Patrick Darby
Executive Vice President, General Counsel and Secretary at EHC
Executive
About Patrick Darby
Patrick Darby (age 60) serves as Executive Vice President, General Counsel and Secretary at Encompass Health (EHC) since February 18, 2016; prior to EHC he was a partner at Bradley Arant Boult Cummings LLP (1990–2016) and an adjunct professor at Cumberland School of Law . Pay-for-performance is anchored by Adjusted EBITDA, EPS, ROIC, and a relative TSR modifier; in 2024, EHC achieved Adjusted EBITDA of $1,107,786,000 and Darby’s SMBP paid 169.1% of target, reflecting strong operational performance and quality metrics outcomes . The company’s five-year TSR exceeded that of the S&P Health Care Services Select Industry Index, and compensation actually paid (CAP) shows a positive correlation with TSR, consistent with equity-heavy compensation design .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Bradley Arant Boult Cummings LLP | Partner | 1990–2016 | Senior legal practice experience that underpins GC responsibilities |
| Cumberland School of Law | Adjunct Professor | Not disclosed | Legal academic experience prior to EHC appointment |
External Roles
No external public company directorships or committee roles for Darby are disclosed in the filings reviewed .
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base Salary ($) | $550,000 | $550,000 | $625,000 |
| Annual Cash Incentive Target (% of Salary) | 2024 | 2025 |
|---|---|---|
| Target % | 75% | 80% |
| Target $ | $468,750 | $500,000 |
| Actual SMBP Bonus Paid ($) | 2022 | 2023 | 2024 |
|---|---|---|---|
| Non-Equity Incentive Compensation | $395,010 | $757,433 | $792,797 |
Performance Compensation
Annual Incentive Plan (SMBP) – Structure and Results
| Metric | Weight | Threshold | Target | Maximum | 2024 Actual Attainment |
|---|---|---|---|---|---|
| Adjusted EBITDA | 70% | $966,795,000 | $1,045,184,000 | >$1,123,573,000 | $1,107,786,000 (179.9% of target) |
| Quality/Strategic Scorecard – Discharge to Community | 35% sub-weight | <60% hospitals | 70% hospitals | 80% hospitals | 200.0% of target |
| Quality/Strategic Scorecard – Acute Transfer | 15% sub-weight | <60% hospitals | 70% hospitals | 80% hospitals | 181.0% of target |
| Quality/Strategic Scorecard – Patient Satisfaction | 30% sub-weight | <60% hospitals | 70% hospitals | 80% hospitals | 156.0% of target |
| Quality/Strategic Scorecard – First Year RN Turnover | 20% sub-weight | <60% hospitals | 70% hospitals | 80% hospitals | Below threshold |
| SMBP Payout Calculations (2024) | Adjusted EBITDA ($) | Quality/Strategic ($) | Total Payout ($) | Result as % of Target |
|---|---|---|---|---|
| Patrick Darby | 590,297 | 202,500 | 792,797 | 169.1% |
Notes:
- 2024 SMBP used Adjusted EBITDA and Quality/Strategic metrics; no discretionary adjustments were applied to final awards; maximum payout capped at 200% .
- Adjusted EBITDA used defined adjustment categories and applied minor add-backs for certain unbudgeted items in 2024 .
Long-Term Incentive Plan (LTIP) – 2024 Grants and Vesting
| Grant Type | Grant Date | Shares/Units | Exercise Price | Grant-Date Fair Value ($) | Vesting Schedule |
|---|---|---|---|---|---|
| PSUs | 2/28/2024 | Target 8,434; Max 16,868 | — | 713,263 | Earned over 3-year period on EPS and ROIC with relative TSR modifier; dividends accrue and pay on issuance |
| RSAs | 2/28/2024 | 2,812 | — | 210,113 | Time-based vesting in three equal annual installments starting 1st anniversary |
| Stock Options | 3/1/2024 | 7,894 | $74.20 | 206,321 | Options vest in three equal annual installments starting 1st anniversary; 10-year term |
| 2024 Target LTIP Mix | Options (%) | PSUs (%) | RSAs (%) | Total Target Value ($) |
|---|---|---|---|---|
| Darby (EVP) | 20% | 60% | 20% | $1,031,250 |
TSR Modifier Framework:
- For senior VPs and above (including Darby), EPS and ROIC PSU outcomes are multiplied by 1.25 at ≥75th percentile TSR, by 0.75 at ≤25th percentile TSR, and interpolated between; capped at 200% of target .
Retention Grants:
- One-time RSA retention grant on February 23, 2023: $908,000, cliff-vesting on 3rd anniversary; not subject to the “good leaver” retirement clause . Supplemental retention RSAs for Darby in February 2023 fully vest on the 3rd anniversary .
Equity Ownership & Alignment
Beneficial Ownership
| Holder | Shares Beneficially Owned | Percent of Class |
|---|---|---|
| Patrick Darby | 163,101 | <1% (based on 100,709,106 shares) |
| Includes Options Exercisable Within 60 Days | 84,245 | — |
Ownership Guidelines and Policies:
- EVP ownership requirement: 3× annual base salary; executives must retain at least 50% of net shares upon vest/exercise until guideline met; all NEOs with ≥5 years of service have attained required levels; hedging and pledging by executives/directors are expressly prohibited .
Outstanding Equity Awards (as of 12/31/2024)
| Award | Quantity | Key Terms | Market/Value |
|---|---|---|---|
| RSAs (unvested) | 13,116; 1,147; 1,970; 2,812; 14,774 | Time-based vesting in three equal annual installments from grant anniversary; 2023 supplemental retention vests fully at 3 years | $1,211,263; $105,925; $181,930; $259,688; $1,364,379 |
| PSUs (unearned) | 17,720; 16,868 | Earned on 3-year EPS and ROIC with TSR modifier | $1,636,442; $1,557,760 |
| Options (exercisable/unexercisable) | 14,858 / — at $35.06 exp. 2/24/2027 | 10-year term; vest 1/3 annually | — |
| 12,636 / — at $44.67 exp. 3/1/2028 | — | ||
| 12,435 / — at $52.96 exp. 3/1/2029 | — | ||
| 11,702 / — at $63.56 exp. 3/2/2030 | — | ||
| 11,289 / — at $66.76 exp. 3/2/2031 | — | ||
| 8,601 / 4,301 at $55.13 exp. 3/1/2032 | — | ||
| 2,896 / 5,793 at $56.21 exp. 3/1/2033 | — | ||
| — / 7,894 at $74.20 exp. 3/1/2034 | — |
Option Exercises and Stock Vested (2024)
| Name | Options Exercised (#) | Value Realized ($) | Stock Vested (#) | Value Realized ($) |
|---|---|---|---|---|
| Patrick Darby | 14,543 | $798,056 | 13,822 | $947,990 |
Equity Plan Capacity (as of 12/31/2024):
- Securities to be issued upon exercise: 3,359,262; weighted average exercise price: $53.05; shares available for future issuance: 5,537,035 (2016 Omnibus Plan) .
Employment Terms
Role and Tenure
| Item | Detail |
|---|---|
| Current Role | EVP, General Counsel and Secretary |
| Effective Date | February 18, 2016 |
| Employment Agreements | No employment agreements in effect for NEOs in 2024 |
Severance and Change-of-Control Economics
| Plan | Trigger | Lump Sum ($) | Benefits Continuation ($) | Equity Vesting Accelerated ($) | Total ($) |
|---|---|---|---|---|---|
| Executive Severance Plan | Without Cause / For Good Reason | $1,250,000 | $32,770 | $3,452,355 | $4,735,125 |
| Executive Severance Plan | Disability or Death | — | — | $5,039,123 | $5,039,123 |
| Change in Control Benefits Plan (Double Trigger) | CIC + Qualifying Termination | $4,440,650 | $49,154 | $5,232,912 | $9,722,716 |
Severance Multiples and Covenants:
- EVP severance equals 2× annual base salary; benefits continue for 24 months; restrictive covenants (non-compete/related restrictions) are required and apply for the benefit continuation period; payments subject to clawback policy; no tax gross-ups; CIC plan is double-trigger (CIC plus termination) .
Tax and 280G Treatment:
- CIC payments automatically reduced under “best payment method” to avoid excise tax under IRC Sections 280G/4999 when net-benefit is higher; no tax gross-ups .
Other Benefits:
- NEOs eligible for qualified 401(k) and nonqualified deferred compensation; no pension or SERP provided; perquisites are limited, with no tax gross-ups; optional executive physicals; aircraft personal-use allowance applies to CEO only (not Darby) .
Compensation Structure Analysis
| Component | 2024 Target | 2025 Target Changes |
|---|---|---|
| Base Salary | $625,000 | Unchanged |
| SMBP Target (% of Salary) | 75% | 80% |
| LTIP Target | $1,031,250 (165% of salary) | $1,093,750 (175% of salary) |
- The mix emphasizes performance-linked equity (PSUs with EPS, ROIC plus TSR modifier) and Adjusted EBITDA in annual cash; average for EVP (Darby) places 64.2% of TDC as performance-based, with 55.4% long-term orientation .
- No evidence of option repricing or tax gross-ups; clawback policy extends beyond restatement events and complies with NYSE rules .
Say-on-Pay & Governance Signals
- Say-on-pay approval has been >93% each year, indicating investor endorsement of pay-for-performance and governance practices including clawbacks, hedging/pledging prohibitions, and double-trigger CIC .
- Independent compensation consultant (Pay Governance) retained solely by the Committee; no other work for the Company .
Equity Ownership & Pledging
- EVP ownership guideline: 3× salary; mandatory 50% net-share retention until achieved; Darby, with >5 years of service, has attained guideline; hedging and pledging prohibited—reducing misalignment risk .
Work History & Career Trajectory
| Period | Employer | Role | Notes |
|---|---|---|---|
| 2016–Present | Encompass Health | EVP, General Counsel & Secretary | Expanded responsibilities including Government Affairs and Reimbursement recognized in 2024 salary increase |
| 1990–2016 | Bradley Arant Boult Cummings LLP | Partner | Long-tenured partner in Birmingham, AL |
| Not disclosed | Cumberland School of Law | Adjunct Professor | Prior academic role |
Investment Implications
- Alignment: High-performance weighting via Adjusted EBITDA (annual) and EPS/ROIC with TSR modifier (LTIP) plus strict ownership/retention policies suggests strong alignment and lower hedging/pledging risk .
- Retention: EVP severance at 2× salary and continued vesting for RSAs for senior VPs post-retirement (“good leaver”) support retention; 2023 one-time cliff RSA enhances stickiness through 2026 .
- Insider supply: 2024 exercises (14,543 options) and vesting (13,822 shares) create potential selling pressure around tax events, but 50% net-share hold and guideline compliance mitigate forced selling and signal sustained ownership .
- Event risk: CIC economics for Darby total $9.7M (double trigger) with best-pay method and no gross-ups; clawback breadth and prohibited pledging/hedging lower governance red flags and reduce adverse trading signals on executive actions .