation structure is comprised of both short-term and long-term incentive opportunities, which are based on challenging performance goals that we believe align with our strategic objectives, including to provide high-quality care to our patients, increase profitability, maximize capital-efficient growth and increase stockholder value.
We believe that the design of our 2019 short-term and long-term incentive criteria, described in further detail in the subsection titled "— Elements of Compensation," emphasizes our objectives as a Company. Our resulting compensation structure for 2019 incorporates incentives tied to clinical care, profit and growth.
We believe it is important to maintain consistency with our compensation philosophy and approach, described in further detail below in the subsection titled “— Our Compensation Design and Philosophy,” to continue to incentivize management toward short-term and long-term strategic, financial and operating goals, which are intended to create long-term stockholder value.

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NEO Pay Elements
The following table generally summarizes the key elements of our executive compensation program in 2019 and demonstrates the link between pay and performance in both the short-term and long-term elements of the program:
Base Salary
  
Short-Term Incentive Program*
  
Long-Term Incentive Program ("LTI")
We believe it is appropriate that some portion of compensation be in a form that is assured. Base salaries can be adjusted based on individual performance, changes to portfolio of responsibilities and comparative market data.
 
Performance Measures
•   Financial: Adjusted Operating Income from Continuing Operations (70%)
•   Clinical: Home Modalities Outperformance vs. Non-Acute Non-Acquired Growth (“NAG”) (15%)
•   Strategic Objectives (15%)

 
 
  
 
 
 
Performance Stock Units
 
Restricted Stock Units
 
 
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•  Vests 50% in three years and 50% in four years
•  Payout up to 200% of target shares
•  Performance criteria
    75% Adjusted EPS
    25% Relative TSR
 
•  Vests 50% in three years and 50% in four years
* Modality selections and decisions related to a patient's care are always made by the attending nephrologist and patient, and provided pursuant to a physician's order.
Because the table above is intended to represent the general structure of the executive compensation program, it excludes structural items unique to 2019 associated with the transition of Mr. Rodriguez to the role of CEO, namely (1) an incremental grant of PSUs to Mr. Rodriguez specifically associated with his promotion to CEO and (2) special SSAR awards granted to Messrs. Ackerman and Staffieri, Ms. Waters and Ms. Zumwalt in connection with the transition to a new CEO, in order to align incentives for the senior management team around the evolving strategic imperatives of the Company and the new CEO. Also, because Mr. Staffieri was not a Section 16 Officer at the time the executive compensation program was put in place in 2019, he participated in different short-term and long-term incentive programs than described in the chart above.
Target Pay Mix
The Compensation Committee believes that the target pay mix illustrated below appropriately balanced (1) promoting long-term stockholder value creation and preventing excessive risk-taking and (2) providing appropriate incentives and fostering retention objectives. The 2019 CEO Target Total Direct Compensation Mix chart below includes both the normal annual long-term incentive grant to Mr. Rodriguez in early 2019 when he was CEO, Kidney Care, as well as the incremental grant of PSUs associated with his promotion to CEO resulting in an aggregate level of long-term incentive compensation more representative of what would be granted to the CEO in a typical annual grant cycle. The 2019 Average NEO (excluding CEO) Target Total Direct Compensation Mix chart below excludes the SSARs awarded to Messrs. Ackerman and Staffieri, Ms. Waters and Ms. Zumwalt in connection with the transition to a new CEO because these SSAR grants were not viewed as representative of what would be granted to the other NEOs in a typical annual grant cycle. Although Restricted Stock Units (“RSUs”) do not have a performance requirement associated with vesting, the value of the RSUs depends on the stock price at the time of vesting, and therefore are considered as part of the total “At-Risk Compensation.”
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Compensation Discussion and Analysis
 

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Mr. Staffieri was not a Section 16 Officer at the time the long-term incentive grants were made in 2019 and, as a result, he did not receive any PSUs, but received all of his long-term incentive award as RSUs. As a result, the mix between PSUs and RSUs is more heavily skewed towards RSUs in the table above. The other NEOs received an equal mix of RSUs and PSUs.
CEO Premium-Priced SSAR Award
On November 4, 2019 (the "Board Approval Date"), the independent members of the Board, on the recommendation of the Compensation Committee, granted Mr. Rodriguez the Premium-Priced SSAR Award of 2,500,000 SSARs, subject to stockholder approval of an amendment to the 2011 Plan to lift the plan provision that limits to 2,250,000 the number of shares of Common Stock that may be subject to awards made to any one person during any consecutive twelve-month period. Because the Premium-Priced SSAR Award is in lieu of any other long-term incentive awards to Mr. Rodriguez for the next five years, the Company does not intend to grant any additional equity awards to Mr. Rodriguez for the five years following the Board Approval Date. Stockholder approval was obtained at a special meeting of stockholders on January 23, 2020, with approximately 88% of the shares present in person or by proxy and entitled to vote on the proposal voting in favor. Because the grant was subject to stockholder approval of the related amendment to the 2011 Plan, the grant is considered a 2020 grant for accounting purposes and will appear in the 2020 Summary Compensation Table. Given that the Board approved this grant in 2019, we believe it is important to discuss the grant in this Proxy Statement, even though the grant does not appear in the 2019 Summary Compensation Table.
Based on discussions with Compensia, its independent compensation consultant, the Compensation Committee structured the Premium-Priced SSAR Award to reflect stockholder feedback and incentivize the creation of sustained stockholder value, resulting in the following features in the Premium-Priced SSAR Award design:
Premium-Price: The base price (similar to strike price on an option) on the Premium-Priced SSAR Award of $67.80 ("Base Price") was set at a 20% premium to the price per share at which the Company purchased shares in its then recently completed modified "Dutch
 

auction" tender offer and a 56% premium to the price per share on the day before Mr. Rodriguez assumed the CEO role on June 1, 2019. On January 23 2020, the date of the Special Meeting, the closing sale price of a share of Common Stock on the NYSE was $80.50.
Multi-Year Vesting: The Premium-Priced SSAR Award vests 50% three years from the Board Approval Date and 50% four years from the Board Approval Date.
Five-Year Holding Period: There is a five-year holding period requirement from the Board Approval Date with respect to the after-tax Gain Shares (as defined in "—Elements of Compensation — Long-Term Incentive Program (LTI Program) for 2019 — Stock-Settled Stock Appreciation Rights"), subjecting the shares underlying the Premium-Priced SSAR Award to a full five years of potential stock price fluctuations.
Five-Year Term: The Premium-Priced SSAR Award will expire on the date that is five years from the Board Approval Date.
Rationale for Premium-Priced SSAR Award
In connection with Mr. Rodriguez's transition to the CEO role in 2019, and leading up to the decision to grant the Premium-Priced SSAR Award to him, the Company and the Board received and proactively sought feedback from the Company's largest stockholders on the structure of the executive compensation program as part of its ongoing stockholder engagement program. The Compensation Committee, in consultation with Compensia, evaluated a number of alternatives to structure the compensation for Mr. Rodriguez in a way that continues to closely align him with Company and stock performance, particularly over the longer-term. The Compensation Committee concluded that the Premium-Priced SSAR Award incentivizes the creation of sustained and meaningful long-term value, as it is subject to a multi-year vesting period, a five-year holding period and

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utilizes a Base Price that is not a performance hurdle triggering exercisability at some lower price. Rather, Mr. Rodriguez only participates in the upside above this price, and would potentially receive no value for five years' worth of equity awards if the required stockholder returns are not sustained. This Premium-Priced SSAR Award also demonstrates the Board's strong confidence in Mr. Rodriguez's leadership of DaVita and the momentum of his new strategy as well as the Board's desire to ensure Mr. Rodriguez's continued service during this period of strategic transformation.
The Company was as of the Board Approval Date, and remains, at an important inflection point as an organization:
after divesting the DaVita Medical Group ("DMG") business in June 2019 to focus primarily on the kidney care business,
after effectuating the CEO transition following the announced retirement of Mr. Thiry as CEO in April 2019, and
while continuing to navigate the ongoing intricacies of a heavily regulated healthcare sector that will be a headlining topic as part of the upcoming 2020 election cycle.
We recognize that there is a lot of work to be done as we are in the early stages of this next phase of our evolution to benefit our patients, teammates, physician partners and healthcare community as a whole. The Board believes that the Premium-Priced SSAR Award provides a powerful incentive to Mr. Rodriguez to take steps that are intended to maximize the sustained, long term value of our Common Stock. Additionally, because gains from the Premium-Priced SSAR Award are settled in DaVita shares (not in cash), and those after-tax Gain Shares must be held for five years from the Board Approval Date, the Board believes that the Premium-Priced SSAR Award powerfully aligns Mr. Rodriguez's interests directly with those of the Company's stockholders.
Some of the other alternatives to incentivize Mr. Rodriguez that were considered by the Compensation Committee, in consultation with Compensia, included continuing to utilize regular annual grants, as well as performance stock units with multiple performance targets. The Board recognized that a multi-year grant is uncommon, but at this stage in the Company's evolution, the Board believed the Premium-Priced SSAR Award was the best alternative to directly link Mr. Rodriguez's compensation with sustained long-term stockholder interests and gives Mr. Rodriguez a strong incentive to execute successfully on the
 
Company's new strategies to drive meaningful and sustained long-term value for our stockholders.
Our Board is committed to soliciting input from and being responsive to our stockholders on a variety of topics, including executive compensation. Engaging with our investors is fundamental to our commitment to good governance and essential to evolving our executive compensation program and governance practices. The Premium-Priced SSAR Award is a product of that commitment and aligns with our philosophy of linking pay with performance.
Selected Premium
The Board believed that the base price for the award should be set at a premium to the tender clearing price from our then recently completed modified "Dutch auction" tender offer for our stock, because that was a meaningful indicator of value based on the views of our stockholders. By setting the Base Price ($67.80) at a 20% premium to the tender clearing price of $56.50, Mr. Rodriguez has to create and sustain significant long-term value for our stockholders before he will be able to realize meaningful value from the Premium-Priced SSAR Award. In addition, the base price is a significant premium to the stock price when Mr. Rodriguez assumed the CEO role. Specifically, the premium represented by the base price, compared to those benchmarks, is as follows:
 
Date
Price
Premium
Stock price day before Mr. Rodriguez assumed CEO role
May 31, 2019
$43.42
56%
Tender clearing price
Aug. 16, 2019
$56.50
20%
On January 23, 2020, the date of the Special Meeting, the closing sale price of a share of Common Stock on the NYSE was $80.50.
Number of SSARs
In determining the number of SSARs to be granted, after discussion with Compensia, the Compensation Committee considered, among other things, the expected value of equity awards that would otherwise have been granted to our CEO over a five-year period. The Compensation Committee believed that the Premium-Priced SSAR Award would provide a similar value to Mr. Rodriguez if he were successful in driving meaningful and sustained stockholder returns. Conversely, in the absence of meaningful and sustained long-term stockholder returns, Mr. Rodriguez will realize little or no value from the

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Compensation Discussion and Analysis
 

Premium-Priced SSAR Award. The Board does not intend to grant any other equity awards to Mr. Rodriguez during the five-year term of the Premium-Priced SSAR Award. During the five-year term, Mr. Rodriguez will continue to receive a fixed base salary in line with competitive practices, which creates some certainty in base levels of compensation during the
 
term of the Premium-Priced SSAR Award, and also will be eligible to receive an annual short-term incentive award that is designed to align compensation with the achievement of annual objectives that are informed by and aligned with our strategy.
Treatment Upon Termination of Employment
The following is a summary of the treatment of the Premium-Priced SSAR Award under different termination of employment scenarios:
Termination by Company without Cause or by Mr. Rodriguez for Good Reason (a "Qualifying Termination") prior to or not within two years after a Change of Control
Pro rata vesting; Mr. Rodriguez will have one year from the date of his termination of employment (the "Termination Date") to exercise the vested SSARs.
Qualifying Termination within two years after a Change of Control
Vesting in full; Mr. Rodriguez will have one year from the Termination Date to exercise the vested SSARs.
Termination by Company for Cause or by Mr. Rodriguez without Good Reason
Vesting will cease as of the Termination Date; Mr. Rodriguez will have three months from the Termination Date to exercise any vested SSARs.
Termination Upon Death or Disability
Pro rata vesting; Mr. Rodriguez, or his estate, will have one year from the Termination Date to exercise the vested SSARs.
This summary of the Premium-Priced SSAR Award is qualified in its entirety by reference to the Premium-Priced SSAR Award itself, which is filed with the SEC as Appendix A to our Definitive Proxy Statement filed with the SEC on December 6, 2019.
Consideration of Say-on-Pay Results and Pay for Performance
At our annual meeting of stockholders held in June 2019, approximately 91% of the votes cast by stockholders at the annual meeting were voted in favor of the compensation program for our NEOs. We believe this vote reflects strong support for our executive compensation program. However, we continue to evaluate our program to find ways we can refine it and further align management incentives with stockholder interests. Part of that evaluation involves soliciting feedback from investors as part of an ongoing dialogue with our stockholders that we maintain throughout the year. As discussed earlier in this Proxy Statement, we firmly believe that engaging with investors is fundamental to our commitment to good governance and essential to maintaining our strong corporate governance practices. We believe in a collaborative approach to stockholder outreach and value the variety of investors’ perspectives received, which deepens our understanding of stockholder interests and fosters a mutual understanding of governance priorities. See the discussion above under the heading "Corporate Governance — Ongoing Stockholder Outreach" for additional details regarding our principles on stockholder outreach.
 
Since our 2019 Annual Meeting of Stockholders, at the direction of the Compensation Committee, we contacted stockholders representing approximately 80% of our shares outstanding, and met with stockholders representing approximately 69% of our shares outstanding, including our largest institutional stockholders, to discuss our existing compensation practices and recent developments such as the consummation of the sale of DMG and the 2019 management transition. During these discussions, many of which were led by our Lead Independent Director and/or our Chair of the Compensation Committee, we believed the overall sentiment from stockholders regarding our existing compensation structure, sustainability initiatives and governance matters continued to be positive. Overall, investors expressed general satisfaction with our executive compensation program and corporate governance practices and support of a continued emphasis on “pay-for-performance.” See the subsection titled "— Elements of Compensation —Highlights of 2020 Executive Compensation Program." As part of this engagement with stockholders, we received and proactively sought feedback regarding the compensation structure for Mr. Rodriguez in particular, which resulted in the Premium-Priced SSAR Award grant to Mr. Rodriguez.

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We will continue our ongoing engagement with our stockholders on corporate governance, executive compensation and sustainability matters that are of interest to them.
Since 2012, we have maintained this practice of routinely engaging with stockholders to discuss our executive compensation program and have shared this stockholder feedback with the Compensation Committee. The Compensation Committee intends to continue to consider feedback we receive from our stockholders, including the 2019 say-on-pay results, and to make changes in response to such stockholder feedback when deemed appropriate to further align our executive compensation program and the individual compensation of our NEOs with our compensation and business objectives and stockholder interests. While we have made a number of changes in response to feedback received through stockholder engagement, the table below illustrates how certain feedback we have received over the past several years correlates to the design of certain aspects of our executive compensation program structure. For additional information on governance-related changes made in response to feedback received through stockholder engagement, please see above under the heading "Corporate Governance — Ongoing Stockholder Outreach — Key Themes Discussed with Stockholders in Recent Years and Actions Taken as a Result."
What We Heard
What We Did
Executive Compensation Program
•    
There should be more intense focus on stockholder value creation as reflected in a sustained increase in stock price over the longer-term

•    
Awarded the Premium-Priced SSAR Award to our CEO, intended to replace five years of future equity grants, and re-introduced SSARs as a component of executive compensation (2020)
•    
The Company should consider adding a cash flow metric to the short-term incentive program
•    
Added free cash flow metric to the annual incentive program (2020)
•    
PSUs earned under the relative TSR metric should be benchmarked against a more specific peer group than the S&P 500 Index
•    
Relative TSR representing a performance metric for PSUs is measured compared to the S&P Healthcare Services Select Industry Index (2020)
•    
Executive officers should not have excise tax gross-up in case of a change of control
•    
Removed excise tax gross-up provision in then-CEO’s employment agreement (2018)
•    
The Company should use a “target-based” annual incentive structure rather than a “maximum-based” annual incentive structure to be more in-line with peer companies
•    
Switched to “target-based” annual incentive structure (2018)
•    
The Company should have a long-term metric tied to return on capital
•    
Introduced long-term EPS as PSU target for then-CEO (2016) and more broadly for executive officers (2017)
Our Compensation Design and Philosophy
Our ability to recruit, engage, motivate and retain highly qualified executives is essential to our long-term success. Historically, our compensation program structure has focused on optimizing (i) incentives and metrics that we believe result in the greatest degree of alignment with stockholder interests, and (ii) effective recruitment, engagement, motivation and retention of executives.
In light of the generally favorable reception by stockholders to our compensation program and our most recent say-on-pay vote, the changes being made for the 2020 program are incremental in nature and do not represent wholesale design changes, with one notable exception being the CEO Premium-Priced SSAR Award. The related amendment to the 2011 Plan to permit the CEO Premium-Priced SSAR Award was approved by our stockholders at the
 
Special Meeting on January 23, 2020, with approximately 88% of the shares present in person or by proxy and entitled to vote on the proposal voting in favor.
Greater detail on the changes we are making to our short-term and long-term incentive programs are provided in the subsection titled "— Elements of Compensation — Highlights of 2020 Executive Compensation Program."


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Compensation Discussion and Analysis
 

2019 Financial and Performance Highlights
Our overall financial performance in 2019 benefited from increased treatment volume from acquired and non-acquired growth in both our U.S. dialysis and international businesses and a corresponding increase in revenue, as well as improved operating margins due to a decrease in the cost of calcimimetics (a class of drugs used to treat secondary hyperparathyroidism, a common condition in ESRD patients which can result in bone fractures) from the introduction of lower cost oral generics, a decrease in other pharmaceutical unit cost, and a decrease in advocacy costs as compared to the prior year. This was partially offset by increases in labor and benefits costs, other center related costs and a decrease in revenues from the closure of our pharmaceutical business in 2018. The year-over-year comparison was also adversely impacted by $36 million of additional Medicare bad debt revenue recognized in 2018 due to a policy election on adoption of the new revenue recognition accounting standard. We believe that the NEOs were instrumental in achieving our 2019 results, including the following achievements and financial and operating performance indicators for 2019 as compared to 2018:
improved key clinical outcomes in our U.S. dialysis business, including our recognition as an industry leader for the seventh consecutive year in CMS’ Quality Incentive Program and for the last six years under the CMS Five-Star Quality Rating system;
23.5% é growth in our integrated care patient population (patients enrolled in special needs plans, ESCOs and value-based contracts), while continuing to develop integrated care capabilities and advocate for availability of integrated care on a broader scale, either through new legislation or the mandatory and voluntary payment model demonstrations being developed by CMS;
4x home modalities growth in 2019 versus in-center growth, and innovation in the use of home remote monitoring;
closed on the previously announced sale of DMG, on June 19, 2019, at a price of $4.34 billion, subject to customary purchase price adjustments;
2.2% é U.S. dialysis revenue growth;
13.6% é international revenue growth;
 
2.5% é U.S. dialysis treatment growth;
89 é net increase of U.S. dialysis centers and a net increase of 18 international dialysis centers;
$2.0 billion operating cash flows from continuing operations;
repurchased over 41 million shares of our common stock for approximately $2.4 billion (including through a modified "Dutch auction" tender) and reduction of our outstanding share count by approximately 24.4% year-over-year;
a $174 million or 19.3% reduction in routine maintenance and development capital expenditures from continuing operations, consistent with our capital efficient growth strategies; and
entry into a new $5.5 billion senior secured credit agreement and redemption of our 5.75% senior notes.
As a care-giving company, we focus on not just improving clinical outcomes, but also improving our patients' quality of life through clinical initiatives. One specific example of this has been our continued focus on reducing infections in our patients. Dialysis patients are prone to infection, which can often lead to lengthy hospitalization stays and increased mortality. In 2019, we reduced the rate of bloodstream infections by 13% and reduced the rate of peritonitis (inflammation of the tissue covering the inside of the abdominal cavity, which is more common in patients undergoing peritoneal dialysis) by 20% versus the prior year. These are meaningful improvements that we believe kept many of our patients out of the hospital.

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Linking 2019 NEO Compensation to Performance
Our compensation program for our NEOs emphasizes compensation based on performance and is designed to align our NEOs’ interests with those of our stockholders. To that end, our compensation program is designed to reward those individuals who have performed well in creating and protecting significant long-term value for the Company and its stockholders by permitting them to share in the value generated. As such, our compensation program heavily emphasizes variable compensation in the form of performance-based cash and equity awards.
When determining the compensation for our NEOs for 2019, the Compensation Committee evaluated the following:
clinical operating results
financial performance
advances in strategic imperatives
organizational development and succession planning
Specifically in determining the amounts of the annual performance incentives for 2019, the Compensation Committee evaluated the outcome of the specific
 
performance metrics for the short-term incentive program. See the subsection titled "— Elements of Compensation — Short-Term Incentive Program (STI Program) for 2019" below for further discussion.
In determining the amounts of the annual long-term incentive awards for 2019, the Compensation Committee considered historical long-term incentive awards, realized compensation in the context of actual performance against previously set targets, relative performance as compared to other executives in the Company, and the pay practices of our comparator peer group, all as more fully detailed in the subsection titled "— Elements of Compensation — Long-Term Incentive Program (LTI Program) for 2019 —Determining LTI Program Award Amounts." The following table shows the 2019 total direct compensation elements (base salary, annual performance-based cash award paid and annual long-term incentive award granted) determined by the Compensation Committee for each NEO. This table is not a substitute for the information disclosed in the 2019 Summary Compensation Table and related footnotes.
  Name
 
Base
Salary1

Annual Cash
Award

 
Annual LTI  
Award4

 
Total Direct Compensation

Javier J. Rodriguez

$1,066,154


$2,791,441

2 

$8,748,533

5 

$12,606,128

Kent J. Thiry

$1,138,462


$2,399,466

2 

$3,485,347

 

$7,023,275

Joel Ackerman

$700,000


$1,280,906

2 

$2,987,447

6 

$4,968,353

Michael D. Staffieri

$700,000


$1,400,000

3 

$4,000,023

6 

$6,100,023

Kathleen A. Waters

$566,154


$838,375

2 

$1,493,750

6 

$2,898,279

LeAnne M. Zumwalt

$426,154


$446,555

2 

$995,799

6 

$1,868,508

1
The amounts reported here reflect the base salary amounts actually paid during the 2019 fiscal year.
2
The amounts reported here reflect the payments made to Messrs. Rodriguez, Thiry, and Ackerman and Mss. Waters and Zumwalt under the 2019 STI Program. Ms. Zumwalt's amount excludes a performance-based bonus of $343,333, which was paid based on the achievement of specified pre-determined strategic operational goals. This amount is excluded from this column as it is not considered part of the normal 2019 annual incentive compensation payouts. It represents a portion of amounts withheld from annual bonuses from prior years pending the achievement of the additional strategic operational goals, and as such, reflects compensation for both 2019 and prior year performance.
3
Mr. Staffieri did not participate in the 2019 STI Program. The amount reported reflects the bonus payment under the annual bonus program applicable to Mr. Staffieri, as described further below in the subsection titled "— Elements of Compensation — Short-Term Incentive Program (STI Program) for 2019."
4
The amounts reported under the Annual LTI Award column consist of the grant date fair value of all 2019 annual equity awards (RSUs and PSUs). For additional details on the terms of the 2019 equity awards, see "— Executive Compensation — 2019 Summary Compensation Table" and "— Elements of Compensation — Long-Term Incentive Program (LTI Program) for 2019 — Equity Awards," respectively.
5
The amount reported includes a PSU award in connection with the promotion of Mr. Rodriguez into the role of CEO. This PSU award vests 100% on May 15, 2022, subject to Mr. Rodriguez's continued employment and the achievement of the underlying performance conditions. The grant date fair value of this PSU award was $1,777,788. This amount does not include the Premium-Priced SSAR Award as that amount was not considered 2019 compensation under applicable accounting rules.
6
The amounts reported exclude one-time SSAR grants in connection with the 2019 management transition in order to align incentives for the senior management team around the evolving strategic imperatives of the new CEO. For Mr. Ackerman and Ms. Waters, the SSARs vest 50% on June 20, 2022 and 50% on June 20, 2023, subject to the NEO’s continued employment through the applicable vesting dates. For Mr. Staffieri and Ms. Zumwalt, the SSARs vest 50% on June 20, 2021 and 50% on June 20, 2023, subject to the NEO's continued employment through the applicable vesting dates. The grant date fair value of these SSARs was as follows: Mr. Ackerman - $1,565,971, Mr.

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Compensation Discussion and Analysis
 

Staffieri - $2,802,840, Ms. Waters - $1,138,888 and Ms. Zumwalt - $560,568. For additional description of the SSARs, see the subsection titled “— Elements of Compensation — Long-Term Incentive Program (LTI Program) for 2019 — Equity Awards — Stock-Settled Stock Appreciation Rights.”
Realized LTI
To help our stockholders evaluate the alignment of our executive pay with performance and the rigor of the Company's long-term incentive criteria, the tables below compare the actual value realized by Messrs. Rodriguez and Thiry upon vesting from long-term incentive awards ("Realized LTI") to the grant date fair value of those awards over the three-year period for which compensation is disclosed in this Proxy Statement (2017, 2018 and 2019). The second column presented for each year in the graphs below represents (i) the sum of (a) the value of Cash LTI vesting during the year and (b) the value of equity on the applicable vesting date during the year as a percentage of (ii) the target value of Cash LTI and grant date fair value of such equity. Specifically, the value of equity at each vesting date is represented by the sum of (i) the actual intrinsic value of any SSAR that vested in the indicated year, valued based on the closing stock price as of the date of vesting, (ii) the value of any RSU award that vested in the indicated year, valued based on the closing stock price as of the date of vesting and (iii) the value of any PSU award that vested in the indicated year, reflecting the actual shares earned for those PSUs, based on the performance metric outcome, and the closing stock
 
price as of the date of vesting. For example, Mr. Rodriguez was scheduled to vest in approximately $5.8M in 2019 based on the grant date fair value from previous SSAR and PSU awards and a Cash LTI grant. However, the actual value at vesting was $0.2M due to target outcomes of approximately 28% and 38% on the 2015 and 2016 PSUs, respectively; no value from relevant SSARs since the stock price on the vesting date was below the base price; and no payout on the Cash LTI, since the performance outcome was below the minimum threshold. As a result, Mr. Rodriguez vested in long-term incentives in 2019 with a value of 3% of the grant date target value of those long-term incentives.
We believe that Realized LTI is useful to our stockholders as a complement to the information in the 2019 Summary Compensation Table, as Realized LTI allows for an evaluation of the specific relationship between pay and performance over a longer period of time. Realized LTI represents supplemental disclosure and should not be viewed as a substitute for the information disclosed in the 2019 Summary Compensation Table and related footnotes.


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* Represents the total stockholder return based on average closing stock price for each trading day in the first quarter of the indicated year as compared to the corresponding average three and four years prior, which are the years in which the equity grants had been made that vest in the indicated years.

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* Represents the total stockholder return based on average closing stock price for each trading day in the first quarter of the indicated year as compared to the corresponding average three and four years prior, which are the years in which the equity grants had been made that vest in the indicated years.
Realizable Pay
To demonstrate further the alignment of executive pay with performance, the tables below compare the realizable pay (actual cash compensation and the intrinsic value of equity-based compensation as of year-end) for Messrs. Rodriguez and Thiry over the three-year period for which compensation is disclosed in this Proxy Statement (2017, 2018 and 2019) to target annual compensation. These tables provide supplemental disclosure and should not be viewed as a substitute for the information disclosed in the 2019 Summary Compensation Table and related footnotes.
Whereas the Realized LTI in the prior section reflects the actual value realized on vesting in each of the

 

indicated years, irrespective of what year the underlying grant was made, the Realizable Pay reflects the estimated future value of compensation granted in the given year. For example, in 2019, our CEO, Mr. Rodriguez, realized 3% of the grant date fair value of LTI granted in prior years, as indicated in the prior section. On the other hand, as indicated below, based on estimated performance and stock price as of December 31, 2019, Mr. Rodriguez could be expected to ultimately realize $21.4 million versus a target value of $11.4 million for the different elements of his compensation granted in 2019. Said differently, "Realized LTI" is "backward looking" and "Realizable Pay" is "forward looking."

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* Represents the total stockholder return based on the closing stock price on December 31, 2019 (which forms the basis for the calculation of realizable value for the equity grants included in the chart above) as compared to the closing stock price on the first day of the indicated year.
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* Represents the total stockholder return based on the closing stock price on December 31, 2019 (which forms the basis for the calculation of realizable value for the equity grants included in the chart above) as compared to the closing stock price on the first day of the indicated year.

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The first column in each graph above represents target annual compensation. Specifically, it reflects (i) base salary earned during the year, (ii) target non-equity incentive compensation under the STI Program, (iii) target non-equity incentive compensation granted as Cash LTI in the applicable year and (iv) grant date fair value of equity awards granted in the applicable year. We transitioned from a "Maximum Bonus Structure" to a "Target" opportunity structure for the annual incentive program in 2018. For 2017, the effective annual "Target" opportunity was 50% of the Maximum Bonus Potential, and this is what is included in "Target Non-Equity Incentive Comp" for 2017 in the graphs above. The second column in each graph reflects (i) base salary earned during the year, (ii) actual non-equity incentive compensation earned under the STI Program for the year, (iii) actual non-equity incentive compensation ultimately paid under the Cash LTI initially granted in the applicable year and (iv) the actual intrinsic value as of December 31, 2019 of any equity awards granted in the applicable year.
All equity awards granted in the respective years reported in the graphs above remained fully unvested
 
as of December 31, 2019. Mr. Rodriguez only received a Cash LTI grant in 2017, since the Company stopped awarding Cash LTI beginning in 2018. Mr. Thiry was never granted Cash LTI, resulting in all of his long-term incentive compensation being delivered in the form of equity.
The intrinsic value of an SSAR award is calculated as the "in-the-money" value, or difference between the base price of an SSAR and the closing stock price of $75.03 per share as of December 31, 2019, multiplied by the number of shares subject to the SSAR award. The intrinsic value of PSUs reflects the payouts actually achieved for PSUs associated with performance periods that have ended as of December 31, 2019 and the estimated payouts for PSUs associated with performance conditions still outstanding as of December 31, 2019, in each case with those shares valued at the closing stock price of $75.03 per share as of December 31, 2019. The intrinsic value of RSUs is calculated based on the closing stock price of $75.03 per share as of December 31, 2019.
Stockholder Interest Alignment
Our executive compensation is designed to reflect our pay-for-performance philosophy and to align the interests of our executives with the long-term interests of our stockholders. In 2019, our executives received all long-term incentive compensation in the form of equity compensation. Notably, the annual long-term incentive grant cycle for 2019 was comprised entirely of RSUs and PSUs. After consideration of the mix of unvested RSUs, PSUs and SSARs held by our Section 16 Officers, we decided not to grant any SSARs in the 2019 grant cycle to enhance our retention objectives. In order to maintain a meaningful performance-based component to the long-term incentive program, 61% of the long-term incentive grant in the 2019 annual grant cycle for the CEO and 50% for all other NEOs (other than Mr. Staffieri, who was not a Section 16 Officer at the time of the 2019 grant) were in the form of PSUs. Subsequently, and in connection with the 2019 management transition, we granted additional long-term incentive compensation in the form of SSARs to the NEOs other than Messrs. Rodriguez and Thiry to align their incentives with the evolving strategic imperatives of the new CEO. See the subsection titled "Elements of Compensation — Long-Term Incentive Program (LTI Program) for 2019 — Determining LTI Program Award Amounts — 2019 Management Transition SSAR Grants" below.
 
We believe that long-term, capital-efficient growth is aligned with the creation of stockholder value and that using adjusted earnings per share as a performance metric focuses our executives on maximizing long-term stockholder value and imposes further discipline on the type of development and acquisition-driven growth that we evaluate and in which we invest. As a result, the Compensation Committee selected adjusted multi-year earnings per share as the performance metric for 75% of the PSUs granted to our NEOs in 2019.
Relative total stockholder return ("Relative TSR") represents the performance metric for the remaining 25% of the PSUs granted to our NEOs in 2019. Relative TSR for the 2019 grants is measured by comparing the return on an investment in DaVita to an investment in the S&P 500 index over three- and four-year performance periods.

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Compensation Discussion and Analysis
 

Key Features of Our Executive Compensation Program
Our executive compensation program includes the following practices and policies, which we believe reinforce our executive compensation philosophy and objectives and are aligned with the interests of our stockholders:
What We Do
 
ü
Align compensation with stockholder interests. The compensation program for our NEOs is designed to align the interests of our executives with the long-term interests of our stockholders. 
ü
At-risk compensation. Our executive compensation program emphasizes variable (or at-risk) compensation in the form of performance-based cash and equity awards. For 2019, approximately 91% of the target total direct compensation for our CEO and, on average, approximately 83% of the target total direct compensation for NEOs other than the CEO was at-risk compensation. 
ü
Multi-year vesting and performance periods. Generally, our long-term equity incentive awards have multi-year vesting and performance periods to reinforce a culture in which the Company’s long-term success takes precedence over volatile short-term results.
ü
Annual say-on-pay vote. We conduct an annual advisory “say-on-pay” vote to approve the compensation of our NEOs. At our 2019 annual meeting of stockholders, approximately 91% of the votes cast on the say-on-pay proposal were voted in favor of the 2018 compensation of our NEOs, and since 2013, on average approximately 93% of the votes cast were voted in favor of the compensation of our NEOs.
ü
Stockholder engagement. We continue to be committed to ongoing engagement with our stockholders on executive compensation, sustainability and corporate governance matters.
ü
Independent compensation consultant retained by the Compensation Committee. Our Compensation Committee uses an independent compensation consultant that reports directly to the Compensation Committee and provides no other services to the Company.
ü
Annual comparator peer group review. Our Compensation Committee, with the assistance of its independent compensation consultant, evaluates our executive compensation program against a comparator peer group, which is reviewed annually for adjustments.
ü
“Double-trigger” change of control provisions in equity award agreements. Our equity award agreements provide for double-trigger acceleration of vesting for equity awards in the event of a change of control of the Company.
ü
Limits on severance payments. Under our employment and severance arrangements with executive officers, severance payments are limited to not more than 3x base salary and bonus.
ü
Clawback policy. We have a clawback policy that permits recovery of cash incentive and equity-based compensation from executive officers in connection with certain restatements of the Company’s financial statements or significant misconduct. 
ü
Stock ownership requirements. We apply meaningful stock ownership requirements to further align the interests of our executive officers with the long-term interests of our stockholders (6x base salary for our CEO and 3x base salary for all of our other executive officers).
ü

Annual risk assessment. Based on our annual risk assessment, we have concluded that our compensation program does not present any risk that is reasonably likely to have a material adverse effect on the Company.
What We Do Not Do
 
û
No repricing or replacing of underwater stock appreciation rights or stock options. Our equity incentive plan prohibits repricing or replacing underwater stock options or stock appreciation rights without prior stockholder approval.
û
No hedging of Company securities and restricted pledging of Company securities. Our Insider Trading Policy prohibits our directors and all employees (including our officers) from entering into any hedging transactions relating to our securities. The policy also prohibits our directors, executive officers and teammates that are VP level and above from pledging Company securities as collateral for a loan.
û
No change-of-control tax gross-ups in employment agreements. None of our employees is eligible for excise tax gross-up payments in connection with a change of control of the Company.
û
No defined benefit pension benefits. We do not have a defined benefit pension plan for any employee that provides for payments or other benefits in connection with retirement.
û
No dividends on unearned or unvested stock awards. We do not pay dividends or dividend equivalents on unearned performance-based stock awards or unvested time-based stock awards.

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Elements of Compensation
The elements of direct compensation offered under our executive compensation program include both fixed (base salaries) and variable (short-term and long-term incentives) compensation.
Base Salary
We compensate our executives with a base salary because we believe it is appropriate that some portion of compensation be provided in a form that is liquid and assured. Base salaries are initially established at levels necessary to enable us to attract and retain highly qualified executives with reference to both our peer group and comparative pay within the Company for executives with similar levels of responsibility, the prior experience of the executive, and expected contributions to Company performance.
We do not guarantee base salary adjustments on an annual basis. After considering input from Compensia, at the beginning of each year, the Compensation Committee considers adjustments to base salary as part of the overall annual compensation assessment for our executives. Our CEO typically provides the Compensation Committee with his recommendation regarding merit-based increases for each executive officer other than himself. The CEO’s and Executive Chairman's base salary is recommended by the Compensation Committee for approval by the independent members of the Board of Directors, after considering input from Compensia and Compensia’s analysis of our comparator peer group.
In March 2019, the base salaries for Mr. Rodriguez, Ms. Waters and Ms. Zumwalt were each increased by $40,000 in recognition of their performance and to better align with the competitive market. Effective June 1, 2019, the base salary for Mr. Rodriguez was further increased by $260,000 reflecting his assumption of the role of CEO and to better align his compensation as CEO with that of the CEOs of our comparator peer group. At the same time, Mr. Thiry's annual salary was reduced by $300,000 in connection with Mr. Thiry's transition to the role of Executive Chairman, reflecting a reduction in his portfolio of responsibilities. The Compensation Committee did not adjust the base salary levels for Mr. Ackerman or Mr. Staffieri as compared to 2018. Base salaries for the NEOs as of December 31 of each year are reflected in the following table:
 


Name
 
2018 Base Salary

 
2019 Base Salary

 
Percentage Change in Base Salary in 2019

Javier J. Rodriguez
 

$900,000

 

$1,200,000

 
33
%
Kent J. Thiry
 

$1,300,000

 

$1,000,000

 
(23
%)
Joel Ackerman
 

$700,000

 

$700,000

 
0
%
Michael D. Staffieri
 

$700,000

 

$700,000

 
0
%
Kathleen A. Waters
 

$540,000

 

$580,000

 
7
%
LeAnne M. Zumwalt
 

$400,000

 

$440,000

 
10
%

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Compensation Discussion and Analysis
 

Short-Term Incentive Program (STI Program) for 2019
The 2019 STI Program awards were granted pursuant to the 2011 Plan, which permits the issuance of stock options, SSARs, RSUs, PSUs, equity-based and cash-based performance awards, as well as other forms of equity awards.
In 2019, the annual bonus opportunity for Messrs. Rodriguez, Thiry and Ackerman and Ms. Waters and Ms. Zumwalt was granted under the STI Program. Our STI Program is applicable to all Section 16 Officers other than the Chief Accounting Officer. Since Mr. Staffieri was not a Section 16 Officer at the time the 2019 STI Program was developed, he participated in the same Maximum Bonus Potential Program applicable to non-Section 16 bonus-eligible teammates. Specifically, this Maximum Bonus Potential program for 2019 relies less on strictly formulaic assessments of performance, and more on non-formulaic qualitative and quantitative assessments of performance as calibrated against a maximum potential annual bonus amount. In 2019, Ms. Zumwalt also earned $343,333 of a total potential of $1,030,000, which represents a portion of the bonuses that would have been paid to her in prior years under the annual bonus programs for such years but remained subject to Ms. Zumwalt's achievement of pre-determined specified strategic operational goals. During 2019, Ms. Zumwalt achieved a portion of the specified strategic operational goal and remains eligible to receive the remaining portion of the withheld bonuses based on her achievement of the remaining portion of the strategic operational goal. The goal was designed to be challenging and require consistent execution by Ms. Zumwalt in order to be achieved, with the level of achievement to be determined based on an evaluation by Messrs. Thiry and Rodriguez. This amount was not part of the normal annual 2019 STI Program, but instead represents compensation earned based on the achievement of a specified performance goal in 2019 which was funded through the withholding of a portion of the bonuses that would have been paid to Ms. Zumwalt in 2014 through 2017 under the annual bonus programs.
The participants in the 2019 STI Program had a target bonus approved by the Compensation Committee, and with respect to the CEO and Executive Chairman, the independent members of the Board. Participants could earn up to 200% of their target bonus, subject to the application of negative discretion. In addition, the 2019 STI Program included a modifier which would have allowed participants to achieve an incremental 50% payout, based on a predetermined objective involving
 
legislation related to full capitation or regulated demonstration for ESRD, with the payout determined based on the executive's level of involvement and role played in the achievement of this objective, resulting in the potential to earn up to 300% of target bonus. The Compensation Committee believed it is appropriate to allow for payment up to 300% of target because a successful outcome on legislation related to full capitation or regulated demonstration for ESRD would create significant potential long-term stockholder value. That said, the conditions necessary for this modifier objective to be deemed achieved were not met in 2019. The following table summarizes the target bonus and target bonus as a multiple of base salary for each of the NEOs who was a participant in the 2019 STI Program:
Name
 
2019 Base
Salary

 
2019 Target Incentive Opportunity

 
2019 Target Incentive Opportunity as a Percentage of Salary

Javier J. Rodriguez
 

$1,080,384

 

$1,620,575

 
150
%
Kent J. Thiry
 

$1,124,110

 

$1,393,014

 
124
%
Joel Ackerman
 

$700,000

 

$750,000

 
107
%
Kathleen A. Waters
 

$580,000

 

$500,000

 
86
%
LeAnne M. Zumwalt
 

$440,000

 

$268,000

 
61
%
*Messrs. Rodriguez and Thiry are the only NEOs with annual bonuses approved by the Committee as a percentage of their base salary. The target incentive opportunities for the other NEOs were approved by the Committee in terms of an absolute dollar opportunity and this column includes the percentage opportunity determined by dividing the target dollar value by the NEO’s base salary.
The 2019 Base Salary amounts in the table above may not match the 2019 salary reported in the 2019 Summary Compensation Table. For Messrs. Rodriguez and Thiry, the table above reflects the salary accrued and earned in 2019, which forms the basis for the 2019 Target Incentive Opportunity, whereas the 2019 salary reported in the Summary Compensation Table reflects the salary actually paid in 2019 based on the timing of the biweekly payroll cycles. Mr. Rodriguez's employment agreement as CEO provides for a target incentive bonus opportunity in 2019 of 150% of salary earned in 2019. Mr. Thiry's employment agreement as Executive Chairman provides for a target incentive bonus opportunity of 150% of salary earned in his role as CEO and 100% of his salary earned in his role as Executive Chairman, pro-rated for the portion of the year during which he serves in each respective role. For Ms. Waters and Ms. Zumwalt, the salary in the table above reflects the annualized salary after giving effect to the increase approved by the Compensation Committee during the 2019 annual compensation cycle, whereas the salary reported in the 2019 Summary Compensation Table reflects the salary actually paid to them during the calendar year 2019.

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Adjusted operating income from our continuing operations and a clinical metric related to the volume growth of dialysis treatments performed at home relative to the overall volume growth of dialysis treatments formed the basis for 70% and 15%, respectively, of the target incentive opportunity for each participant in the 2019 STI Program. The remaining 15% consisted of strategic objectives which varied by individual. The Compensation Committee or, in the case of the CEO and Executive Chairman, the independent members of the Board, can exercise negative discretion to reduce the annual bonus payment as otherwise formulaically determined based on changed or special circumstances, or other factors that may not have been anticipated when the criteria range for the metrics was established. In setting these 2019 STI Program performance goals, the Compensation Committee considered the uncertainty in the operating environment at the time the goals were set and set the targets at levels that it deemed to be challenging but achievable with strong and consistent performance. The following table summarizes the performance metrics, weightings, criteria ranges, performance-based eligibility ranges, actual performance and eligible payout percentages for the components of the 2019 STI Program:
2019 STI Program Performance Metrics
Performance Metrics Weightings
Criteria Range
Performance Based Eligibility Range (%)
Actual Performance
Eligible Payout Achieved (%)
Financial: Adjusted Operating Income from Continuing Operations
70.0%
$1,540 million to $1,640 million ($1,575 million target)
0%; 50% - 200%
$1,770 million
200.0%
Clinical: Home Modalities Outperformance vs. Non-Acute Non-Acquired Growth ("NAG")
15.0%
3% - 9% (6% target)
0%; 50% - 200%
3.9%
65.0%
Strategic Objectives
15.0%
Varies by NEO
0% - 200%
Varies by NEO
Varies by NEO
Adjusted Operating Income
The adjusted operating income from continuing operations metric had a range corresponding to the latest guidance range as provided to our stockholders at the time the Compensation Committee approved the 2019 STI Program performance conditions. In addition, the Compensation Committee specified that the actual results would be adjusted for certain items which could negatively impact short-term adjusted operating income results but which the Compensation Committee viewed as aligning with long-term value creation for stockholders, as well as adjustments for items that do not reflect the normal operations of the Company. All such adjustments were specified in advance by the Compensation Committee in detail at the time it approved the 2019 STI Program.
The level of adjusted operating income from continuing operations for target payout at the time that the 2019 STI Program was developed factored in anticipated inflationary unit cost increases, particularly wage rate pressures on total labor costs, which were expected to more than offset the benefits of revenue per treatment increases, calcimimetics profit (calcimimetics is a class of drugs used to treat secondary hyperthyroidism, a common condition in ESRD patients which can result in bone fractures) and the absence of expenses related to the 2018 California ballot initiative. The level for target payout ($1,575 million adjusted operating income from continuing operations) represented the budget for 2019 adjusted operating income from continuing operations. In light of the anticipated headwinds referenced above, the Compensation

 
Committee believed that the performance level for achieving target payout would not be easily achieved and was a rigorous goal.
The threshold for 50% payout (below which payout was 0%) was set at the low end of the most recent guidance provided to our stockholders for adjusted operating income from continuing operations prior to the approval of the criteria for the 2019 STI Program.
Notwithstanding the headwinds to profit growth anticipated in 2019, as described in the preceding paragraph, strong operating performance in 2019 resulted in achievement at the 200% payout eligibility level. Drivers of this outperformance included a decrease in the cost of calcimimetics relative to our original expectations, partially due to the introduction of lower cost oral generics in 2019 and effective contracting; revenue per treatment and labor productivity better than expectations; general and administrative costs below expectations; which were partially offset by volume growth below expectations. Because we expect increased calcimimetics profit to be a transitory factor, the Compensation Committee considered whether to exercise its negative discretion with respect to this criterion, evaluating what the performance outcome would have been if only budgeted results had been achieved with respect to calcimimetics (rather than actual). Even at budgeted results with respect to calcimimetics, the Company’s 2019 performance would have been at the 200% payout eligibility level, and so the Compensation Committee determined not to exercise its negative discretion.

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Notice of 2020 Annual Meeting and Proxy Statement
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Compensation Discussion and Analysis
 

Home Modalities Outperformance vs. Non-Acute Non-Acquired Growth ("NAG")
Each year the Company has one or more clinical imperatives which are a particular area of operational focus to drive continuous improvement in the clinical outcomes for our patients. While the metric in the 2018 STI Program (Frequent Excessive Interdialytic Weight Gain) continues to be a focus area for the Company’s clinical operations, for the 2019 STI Program, the Compensation Committee selected a clinical criterion related to home dialysis modalities, consistent with the Company’s evolving capital-efficient growth strategies.
An important element of our clinical strategic imperatives has been the continued development and implementation of, and education regarding the availability of home modalities. Modality selection and decisions related to a patient's care are always made by the attending nephrologist and patient, and provided pursuant to a physician's order. Our goal is to provide education of the home opportunity and support the decision of the attending nephrologist and patient.
There are two different home modalities, home hemodialysis ("HHD") and peritoneal dialysis ("PD"). HHD utilizes a machine similar to that used in outpatient dialysis centers to cycle a patient's blood through an artificial kidney, or dialyzer. PD utilizes a patient's peritoneal, or abdominal, cavity to cleanse a patient's blood. As widely supported by the government, home modalities have been underutilized and in many instances could be the preferred form of treatment for some patients under certain circumstances. We strive to give them the education and options to make an informed decision. 
The home modalities outperformance metric is calculated as 2019 NAG for home modalities less 2019 NAG for all non-acute (that is, non-hospital) modalities. NAG is essentially a measure of year-over-year increase in same-store treatment volume, that is, the increase in aggregate treatment volume at clinics that were in operations for all of 2018 and all of 2019, to normalize for the impact of clinic openings and clinic closures. Although our PD business exceeded our internal target, our HHD business performed below our internal targets, and as a result overall home modalities NAG exceeded all non-acute modalities NAG by 3.9%, which resulted in the below-target payout at 65% for this metric.
 
Strategic Objectives
Strategic objectives vary by participant in the 2019 STI Program, with each objective being evaluated qualitatively to result in a single performance outcome for the strategic objectives for each participant measured on a scale of 0% to 200%, with 100% representing target. The Compensation Committee designed the individual strategic objectives to be challenging, but achievable with strong and consistent performance. More than one executive officer may have the same strategic objective given its importance and/or the role played by the individual executive officer. Participants in the 2019 STI Program had between eight and eleven strategic objectives.

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The following summarizes the strategic objectives for the 2019 STI Program by individual.