🧾 What This Document Is

This is a Definitive Proxy Statement (DEF 14A) from Encompass Health Corporation. Think of it as an invitation and an instruction manual for the company's annual shareholder meeting. You'll find details on what's being voted on, who is running the company, how the top bosses are paid, and other important governance information.

👉 In simple terms: This document tells you, as a shareholder, what decisions you get to make this year and gives you the info you need to vote.

Key Date: The annual meeting is a virtual webcast on Thursday, May 7, 2026, at 11:00 a.m., Central Time.

🏢 What The Company Does

In simple terms, Encompass Health is one of the largest providers of inpatient rehabilitation services in the United States. They operate a network of rehabilitation hospitals and clinics. Patients are typically recovering from strokes, spinal cord injuries, brain injuries, or other major conditions and need intensive, specialized therapy to regain independence.

👉 They run the physical hospitals and employ the therapists and doctors. Their business model revolves around patient outcomes and navigating complex healthcare reimbursement from insurers like Medicare.

📋 What Shareholders Are Voting On

There are three main proposals for the May 7th meeting. The board recommends a "FOR" vote on all of them.

Proposal 1: Elect 10 Directors

You're voting to elect the entire board of directors. Here’s a snapshot of the nominees:

Name	Age	Key Roles/Experience
Greg D. Carmichael*	64	Independent Chairman. Former bank CEO, expert in IT & strategy.
Mark J. Tarr	64	President & CEO. Company veteran of 30+ years, knows operations inside out.
Edward M. Christie III*	55	Former airline CEO. Audit committee financial expert.
Cain A. Hayes*	56	Former health plan CEO. Brings payer industry insight.
Joan E. Herman*	72	Healthcare consultant & executive. Cybersecurity oversight training.
Leslye G. Katz*	71	Former CFO in healthcare/pharma. Audit committee financial expert.
Kevin J. O’Connor*	58	Top lawyer at Lockheed Martin. Legal & compliance expert.
Christopher R. Reidy*	69	Former CFO of medical tech giant Becton Dickinson. Audit & cyber expert.
Nancy M. Schlichting*	71	Former CEO of major health system Henry Ford. Deep healthcare ops.
Terrance Williams*	57	CEO of TruStage Financial. Marketing, sales & insurance veteran.

*Denotes an independent director.

👉 Why it matters: This board oversees the CEO and sets the company's strategic direction. You're choosing the stewards of your investment.

Proposal 2: Ratify the Auditor

Shareholders are asked to approve PricewaterhouseCoopers LLP (PwC) as the independent accounting firm for 2026.

• 2025 Audit Fees: $3.36 million
• Total 2025 Fees to PwC: $3.62 million

👉 Why it matters: This is a routine but important check on the company's financial reporting. The Audit Committee is satisfied with PwC's work.

Proposal 3: Approve Executive Compensation ("Say-on-Pay")

This is a non-binding vote on the pay packages for the top executives, including the CEO. The company highlights its "pay-for-performance" philosophy and notes it received 97.6% approval on this vote in 2025.

👉 Why it matters: It’s your chance to signal approval or disapproval of how the company rewards its leadership.

👥 Board Governance & Structure

The company emphasizes strong, independent governance:

• Independent Leadership: Greg Carmichael is the non-executive, independent Chairman.
• High Independence: 9 out of 10 director nominees are independent. All board committees are fully independent.
• Strict Rules: Directors face term limits (15 years) and mandatory retirement at 75. No director serves on more than 2 other public company boards.
• Risk Oversight: The full board and specific committees (like the Compliance & Quality Committee) oversee major risks, from cybersecurity to patient care quality.
• Shareholder Friendly: The board is declassified (annual elections), and shareholders can amend bylaws or call a special meeting.

💼 Executive Compensation

The Compensation Committee ties executive pay closely to company performance and shareholder returns. The package has several key elements:

• Base Salary: Fixed cash payment.
• Annual Incentive (Bonus): Based on yearly financial goals (like revenue, profit) and sustainability metrics (employee turnover, patient quality measures).
• Long-Term Incentive (Stock Awards): Based on 3-year performance, with a major component tied to how Encompass Health's stock performs relative to a peer group of companies (Relative Total Shareholder Return).
• Strong Safeguards: They have a "claw-back" policy to recover pay in cases of misconduct, and executives must own significant company stock.

2025 CEO Pay Snapshot (Mark Tarr):

• Total 2025 Compensation: $8,921,673
• This includes salary, bonus, and the grant-date value of stock awards.

🔮 What's Next & The Broader Picture

👍 Strengths:

• Market Leader: Operates in a growing sector (rehabilitation) as the population ages.
• Aligned Pay: Compensation structure with strong performance hurdles and "claw-backs" aligns management with shareholders.
• Stable Leadership: Long-tenured CEO (Tarr) with deep operational knowledge, backed by a highly independent board.
• Focus on Fundamentals: Emphasis on quality of care and employee metrics, which are crucial for a healthcare provider's reputation and compliance.

⚠️ Risks:

• Regulatory & Payer Pressure: Heavily reliant on Medicare and private insurance reimbursement rates, which are subject to change.
• Competition: Faces competition from other hospital systems and outpatient rehab providers.
• Operational Execution: Success depends on managing a large network of hospitals, maintaining high-quality care, and controlling costs.

🧠 The Analogy

Think of this proxy statement like the materials for a co-op building's annual tenant meeting. You're not just getting a notice to show up; you're being given the resumes of the proposed board members, the budget (executive pay), and the proposal to renew the contract with the building's accounting firm. You get to vote on who makes the big decisions and how much the building manager gets paid, all while reviewing how well the building has been maintained.

🧩 Final Takeaway

Encompass Health is asking shareholders to approve its highly independent board, its auditor, and its performance-based pay for top executives. The company presents itself as a well-governed leader in rehabilitation with strong shareholder alignment, but its fortunes remain tied to the complex and regulated U.S. healthcare system.