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Preliminary Proxy Statement
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CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §.240.14a-12
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee paid previously with preliminary materials.
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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Jennifer F. Francis
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| | David A. Pierce | |
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John L. Harrington
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Adam D. Portnoy
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Lisa Harris Jones
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Jeffrey P. Somers
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| | | | Daniel F. LePage | | | | |
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Location:
Live Webcast Accessible at
https://www.viewproxy.com/ DiversifiedHealthcareTrust/ 2023
Date:
Monday, June 5, 2023
Time:
9:30 a.m., Eastern time
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Agenda:
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Elect the Trustee nominees identified in the accompanying Proxy Statement to our Board of Trustees;
•
Advisory vote to approve executive compensation;
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Advisory vote on the frequency of future advisory votes to approve our executive compensation;
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Ratify the appointment of Deloitte & Touche LLP as our independent auditors to serve for the 2023 fiscal year; and
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Transact such other business as may properly come before the meeting and at any postponements or adjournments of the meeting.
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Record Date: You can vote if you were a shareholder of record as of the close of business on April 17, 2023 (the “Record Date”).
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Attending Our 2023 Annual Meeting: To provide all of our shareholders across the United States and abroad an opportunity to participate in our 2023 Annual Meeting, our 2023 Annual Meeting will be a completely virtual meeting of shareholders which will be conducted exclusively by webcast. No physical meeting will be held.
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Record Owners: If you are a shareholder as of the close of business on the Record Date who holds shares directly, you may participate in our 2023 Annual Meeting via internet webcast by visiting the following website and following the registration and participation instructions contained therein: https://www.viewproxy.com/DiversifiedHealthcareTrust/2023. Please have the control number located on your proxy card or voting information form available.
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Beneficial Owners: If you are a shareholder as of the close of business on the Record Date who holds shares indirectly through a brokerage firm, bank or other nominee, you must register in advance to attend our 2023 Annual Meeting. You will need to present evidence of your beneficial ownership of shares. You will not be able to vote your shares at our 2023 Annual Meeting without a legal proxy. Beneficial owners should complete the registration process at least three days in advance of our 2023 Annual Meeting to ensure that all documentation and verifications are in order.
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Please see the accompanying Proxy Statement for additional information.
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By Order of our Board of Trustees,
Jennifer B. Clark
Secretary
April 20, 2023
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR OUR
2023 ANNUAL MEETING TO BE HELD ON MONDAY, JUNE 5, 2023. |
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The Notice of 2023 Annual Meeting, Proxy Statement and Annual Report to Shareholders for the fiscal year ended December 31, 2022 are available at www.proxyvote.com.
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PROPOSAL
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MORE
INFORMATION |
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BOARD
RECOMMENDATION |
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VOTES REQUIRED
FOR APPROVAL |
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1
Election of Trustees
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Page 23
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✓ FOR
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Plurality of all
votes cast* |
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2
Advisory vote to approve executive compensation**
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Page 39
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✓ FOR
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Majority of all
votes cast |
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3
Advisory vote on the frequency of future advisory votes to approve executive compensation**
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Page 52
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EVERY YEAR
(“1 Year” on proxy card) |
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Majority of all
votes cast |
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4
Ratification of independent auditors**
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Page 53
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✓ FOR
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Majority of all
votes cast |
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via the internet
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Visit www.proxyvote.com and enter your 16 digit control number provided in your Notice Regarding the Availability of Proxy Materials, proxy card or voting instruction form before 11:59 p.m., Eastern time, on June 4, 2023 to authorize a proxy VIA THE INTERNET.
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by phone
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Call 1-800-690-6903 if you are a shareholder of record and 1-800-454-8683 if you are a beneficial owner before 11:59 p.m., Eastern time, on June 4, 2023 to authorize a proxy BY TELEPHONE. You will need the 16 digit control number provided on your Notice Regarding the Availability of Proxy Materials, proxy card or voting instruction form.
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by mail
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Sign, date and return your proxy card if you are a shareholder of record or voting instruction form if you are a beneficial owner to authorize a proxy BY MAIL.
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2023 Proxy Statement
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1
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PROPOSAL
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BOARD RECOMMENDATION
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VOTES REQUIRED
FOR APPROVAL |
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1
Election of Trustees
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✓ FOR
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Plurality of all
votes cast* |
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2
Advisory vote to approve executive compensation**
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✓ FOR
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Majority of all
votes cast |
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3
Advisory vote on the frequency of future advisory votes to approve executive compensation**
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EVERY YEAR
(“1 Year” on proxy card) |
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Majority of all
votes cast |
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4
Ratification of independent auditors**
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✓ FOR
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Majority of all
votes cast |
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2
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2023 Proxy Statement
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NAME OF TRUSTEES
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INDEPENDENT
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COMMITTEE MEMBERSHIP
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Jennifer F. Francis | | | | | | None | |
John L. Harrington | | |
✓
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Audit
Nominating and Governance (Chair)
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Lisa Harris Jones | | |
✓
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Audit
Compensation
Nominating and Governance
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Daniel F. LePage | | |
✓
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| | Audit (Chair) | |
David A. Pierce | | |
✓
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Audit
Compensation
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Adam D. Portnoy | | | | | | None | |
Jeffrey P. Somers | | |
✓
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Audit
Compensation (Chair)
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2023 Proxy Statement
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2023 Proxy Statement
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ISG Principle
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Our Practice
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Principle 1:
Boards are accountable to shareholders.
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We amended our Declaration of Trust to declassify our Board. Beginning this year, all of our Trustees will stand for election annually.
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We adopted a proxy access bylaw.
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We have a resignation policy pursuant to which an incumbent Trustee who fails to receive a majority of votes cast in an uncontested election will offer to resign from our Board and, in such circumstance, our Board will decide whether to accept or reject the resignation offer.
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Principle 2:
Shareholders should be entitled to voting rights in proportion to their economic interest.
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We do not have a dual class structure; each shareholder gets one vote per share.
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Principle 3:
Boards should be responsive to shareholders and be proactive in order to understand their perspectives.
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In 2022, our proactive shareholder outreach extended to all of our shareholders who hold 1% or more of our Common Shares. We had active engagements with shareholders owning 68% of our Common Shares.
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Our engagement topics included the impact of the COVID-19 pandemic on our business, governance reform priorities, sustainability and social strategy, Board composition, leadership and refreshment, succession planning and executive compensation program disclosure.
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Principle 4:
Boards should have a strong, independent leadership structure.
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We have a Lead Independent Trustee with clearly defined duties and robust responsibilities that are disclosed to shareholders.
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Our Board considers the appropriateness of its leadership structure at least annually.
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We have strong Independent Committee Chairs.
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2023 Proxy Statement
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ISG Principle
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Our Practice
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Principle 5:
Boards should adopt structures and practices that enhance their effectiveness.
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71% of Board members are independent.
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Our Board includes members of underrepresented communities and is comprised of 29% women and 14% African American.
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We have an active Board refreshment plan, including an ongoing engagement with an executive search and consulting firm to identify and evaluate candidates to expand and refresh our Board; four new Board members have joined our Board in the last six years.
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Our Trustees then in office attended at least 75% of all Board and applicable committee meetings in 2022, and each of our Trustees then in office attended the 2022 annual meeting of shareholders.
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Principle 6:
Boards should develop management incentive structures that are aligned with the long term strategy of the company.
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Our Compensation Committee annually reviews and approves incentive compensation program design, goals and objectives for alignment with compensation and business strategies.
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Although we do not pay any cash compensation directly to our officers and have no employees, we have adopted the Amended and Restated 2012 Equity Compensation Plan (the “Share Award Plan”) to reward our named executive officers and other employees of RMR who provide services to us and to align their interests with those of our shareholders.
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RMR’s compensation is tied to our performance.
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2023 Proxy Statement
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2023 Proxy Statement
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2023 Proxy Statement
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2023 Proxy Statement
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2023 Proxy Statement
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2023 Proxy Statement
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2023 Proxy Statement
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2023 Proxy Statement
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2023 Proxy Statement
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Risks
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Opportunities
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Over time, chronic or acute climate stressors such as extreme heat, increased precipitation, inland flooding or storm surges could lead to the need for capital investments to meet landlord commitments or improve asset resilience.
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Increases in regional water stress may lead to water use restrictions and impact our operators’ and tenants’ ability to provide services to their guests and patrons.
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Energy or emissions performance standards require capital investments to meet standards and offset regulatory fines.
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Maintaining comfort for vulnerable populations may become more costly for SHOP managers.
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Maintaining electrical power during climate disasters is critical.
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Energy-efficient, low-carbon footprint and climate change resilient properties may be in high demand, increasing revenue potential.
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On-site solar power generation can drive down utility expenses and provide clean energy and covered parking for tenants. Battery energy storage may further reduce operating expenses while contribute to an increase of localized grid reliability.
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Innovative solutions such as smart buildings, healthy buildings and buildings with sought-after amenities such as alternative fuels and electric vehicle (EV) charging stations may attract high-quality, investment-grade tenants or increase corporate and leisure travel to our hotels.
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Senior living communities provide safe environments during climate-related emergencies.
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Code
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Activity Metric
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Value
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| | IF-RE-000.A | | | | Number of assets | | | |
Office Portfolio: 105
SHOP: 237
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| | IF-RE-000.B | | | | Leasable floor area (square feet) | | | |
Office Portfolio: 8,811,373
SHOP: 25,055,988
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| | IF-RE-000.C | | | |
Percentage of indirectly managed assets
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Office Portfolio: 38.9%
SHOP: 100%
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| | IF-RE-000.D | | | | Average occupancy rate | | | |
Office Portfolio: 84.7%
SHOP: 74.4%
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2023 Proxy Statement
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Oversight of Strategy
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Oversight of Risk
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Succession Planning
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✓
Our Board oversees and monitors strategic planning.
✓
Business strategy is a key focus of our Board and embedded in the work of Board committees.
✓
Company management is charged with executing business strategy and provides regular performance updates to our Board.
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✓
Our Board oversees risk management.
✓
Board committees, which meet regularly and report back to our full Board, play significant roles in carrying out the risk oversight function.
✓
Company management is charged with managing risk, through robust internal processes and effective internal controls.
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✓
Our Board oversees succession planning and talent development for senior executive positions.
✓
Our Nominating and Governance Committee makes an annual report to our Board on succession planning.
✓
In the event of a succession, our entire Board may work with our Nominating and Governance Committee, or the Independent Trustees, as applicable, to nominate and evaluate potential successors.
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2023 Proxy Statement
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2023 Proxy Statement
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2023 Proxy Statement
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2023 Proxy Statement
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2023 Proxy Statement
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2023 Proxy Statement
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DIVERSITY OF SKILLS AND EXPERIENCES
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Risk oversight/management expertise
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Familiarity with the public capital markets
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Accounting and finance experience, including a high level of financial literacy and understanding of the impact of financial market trends on the real estate industry
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Knowledge of the asset management industry, commercial real estate (“CRE”) industry and real estate investment trusts (“REITs”), including medical office, life sciences and senior living markets
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Corporate Governance
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Understanding of healthcare policy, trends and regulations, and medical office, life science and healthcare business trends
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Sustainability
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Service on other public company boards and committees
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Experience at a strategic or policymaking level
in a business, government, non-profit or academic organization of high standing |
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CORE QUALIFICATIONS AND EXPERIENCES
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High standards of integrity and ethics
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Diverse perspectives, backgrounds and experiences, including professional background, gender, ethnicity and skills
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Business acumen, practical wisdom, ability to exercise sound judgment in a congenial manner and ability to make independent analytical inquiries
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Commitment to serve on our Board over a period of years in order to develop knowledge about our operations and have sufficient time and availability to devote to Board and committee matters
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Strong record of achievements, including work
experience with a proven record of success |
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2023 Proxy Statement
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23
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Total Number of Trustees
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7
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Part I: Gender Identity
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Female
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Male
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Non-Binary
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Did Not Disclose
Gender |
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| | Trustees | | | |
2
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5
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—
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—
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| | Part II: Demographic Background | | | | | | | | | | | | | | | | | | |
| | African American or Black | | | |
1
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—
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—
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—
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| | Alaskan Native or Native American | | | |
—
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—
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| | Hispanic or Latinx | | | |
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| | Native Hawaiian or Pacific Islander | | | |
—
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—
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—
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—
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| | White | | | |
1
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5
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—
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—
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| | Two or More Races or Ethnicities | | | |
—
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—
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—
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—
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| | LGBTQ+ | | | | | | | | | | | |
—
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| | Did Not Disclose Demographic Background | | | | | | | | | | | |
—
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2023 Proxy Statement
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2023 Proxy Statement
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25
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Jennifer F. Francis, 59, Managing Trustee
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TRUSTEE SINCE 2021
CHIEF EXECUTIVE OFFICER SINCE 2021 PRESIDENT SINCE 2018 BOARD COMMITTEES None |
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PROFESSIONAL EXPERIENCE:
•
Our Chief Operating Officer from 2018 until 2021, when she was elected as our Chief Executive Officer.
•
Executive vice president of RMR since 2020, after joining RMR in 2006, where Ms. Francis is responsible for oversight of various functions at RMR, including acquisitions and dispositions, the asset management division of RMR, which includes asset management and leasing activities at all RMR managed properties as well as asset management for the senior living and hotel properties owned by RMR’s managed REITs, and RMR’s business analytics, credit, development and project management departments; previously, Ms. Francis served as a senior vice president of RMR from 2014 to 2020.
•
Former partner at CBRE/NE Partners, where Ms. Francis performed brokerage and corporate advisory services for a number of large corporate clients on their national commercial real estate portfolios, prior to joining RMR.
•
Former vice president of The Gunwyn Company where Ms. Francis was responsible for the asset management of a portfolio of commercial, retail and residential assets.
•
Executive board member of the American Seniors Housing Association (ASHA).
•
Member of the National Association of Industrial and Office Properties (NAIOP).
•
Member of the Commercial Real Estate Women (CREW).
•
Member of the Nareit Advisory Board of Governors.
OTHER RMR PUBLIC CLIENT BOARDS(1):
•
None
OTHER NON-RMR MANAGED PUBLIC COMPANY BOARDS:
•
None
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QUALIFICATIONS
Ms. Francis brings to our Board leadership experience from positions with RMR and demonstrated management ability. Ms. Francis has experience in, and knowledge of, REITs and over 30 years of experience working in the CRE industry. Ms. Francis possesses institutional knowledge earned through prior service as an officer of our Company and in leadership positions with RMR. Ms. Francis has professional skills and expertise in real estate matters and experience as a senior level executive officer. Ms. Francis identifies as Caucasian and as female. Ms. Francis qualifies as a Managing Trustee in accordance with the requirements of our governing documents.
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Risk Oversight/Management
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Financial Literacy
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Human Capital Management
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Investment Expertise
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REIT/Real Estate
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ESG
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Public Company Executive
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26
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2023 Proxy Statement
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| John L. Harrington, 86, Independent Trustee | | | | | |||||||
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TRUSTEE SINCE 1999
BOARD COMMITTEES Audit Nominating and Governance (Chair) |
| | |
PROFESSIONAL EXPERIENCE:
•
Chairman of the board of trustees of the Yawkey Foundation (a charitable foundation) since 2007 and from 2002 to 2003.
•
Trustee of the Yawkey Foundation since 1982 and executive director from 1982 to 2006.
•
Trustee of the JRY Trust from 1982 through 2009.
•
Chief executive officer and general partner of the Boston Red Sox Baseball Club from 1986 to 2002 and vice president and chief financial officer prior to 1986.
•
Independent trustee of Seven Hills Realty Trust (then known as RMR Mortgage Trust and prior to that as RMR Real Estate Income Fund (and its predecessors)) from 2003 to 2021.
•
Independent trustee of Tremont Mortgage Trust from 2017 to 2021.
•
President of Boston Trust Management Corp. from 1981 to 2006.
•
Principal of Bingham McCutchen Sports Consulting LLC from 2007 to 2008.
•
Represented the Boston Red Sox majority interest in co-founding The New England Sports Network, managing it from 1981 to 2002.
•
Director of Fleet Bank from 1995 to 1999.
•
Director of Shawmut Bank of Boston from 1986 to 1995.
•
Member of the Major League Baseball Executive Council from 1998 to 2001.
•
Assistant secretary of administration and finance for the Commonwealth of Massachusetts in 1980.
•
Treasurer of the American League of Professional Baseball Clubs from 1970 to 1972.
•
Assistant professor and director of admissions, Carroll Graduate School of Management at Boston College from 1967 through 1970.
•
Supervisory auditor for the U.S. General Accounting Office from 1961 through 1966.
•
Independent trustee of RMR Funds Series Trust from shortly after its formation in 2007 until its dissolution in 2009.
•
Many civic leadership positions.
•
Recipient of numerous leadership awards and honorary doctorate degrees.
•
Licensed as a certified public accountant in Massachusetts.
OTHER RMR PUBLIC CLIENT BOARDS(1):
•
Service Properties Trust (since 1995)
•
Office Properties Income Trust (since 2009)
OTHER NON-RMR MANAGED PUBLIC COMPANY BOARDS:
•
None
|
| ||||||
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QUALIFICATIONS
Mr. Harrington brings to our Board extensive professional skills and leadership experience. Mr. Harrington has held key management roles in various enterprises and has worked on public company boards as well as board committees. Mr. Harrington has served on the boards of several private and charitable organizations. Mr. Harrington possesses extensive experience in, and knowledge of, accounting, finance, risk management, compensation and benefits. Mr. Harrington also has experience as a chief executive officer and a chief financial officer. Mr. Harrington has institutional knowledge earned through prior service on our Board. Mr. Harrington identifies as Caucasian and as male. Mr. Harrington qualifies as an Independent Trustee in accordance with the requirements of the Nasdaq, the SEC and our governing documents.
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Risk Oversight/Management
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Human Capital Management
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Financial Literacy
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Public Company Board
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REIT/Real Estate
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ESG
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Government/Public Policy
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Financial Expertise
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2023 Proxy Statement
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27
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| Lisa Harris Jones, 55, Independent Trustee | | | | | |||||||
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TRUSTEE SINCE 2015
LEAD INDEPENDENT TRUSTEE SINCE DECEMBER 2018 BOARD COMMITTEES Audit Compensation Nominating and Governance |
| | |
PROFESSIONAL EXPERIENCE:
•
Founding and managing member of Harris Jones & Malone, LLC, a Maryland based law firm that focuses on state and local lobbying, government relations and procurement, since 2000.
•
Practiced corporate securities, mergers and acquisitions, government relations, real estate financing and land use law at other Maryland law firms, prior to founding Harris Jones & Malone.
•
Worked in a pro bono capacity for dyslexia education, community development in Baltimore City’s most challenging areas, and the advancement of minority and women business enterprises.
•
Served in leadership positions on several non-profit boards including the Baltimore Museum of Art and Everyman Theatre.
•
Recognized for both her professional and civic work by multiple entities including Savoy Magazine where she gained national recognition by being named one of the Most Influential Black Corporate Directors.
OTHER RMR PUBLIC CLIENT BOARDS(1):
•
TravelCenters of America Inc. (since 2013)
•
Industrial Logistics Properties Trust (since 2018)
OTHER NON-RMR MANAGED PUBLIC COMPANY BOARDS:
•
None
|
| ||||||
|
QUALIFICATIONS
Ms. Harris Jones brings to our Board extensive professional skills and experience in legal and business finance matters, public policy and real estate matters. Ms. Harris Jones has dedicated a great deal of her time and resources to matters of public interest. Ms. Harris Jones’s practice includes representation of small and large business enterprises, both publicly and privately held, municipalities and related quasi-public agencies, and nonprofit organizations. Ms. Harris Jones represents clients on a wide range of business interests’ concerns including, but not limited to, public and private real estate development, land use zoning and financing, construction, energy, retail sales, education, transportation, public safety, healthcare, gaming, telecommunications, intellectual technology, procurement, corporate, taxation, labor and employment, insurance, public interest, election, and environmental law. Ms. Harris Jones has demonstrated leadership capacity as an entrepreneur and founding member of a law firm. Ms. Harris Jones has served on public company boards and board committees and possesses institutional knowledge earned through prior service on our Board. Ms. Harris Jones identifies as African American and as female. Ms. Harris Jones qualifies as an Independent Trustee in accordance with the requirements of the Nasdaq, the SEC and our governing documents.
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Risk Oversight/Management
|
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Financial Literacy
|
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Public Company Board
|
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Investment Expertise
|
|
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Legal/Regulatory
|
| |
Human Capital Management
|
| |
ESG
|
| |
REIT/Real Estate
|
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Government/Public Policy
|
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28
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2023 Proxy Statement
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| Daniel F. LePage, 68, Independent Trustee | | | | | |||||||
|
TRUSTEE SINCE 2020
BOARD COMMITTEES Audit (Chair) |
| | |
PROFESSIONAL EXPERIENCE:
•
Founder and managing partner of DFL Capital LLC, a New York based real estate investment firm formed in April 2019.
•
Managing director and head of the U.S. real estate corporate banking group at RBC Capital Markets from 2006 to 2019.
•
Senior leadership positions in commercial real estate lending at Emigrant Savings Bank and Citigroup, Inc. prior to involvement with RBC Capital Markets and its affiliates.
•
Member of the board of the National Eating Disorders Association, a non-profit organization supporting individuals and families affected by eating disorders.
•
Member of Urban Land Institute.
•
Chartered Financial Analyst, member of the CFA Institute and has achieved the CFA Institute Certificate in ESG Investing.
OTHER RMR PUBLIC CLIENT BOARDS(1):
•
None
OTHER NON-RMR MANAGED PUBLIC COMPANY BOARDS:
•
None
|
| ||||||
|
QUALIFICATIONS
Mr. LePage brings to our Board professional skills and experience in finance, real estate matters, capital raising, strategic business transactions, risk management and ESG. Mr. LePage has experience in and knowledge of capital markets and has demonstrated leadership and management abilities. Mr. LePage has achieved the CFA Institute Certificate in ESG Investing. Mr. LePage identifies as Caucasian and as male. Mr. LePage qualifies as an Independent Trustee in accordance with the requirements of the Nasdaq, the SEC and our governing documents.
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Risk Oversight/Management
|
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Human Capital Management
|
| |
Financial Literacy
|
| |
ESG
|
|
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REIT/Real Estate
|
| |
Investment Expertise
|
| |
Financial Expertise
|
| | | |
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2023 Proxy Statement
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29
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| David A. Pierce, 60, Independent Trustee | | | | | |||||||
|
TRUSTEE SINCE 2022
BOARD COMMITTEES Audit Compensation |
| | |
PROFESSIONAL EXPERIENCE:
•
Various positions at Boston Scientific Corporation from 1991 through July 2022, including from 2018 through July 2022, Executive Vice President and President, MedSurg and from 2020 through July 2022 President, Endoscopy.
•
Senior Vice President and President of the Urology Division from 2016 to 2018 and Senior Vice President and President of the Endoscopy Division from 2010 to 2016.
•
Trustee of Norwich University since 2020.
•
Director of Neuraptive Therapeutics, Inc., a private company, since 2020.
•
Director of the Medical Device Manufacturers Association since 2014.
•
Director of MassMedic from 2020 to July 2022.
•
Strategic advisory board chair of the American Gastroenterology Association Center for GI Innovation from 2014 until 2016.
•
Director of the American Society of Gastrointestinal Endoscopy Foundation from 2011 until 2012.
•
Served in the United States Army from 1985 until 1989, serving in multiple line and staff positions, providing transportation and logistics management, attaining the rank of Captain.
OTHER RMR PUBLIC CLIENT BOARDS(1):
•
None
OTHER NON-RMR MANAGED PUBLIC COMPANY BOARDS:
•
None
|
| ||||||
|
QUALIFICATIONS
Mr. Pierce brings to our Board professional skills and experience in business matters as well as knowledge of and experience in the healthcare industry. Mr. Pierce has demonstrated leadership and management abilities as well as experience as an operator of healthcare business units. Mr. Pierce identifies as Caucasian and as male. Mr. Pierce qualifies as an Independent Trustee in accordance with the requirements of the Nasdaq, the SEC and our governing documents.
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Risk Oversight/Management
|
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Human Capital Management
|
| |
Financial Literacy
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ESG
|
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REIT/Real Estate
|
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Public Company Executive
|
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30
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2023 Proxy Statement
|
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| Adam D. Portnoy, 52, Managing Trustee | | | | | |||||||
|
TRUSTEE SINCE 2007
CHAIR OF OUR BOARD SINCE 2019 BOARD COMMITTEES None |
| | |
PROFESSIONAL EXPERIENCE:
•
President and chief executive officer of RMR Inc., since shortly after its formation in 2015.
•
President and chief executive officer of RMR since 2005, and director from 2006 to June 5, 2015 when RMR became a majority owned subsidiary of RMR Inc. and RMR Inc. became RMR’s managing member.
•
Managing director of AlerisLife Inc. from 2018 to March 2023 until its acquisition by ABP Trust and its sole director since that acquisition, and chair of its board from 2019 to March 2023.
•
Director of Tremont Realty Capital LLC since March 2016 and served as its president and chief executive officer from March 2016 to December 2017.
•
Sole trustee and controlling shareholder and an officer of ABP Trust.
•
Director and controlling shareholder of Sonesta International Hotels Corporation and its parent.
•
Director of RMR Advisors LLC from 2007 to 2021 when it merged with Tremont Realty Capital LLC, its president from 2007 to 2017 and its chief executive officer from 2015 to 2017.
•
President and chief executive officer of Seven Hills Realty Trust (then known as RMR Real Estate Income Fund) from 2007 to 2015.
•
President of Office Properties Income Trust from 2009 to 2011.
•
Managing trustee of Tremont Mortgage Trust from 2017 until it merged with Seven Hills Realty Trust in September 2021.
•
Managing trustee of Select Income REIT from 2011 until it merged with a wholly owned subsidiary of Office Properties Income Trust in December 2018.
•
Served in various positions in the finance industry and public sector, including working as an investment banker at Donaldson, Lufkin & Jenrette and working in private equity at DLJ Merchant Banking Partners and at the International Finance Corporation (a member of The World Bank Group).
•
Founded and served as chief executive officer of a privately financed telecommunications company.
•
Honorary Consul General of the Republic of Bulgaria to Massachusetts.
•
Chair of the board of directors of the Pioneer Institute.
•
Executive committee member of the board of directors of the Greater Boston Chamber of Commerce.
•
Member of AJC New England’s Leadership Board.
•
Previously served on the board of governors for the National Association of Real Estate Investment Trusts and the board of trustees of Occidental College.
OTHER RMR PUBLIC CLIENT BOARDS(1):
•
Service Properties Trust (since 2007)
•
Office Properties Income Trust (since 2009)
•
Seven Hills Realty Trust, including its predecessor companies (since 2009)
•
The RMR Group Inc. (since 2015)
•
Industrial Logistics Properties Trust (since 2017)
•
TravelCenters of America Inc. (since 2018)
OTHER NON-RMR MANAGED PUBLIC COMPANY BOARDS:
•
None
|
| ||||||
|
QUALIFICATIONS
Mr. Portnoy brings to our Board extensive experience in, and knowledge of, the asset management and CRE industries and REITs, gained in part through his key leadership position with RMR and its subsidiaries, his public company board service, and his demonstrated management ability. Mr. Portnoy also possesses experience in investment banking and private equity, as well as institutional knowledge earned through prior service on our Board and deep knowledge of our business. Mr. Portnoy identifies as Caucasian and as male. Mr. Portnoy qualifies as a Managing Trustee in accordance with the requirements of our governing documents.
Our Nominating and Governance Committee and our Board believe that, because Mr. Portnoy is the president and chief executive officer of RMR and the business of all the companies (including our Company) for which he serves as a managing trustee or managing director is integral to his day to day work, service on these additional boards does not impair the amount of attention or time that Mr. Portnoy spends on service on our Board. Our Board believes that Mr. Portnoy’s extensive familiarity with our day to day business provides valuable insight for our Board.
|
|
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Risk Oversight/Management
|
| |
Human Capital Management
|
| |
Financial Literacy
|
| |
Public Company Board
|
|
|
REIT/Real Estate
|
| |
Investment Expertise
|
| |
ESG
|
| |
Public Company Executive
|
|
|
Government/Public Policy
|
| | | | | | | | | |
|
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2023 Proxy Statement
|
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31
|
|
| Jeffrey P. Somers, 80, Independent Trustee | | | | | | | | |||||||
|
TRUSTEE SINCE 2009
LEAD INDEPENDENT TRUSTEE FROM 2015-2018 BOARD COMMITTEES Audit Compensation (Chair) |
| | |
PROFESSIONAL EXPERIENCE:
•
Of counsel since 2010, and member of the law firm of Morse, Barnes-Brown & Pendleton, PC from 1995 to 2009, serving as managing member for six of those years.
•
Former partner at the law firm of Gadsby Hannah LLP (now McCarter & English, LLP) for more than 20 years prior to working at Morse, Barnes-Brown & Pendleton, PC, serving as managing partner for eight of those years.
•
Independent Trustee of Tremont Mortgage Trust from 2017 to 2020 and of Select Income REIT from 2012 until it merged with a wholly owned subsidiary of Office Properties Income Trust (then known as Government Properties Income Trust) in December 2018.
•
Director of Cantella Management Corp., a holding company of Cantella & Co., Inc., an SEC registered broker-dealer, from 2002 until January 2014, when the company was acquired by a third party.
•
Trustee of the Pictet Funds from 1995 to 2001.
•
Former staff attorney at the SEC in Washington, D.C. prior to entering private law practice.
•
Former trustee of Glover Hospital, a private not for profit regional hospital, which is currently part of Beth Israel Deaconess Hospital, among various other civic leadership roles.
OTHER RMR PUBLIC CLIENT BOARDS(1):
•
Office Properties Income Trust (since 2009)
•
Seven Hills Realty Trust including its predecessor companies (since 2009)
OTHER NON-RMR MANAGED PUBLIC COMPANY BOARDS:
•
None
|
| | ||||||||
|
QUALIFICATIONS
Mr. Somers brings to our Board extensive expertise in legal, corporate governance and regulatory matters, as well as leadership experience gained from his role as a law firm managing partner. Mr. Somers also possesses a sophisticated understanding of finance and accounting matters, obtained through his service as a trustee of public REITs and investment companies, as well as work on board committees. Mr. Somers has extensive experience in public policy matters and complex business transactions gained partly from government service, as well as institutional knowledge earned through prior service on our Board. Mr. Somers identifies as Caucasian and as male. Mr. Somers qualifies as an Independent Trustee in accordance with the requirements of the Nasdaq, the SEC and our governing documents.
|
| |
|
Risk Oversight/Management
|
| |
Human Capital Management
|
| |
Financial Literacy
|
| |
REIT/Real Estate
|
|
|
ESG
|
| |
Legal/Regulatory
|
| |
Government/Public Policy
|
| |
Public Company Board
|
|
|
32
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|
| |
2023 Proxy Statement
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
|
| | | | | | |
Jennifer F. Francis
Age: 59
|
| | | | | | |
Chief Executive Officer since 2021 and President since 2018
|
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Ms. Francis’s background and qualifications are described above.
|
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
|
| | | | | | |
Richard W. Siedel, Jr.
Age: 43
|
| | | | | | |
Chief Financial Officer and Treasurer since 2016
|
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Mr. Siedel has been a senior vice president of RMR since 2016 and was a vice president of RMR prior to then in 2016. Mr. Siedel was chief financial officer and treasurer of Industrial Logistics Properties Trust from 2018 through September 2022. Mr. Siedel was chief accounting officer of AlerisLife Inc. from 2014 through 2015, and he previously served as controller of RMR from 2013 to 2014. Mr. Siedel’s former experience also includes various accounting leadership positions, including corporate controller at Sensata Technologies (NYSE: ST) from 2010 to 2013 and an auditor at Ernst & Young LLP from 2001 to 2010. Mr. Siedel identifies as Caucasian and as male.
|
| | | | | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
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| |
2023 Proxy Statement
|
| |
33
|
|
|
Members
Daniel F. LePage (Chair)
John L. Harrington Lisa Harris Jones David A. Pierce Jeffrey P. Somers
8 meetings during 2022
|
| |
Our Audit Committee is comprised solely of Independent Trustees. Its primary role is to help our Board fulfill its oversight responsibilities related to the integrity of our financial statements and financial reporting process, the qualifications, independence and performance of our independent registered public accounting firm, the performance of our internal audit function, risk management and our compliance with legal and regulatory requirements. Our Audit Committee is responsible for the appointment, compensation, retention and oversight, and the evaluation of the qualifications, performance and independence, of our independent auditor and the resolution of disagreements between management and our independent auditor. Our independent auditor reports directly to our Audit Committee. Our Audit Committee reviews the overall audit scope and plans of the audit with our independent auditor. Our Audit Committee also reviews with management and our independent auditors our quarterly reports on Form 10-Q, annual reports on Form 10-K and earnings releases.
Our Board has determined that each member of our Audit Committee is financially literate and that Messrs. Harrington and LePage are our Audit Committee’s “financial experts.”
|
|
|
Members
Jeffrey P. Somers (Chair)
Lisa Harris Jones David A. Pierce
5 meetings during 2022
|
| |
Our Compensation Committee is comprised solely of Independent Trustees. Its primary responsibilities pertain to evaluating the performance and compensation of RMR and our executive officers, evaluating and approving any changes in our agreements with RMR and approving equity compensation awards. Our Compensation Committee recommends to our Board the cash compensation payable to our Trustees for Board and committee service. Our Compensation Committee determines and approves the equity based compensation payable to our Trustees for Board and committee service, and any compensation payable to the Lead Independent Trustee in his, her or their capacity as such. Our Compensation Committee administers our Share Award Plan and determines all awards granted pursuant to the Share Award Plan. It also reviews amounts payable by us to RMR under our business and property management agreements and approves any proposed amendments to or termination of those agreements.
Messrs. Harrington and LePage served on our Compensation Committee until June 2, 2022.
|
|
|
Members
John L. Harrington (Chair)
Lisa Harris Jones
2 meetings during 2022
|
| |
Our Nominating and Governance Committee is comprised solely of Independent Trustees. Its primary role is to identify individuals qualified to become Board members, consistent with criteria approved by our Board, and to recommend candidates to our entire Board for nomination or selection as Board members for each annual meeting of shareholders or when vacancies occur, to perform certain assessments of our Board and Board committees, including to assess the independence of Trustees and Trustee nominees, and to develop and recommend to our Board governance principles for our Company. Under its charter, our Nominating and Governance Committee is also responsible for considering and reporting on our succession planning to our Board.
Messrs. LePage and Somers served on our Nominating and Governance Committee until June 2, 2022.
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34
|
| |
|
| |
2023 Proxy Statement
|
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|
| |
2023 Proxy Statement
|
| |
35
|
|
Name
|
| |
Fees Earned or Paid
in Cash ($)(1) |
| |
Stock Awards ($)(2)
|
| |
All Other
Compensation ($) |
| |
Total ($)
|
| ||||||||||||
Jennifer F. Francis(3) | | | | | — | | | | | | 42,800 | | | | | | — | | | | | | 42,800 | | |
John L. Harrington | | | | | 90,000 | | | | | | 42,800 | | | | | | — | | | | | | 132,800 | | |
Lisa Harris Jones | | | | | 92,500 | | | | | | 42,800 | | | | | | — | | | | | | 135,300 | | |
Daniel F. LePage | | | | | 95,000 | | | | | | 42,800 | | | | | | — | | | | | | 137,800 | | |
David A. Pierce | | | | | 88,356 | | | | | | 42,800 | | | | | | — | | | | | | 131,156 | | |
Adam D. Portnoy(3) | | | | | — | | | | | | 42,800 | | | | | | — | | | | | | 42,800 | | |
Jeffrey P. Somers | | | | | 90,000 | | | | | | 42,800 | | | | | | — | | | | | | 132,800 | | |
|
36
|
| |
|
| |
2023 Proxy Statement
|
|
Name and Address
|
| |
Aggregate
Number of Shares Beneficially Owned* |
| |
Percent of
Outstanding Shares** |
| |
Additional Information
|
| |||
Adam D. Portnoy | | | | | 2,744,392 | | | |
1.15%
|
| |
Includes 2,550,019 Common Shares
owned by ABP Trust. Voting and investment power with respect to Common Shares owned by ABP Trust may be deemed to be shared by Adam D. Portnoy as ABP Trust’s sole trustee. |
|
Jennifer F. Francis | | | | | 191,992 | | | |
Less than 1%
|
| | | |
Richard W. Siedel Jr. | | | | | 95,877 | | | |
Less than 1%
|
| | | |
Jeffrey P. Somers | | | | | 78,500 | | | |
Less than 1%
|
| | | |
Lisa Harris Jones | | | | | 69,233 | | | |
Less than 1%
|
| | | |
Daniel F. LePage | | | | | 51,910 | | | |
Less than 1%
|
| | | |
John L. Harrington | | | | | 40,000 | | | |
Less than 1%
|
| | Includes 40,000 Common Shares owned by the John L. Harrington Revocable Trust. Mr. Harrington may be deemed to hold voting and investment power as a trustee and beneficiary of the John L. Harrington Revocable Trust. | |
David A. Pierce | | | | | 20,000 | | | |
Less than 1%
|
| | | |
All Trustees, the Trustee nominees and executive officers as a group (eight persons) | | | | | 3,291,904 | | | |
1.37%
|
| | | |
|
|
| |
2023 Proxy Statement
|
| |
37
|
|
Name and Address
|
| |
Aggregate
Number of Shares Beneficially Owned |
| |
Percent of
Outstanding Shares* |
| |
Additional Information
|
| ||||||
The Vanguard Group, Inc. (“Vanguard”)
100 Vanguard Boulevard Malvern, Pennsylvania 19355 |
| | |
|
24,100,068
|
| | | |
|
10.05%
|
| | | Based on a Schedule 13G/A filed with the SEC on March 10, 2023 by Vanguard reporting that, at February 28, 2023, Vanguard beneficially owned 24,100,068 Common Shares and had shared voting power over 120,800 Common Shares, sole dispositive power over 23,889,251 Common Shares and shared dispositive power over 210,817 Common Shares. | |
BlackRock, Inc. (“BlackRock”)
55 East 52nd Street New York, New York 10055 |
| | | | 17,083,807 | | | | | | 7.13% | | | |
Based on a Schedule 13G/A filed with the SEC
on January 6, 2023 by BlackRock reporting that, at December 31, 2022, BlackRock beneficially owned 17,083,807 Common Shares and had sole voting power over 16,641,069 Common Shares and sole dispositive power over 17,083,807 Common Shares. |
|
Flat Footed LLC (“Flat Footed”)
3465 N Pines Way, Suite 104 Box 206 Wilson, WY 83014 |
| | | | 16,730,156 | | | | | | 6.98% | | | |
Based on a Schedule 13G filed with the SEC on
February 14, 2023 by Flat Footed reporting that at December 31, 2022, Flat Footed beneficially owned 16,730,156 Common Shares and had shared voting power over 16,730,156 Common Shares and shared dispositive power over 16,730,156 Common Shares. |
|
Millennium Management LLC (“Millennium”)
399 Park Avenue New York, New York 10022 |
| | | | 13,054,108 | | | | | | 5.45% | | | |
Based on a Schedule 13G filed with the SEC on
January 3, 2023 by Millennium reporting that, at December 23, 2022, Millennium beneficially owned 13,054,108 Common Shares and had shared voting power over 13,054,108 Common Shares and shared dispositive power over 13,054,108 Common Shares. |
|
|
38
|
| |
|
| |
2023 Proxy Statement
|
|
|
PROPOSAL 2:
|
| | ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION | |
|
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| |
2023 Proxy Statement
|
| |
39
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|
40
|
| |
|
| |
2023 Proxy Statement
|
|
|
The key principle of RMR’s compensation philosophy for all employees, including our named executive officers, is to pay for performance. RMR maintains a rigorous and thorough talent and compensation review process to ensure that its employees are in appropriate roles that maximize their full potential. This process also ensures that there is strong leadership guiding employees and that there is a succession and development plan for each role. RMR’s goal is to make employee and leadership development an integral part of its culture, supporting each employee and the continued success of RMR, our Company and other RMR Clients.
|
| |
|
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| |
2023 Proxy Statement
|
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41
|
|
Compensation Element
|
| |
What It Does
|
| |
Key Measures
|
|
Base Salary | | |
•
Provides a level of fixed pay appropriate to an executive’s role and responsibilities
•
Evaluated on an annual basis
|
| |
•
Experience, duties and scope of responsibility
•
Internal and external market factors
|
|
Discretionary Cash Bonus | | |
•
Provides a competitive annual cash incentive opportunity
•
Links executives’ interests with shareholders’ interests
•
Incentivizes and rewards superior group, individual and Company performance
|
| |
•
Based on holistic performance evaluation
|
|
Equity Compensation | | |
•
Links executives’ interests with long-term interests of shareholders
•
Incentivizes and rewards superior group, individual and Company performance
|
| |
•
Based on holistic performance evaluation
|
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42
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| |
2023 Proxy Statement
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2023 Proxy Statement
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43
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44
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2023 Proxy Statement
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2023 Proxy Statement
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45
|
|
Name and Principal Position
|
| |
Year
|
| |
Salary
|
| |
Bonus
|
| |
Stock Awards ($)(1)
|
| |
All Other
Compensation ($)(2) |
| |
Total ($)
|
| ||||||||||||
Jennifer F. Francis(3)
President and Chief Executive Officer |
| | | | 2022 | | | |
—
|
| |
—
|
| | | | 120,800 | | | | | | 3,195 | | | | | | 123,995 | | |
| | | 2021 | | | |
—
|
| |
—
|
| | | | 278,600 | | | | | | 1,824 | | | | | | 280,424 | | | ||
| | | 2020 | | | |
—
|
| |
—
|
| | | | 113,100 | | | | | | 3,321 | | | | | | 116,421 | | | ||
Richard W. Siedel Jr.(3)
Chief Financial Officer and Treasurer |
| | | | 2022 | | | |
—
|
| |
—
|
| | | | 52,000 | | | | | | 1,845 | | | | | | 53,845 | | |
| | | 2021 | | | |
—
|
| |
—
|
| | | | 102,300 | | | | | | 1,189 | | | | | | 103,489 | | | ||
| | | 2020 | | | |
—
|
| |
—
|
| | | | 75,400 | | | | | | 2,757 | | | | | | 78,157 | | |
|
46
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|
| |
2023 Proxy Statement
|
|
Name
|
| |
Grant Date
|
| |
All Other Stock Awards:
Number of Shares of Stock or Units (#) |
| |
Grant Date Fair Value of
Stock and Option Awards ($)(1) |
| |||||||||
Jennifer F. Francis | | | | | 9/14/2022 | | | | | | 60,000 | | | | | | 78,000 | | |
Richard W. Siedel Jr. | | | | | 9/14/2022 | | | | | | 40,000 | | | | | | 52,000 | | |
| | | | | | | | |
Stock Awards
|
| |||||||||
Name
|
| |
Year Granted
|
| |
Number of Shares or Units
of Stock That Have Not Vested (#)(1) |
| |
Market Value of Shares or
Units of Stock That Have Not Vested ($)(2) |
| |||||||||
Jennifer F. Francis
|
| | | | 2022 | | | | | | 48,000 | | | | | | 31,046 | | |
| | | 2021 | | | | | | 36,000 | | | | | | 23,285 | | | ||
| | | 2020 | | | | | | 12,000 | | | | | | 7,762 | | | ||
| | | 2019 | | | | | | 3,000 | | | | | | 1,940 | | | ||
Richard W. Siedel Jr.
|
| | | | 2022 | | | | | | 32,000 | | | | | | 20,698 | | |
| | | 2021 | | | | | | 18,000 | | | | | | 11,642 | | | ||
| | | 2020 | | | | | | 8,000 | | | | | | 5,174 | | | ||
| | | 2019 | | | | | | 2,000 | | | | | | 1,294 | | |
|
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2023 Proxy Statement
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47
|
|
| | |
Stock Awards
|
| |||||||||
Name
|
| |
Number of Shares Acquired
on Vesting (#) |
| |
Value Realized on
Vesting ($)(1) |
| ||||||
Jennifer F. Francis (2) | | | | | 34,500 | | | | | | 45,105 | | |
Richard W. Siedel Jr. | | | | | 21,500 | | | | | | 28,145 | | |
Name
|
| |
Number of Shares Vested Upon
Termination Event (#) |
| |
Value Realized on Termination Event
as of December 31, 2022 ($)(1) |
| ||||||
Jennifer F. Francis | | | | | 99,000 | | | | | | 64,033 | | |
Richard W. Siedel Jr. | | | | | 60,000 | | | | | | 38,808 | | |
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48
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2023 Proxy Statement
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| Pay Versus Performance | | ||||||||||||||||||||||||||||||||||||||||||
| Year | | | Summary Compensation Table Total for Principal Executive Officer (“PEO”) | | | Compensation Actually Paid to PEO(1) | | | Average Summary Compensation Table Total for Non-PEO NEOs | | | Average Compensation Actually Paid to Non-PEOs NEOs(2) | | | Value of Initial Fixed $100 Investment Based on: | | | Net Income ($000s) | | ||||||||||||||||||||||||
| Total Shareholder Return | | | Peer Group Total Shareholder Return** | | |||||||||||||||||||||||||||||||||||||||
| 2022 | | | | | $ | | | | | | $( | | | | | | $ | | | | | | $( | | | | | | $ | | | | | | $ | | | | | | $( | | |
| 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||
| 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ( | | |
| PEO Compensation Actually Paid | | |||||||||||||||||||||||||||||||||||||||||||||
| Year | | | PEO Name | | | Total Compensation Per Summary Compensation Table Less Stock Grant Amount | | | Year End Fair Value of Equity Awards Granted and Unvested During Applicable Year | | | Change in Fair Value as of Year End of Any Prior Year Awards that Remain Unvested as of Year End | | | Awards Granted and Vested in the Same Year, at Fair Value as of the Vesting Date | | | Change in Fair Value as of Year End of Any Prior Year Awards that Vested During Applicable Year | | | Total Equity Value Reflected in Compensation Actually Paid | | | Compensation Actually Paid to PEO | | |||||||||||||||||||||
| 2022 | | | | | | | | $ | | | | | | $ | | | | | | $( | | | | | | $ | | | | | | $( | | | | | | $( | | | | | | $( | | |
| 2021 | | | Jennifer Francis | | | | | | | | | | | | | | | ( | | | | | | | | | | | ( | | | | | | | | | | | | | |||||
| 2020 | | | Jennifer Francis | | | | | | | | | | | | | | | ( | | | | | | | | | | | ( | | | | | | | | | | | | |
| Average Non-PEO NEOs—Compensation Actually Paid | | ||||||||||||||||||||||||
| Year | | | NEO Names | | | Total Compensation Per Summary Compensation Table Less Stock Grant Amount | | | Year End Fair Value of Equity Awards Granted and Unvested During Applicable Year | | | Change in Fair Value as of Year End of Any Prior Year Awards that Remain Unvested as of Year End | | | Awards Granted and Vested in the Same Year, at Fair Value as of the Vesting Date | | | Change in Fair Value as of Year End of Any Prior Year Awards that Vested During Applicable Year | | | Total Equity Value Reflected in Compensation Actually Paid | | | Compensation Actually Paid to Non-PEO NEOs | |
| 2022 | | | Richard Siedel* | | | $ | | | $ | | | $( | | | $ | | | $( | | | $( | | | $( | |
| 2022 Average | | | | | | | | | ( | | | | | | ( | | | ( | | | ( | | |||
| 2021 | | | Richard Siedel | | | | | | | | | ( | | | | | | ( | | | | | | | |
| 2021 Average | | | | | | | | | ( | | | | | | ( | | | | | | | | |||
| 2020 | | | Richard Siedel | | | | | | | | | ( | | | | | | ( | | | | | | | |
| 2020 Average | | | | | | | | | ( | | | | | | ( | | | | | | | |
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PROPOSAL 3:
|
| | ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATION | |
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52
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2023 Proxy Statement
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PROPOSAL 4:
|
| | RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS | |
| | |
2022 Fees
|
| |
2021 Fees
|
| ||||||
Audit Fees | | | | $ | 1,403,477 | | | | | $ | 1,266,688 | | |
Audit Related Fees | | | | | 0 | | | | | | 0 | | |
Tax Fees | | | | | 28,350 | | | | | | 7,350 | | |
All Other Fees | | | | | 948 | | | | | | 812 | | |
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2023 Proxy Statement
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A-1
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A-2
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A-3
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A-5
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A-6
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