Diversified Healthcare Trust PRE 14A, filed Apr 2, 2020

The key principle of RMR LLC's compensation philosophy for all employees, including our named executive officers, is to pay for performance. RMR LLC 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 LLC's goal is to make employee and leadership development an integral part of its culture, supporting each employee and the continued success of RMR LLC, RMR Inc., the Company and other companies managed by RMR LLC or its subsidiaries.

The key principle
of RMR LLC's
compensation
philosophy is to pay
for performance.

Diversified Healthcare Trust (DHC)

PRE 14A 2020-04-02 For: 2020-05-19

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Added on October 22, 2026

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		Jennifer B. Clark		Adam D. Portnoy
		John L. Harrington		Jeffrey P. Somers
		Lisa Harris Jones


PLEASE VOTE		1
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS		2
Review of Corporate Governance Policies and Shareholder Engagement		2
Board Composition, Expansion and Refreshment		2
Process for Selecting Trustees		3
ISG Corporate Governance Framework		3
Sustainability		4
Key Responsibilities of Our Board		10
Our Board's Role in Oversight of Risk Management		10
Trustee Independence		11
Executive Sessions of Independent Trustees		12
Board Leadership Structure		12
Lead Independent Trustee		13
Code of Business Conduct and Ethics and Committee Governance		13
Trustee Resignation Policy		13
Prohibition on Hedging		14
Nominations for Trustees		14
Communications with Our Board		14
Shareholder Nominations and Other Proposals		14
PROPOSAL 1: ELECTION OF TRUSTEES		16
Trustee Nominee to be Elected at Our 2020 Annual Meeting		18
Continuing Trustees		19
Summary of Trustee Qualifications and Experience		23
Executive Officers		24
BOARD COMMITTEES		25
Audit Committee		25
Compensation Committee		25
Nominating and Governance Committee		25
BOARD MEETINGS		26
TRUSTEE COMPENSATION		26
Compensation of Trustees		26
Trustee Share Ownership Guidelines		26
2019 Annual Trustee Compensation		27
OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY		28
Trustees and Executive Officers		28
Principal Shareholders		29
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO OUR DECLARATION OF TRUST TO PROVIDE FOR THE ANNUAL ELECTION OF ALL TRUSTEES		30
PROPOSAL 3: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION		32
COMPENSATION DISCUSSION AND ANALYSIS		33
Compensation Overview		33
Compensation Philosophy		36
Overview of 2019 Compensation Actions		36
Analysis of 2019 Awards under the Share Award Plan		37
Frequency of Say on Pay		38
REPORT OF OUR COMPENSATION COMMITTEE		39
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION		39
EXECUTIVE COMPENSATION		40
Summary Compensation Table		40
2019 Grants of Plan Based Awards		41
2019 Outstanding Equity Awards at Fiscal Year End		41


2019 Stock Vested		42
Potential Payments upon Termination or Change in Control		42
Pay Ratio		42
PROPOSAL 4: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS		43
Audit Fees and All Other Fees		43
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors		44
Other Information		45
REPORT OF OUR AUDIT COMMITTEE		46
FREQUENTLY ASKED QUESTIONS		47
RELATED PERSON TRANSACTIONS		52
OTHER INFORMATION		53
ANNEX A—CERTAIN RELATED PERSON TRANSACTIONS		A-1


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

PROPOSAL		MORE INFORMATION	BOARD RECOMMENDATION	VOTES REQUIRED FOR APPROVAL


1	Election of Trustee	Page 16	✓ FOR	Plurality of all votes cast*
2	Approval of an amendment to our Declaration of Trust to provide for the annual election of all Trustees	Page 30	✓ FOR	Two-thirds of all votes entitled to be cast
3	Advisory vote to approve executive compensation**	Page 32	✓ FOR	Majority of all votes cast
4	Ratification of independent auditors**	Page 43	✓ FOR	Majority of all votes cast


via the internet		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 , 2020 to authorize a proxy VIA THE INTERNET.
by phone		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 , 2020 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.
by mail		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.

ISG Principle		Our Practice


Principle 1: Boards are accountable to shareholders.		• Assuming Proposal 2 is approved by our shareholders, beginning in 2023, all of our Trustees will stand for election annually. • We adopted a proxy access bylaw. • 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.

Principle 2: Shareholders should be entitled to voting rights in proportion to their economic interest.		• We do not have a dual class structure; each shareholder gets one vote per share.

Principle 3: Boards should be responsive to shareholders and be proactive in order to understand their perspectives.		• In 2019, our proactive shareholder outreach extended to all of our shareholders who hold 1% or more of our common shares, and we had meaningful engagements with more than 36.0% of our shareholders. • Our engagement topics included governance reform priorities, sustainability and social strategy, Board composition, leadership and refreshment, succession planning and executive compensation program disclosure.

ISG Principle		Our Practice


Principle 4: Boards should have a strong, independent leadership structure.		• We have a Lead Independent Trustee with clearly defined duties and responsibilities that are disclosed to shareholders. • Our Board considers the appropriateness of its leadership structure at least annually. • We have strong Independent Committee Chairs.

Principle 5: Boards should adopt structures and practices that enhance their effectiveness.		• 60% of Board members are independent. • Our Board is comprised of 40% women and 20% African American. • 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; two new Board members have joined our Board in the last four years. • Our Trustees attended 100% of all Board and applicable committee meetings in 2019, and all Trustees attended the 2019 annual meeting of shareholders.

Principle 6: Boards should develop management incentive structures that are aligned with the long term strategy of the company.		• Our Compensation Committee annually reviews and approves incentive compensation program design, goals and objectives for alignment with compensation and business strategies. • Although we do not pay any cash compensation directly to our officers and have no employees, we have adopted the Company's 2012 Equity Compensation Plan (the "Share Award Plan") to reward our named executive officers and other employees of our manager, The RMR Group LLC ("RMR LLC"), who provide services to us and to align their interests with those of our shareholders.


	Jennifer F. Francis (Mintzer) Age: 55	President and Chief Operating Officer since 2018



Ms. Francis has been a senior vice president of RMR LLC since 2008 and in addition is responsible for asset management and leasing activities at all RMR LLC managed properties. Prior to joining RMR LLC in 2006, Ms. Francis was a partner at CBRE/NE Partners, where she performed brokerage and corporate advisory services for a number of large corporate clients on their national commercial real estate portfolios. Previously, Ms. Francis was a vice president at The Gunwyn Company where she was responsible for the asset management of a portfolio of commercial, retail and residential assets. Ms. Francis has over 30 years of experience working in the commercial real estate industry. She is on the executive board of the American Seniors Housing Association (ASHA), a member of the National Association of Industrial and Office Properties (NAIOP) and a member of the Commercial Real Estate Women (CREW).


	Richard W. Siedel, Jr. Age: 40	Chief Financial Officer and Treasurer since 2016



Mr. Siedel has been a senior vice president of RMR LLC since 2016 and was a vice president of RMR LLC from 2015 to 2016. Mr. Siedel has been chief financial officer and treasurer of Industrial Logistics Properties Trust since 2018. Mr. Siedel was chief accounting officer of Five Star Senior Living Inc. from 2014 through 2015, and he previously served as controller of RMR LLC 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.


Name	Fees Earned or Paid in Cash ($)⁽¹⁾	Stock Awards ($)⁽²⁾	All Other Compensation ($)	Total ($)

Jennifer B. Clark⁽³⁾	—	23,850	—	23,850
John L. Harrington	133,750	23,850	—	157,600
Lisa Harris Jones	133,750	23,850	—	157,600
Adam D. Portnoy⁽³⁾	—	23,850	—	23,850
Jeffrey P. Somers	118,750	23,850	—	142,600

Name and Address			Additional Information


Adam D. Portnoy	2,694,393	1.13%	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 B. Clark	126,993	Less than 1%
John L. Harrington	36,000	Less than 1%	Includes 36,000 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.
Jeffrey P. Somers	28,500	Less than 1%
Jennifer F. Francis (Mintzer)	28,610	Less than 1%
Richard W. Siedel Jr.	22,902	Less than 1%
Lisa Harris Jones	16,936	Less than 1%

All Trustees, the Trustee nominee and named executive officers as a group (seven persons)	2,954,334	1.24%

Name and Address			Additional Information


The Vanguard Group, Inc. ("Vanguard") 100 Vanguard Boulevard Malvern, Pennsylvania 19355	36,327,099	15.3%	Based on a Schedule 13G/A filed with the SEC on February 11, 2020 by Vanguard reporting that, at December 31, 2019, Vanguard beneficially owned 36,327,099 Common Shares and had sole voting power over 476,497 Common Shares, shared voting power over 275,873 Common Shares, sole dispositive power over 35,851,618 Common Shares and shared dispositive power over 475,481 Common Shares.
BlackRock, Inc. ("BlackRock") 55 East 52nd Street New York, New York 10055	34,387,024	14.5%	Based on a Schedule 13G/A filed with the SEC on February 4, 2020 by BlackRock reporting that, at December 31, 2019, BlackRock beneficially owned 34,387,024 Common Shares and had sole voting power over 33,642,281 Common Shares and sole dispositive power over 34,387,024 Common Shares.
State Street Corporation ("State Street") One Lincoln Street Boston, Massachusetts 02111	12,796,945	5.4%	Based on a Schedule 13G filed with the SEC on February 14, 2020 by State Street reporting that, at December 31, 2019, State Street beneficially owned 12,796,945 Common Shares and had shared voting power over 10,530,778 Common Shares and shared dispositive power over 12,796,945 Common Shares.

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; may be adjusted up or down	• 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 by the compensation committee of RMR Inc.


		Jeffrey P. Somers, Chair John L. Harrington Lisa Harris Jones

Name and Principal Position	Year	Salary	Bonus		All Other Compensation ($)⁽²⁾


Jennifer F. Francis (Mintzer)	2019	—⁽³⁾	—⁽³⁾	130,650	7,992	138,642
President and Chief Operating Officer	2018	—⁽³⁾	—⁽³⁾	143,325	6,366	149,691

Richard W. Siedel Jr.	2019	—⁽³⁾	—⁽³⁾	87,100	8,829	95,929
Chief Financial Officer and Treasurer	2018	—⁽³⁾	—⁽³⁾	143,325	9,594	152,919
	2017	—⁽³⁾	—⁽³⁾	79,120	4,758	83,878

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


Jennifer F. Francis (Mintzer)	9/18/2019	15,000	130,650
Richard W. Siedel Jr.	9/18/2019	10,000	87,100

		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 (Mintzer)⁽³⁾	2019	12,000	101,280
	2018	4,500	37,980
	2017	600	5,064
	2016	300	2,532

Richard W. Siedel Jr.	2019	8,000	67,520
	2018	4,500	37,980
	2017	1,600	13,504
	2016	600	5,064

	Stock Awards


Name	Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)⁽¹⁾
Jennifer F. Francis (Mintzer)⁽²⁾		5,400		47,325
Richard W. Siedel Jr.		4,900		43,172

Name


Jennifer F. Francis (Mintzer)⁽²⁾	17,400	146,856
Richard W. Siedel Jr	14,700	124,068




Audit Fees	1,486,041	1,727,175
Audit Related Fees	—	—
Tax Fees	24,700	23,900
All Other Fees	787	720


		John L. Harrington, Chair Lisa Harris Jones Jeffrey P. Somers