Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Preliminary Proxy Statement |
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Confidential, For Use of the Commission Only
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Under Rule
14a-12 |
CVS Health Corporation
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
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BOX): |
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Fee computed on table below per Exchange Act Rules
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Table of Contents
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Notice
of
Annual Meeting of
Stockholders |
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May 19, 2016;
9:00 a.m. |
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CVS Health
Corporation Customer Support Center One CVS Drive Woonsocket,
Rhode Island 02895 |
Table of
Contents
Message from our Chairman and our Chief
Executive Officer
Dear Fellow Stockholders:
CVS Health enjoyed a successful 2015 that
was highlighted by excellent performance across our enterprise and two key
acquisitions that support our strategy for growth in an evolving health care
market. That strategy is focused on creating superior value for patients,
payors, and providers through an unmatched suite of integrated assets.
We are truly a one-of-a-kind company that
helps patients get the care they need through the channel that works best for
them. Products such as Maintenance Choice®, Specialty Connect, and
Pharmacy Advisor® remain unmatched in the marketplace. In specialty,
we have unparalleled capabilities to holistically manage patients, provide
clinical support, and drive superior outcomes.
From our nationwide retail footprint to
our leading pharmacy benefits management (PBM) and specialty businesses, and now
our leading presence in long-term pharmacy care, we have forged a competitive
advantage that is helping us benefit from a broad range of market trends. We
broadened our reach in 2015 with the acquisition of Omnicare, the nations
leading provider of pharmacy services to the long-term care market. We also grew
our core pharmacy business with the purchase of more than 1,670 pharmacies and
nearly 80 retail clinics from Target Corporation, which expanded our pharmacy
count by 20 percent and our number of clinics by 8 percent. Both acquisitions
represent efficient strategic uses of our capital that will help drive long-term
growth.
Importantly, we maintained our focus on
the three pillars that we consider essential to maximizing stockholder value:
driving productive, long-term growth; generating significant free cash flow; and
optimizing capital allocation. We delivered solid year-over-year growth in
revenues, operating profit and earnings per share, and returned more than $6
billion to stockholders through dividends and share repurchases.
As a pharmacy innovation company, we are
working every day to provide people with high quality pharmacy and basic health
care services, and to make these services accessible and affordable. Our
corporate social responsibility roadmap, Prescription for a Better World, aligns
with our purpose of helping people on their path to better health and extends to
our sustainable business operations, workplace, supply chain and communities.
In addition to engaging with our
communities, we seek to engage proactively with our stockholders to ensure that
we understand your needs. We believe that accountability to our stockholders is
a mark of good governance, and we pride ourselves on strong corporate governance
practices. As a result of conversations with many of you last year, we
redesigned our long-term incentive plan payout and adopted a proxy access
by-law. Youll find the details within this proxy statement, and we certainly
welcome your feedback.
Our 2016 Annual Meeting of Stockholders
will be held on Thursday, May 19, 2016, at 9:00 a.m., at the CVS Health Customer
Support Center located at One CVS Drive in Woonsocket, Rhode Island. We invite
you to attend, and ask you to please vote at your earliest convenience, whether
or not you plan to attend. Your vote is important.
We remain confident that our leadership
across the pharmacy spectrum will allow us to continue to drive superior value
for our health care partners and our shareholders. Thank you for investing in
CVS Health.
Sincerely, |
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David W. Dorman Chairman of the
Board |
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Larry J. Merlo President and Chief Executive
Officer |
CVSHealthannualmeeting.com
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1 |
Table of
Contents
Table of Contents
2 |
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2016 Proxy
Statement |
Table of
Contents
CVSHealthannualmeeting.com
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3 |
Table of
Contents
Notice of Annual
Meeting of
Stockholders
Date and Time
May 19, 2016, 9:00 A.M. EDT
Place
CVS Health Corporation
Customer Support Center
One CVS
Drive
Woonsocket, Rhode Island 02895
Items to be Voted
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Elect
11 directors named in this proxy statement; |
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Ratify the appointment of Ernst
& Young LLP (Ernst & Young) as the Companys independent
registered public accounting firm for fiscal 2016;
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Act, by non-binding vote, to approve
the Companys executive compensation as disclosed in this proxy statement;
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Act
on two stockholder proposals, if properly presented; and
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Conduct any other business properly brought before the
Meeting. |
Eligibility to Vote
Stockholders of record at the close of business on March 24,
2016 may vote at the Meeting.
By Order of the Board of Directors,
Colleen M. McIntosh
Senior Vice President & Corporate
Secretary
How to Vote
Your vote is important to the future of CVS Health. You are eligible to
vote if you were a stockholder of record at the close of business on March 24,
2016. Even if you plan to attend the meeting, please vote as soon as possible
using one of the following methods. In all cases, you should have your proxy
card in hand:
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Use the
Internet www.proxyvote.com |
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Use a Mobile
Device Scan this QR
Code |
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Call
Toll-Free 1-800-690-6903 |
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Mail Your Proxy Card
Follow the instructions on your
voting form |
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting to Be Held on May 19,
2016:
The proxy statement and annual report
to security holders are available at www.cvshealthannualmeeting.com and at
www.proxyvote.com/cvs.
Your vote is important.
Whether or not you plan to attend the
Annual Meeting, please vote your shares. In addition to voting in person or by
mail, stockholders of record have the option of voting by telephone or via the
Internet. If your shares are held in the name of a bank, broker or other holder
of record (i.e., in street name), please read your voting instructions to see
which of these options are available to you. Even if you are attending the
Annual Meeting in person, we encourage you to vote in advance by mail, phone or
Internet.
We began mailing this proxy statement and
the enclosed proxy card on or about April 8, 2016 to all stockholders entitled
to vote. Our 2015 Annual Report, which includes our financial statements, is
being sent with this proxy statement.
4 |
|
2016 Proxy
Statement |
Table of
Contents
Proxy Statement
Highlights
This summary highlights selected
information in this Proxy Statement please review the entire document before
voting.
All of our Annual Meeting materials
are available in one place at www.cvshealthannualmeeting.com. There, you
can download electronic copies of our Annual Report and Proxy Statement,
and use the link to vote. |
ITEM
1 |
Election of 11 directors named in
this proxy statement |
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See page 11 for further
information |
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●Our nominees are
seasoned leaders who bring a mix of skills and qualifications to the
Board |
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The Board
of Directors unanimously recommends a vote FOR each director nominee |
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The CVS Health Board
You are asked to vote on the election of
the following 11 director nominees to serve on the Board of CVS Health. All
directors are elected by a majority of votes cast.
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DIRECTOR SINCE |
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OTHER PUBLIC COMPANY BOARDS |
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CVS HEALTH
COMMITTEES* |
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NAME, PRIMARY OCCUPATION |
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AGE |
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INDEPENDENT |
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A |
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MP&D |
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N&CG |
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PS&CQ |
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E |
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Richard M.
Bracken |
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63 |
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2015 |
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YES |
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None |
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Chairman and CEO of HCA Holdings, Inc.
(Retired) |
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C. David Brown
II |
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64 |
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2007 |
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YES |
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2 |
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Chairman of Broad and Cassel |
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Alecia A.
DeCoudreaux |
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61 |
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2015 |
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YES |
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None |
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President of Mills College |
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Nancy-Ann M.
DeParle |
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59 |
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2013 |
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YES |
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1 |
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Co-Founding Partner
of |
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Consonance Capital Partners, LLC |
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David W.
Dorman |
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62 |
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2006 |
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YES |
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2 |
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Chairman of the Board
of |
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CVS Health
Corporation, Founding Partner of |
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Centerview Capital Technology Fund |
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Anne M.
Finucane |
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63 |
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2011 |
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YES |
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None |
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Vice Chairman
of |
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Bank of America Corporation |
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Larry J.
Merlo |
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60 |
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2010 |
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NO |
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None |
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President and CEO
of |
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CVS Health Corporation |
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Jean-Pierre
Millon |
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65 |
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2007 |
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YES |
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None |
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President and CEO
of |
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PCS Health Systems, Inc. (Retired) |
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Richard J.
Swift |
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71 |
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2006 |
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YES |
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4 |
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Chairman of the Board,
President and CEO of |
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Foster Wheeler Ltd. (Retired) |
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William C.
Weldon |
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67 |
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2013 |
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YES |
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2 |
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Chairman of the Board
and CEO of |
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Johnson & Johnson (Retired) |
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Tony L.
White |
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69 |
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2011 |
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YES |
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2 |
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Chairman of the Board,
President and CEO of |
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Applied Biosystems, Inc. (Retired) |
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●: Committee Chair |
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MP&D: Management Planning & Development |
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PS&CQ: Patient Safety & Clinical Quality |
A: Audit |
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N&CG: Nominating & Corporate Governance |
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E: Executive |
* |
Please note that the above chart shows committee
membership as of our mailing date, April 8, 2016. Committee membership
changed effective March 1, 2016 with the formation of our new Board
committee. See pages 22-29 for details. |
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CVSHealthannualmeeting.com |
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5 |
Table of
Contents
Proxy Statement Highlights |
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The CVS Health Board
Director Independence
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Director Gender |
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Director
Tenure |
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Independent:
10 Not Independent: 1 |
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Female:
3 Male: 8 |
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0-3 Years:
4 4-7 Years: 3 >7 Years:
4 |
10 CVS Health Directors, including
our Chairman, are independent of management. |
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Our director nominees bring a
balance of experience and fresh perspective to our boardroom. The average
tenure of CVS Health directors is under six
years. |
Director Skills and
Experience
Our director nominees possess relevant
experience, skills and qualifications that contribute to a well-functioning
Board to effectively oversee the Companys strategy and management. Areas of
director expertise include:
For more information about our
director nominees, please refer to pages 11-16 of this proxy
statement. |
6 |
|
2016 Proxy Statement |
Table of Contents
|
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Proxy Statement
Highlights |
Board
Developments and Highlights
The CVS Health
Board continues to evaluate our governance arrangements to ensure that the right
mix of individuals are present in our boardroom, to best serve the stockholders
we represent by ensuring effective oversight of our strategy and
management.
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FURTHER INFORMATION |
2015-2016
Board Developments |
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●Formation of a new
Committee focused on patient safety and clinical quality |
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page 28 |
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●Adoption of a proxy
access by-law |
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page 22 |
Board Communication |
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●Our Board supports
our stockholder outreach program and has responded to stockholder input
with changes in our compensation program and other areas |
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pages 9, 20, 33, 37 |
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●CVS Health directors
welcome communications from our stockholders and other interested parties
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page 20 |
Director Alignment with
Stockholder Interests |
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●At least 75% of our
directors annual retainer mix is paid in shares of CVS Health common
stock |
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page 29 |
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●Directors must own
at least 10,000 shares of CVS Health common stock |
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page 68 |
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●All directors had
over 75% meeting attendance |
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page
29 |
Corporate Governance Highlights
The Board of CVS Health is committed to
maintaining the highest standards of corporate governance, and has established a
strong and effective framework by which the Company is governed and reviewed.
Highlights include:
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FURTHER INFORMATION |
2015-2016 Corporate Governance Development
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●In January 2016 we
adopted a proxy access by-law, allowing holders of at least 3% of our stock for a
period of three years the right to nominate candidates for up to 20% of
board seats, with a minimum of two seats |
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page 22 |
Stockholder Rights |
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●Annual election of
all directors, annual Say on Pay vote |
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pages 11, 33 |
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●Stockholder outreach
program |
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pages 9, 20, 33, 37 |
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●Majority voting in
director elections |
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page 17 |
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●Right to act by
written consent and to call special meetings |
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page 20 |
Committees |
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●We have historically
had four Board Committees: Audit, Management Planning and Development,
Nominating and Corporate Governance and Executive |
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page 22 |
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●In March 2016 the
Board formed a new Committee, the Patient Safety and Clinical Quality
Committee, focused on the quality of pharmacy and medical care being
delivered by the Company |
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page 28 |
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●All members of
Audit, Management Planning and Development, Nominating and Corporate
Governance, and Patient Safety and Clinical Quality Committees are
independent of management |
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pages 22-29 |
Board Oversight of
Risk |
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●Full Board and
individual Committee focus on understanding Company risks
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page 20 |
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●Annually, the Audit
Committee reviews our policies and practices with respect to risk
assessment and risk management, including discussing with management our
major risks and the steps that have been taken to monitor and mitigate
such risks |
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pages 23-24 |
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●Our independent
Chairman and our Chief Executive Officer (CEO) are focused on the
Companys risk management efforts and ensure that risk matters are
appropriately brought to the Board and/or its Committees for
review |
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pages
20, 22 |
For more information on corporate
governance at CVS Health, please refer to pages 11-30 of this proxy
statement and to our website at
http://investors.cvshealth.com/corporate-governance. |
CVSHealthannualmeeting.com |
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7 |
Table of Contents
Proxy Statement
Highlights |
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ITEM 2 |
Ratify the appointment of Ernst
& Young LLP as the Companys independent registered public accounting
firm for fiscal 2016 |
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See page 31 for further
information |
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●Based on its recent
evaluation, our Audit Committee believes that the retention of Ernst &
Young is in the best interests of the Company and its
stockholders |
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The Board of
Directors unanimously recommends a vote FOR this proposal |
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ITEM 3 |
Approve, on a non-binding basis,
the Companys executive compensation as disclosed in this proxy
statement |
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See page 33 for further
information |
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●Our executive
compensation program reflects our unwavering commitment to paying for
performance and reflects feedback received from stockholder
outreach |
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The Board of
Directors unanimously recommends a vote FOR this proposal |
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Performance Highlights
For
CVS Health, 2015 was a successful year. Here are some highlights:
Net Revenues ($
billions) 1 year growth of 10.0% |
Operating Profit ($
billions) 1 year growth of 7.4% |
Diluted Earnings Per Share from Continuing Operations ($) 1 year growth of
16.8% |
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Total Shareholder Return (TSR)
(%) Outperformed S&P 500
in all three periods |
Annual Cash Dividends ($ per
share) 1 year increase of 27.3% |
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For more information on our financial
performance, please refer to page 35 of this proxy statement and to our Annual
Report available at www.cvshealthannualmeeting.com.
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8 |
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2016 Proxy Statement |
Table of Contents
|
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Proxy Statement
Highlights |
Compensation Highlights
Leading
Practices in Compensation Programs
Our pay
practices align with our core compensation principles and facilitate our
implementation of those principles. They also demonstrate our commitment to
sound compensation and governance practices.
Our executive
compensation program motivates executive officers to take
personal responsibility for the performance of CVS
Health |
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✓ |
Core Executive Compensation
Principles Designed to Promote Company Growth |
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✓ |
Performance Measures Aligned with
Stockholder Interests |
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✓ |
Majority of the Total Compensation
Opportunity is Performance-Based |
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✓ |
LTIP Awards Settled in Stock that is
Subject to Retention Requirement (Holding Period) |
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✓ |
Stock Ownership Guidelines
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We apply leading
executive compensation practices |
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✓ |
No Excise Tax Gross-Ups |
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✓ |
No Option Repricing |
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✓ |
No Recycling of Shares |
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✓ |
Recoupment Policy |
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✓ |
Broad Anti-Pledging and Hedging
Policies |
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✓ |
Executive Severance Policy
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✓ |
Limited Perquisites and Personal
Benefits |
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✓ |
SERP Closed to New Participants
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✓ |
Double Trigger Vesting of Equity
Awards |
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✓ |
Board Committee Oversight of
Comprehensive Annual Compensation Program Risk
Assessment |
Stockholder Outreach - Compensation and Governance
Actions
In 2015, following the redesign of
our proxy statement and enhanced disclosure regarding our prohibition
on tax
gross-ups, the modification of our peer group, and amendments of our stock
option grant policy to explicitly prohibit the re-pricing of stock options
without stockholder approval, we received a high level of stockholder support
for our executive compensation program, with a 94% vote in favor of our program.
During the fall of 2015, we reached out to our 50 largest stockholders, holders
of approximately 50% of our outstanding common stock in the aggregate, and
offered to discuss our compensation programs, corporate governance and any other
matters of interest. We had discussions with several stockholders and all were
generally pleased with our business results and the link between performance and
the compensation earned by key executives. During those discussions, however, we
heard several themes that caused us to take action:
WHAT WE HEARD |
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WHAT WE HAVE DONE IN
RESPONSE |
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INTENDED OUTCOME |
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WHEN EFFECTIVE |
You deliver a portion of
performance-based long-term incentives in cash; the Company should
consider settling future LTIP awards fully in common
stock |
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Shift to 100% common stock-settled
awards starting with the 2016-2018 LTIP cycle |
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Brings our practices into better
alignment with the marketplace |
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2016 awards vesting in 2018;
outstanding awards vesting in 2016 and 2017 will continue to be paid in
equal amounts of cash and common stock |
The Company should consider
increasing the portion of long-term incentive pay that is based on awards
considered to be performance-based |
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Rebalanced the CEOs long-term
incentive mix at target to be evenly split between performance-based LTIP
and time-based RSU and stock option awards, versus current mix of 60%
time-based and 40% performance-based |
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Increases the portion of the CEOs
compensation that is considered to be performance-based |
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2016 |
Proxy access is a right that is
important to stockholders |
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Adopted a proxy access
by-law |
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Provides stockholders the right to
nominate candidates for election to our Board and have their nominees
included in our proxy statement |
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2016 |
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9 |
Table of Contents
Proxy Statement
Highlights |
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Our 2015
Executive Pay
The following shows the breakdown of
reported 2015 compensation for our CEO and our other named executive officers,
or NEOs.
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CEO |
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All Other NEOs |
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For more information on our
executive compensation practices, please refer to Compensation Discussion
and Analysis, beginning on page 35 of this proxy
statement. |
ITEMS 4-5 |
Stockholder
proposals |
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See pages 64-67 for further
information |
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●See the Boards
statement of opposition AGAINST both stockholder
proposals |
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The Board of
Directors unanimously recommends a vote AGAINST both stockholder proposals |
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2016 Proxy
Statement |
Table of Contents
Corporate Governance and
Related Matters
ITEM 1:
ELECTION OF DIRECTORS
Our Board of
Directors has nominated 11 directors for election at the Annual Meeting. Each
nominee is currently serving as one of our directors. If you re-elect them, they
will hold office until the next annual meeting.
In recognition of the fact that the
selection of qualified directors is complex and crucial to the long-term success
of the Company, the Nominating and Corporate Governance Committee (for purposes
of this Item 1, the Committee) has established guidelines for the
identification and evaluation of candidates for membership on the Companys
Board of Directors (the Board). Those guidelines are included in this proxy
statement on page 18. When considering current directors for re-nomination to
the Board, the Committee takes into account the performance of each director,
which is part of the Committees annual Board evaluation process. That process
consists of individual interviews of each director by our General Counsel,
followed by a report summarizing his findings. The Committee then recommends
actions for the Board to consider and adopt as it sees fit. The Committee also
reviews the composition of the Board in light of the current challenges and
needs of the Board and the Company, and determines whether it may be appropriate
to add or remove individuals after considering, among other things, the need for
audit committee expertise and issues of independence, diversity, judgment,
character, reputation, age, skills, background and experience. The Committee
believes that the Board, as currently constituted, is well-balanced and that it
fully and effectively addresses the Companys needs. All of our nominees are
seasoned leaders, the majority of whom are or were chief executive officers or
other senior executives, who bring to the Board skills and qualifications gained
during their tenure at a vast array of public companies, private companies,
non-profits and other organizations. We have indicated below for each nominee
certain of the experience, qualifications, attributes or skills that led the
Committee and the Board to conclude that the nominee should continue to serve as
a director.
Biographies of our Board Nominees
Independent
Director Age 63 Director since January 2015
CVS Health
Board Committees Audit (March 2015 through February 2016);
Patient Safety and Clinical Quality (Chair)(beginning
March 2016); Nominating and Corporate Governance (beginning March
2016) Other
Public Boards None |
Richard M.
Bracken Chairman and CEO
of HCA, Inc. and HCA Holdings, Inc. (Retired) |
Director Qualification
Highlights
●Leadership Former
CEO
●Business Operations;
Consumer Products or Services
●Finance
●Health
Care/Regulated Industry
●Risk
Management
●Corporate
Governance |
Education B.A., San Diego State
University; M.H.A., Medical College of Virginia
Biography Mr.
Bracken is the former Chairman and Chief Executive Officer of HCA, Inc.
and HCA Holdings, Inc. (collectively, HCA), one of the nations leading
providers of health care services. At the time of Mr. Brackens
retirement, HCAs facilities included approximately 165 hospitals and 115
freestanding surgery centers in 20 states and England. Mr. Bracken served
in a number of executive roles in his 33 year career at HCA, including
President of HCAs Pacific Division in 1995, Western Group President in
1997, Chief Operating Officer of HCA in July 2001, and President and Chief
Operating Officer in January 2002. He was elected to the HCA Board of
Directors in November 2002, became President and Chief Executive Officer
in January 2009, and Chairman and Chief Executive Officer in December,
2009. He retired as CEO in December 2013, and as Chairman in December
2014.
Skills and
Qualifications of Particular Relevance to CVS
Health Mr. Brackens
experience in leading a large, publicly traded health care company lends
expertise and perspective greatly valued by the Board. In addition, his
experience operating in the highly-regulated health care industry with
significant experience in enterprise clinical quality is also a
complementary skill set for the Board. In fact, that experience led the
Board to appoint Mr. Bracken as Chair of the new Patient Safety and
Clinical Quality Committee. |
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Table of Contents
Corporate Governance and Related
Matters |
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C. David
Brown II
Chairman of
Broad and Cassel
Independent
Director CVS
Health Board Committees Management Planning and Development (Chair), Nominating and
Corporate Governance, Executive Other Public Boards Rayonier Advanced Materials Inc.; ITT Educational Services,
Inc. |
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Alecia A.
DeCoudreaux
President of
Mills College
Independent
Director CVS
Health Board Committees Nominating and Corporate Governance (May 2015 through February
2016); Audit (beginning March 2016); Patient Safety and Clinical Quality
(beginning March 2016) Other Public Boards None |
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Age 64 Director since March 2007 |
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Age 61 Director since March 2015 |
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Director
Qualification Highlights
●Real Estate
●Business Development and Corporate Transactions
●Finance
●Legal and Regulatory Compliance
●Risk Management
●Public Company Board Service
Education B.S.B.A., University of Florida; J.D.,
University of Florida College of Law
Biography Mr.
Brown has been Chairman of Broad and Cassel, a Florida law firm, since
March 2000. From 1989 until March 2000, he was Managing Partner of the
Orlando office of the firm. He is also the lead director of Rayonier
Advanced Materials Inc. (RYAM), a leading specialty cellulose production
company, and is a director of ITT Educational Services, Inc., a national
provider of technology-oriented undergraduate and graduate degree
programs. Mr. Brown previously served on the board of directors and as
lead director of Rayonier Inc., a real estate development and timberland
management company, prior to the spin-off of RYAM in June 2014.
Mr. Brown also previously served on
the board of Caremark Rx, Inc. (Caremark) from March 2001 until the
closing of the merger transaction involving CVS Health and Caremark, when
he became a director of CVS Health. Mr. Brown has significant health care
experience, including through his oversight of UF Health while serving as
Chairman of the Board of Trustees for the University of Florida and as a
member of the Board of Directors and Executive Committee of Orlando
Health, a not-for-profit health care network.
Skills and
Qualifications of Particular Relevance to CVS
Health Mr. Browns legal
expertise and health care experience are highly valued by the Board, as is
his ability to analyze and interpret complex issues and facilitate Board
engagement. The Board believes that Mr. Browns experience adds knowledge
and leadership depth to the Board. |
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Director Qualification
Highlights
●Business Development and Corporate Transactions
●Legal and Regulatory Compliance
●Health Care/Regulated Industry
●Corporate Governance
●Public Policy and Government Affairs
Education B.A., Wellesley College; J.D.,
Indiana University School of Law
Biography Ms.
DeCoudreaux has been President of Mills College, a liberal arts college
for women with graduate programs for women and men, since July 2011. Ms.
DeCoudreaux has announced that she plans to leave Mills College when her
current term ends in June 2016. Previously, Ms. DeCoudreaux served in a
number of leadership roles at Eli Lilly and Company (Eli Lilly), a
global pharmaceutical manufacturer, including as Vice President and Deputy
General Counsel, Specialty Legal Team, from 2010-2011, Vice President and
General Counsel, Lilly USA, from 2005-2009, and Secretary and Deputy
General Counsel of Eli Lilly from 1999-2005. During her 30-year career
with Eli Lilly Ms. DeCoudreaux also previously served as Executive
Director of Lilly Research Laboratories, Director of Federal Government
Relations, Director of State Government Relations and Director of
Community Relations. In addition, Ms. DeCoudreaux has served on a number
of charitable, educational, for profit and nonprofit boards, including as
both a trustee and board chair at Wellesley College.
Skills and
Qualifications of Particular Relevance to CVS
Health Ms. DeCoudreaux has
more than 30 years of experience in the pharmaceutical industry, and her
experience as an attorney in that field and in the area of corporate
governance, makes her a great asset to our
Board. |
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2016 Proxy
Statement |
Table of Contents
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Corporate Governance and Related
Matters |
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Nancy-Ann M.
DeParle
Co-Founding Partner
of Consonance Capital Partners, LLC
Independent
Director CVS
Health Board Committees Audit;
Patient Safety and Clinical Quality (beginning March
2016) Other
Public Boards HCA Holdings,
Inc. |
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David W.
Dorman
Chairman of the Board
of CVS Health Corporation, Founding Partner of Centerview Capital
Technology Fund
Independent
Director CVS
Health Board Committees Management Planning and Development, Nominating and Corporate
Governance (Chair), Executive Other Public Boards PayPal Holdings, Inc.; Yum! Brands, Inc. |
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Age 59 Director since September 2013 |
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Age 62 Director since March 2006 |
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Director
Qualification Highlights
●Business Development and Corporate Transactions
●Finance
●Legal and Regulatory Compliance
●Health Care Industry
●Public Policy and Government Affairs
●Public Company Board Service
Education B.A., University of Tennessee; B.A. and
M.A., Balliol College, Oxford University; J.D., Harvard Law
School
Biography Ms.
DeParle has been a Co-Founding Partner of Consonance Capital Partners,
LLC, a private equity firm focused on investing in small and mid-size
health care companies, since August 2013. From March 2009 to January 2013,
Ms. DeParle served in the White House, first as Counselor to the President
and Director of the White House Office of Health Reform, and later as
Assistant to the President and Deputy Chief of Staff for Policy. In
addition, from 1993 to 2000, Ms. DeParle served as the Associate Director
for Health and Personnel for the White House Office of Management and
Budget, and later as the Administrator of the Centers for Medicare and
Medicaid Services (then known as the Health Care Financing
Administration). From 2001 to March 2009, Ms. DeParle served as a Senior
Advisor with JPMorgan Partners and as a Managing Director of its successor
entity, CCMP Capital, L.L.C., focusing on private equity investments in
health care companies. Ms. DeParle is also a director of HCA Holdings,
Inc., a health care services company that owns, manages or operates
hospitals and various other health care facilities.
Skills and
Qualifications of Particular Relevance to CVS
Health Ms. DeParle has more
than 25 years of experience in the health care arena, and is widely
considered to be one of the nations leading experts in health care
policy, management and financing, which makes her an excellent fit for our
Board. |
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Director Qualification
Highlights
●Leadership Former CEO
●Finance
●International Business Operations; Consumer Products or
Services
●Technology and Innovation
●Risk Management
●Corporate Governance
●Public Company Board Service
Education B.S., Georgia Tech
University
Biography Mr.
Dorman has been the Chairman of the Board of CVS Health Corporation since
May 2011. He has also been a Founding Partner of Centerview Capital
Technology Fund, a private investment firm, since July 2013. He also
served as Lead Director of Motorola Solutions, Inc. (formerly Motorola,
Inc.), a communications products company, until his retirement from that
board in May 2015, and was Non-Executive Chairman of the Board of Motorola
from May 2008 through May 2011. From October 2006 through April 2008, he
was a Managing Director and Senior Advisor with Warburg Pincus LLC, a
global private equity firm. From November 2005 until January 2006, Mr.
Dorman served as President and a director of AT&T Inc., a
telecommunications company (formerly known as SBC Communications). From
November 2002 until November 2005, Mr. Dorman was Chairman of the Board
and Chief Executive Officer of AT&T Corporation. Mr. Dorman is also a
director of Yum! Brands, Inc., a global quick service restaurant company,
and PayPal Holdings, Inc., a leading technology platform company that
enables digital and mobile payments on behalf of consumers and merchants
worldwide.
Skills and
Qualifications of Particular Relevance to CVS
Health Mr. Dormans
experience in leading large companies, beginning with Sprint and later
Pacific Bell and AT&T, lends a perspective and skill set that is
greatly valued by the Board. His business background of growing companies
is in line with and useful to our business strategy. The Board believes
that Mr. Dormans experience leading the boards of AT&T and Motorola
make him well-suited to be the Companys
Chairman. |
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Table of Contents
Corporate Governance and Related
Matters |
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Anne M. Finucane
Vice
Chairman of Bank of America Corporation
Independent
Director CVS
Health Board Committees Nominating and Corporate Governance; Management Planning and
Development (beginning March 2016) Other Public Boards None |
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Larry J. Merlo
President
and Chief Executive Officer of CVS Health Corporation
Non-Independent
Director CVS
Health Board Committees Executive Other Public Boards None |
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Age 63 Director since January 2011 |
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Age 60 Director since May 2010 |
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Director Qualification
Highlights
●Consumer Products or Services
●Corporate Strategy Development and
Oversight
●Marketing, Brand Management
●Public Policy
●Public Relations
●Regulated Industry
Education B.A., University of New
Hampshire
Biography Ms.
Finucane has been Vice Chairman of Bank of America Corporation (BOA), an
international financial services company, since July 2015 and is a member
of the executive management team at BOA. From 2006 through July 2015 Ms.
Finucane served as Global Chief Strategy and Marketing Officer for BOA and
served as Northeast Market President for BOA from 2004 through July 2015.
During her nineteen-plus years as a senior leader at BOA and its legacy
firms, Ms. Finucane has served as senior advisor to four chief executive
officers and the Board of Directors. Ms. Finucane is responsible for the
strategic positioning of Bank of America and oversees the public policy,
customer research and analytics, global marketing, communications and
corporate social responsibility efforts for the company. She is chair of
BOAs Environmental, Social and Governance Committee and is also chair of
the Bank of America Charitable Foundation.
Skills and
Qualifications of Particular Relevance to CVS
Health Ms. Finucanes
experience in the financial services industry, consumer policy, strategy,
marketing, corporate social responsibility and government affairs provides
the Board with valuable insight in those key areas. |
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Director Qualification
Highlights
●Leadership Current CEO
●Business Operations; Consumer Products or
Services
●Health Care/Regulated Industry
●Public Policy
●Retail, Retail Pharmacy and Pharmacy Benefit
Management
Education B.S., Pharmacy, University of
Pittsburgh
Biography Mr.
Merlo has been Chief Executive Officer of CVS Health Corporation since
March 2011 and President of CVS Health Corporation since May 2010. Mr.
Merlo formerly served as Chief Operating Officer of CVS Health Corporation
from May 2010 through March 2011 and was President of CVS/pharmacy
Retail from January 2007 through May 2010; Executive Vice President
Stores of CVS Health Corporation from April 2000 to January 2007; and
Executive Vice President Stores of CVS Pharmacy, Inc. from March 1998 to
January 2007.
Skills and
Qualifications of Particular Relevance to CVS
Health Mr. Merlo has been
with CVS Health and its subsidiaries for more than 30 years, and provides
the Board with invaluable experience and insight into the retail drugstore
and health care industries. |
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2016 Proxy
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Table of Contents
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Corporate Governance and Related
Matters |
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Jean-Pierre Millon
President
and Chief Executive Officer of PCS Health Systems, Inc. (Retired)
Independent
Director CVS
Health Board Committees Audit;
Patient Safety and Clinical Quality (beginning March
2016) Other
Public Boards None |
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Richard J.
Swift
Chairman of the Board,
President and Chief Executive Officer of Foster Wheeler Ltd.
(Retired)
Independent
Director CVS
Health Board Committees Audit
(Chair), Executive Other Public Boards Ingersoll-Rand PLC, Kaman Corporation, Hubbell Incorporated, Public
Service Enterprise Group Incorporated |
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Age 65 Director since March 2007 |
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Age 71 Director since September 2006 |
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Director Qualification
Highlights
●Leadership Former CEO
●Finance
●Corporate Strategy Development and Oversight
●Health Care/Regulated Industry
●International Business Operations
●Pharmacy Benefit Management
●Public Company Board Service
Education B.S., Ecole Centrale de Lyon (France);
B.A., Université de Lyon (France); M.B.A., Kellogg School of Business,
Northwestern University
Biography Mr.
Millon is the retired former President and Chief Executive Officer of PCS
Health Systems, Inc. (PCS). Mr. Millon joined PCS in 1995, where he
served as President and Chief Executive Officer from June 1996 until his
retirement in September 2000. Prior to that, Mr. Millon served as an
executive and held several global leadership positions with Eli Lilly and
Company. Mr. Millon previously served on the board of Caremark from March
2004, upon Caremarks acquisition of AdvancePCS, and as a director of
AdvancePCS (which resulted from the merger of PCS and Advance Paradigm,
Inc.) beginning in October 2000. He became a director of CVS Health upon
the closing of the merger transaction involving CVS Health and Caremark.
Mr. Millon has over 10 years of financial management experience and
fifteen years of general functional management experience, including
strategic planning experience specific to pharmacy benefit management
companies as the former head of PCS. He also has extensive venture capital
and public and private company board experience, and presently serves on
the CEO advisory board of a private equity fund.
Skills and
Qualifications of Particular Relevance to CVS
Health Mr. Millons extensive
background and experience in the pharmacy benefit management,
pharmaceutical and life sciences businesses, combined with his financial
expertise, provide the Board with additional perspective across the
enterprise. |
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Director Qualification
Highlights
●Leadership Former CEO
●Finance
●International Business
Operations
●Risk Management
●Corporate Governance
●Public Company Board Service
Education B.S., U.S. Military Academy at
West Point; M.S., Purdue University; M.B.A., Fairleigh Dickinson
University
Biography Mr.
Swift is the former Chairman of the Board, President and Chief Executive
Officer of Foster Wheeler Ltd., an international engineering and
construction firm, having served in those positions from April 1994 until
his retirement in October 2001. Mr. Swift also served as a member and as
Chairman of the Financial Accounting Standards Advisory Council (FASAC)
from 2002 until his retirement from FASAC in December 2006. Mr. Swift is
also lead director of Ingersoll-Rand PLC, a diversified industrial
company, and a director of Kaman Corporation, a diversified manufacturer
and distributor, Hubbell Incorporated, an electrical and electronic
products company, and Public Service Enterprise Group Incorporated, an
energy company.
Skills and
Qualifications of Particular Relevance to CVS
Health The Board greatly
values Mr. Swifts financial expertise, including his experience at FASAC
and with various public company boards and audit committees for over 30
years of combined service. Mr. Swift is an audit committee financial
expert and his accounting and financial skills are important to the
oversight of our financial reporting, enterprise and operational risk
management. |
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Table of Contents
Corporate Governance and Related
Matters |
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William C.
Weldon
Chairman of the Board
and Chief Executive Officer of Johnson & Johnson
(Retired)
Independent
Director CVS
Health Board Committees Management Planning and Development, Nominating and Corporate
Governance Other
Public Boards JPMorgan Chase
& Co., Exxon Mobil Corporation |
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Tony L.
White
Chairman of the Board,
President and Chief Executive Officer of Applied Biosystems, Inc.
(Retired)
Independent
Director CVS
Health Board Committees Audit
(through February 2016), Management Planning and Development; Patient
Safety and Clinical Quality (beginning March 2016) Other Public
Boards Ingersoll-Rand PLC,
C.R. Bard, Inc. |
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Age 67 Director since March 2013 |
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Age 69 Director since March 2011 |
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Director Qualification
Highlights
●Leadership Former CEO
●Finance
●Health Care/Regulated Industry
●International Business Operations; Consumer Products or
Services
●Risk Management
●Corporate Governance
●Public Company Board Service
Education B.S., Quinnipiac University
Biography Mr.
Weldon is the former Chairman of the Board and Chief Executive Officer of
Johnson & Johnson, a global developer and manufacturer of health care
products, having served in those positions from 2002 until his retirement
as Chief Executive Officer in April 2012 and his retirement from the board
in December 2012. Mr. Weldon previously served in a variety of senior
executive positions during his 41-year career with Johnson & Johnson.
Mr. Weldon is also a director of JPMorgan Chase & Co., a global
financial services company, and Exxon Mobil Corporation, an international
oil and gas company. He was formerly a director of The Chubb Corporation,
an international insurance company, until it was acquired by ACE Limited
in January 2016.
Skills and
Qualifications of Particular Relevance to CVS
Health Mr. Weldons
experience in managing a complex global health care company and his deep
knowledge of the worldwide health care market across multiple sectors
makes him extremely well suited to serve on our Board. His background in
international business management and operating in the highly-regulated
health care industry is also greatly valued by the Board. |
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Director Qualification
Highlights
●Leadership Former CEO
●Finance
●Health Care/Regulated Industry
●Technology and Innovation
●Risk Management
●Corporate Governance
●Public Company Board Service
Education B.A., Western Carolina
University
Biography Mr.
White is the former Chairman of the Board, President and Chief Executive
Officer of Applied Biosystems, Inc. (formerly Applera Corporation), a
developer, manufacturer and marketer of life science systems and genomic
information products, having served in those positions from September 1995
until his retirement in November 2008. Mr. White is also a director of
Ingersoll-Rand PLC, a diversified industrial company, and C.R. Bard, Inc.,
a company that designs, manufacturers, packages, distributes and sells
medical, surgical, diagnostic and patient care devices.
Skills and
Qualifications of Particular Relevance to CVS
Health Mr. Whites wealth of
management experience in the life sciences and health care industries,
including over 13 years as Chairman and CEO of an advanced-technology life
sciences company and 26 years in various management positions at Baxter
International, Inc., a provider of medical products and services, makes
him well qualified to serve as a director of CVS
Health. |
The Board of
Directors unanimously recommends a vote FOR the
election of all nominees. |
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2016 Proxy
Statement |
Table of Contents
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Corporate Governance and Related
Matters |
Selecting Our Directors
Director
Independence |
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Director
Tenure |
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Independent: 10 Non-Independent:
1 |
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0-3 Years:
4 4-7
Years: 3 >7 Years:
4 |
10 CVS Health directors, including our Chairman, are independent of
management. |
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Our director nominees bring a
balance of experience and fresh perspective to our boardroom. The average tenure of CVS Health directors is under six
years. |
Director Gender |
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Female:
3 Male: 8 |
Director
Nominations
Under our Corporate Governance Guidelines,
the Nominating and Corporate Governance Committee recommends to the Board
criteria for Board membership and recommends individuals for membership on our
Board of Directors. Director Qualification Criteria used by the Committee in
nominating directors are found in the Committees charter and are presented
below. Although there is no specific policy on diversity, the Committee values
diversity, which it broadly views in terms of, among other things, gender, race,
background and experience, as a factor in selecting members to serve on the
Board. In addition, to ensure that it has access to a broad range of qualified,
experienced and diverse candidates, the Nominating and Corporate Governance
Committee uses the services of an independent search firm to help identify and
assist in the evaluation of candidates.
The Committee will consider any director
candidates proposed by stockholders who submit a written request to our
Corporate Secretary (including via our proxy access by-law, described on page
22). All candidates should meet the Director Qualification Criteria. The
Committee evaluates all director candidates and nominees in the same manner
regardless of the source. If a stockholder would like to nominate a person for
election or re-election to the Board, he or she must provide notice to the
Company as provided in our by-laws and described in this proxy statement. The
notice must include a written consent indicating that the candidate is willing
to be named in the proxy statement as a nominee and to serve as a director if
elected and any other information that the U.S. Securities and Exchange
Commission (SEC) would require to be included in a proxy statement when a
stockholder submits a proposal. See Other Information Stockholder Proposals
and Other Business for our Annual Meeting in 2017 for additional information
related to proposals, including any nominations, for our 2017 Annual
Meeting.
In accordance with our by-laws, each
nominee who is a current director must submit an irrevocable resignation, which
resignation becomes effective upon (1) that person not receiving a majority of
the votes cast in an uncontested election, and (2) acceptance by the Board of
that resignation in accordance with the policies and procedures adopted by the
Board. The Board, acting on the recommendation of the Nominating and Corporate
Governance Committee, will no later than at its first regularly scheduled
meeting following certification of the stockholder vote, determine whether to
accept the resignation of the unsuccessful incumbent. Absent a determination by
the Board that a compelling reason exists for concluding that it is in the best
interests of the Company for an unsuccessful incumbent to remain as a director,
the Board will accept that persons resignation.
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Table of Contents
Corporate Governance and Related
Matters |
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The retirement age for CVS Health
directors is 74. Our Corporate Governance Guidelines provide that no director
who is or would be over the age of 74 at the expiration of his or her current
term may be nominated to a new term, unless the Board waives the retirement age
for a specific director in exceptional circumstances. The Board increased the
retirement age from 72 to 74 during 2015, because it believes that the Company
will benefit from the increased pool of experienced candidates that will
result.
Director
Qualification Criteria
In recognition of the fact that the
selection of qualified directors is complex and crucial to our long-term
success, the Committee has established the following guidelines for the
identification and evaluation of candidates for membership on our Board of
Directors.
Candidates should be distinguished
individuals who are prominent in their fields or otherwise possess exemplary
qualities that will enable them to effectively function as directors. While the
Committee does not believe it appropriate at this time to establish any specific
minimum qualifications for candidates, it focuses on the following qualities in
identifying and evaluating candidates for Board membership:
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Background, experience and
skills |
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Character, reputation and personal
integrity |
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Judgment |
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Independence |
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Diversity |
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Commitment to the Company and
service on the Board |
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Any other factors that the Committee
may determine to be relevant and
appropriate |
Recognizing that the overall composition
of the Board is essential to its effective functioning, the Committee makes
these determinations in the context of the existing composition of the Board so
as to achieve an appropriate mix of characteristics. In making its
determinations, the Committee takes into account all applicable legal,
regulatory and stock exchange requirements concerning the composition of the
Board and its committees. The Committee reviews these guidelines from time to
time as appropriate (and in any event at least annually) and modifies them as it
deems appropriate.
Independence
Determinations for Directors
Under
our Corporate Governance Guidelines, a substantial majority of our Board must be
comprised of directors who meet the director independence requirements set forth
in the Corporate Governance Rules of the New York Stock Exchange (NYSE) applicable to listed companies.
Under the NYSE Corporate Governance Rules, no director qualifies as
independent unless the Board affirmatively determines that the director has no
material relationship with the Company.
CVS Healths
Categorical Standards to Assist in Independence
Determinations
Our Board has adopted the following
categorical standards to assist in making director independence determinations.
Any relationship that falls within the following standards or relationships will
not, in itself, preclude a determination of independence:
(1) |
Commercial banking or
investment banking relationships |
|
A situation in which a director (or
a member of his or her immediate family) is an employee of a commercial or
investment bank that has relationships or dealings with or provides
services to CVS Health that do not cross the bright-line tests referred to
in paragraph (3) below. |
(2) |
Ordinary course
commercial relationships |
|
A situation in which a director (or
a member of his or her immediate family) is a director, officer, employee
or significant stockholder of an entity with which CVS Health has ordinary
course business dealings that do not cross the bright-line tests referred
to in paragraph (3) below and where the director (or immediate family
member) is not directly responsible for or involved in the entitys
business dealings with CVS Health. |
(3) |
NYSE Listed Company
Bright-Line Tests |
|
Any relationship or set of facts
that falls within the standards permitted by the bright-line tests set
forth in Section 303A.02(b)(i)-(v) of the NYSEs Listed Company Manual,
which are summarized below. |
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NYSE Bright-Line
Tests For Director Independence
The following summarizes the standards set
forth in Section 303A.02(b)(i)-(v) of the NYSEs Listed Company Manual
(excluding, for sake of brevity, the related Commentary):
(i) |
Employees, or family members who are employees |
|
A director who is an employee, or
whose immediate family member is an executive officer, of the company is
not independent until three years after the end of such employment
relationship. |
(ii) |
Compensated professional
services |
|
A director who receives, or whose
immediate family member receives, more than $120,000 in any 12-month
period in direct compensation from the listed company, other than director
and committee fees and pension or other forms of deferred compensation for
prior service (provided such compensation is not contingent in any way on
continued service), is not independent until three years after he or she
ceases to receive more than $120,000 in such compensation in any 12-month
period. |
(iii) |
Audit
relationships |
|
A director who is a current partner
or employee of a firm that is the companys internal or external auditor,
or a director whose immediate family member is a current partner of such
firm or is an employee of such firm who personally works on the listed
companys audit, or a director who was, or whose immediate family member
was, within the last three years (but is no longer) a partner or employee
of such firm and personally worked on the listed companys audit within
that time, is not independent. |
(iv) |
Executive officer/ compensation
committee relationships |
|
A director who is, or whose
immediate family member is, or in the last three years has been, employed
as an executive officer of another company where any of the listed
companys executives at the same time serve or served on that companys
compensation committee, is not independent. |
(v) |
Significant commercial
relationships |
|
A director who is an executive
officer or an employee, or whose immediate family member is an executive
officer, of a company that makes payments to, or receives payments from,
the listed company for property or services in an amount which, in any
single fiscal year, exceeds the greater of $1 million, or 2% of such other
companys consolidated gross revenues, is not independent until three years
after falling below such threshold. |
2016
Determinations
The Nominating and Corporate Governance
Committee of the Board undertook its annual review of director independence in
March 2016. The Committee recommended and the Board determined that each of
Richard M. Bracken, C. David Brown II, Alecia A. DeCoudreaux, Nancy-Ann M.
DeParle, David W. Dorman, Anne M. Finucane, Jean-Pierre Millon, Richard J.
Swift, William C. Weldon and Tony L. White, is independent. Mr. Merlo is not an
independent director because of his employment as President and CEO of the
Company.
THE BOARDS ROLE AND
ACTIVITIES IN 2015
The
Board acts
as the ultimate decision-making body of the Company and advises and oversees
management, who are responsible for the day-to-day operations and management of
the Company. In carrying out its responsibilities, the Board reviews and
assesses CVS Healths long-term strategy and its strategic, competitive and
financial performance.
In 2015 the Board oversaw the return of
more than $6 billion to our stockholders, through a combination of cash
dividends and stock repurchases. The Board also guided the Company through two
major acquisitions in 2015, of Omnicare, Inc., the leader in pharmacy long-term
care, and the pharmacy and clinic businesses of Target Corporation, as well as
the related financing transactions associated with those acquisitions. In
addition, given the Companys expanded offerings throughout the spectrum of
health care, the Board decided to form a new Committee that will be focused on
the quality of pharmacy and medical care being delivered by the
Company.
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The Boards Role in
Risk Oversight
The Boards role in
risk oversight involves both the full Board and its Committees. The Audit
Committee is charged with the primary role in carrying out risk oversight
responsibilities on behalf of the Board. Pursuant to its charter, the Audit
Committee annually reviews our policies and practices with respect to risk
assessment and risk management, including discussing with management the
Companys major risk exposures and the steps that have been taken to monitor and
mitigate such exposures. As part of CVS Healths ongoing Enterprise Risk
Management process, each of our major business units is responsible for
identifying risks that could affect achievement of business goals and
strategies, assessing the likelihood and potential impact of significant risks,
prioritizing risks and actions to be taken in mitigation and/or response, and
reporting to managements Executive Risk Steering Committee on actions to
monitor, manage and mitigate significant risks. Additionally, the Chief
Financial Officer (CFO), Chief Compliance Officer (CCO) and General Counsel
periodically report on the Companys risk management policies and practices to
relevant Board Committees and to the full Board. The Audit Committee reviews CVS
Healths major financial risk exposures as well as major operational,
compliance, reputational and strategic risks, including developing steps to
monitor, manage and mitigate those risks. In addition, each of the other Board
Committees is responsible for oversight of risk management practices for
categories of risks relevant to their functions. For example, the Management
Planning and Development Committee has oversight responsibility for our overall
compensation structure, including review of its compensation practices, with a
view to assessing associated risk. The Board is regularly updated on specific
risks in the course of its review of corporate strategy, business plans and
reports to the Board by its respective Committees.
The Board considers its role in risk
oversight when evaluating our Corporate Governance Guidelines and its leadership
structure. Both the Corporate Governance Guidelines and the Boards leadership
structure facilitate the Boards oversight of risk and communication with
management. Our independent Chairman and our CEO are focused on CVS Healths
risk management efforts and ensure that risk matters are appropriately brought
to the Board and/or its Committees for their review.
Stockholder
Outreach
Because the Company values
each of its stockholders and their opinions, we have regularly interacted with
our stockholders on a variety of matters. Again in 2015, at the direction of the
Board, the Company engaged in a robust stockholder outreach effort to best
understand and address any concerns stockholders might have. Details regarding
our outreach effort and the compensation-related actions taken are found on
pages 37-38 of this proxy statement.
In addition to compensation-related
matters, a number of corporate governance matters were discussed with our
stockholders during the outreach process, including proxy access, tenure, board
composition and diversity. Stockholders were supportive of the Boards current
tenure mix and appreciated the Companys continued attention to the breadth,
depth and diversity of its Board of Directors. Additionally, with input from
many of our stockholders, the Board adopted a proxy access by-law in January
2016.
We believe that taking the responsive
actions summarized above will continue to strengthen our relationships with our
stockholders and provide positive improvements in the areas
identified.
Stockholder
Rights
Under our Amended and
Restated Certificate of Incorporation (the Charter) and our Amended and
Restated By-laws (the By-laws), our stockholders have the right to call a
special meeting of stockholders and to act by written consent that is less than
unanimous. Holders of at least 25% of our common stock can call a special
meeting or request an action by written consent by following the procedures
described in our Charter and By-laws. Our stockholders also have the right to
proxy access, as described below. Our Charter and By-laws are available to
stockholders at no charge upon request to our Corporate Secretary.
Contact with the
Board, the Chairman and Other Independent Directors
Stockholders and other parties interested in communicating
directly with the Board, the independent Chairman of the Board or with the
independent directors as a group may do so by writing to them care of CVS Health
Corporation, One CVS Drive, MC 1160, Woonsocket, RI 02895. The Nominating and
Corporate Governance Committee has approved a process for handling letters
received by the Company and addressed to the Board, the independent
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Chairman of the Board or to independent
members of the Board. Under that process, our Corporate Secretary reviews all
such correspondence and regularly forwards to the Board copies of all
correspondence that, in her opinion, deals with the functions of the Board or
its Committees or that she otherwise determines requires their
attention.
Code of
Conduct
CVS Health has adopted a
Code of Conduct that applies to all of our directors, officers and employees,
including our CEO, CFO and Chief Accounting Officer. Our Code of Conduct is
available on our website at http://investors.cvshealth.com and will be provided
to stockholders without charge upon request to our Corporate Secretary. We
intend to post amendments to or waivers from our Code of Conduct (to the extent
applicable to our executive officers or directors) at that location on our
website within the timeframe required by SEC rules.
Certain
Transactions with Directors and Officers
In accordance with SEC rules, the Board has adopted a written Related
Person Transaction Policy (the Policy). The Audit Committee of the Board has
been designated as the Committee responsible for reviewing, approving or
ratifying any related person transactions under the Policy. The Committee
reviews the Policy on an annual basis and will amend the Policy as it deems
appropriate.
Pursuant to the Policy, all executive
officers, directors and director nominees are required to notify our General
Counsel or Corporate Secretary of any financial transaction, arrangement or
relationship, or series of similar transactions, arrangements or relationships,
involving the Company in which an executive officer, director, director nominee,
five percent beneficial owner or any immediate family member of such a person
has a direct or indirect material interest. Such officers, directors, nominees,
five percent beneficial owners and their immediate family members are considered
related persons under the Policy. For the above purposes, immediate family
member includes a persons spouse, parents, siblings, children, in-laws,
step-relatives and any other person sharing the household (other than a tenant
or household employee).
The General Counsel or the Corporate
Secretary presents any reported new related person transactions, and significant
proposed transactions involving related persons that might be deemed to be
related person transactions, to the Audit Committee at its next regular meeting,
or earlier if appropriate. The Committee reviews these transactions to determine
whether the related person involved has a direct or indirect material interest
in the transaction. The Committee may conclude, upon review of all relevant
information, that the transaction does not constitute a related person
transaction, and thus that no further review is required under the Policy. On an
annual basis, the Committee reviews previously approved related person
transactions, under the standards described below, to determine whether such
transactions should continue.
In reviewing a related person transaction
or proposed transaction, the Committee considers all relevant facts and
circumstances, including without limitation the commercial reasonableness of the
terms, the benefit and perceived benefit, or lack thereof, to the Company, the
availability and/or opportunity costs of alternate transactions, the materiality
and character of the related persons direct or indirect interest, and the
actual or apparent conflict of interest of the related person. The Committee
does not approve or ratify a related person transaction unless it has determined
that, upon consideration of all relevant information, the transaction is in, or
is not inconsistent with, the best interests of the Company and its
stockholders.
If after the review described above, the
Committee determines not to approve or ratify a related person transaction
(whether such transaction is being reviewed for the first time or has previously
been approved and is being re-reviewed), the transaction will not be entered
into or continued, as the Committee shall direct.
The Audit Committee reviewed certain
transactions reported under the Policy and determined that no transactions
constituted reportable related person transactions under the Policy.
Corporate
Governance Guidelines
The Board has
adopted Corporate Governance Guidelines, which are available on our investor
relations website at http://investors.cvshealth.com and are also available to
stockholders at no charge upon request to our Corporate Secretary. These
Guidelines meet the listing standards adopted by the NYSE, on which our common stock is listed.
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BOARD STRUCTURE AND
PROCESSES
The Boards
Leadership Structure
David W.
Dorman is our independent Chairman of the Board. The independent Chairman
presides at all meetings of the Board, and works with our CEO to set Board
meeting agendas and the schedule of Board meetings. In addition, the independent
Chairman has the following duties and responsibilities: the authority to call,
and to lead, independent director sessions; the ability to retain independent
legal, accounting or other advisors in connection with these sessions; the
responsibility to facilitate communication and serve as a liaison between the
CEO and the other independent directors; and the duty to advise the CEO of the
informational needs of the Board. The Board believes that Board independence and
oversight of management will be maintained effectively through the independent
Chairman, the Boards composition and its Committee system.
Proxy
Access
In January 2016, following
the receipt of a stockholder proposal and extensive conversations with the
proponent and several other stockholders, the Nominating and Corporate
Governance Committee recommended and the Board adopted a proxy access by-law.
Under the by-law a stockholder, or a group of up to 20 stockholders, owning at
least three percent of the Companys outstanding common stock continuously for
at least three years, may nominate and include in the Companys proxy materials
director nominees constituting up to the greater of two nominees or 20% of the
Board, provided that the stockholders and the nominees satisfy the requirements
specified in the Companys by-laws.
2015 COMMITTEES OF THE
BOARD
In 2015, the Board utilized
four standing committees. The table below provides membership and meeting
information for each of the committees during 2015. In early 2016, the Board
established a fifth committee, the Patient Safety and Clinical Quality
Committee, and membership of most of the other committees changed. For details
regarding the newly established committee and current committee membership see
pages 23-29.
NAME |
|
AUDIT COMMITTEE |
|
MANAGEMENT PLANNING
& DEVELOPMENT COMMITTEE |
|
NOMINATING &
CORPORATE GOVERNANCE COMMITTEE |
|
EXECUTIVE COMMITTEE |
Richard M. Bracken |
|
● |
|
|
|
|
|
|
C. David Brown II |
|
|
|
● |
|
● |
|
● |
Alecia A. DeCoudreaux |
|
|
|
|
|
● |
|
|
Nancy-Ann M. DeParle |
|
● |
|
|
|
|
|
|
David W. Dorman |
|
|
|
● |
|
● |
|
● |
Anne M. Finucane |
|
|
|
|
|
● |
|
|
Larry J. Merlo |
|
|
|
|
|
|
|
● |
Jean-Pierre Millon |
|
● |
|
|
|
|
|
|
Richard J. Swift |
|
● |
|
|
|
|
|
● |
William C. Weldon |
|
|
|
● |
|
● |
|
|
Tony L. White |
|
● |
|
● |
|
|
|
|
2015
Meetings |
|
9 |
|
5 |
|
5 |
|
2 |
● |
Committee Chair |
|
Audit Committee Financial
Expert |
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AUDIT
COMMITTEE
|
|
|
Meetings in
2015: 9 |
|
* Audit Committee Financial
Expert |
Each member of the Audit Committee is
financially literate and independent of the Company and management under the
standards set forth in applicable SEC rules and the Corporate Governance Rules
of the NYSE. The Board designated each of Messrs. Swift, Bracken, Millon and
White as an audit committee financial expert, as defined under applicable SEC
rules. The Board has approved a charter for the Committee, which can be viewed
on our website at http://investors.cvshealth.com and also is available to
stockholders without charge upon request to our Corporate Secretary.
Mr. Richard Bracken joined the Committee
in March 2015, shortly after joining the Board. In March 2016 Mr. Bracken
rotated off the Committee when he became Chair of the newly formed Patient
Safety and Clinical Quality Committee. Mr. White also rotated off of the Audit
Committee and joined the new committee in March 2016, while Ms. DeCoudreaux
joined the Audit Committee at that time.
Primary
Responsibilities
Pursuant to its charter, the Committee
assists the Board in its oversight of:
● |
the integrity of our financial
statements; |
● |
the qualifications,
independence and performance of our independent registered public
accounting firm, for whose appointment the
Committee bears principal responsibility; |
● |
the performance of our
internal audit function; |
● |
our policies and practices
with respect to risk assessment and risk management, including discussing
with management the Companys major
financial risk exposures and the steps that have been taken to monitor
and control such exposures;
|
● |
compliance with our Code of
Conduct; |
● |
the review of our information
governance framework, including its privacy and information security
programs, as well as the cybersecurity
aspects of the information security program;
|
● |
the review of our business
continuity and disaster recovery program; |
● |
the review of our
environmental, health and safety program; |
● |
the review and ratification of
any related person transactions in accordance with our policy on such
matters; and |
● |
our compliance with legal and
regulatory requirements, including the review and oversight of matters
related to compliance with Federal health
care program requirements. |
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Audit Committee
Activities in 2015
The Audit Committee met nine times in 2015
and, except for one absence, each member of the Committee attended all of its
meetings while he or she was a member. Four of the Committees meetings were
focused primarily on our quarterly financial reports, including our Form 10-K,
Forms 10-Q and our related earnings
releases. At each of these meetings the Committee reviews the documents in depth
and also receives reports from our internal audit department and our independent
outside audit firm, Ernst & Young. The Committee regularly meets with Ernst
& Young outside the presence of management, and also meets individually with
members of management, including the CCO and the head of Internal Audit. In
addition to its responsibilities related to our financial statements, the
Committee plays a primary role in risk oversight, including reviews of our
enterprise risk management program, cybersecurity efforts, business continuity
and disaster recovery program, privacy programs, and environmental, health and
safety program. The Committee also reviews our legal and regulatory compliance
program on a quarterly basis, and in 2014 it assumed responsibility for
oversight of the Companys compliance with its Corporate Integrity Agreement, or
CIA. During 2015 the Committee provided the required annual certification of
compliance with the CIA. The Committee provided the report found on page 31 of
this proxy statement, recommending the inclusion of the Companys audited
financial statements in its Form 10-K.
NOMINATING AND
CORPORATE GOVERNANCE COMMITTEE
Meetings in 2015:
5 |
|
|
Each member of the
Nominating and Corporate Governance Committee is independent of the Company and
management under the standards set forth in the Corporate Governance Rules of
the NYSE. The Board has approved a charter for
the Committee, which can be viewed on our website at
http://investors.cvshealth.com and also is available to stockholders without
charge upon request to our Corporate Secretary.
Ms. DeCoudreaux
joined the Committee in May 2015, following her election to the Board in March
2015. She then rotated off the Nominating and Corporate Governance Committee and
joined the Audit Committee and the newly formed Patient Safety and Clinical
Quality Committee in March 2016. Mr. Bracken also joined the Nominating and
Corporate Governance Committee in March 2016
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Primary
Responsibilities
Pursuant to its charter, the Committee has
responsibility for:
● |
identifying individuals
qualified to become Board members consistent with criteria approved by the
Board; |
● |
recommending to the Board
director nominees for election at the next annual or special meeting
of stockholders at which directors are to be elected or to fill any
vacancies or newly-created directorships that may occur between
such meetings; |
● |
recommending directors for
appointment to Board Committees; |
● |
making recommendations to the
Board as to determinations of director independence; |
● |
evaluating Board and Committee
performance; |
● |
considering matters of
corporate governance and reviewing, at least annually, our Corporate
Governance Guidelines and overseeing compliance with such Guidelines;
and |
● |
reviewing and considering our
policies and practices on issues relating to corporate social
responsibility, charitable contributions, political spending practices and other
significant public policy issues. |
Nominating and
Corporate Governance Committee Activities in 2015
The Nominating and Corporate Governance
Committee met five times in 2015 and, except for one absence each for two
different members of the Committee, each member of the Committee attended all of
its meetings. The Committee continues to evaluate potential candidates for
future election to the Board, which led to the election of Mr. Bracken in
January 2015 and Ms. DeCoudreaux in March 2015. Both of those candidates were
re-elected by our stockholders at the Companys 2015 Annual Meeting with votes
in favor of approximately 99%. In addition, the Committee reviewed the Companys
political activities and expenditures in depth during two of its meetings, and
reviewed the Companys corporate social responsibility roadmap, Prescription for
a Better World, as well as the corporate social responsibility report itself.
The Committee also oversaw the evaluation process for the Board and its
Committees in 2015, which consisted of an in-depth interview of each director by
the Companys General Counsel. At the completion of the interview process, the
General Counsel reviewed the results with the Committee and the Board, and a
number of enhancements to the Board and Committee meeting process resulted, such
as meetings with lower levels of management. The Committee also considered
suggestions regarding the committee responsibilities and make-up, which resulted
in the formation of a new Board committee in early 2016. In addition, the
Committee received updates regarding legal and regulatory developments related
to corporate governance, as well as updates on proxy season and stockholder
communications. In this regard, during 2015 the Committee received several
updates regarding proxy access, which culminated in the Committee recommending
and the Board adopting a proxy access by-law in January 2016.
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MANAGEMENT PLANNING
AND DEVELOPMENT COMMITTEE
|
|
|
Meetings in 2015:
5 |
|
|
Each member of the Management Planning
and Development Committee is independent of the Company and management under the
standards set forth in applicable SEC rules and the Corporate Governance Rules
of the NYSE. No Committee member participates in any of our employee
compensation programs and none is a current or former officer or employee of CVS
Health or its subsidiaries. At its meetings, non-members, such as the CEO, the
CFO, the Chief Human Resources Officer, the General Counsel, other senior human
resources and legal officers, or external consultants, may be invited to provide
information, respond to questions and provide general staff support. However, no
CVS Health executive officer is permitted to be present during any discussion of
his or her compensation or performance, and the Committee regularly exercises
its prerogative to meet in executive session without management.
The Committees responsibilities are
specified in its charter. The charter, as approved by the Board, may be viewed
on our website at http://investors.cvshealth.com and also is available to
stockholders without charge upon request to our Corporate Secretary.
In March 2016 Ms. Finucane was added as a
member of the Committee.
Primary
Responsibilities
Pursuant to its charter, the
Committee:
● |
oversees our compensation and benefits
policies and programs generally; |
● |
evaluates the performance of designated
senior executives, including the CEO; |
● |
in consultation with our other
independent directors, oversees and sets compensation for the
CEO; |
● |
oversees and sets compensation for our
designated senior executives; |
● |
reviews and recommends to the Board
compensation (including cash and equity-based compensation) for our non-employee
directors; and |
● |
prepares and recommends to the full
Board the inclusion of Management Planning and Development Committee Report set forth
below. The Committee may delegate its authority relating to employees
other than executive officers and directors as it deems appropriate and may
also delegate its authority relating to ministerial
matters. |
Management Planning
and Development Committee Activities in 2015
The Management Planning and Development
Committee met five times in 2015 and each member of the Committee attended all
of its meetings. In addition to reviewing the independence of its advisor as
described below, the Committee devoted substantial time to its oversight of the
Companys compensation and benefit programs as part of its annual governance
process. This review is aimed at ensuring that the Company is providing its
employees with compensation and benefit programs that are appropriate. The
Committee received updates on compensation trends and legislative and regulatory
developments. The Committee also reviewed the Companys compensation programs,
retirement, health and welfare plans. In addition, the Committee devoted
considerable time to CVS
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Healths stockholder outreach efforts and
the feedback received from investors. The Committees review of executive
compensation matters and its decisions, including changes made in response to
input from our stockholders, is discussed in the Compensation Discussion and
Analysis beginning on page 35 of this proxy statement.
Compensation Risk
Assessment
The Committee is responsible for reviewing
and assessing potential risk arising from the Companys compensation policies
and practices. In 2015, the Company performed a comprehensive risk assessment of
its compensation policies and practices to ascertain any potential material
risks that may be created by the programs. Included in its assessment were all
major components of the Companys compensation programs, including: the mix
between annual and long-term compensation; short-term incentive program design;
long-term incentive program performance measures; incentive plan performance
criteria and corresponding objectives; a comparison of the Companys programs
with those of its peer group; the Companys severance and change-in-control
policies; its recoupment policy; its share retention requirements and ownership
guidelines; and the Internal Audit Departments review of the controls regarding
the Companys long-term incentive program. The Committee considered the findings
of the assessment and concluded that the Companys compensation programs are
aligned with the interests of its stockholders, appropriately reward pay for
performance, and do not promote excessive risk-taking.
Independent
Consultant
Exequity LLP is the Committees
independent compensation consultant. Exequity provides no other services to the
Company. Exequitys fees for executive compensation consulting to the Committee
for 2015 were $310,709. During 2015, Exequity:
● |
Collected, organized and presented
quantitative competitive market data for a relevant competitive peer
group with
respect to executive officers target, annual and long-term compensation
levels; |
● |
Developed and delivered an annual Committee
briefing on legislative and regulatory developments and trends in executive
compensation and their implications for CVS Health; and
|
● |
Analyzed market data and provided
recommendations for non-employee director compensation to the Committee for
approval by the Board. |
The Committee believes that the advice it
receives from Exequity is objective and not influenced by any other business
relationship. The Committee and Exequity have policies and procedures in place
to preserve the objectivity and integrity of the executive compensation
consulting advice, including:
● |
The Committee has the sole authority to
retain and terminate the executive compensation consultant; |
● |
The consultant reports to the Committee
Chair and has direct access to the Committee without management involvement; |
● |
While it is necessary for the consultant to
interact with management to gather information, the Committee determines if and
how the consultants advice can be shared with management;
and |
● |
The Committee regularly meets with the
consultant in executive session, without management present, to discuss
recommendations. |
The Committee conducts an annual review of
the independence of its compensation consultant, taking into account the
standards above, the items required to be considered under the NYSE listing
standards and applicable rules and regulations. The Committee determined that
its compensation consultant is independent and that its consultants work does
not raise any conflicts.
Management Planning
and Development Committee Report
The Management Planning and Development
Committee has reviewed and discussed the Compensation Discussion and Analysis,
which begins on page 35 of this proxy statement, with management and, based on
that review and discussion, the Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in our annual report
on Form 10-K and this proxy statement.
|
|
|
|
C.
David Brown II, Chair |
David
W. Dorman |
William C. Weldon |
Tony
L. White |
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|
|
27 |
Table of Contents
Corporate Governance and Related Matters |
|
|
EXECUTIVE
COMMITTEE
2015 and Current Committee
Members
(photographed left to
right)
● |
David
Brown |
● |
Richard Swift |
● |
Larry Merlo |
● |
David
Dorman |
Meetings in 2015: 2
At all times when the Board is not in
session, the Executive Committee may exercise most of the powers of the Board,
as permitted by applicable law.
The Executive Committee met twice during
2015, and took no actions at those meetings.
2016 FORMATION OF NEW
COMMITTEE OF THE BOARD
PATIENT SAFETY AND
CLINICAL QUALITY COMMITTEE
Current Committee
Members
(independent, photographed left to
right)
● |
Tony
White |
● |
Alecia DeCoudreaux |
● |
Richard Bracken
(Chair) |
● |
Nancy-Ann DeParle |
● |
Jean-Pierre
Million |
Each member of the newly formed Patient
Safety and Clinical Quality Committee is independent of the Company and
management under the standards set forth in applicable SEC rules and the
Corporate Governance Rules of the NYSE. The Board has approved a charter for the
Committee, which can be viewed on our website at http://investors.cvshealth.com
and also is available to stockholders without charge upon request to our
Corporate Secretary.
In light of the Companys expanded
offerings throughout the spectrum of health care, this Committee was formed in
March 2016. Its focus will be on the quality of pharmacy and medical care being
delivered by the Company.
28 |
|
2016 Proxy
Statement |
Table of Contents
|
|
Corporate Governance and Related Matters |
Primary
Responsibilities
Pursuant to its charter, the Committee
will:
● |
assist the Board in its oversight of the Companys policies and
procedures relating to the delivery of quality pharmacy and medical care
to its customers and patients, to patient safety, to the management of
health care claims against the enterprise and to clinical quality and
health affairs in general; |
● |
maintain communication between the
Board and the Companys General Counsel, CFO, pharmacy
and clinical operations and other areas of the Company that it deems
relevant to the quality performance of patient care, patient safety and
clinical quality; |
● |
receive reports concerning the
quality performance of the Companys mail, retail, long-term care, and
specialty dispensing and compounding operations, infusion and nursing
operations and its medical clinic services; and |
● |
review matters concerning the
quality performance of pharmacy and medical care delivered to patients,
efforts to improve the quality of such care, patient safety, health care
claims against the enterprise and health affairs in
general. |
MEETINGS AND
ATTENDANCE
During 2015, there were eight meetings of
the Board. Directors are expected to make every effort to attend the Annual
Meeting, all Board meetings and the meetings of the Committees on which they
serve. All of our directors at the time of our 2015 Annual Meeting of
Stockholders attended that Annual Meeting. In 2015, each director attended over
75% of the meetings of the Board and the Committees of which he or she was a
member.
One Board meeting was our annual meeting
of independent directors. The independent directors also regularly hold
executive sessions during regularly scheduled Board meetings in which our
management does not participate.
NON-EMPLOYEE DIRECTOR
COMPENSATION
CVS Healths approach to compensating
non-employee directors for Board service is to provide directors with an annual
retainer comprised of a mandatory 75% paid in shares of our common stock and 25%
paid in cash (or 100% stock at the directors election). The payment of a
significant portion of the annual retainer, and additional retainers as outlined
below, in our common stock is consistent with our policy of using equity
compensation to better align directors interests with stockholders. This also
enhances the directors ability to meet and continue to comply with the stock
ownership guidelines described below.
For the 2015-2016 Board year, the total
annual retainer for non-employee directors was $280,000, consisting of shares of
our stock valued at $210,000 (the mandatory annual stock retainer) and a cash
payment of $70,000 (unless the director elected to receive 100% of the annual
retainer in shares of our common stock). The annual retainer was paid in two
equal installments, in May and November of 2015. Directors may elect to defer
receipt of shares; deferred shares are credited with dividend equivalents to the
extent dividends are paid to stockholders. There are no meeting fees.
Non-Employee
Director Retainer Mix
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|
29 |
Table of Contents
Corporate Governance and Related Matters |
|
|
For the 2015-2016 Board year, additional
retainers were paid as follows: Chair of the Nominating and Corporate Governance
Committee, $15,000; Chair of the Management Planning and Development Committee,
$20,000; Chair of the Audit Committee, $25,000; and independent Chairman of the
Board, $275,000. Each of these additional retainers was paid in two equal
installments, in May and November of 2015. The Chair of the new Patient Safety
and Clinical Quality Committee received an annual retainer of $15,000, which was
prorated for the 2015-2016 Board year and paid in March 2016, when that
Committee was formally established. At least 75% of each additional retainer
must be paid in shares of our common stock, with the remaining 25% paid in cash,
unless the director elects to be paid an additional percentage in shares of
common stock. As with the annual retainer, directors may elect to defer receipt
of shares for additional retainers; any deferred shares are credited with
dividend equivalents to the extent dividends are paid to
stockholders.
All Other
Compensation and Benefits
Directors are eligible to participate in
the employee discount program and are subject to the same terms of the program
as our employees. Directors are generally reimbursed for business expenses
incurred directly in connection with their roles and duties on the Board, such
as services provided by an executive assistant, travel, meals and lodging. We
allow all directors to enroll themselves and their eligible dependents in our
prescription drug benefit program, paying the same premium rates as employees.
If a director retires from the Board with at least five years of service, we
will allow continued participation in the prescription drug benefit plan for
life, but the director must bear the full cost of the premium after
retirement.
The following table shows amounts paid to
each of our non-employee directors in 2015.
Non-Employee
Director Compensation 2015
|
NAME |
|
FEES
EARNED AND PAID IN CASH 1 ($) |
|
CASH
FEES ELECTED TO BE PAID IN STOCK 2 ($) |
|
STOCK AWARDS 2 ($) |
|
ALL
OTHER COMPENSATION 3 ($) |
|
TOTAL ($) |
|
|
Richard M. Bracken
4 |
|
93,514 |
|
|
|
279,819 |
|
1,500 |
|
374,833 |
|
|
C. David Brown
II |
|
|
|
75,000 |
|
225,000 |
|
1,866 |
|
301,866 |
|
|
Alecia A.
DeCoudreaux 5 |
|
|
|
81,667 |
|
245,000 |
|
|
|
326,667 |
|
|
Nancy-Ann M.
DeParle |
|
70,103 |
|
|
|
209,897 |
|
|
|
280,000 |
|
|
David W. Dorman |
|
66 |
|
142,434 |
|
427,500 |
|
1,500 |
|
571,500 |
|
|
Anne M. Finucane |
|
6 |
|
69,994 |
|
210,000 |
|
1,111 |
|
281,111 |
|
|
Jean-Pierre
Millon |
|
70,129 |
|
|
|
209,871 |
|
3,366 |
|
283,366 |
|
|
Richard J. Swift |
|
76,250 |
|
|
|
228,750 |
|
3,366 |
|
308,366 |
|
|
William C.
Weldon |
|
|
|
70,000 |
|
210,000 |
|
1,500 |
|
281,500 |
|
|
Tony L. White |
|
70,129 |
|
|
|
209,871 |
|
2,866 |
|
282,866 |
|
1 |
The amounts shown include cash
payments made in lieu of fractional shares to Mmes. DeParle and Finucane
and Messrs. Bracken, Dorman, Millon and White. |
2 |
These awards are fully vested at
grant and the amounts shown represent both the fair market value and the
full fair value at grant. During 2015, each director received 2,111 shares
of stock with a total value of approximately $210,000 (the mandatory
annual stock retainer) on the date of grant; each director electing to
receive the remaining annual retainer in stock also received 704 shares
valued at $70,000 on the date of grant. Two directors also elected to
receive their additional chair retainers in stock in lieu of cash. As of
December 31, 2015, our directors had deferred receipt of shares of common
stock as follows: Mr. Brown, 43,833 shares; Ms. DeCoudreaux, 3,280 shares;
Ms. DeParle, 3,223 shares; Mr. Dorman, 15,837 shares; Ms. Finucane, 2,629
shares; Mr. Swift, 50,287; and Mr. Weldon, 9,657 shares. |
3 |
Represents Company costs for
director prescription benefits for Ms. Finucane and Messrs, Brown, Millon
and Swift. Also represents participation in our matching gifts program,
under which director or employee contributors to the CVS Health Employee
Political Action Committee may designate a charity to receive a matching
contribution from the Company of up to $1,500. Messrs. Bracken, Dorman,
Millon, Swift, Weldon and White participated in this program. |
4 |
Mr. Bracken joined the Board in
January 2015. His compensation includes a pro rata retainer for the
portion of the 2014-2015 Board year that he served. |
5 |
Ms. DeCoudreaux joined the Board
in March 2015. Her compensation includes a pro rata retainer for the
portion of the 2014-2015 Board year that she
served. |
30 |
|
2016 Proxy
Statement |
Table of Contents
AUDIT COMMITTEE
MATTERS
ITEM 2: RATIFICATION OF
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Audit Committee of the Companys Board
of Directors (for purposes of this Item 2, the Committee) has appointed Ernst
& Young LLP (Ernst & Young), an independent registered public
accounting firm, to audit the financial statements of the Company for the fiscal
year ending December 31, 2016, and recommended to our full Board of Directors
that it approve that appointment. We are submitting the appointment by the
Committee to you for your ratification.
The Board
of Directors unanimously recommends a vote FOR
this proposal. |
Audit Committee
Report
During 2015, Committee was
composed of five independent directors. Set forth below is the report of the
Committee on its activities with respect to CVS Healths audited financial
statements for the fiscal year ended December 31, 2015 (the audited financial
statements).
● |
The
Committee has reviewed and discussed the audited financial statements with
management; |
● |
The
Committee has discussed with Ernst & Young, CVS Healths independent
registered public accounting firm, the matters required to be discussed
under applicable auditing standards; |
● |
The Committee has received the
written disclosures and the letter from Ernst & Young pursuant to
applicable requirements of the Public Company Accounting Oversight Board
regarding Ernst & Youngs communications with the Committee concerning
independence, and has discussed with Ernst & Young its independence
from the Company; and |
● |
Based on the review and discussions
referred to above and relying thereon, the Committee recommended to the
Board of Directors that the audited financial statements be included in
CVS Healths Annual Report on Form 10-K for the fiscal year ended December
31, 2015, for filing with the SEC. |
|
|
|
|
|
Richard J. Swift, Chair |
|
Richard M. Bracken |
|
Nancy-Ann M. DeParle |
|
|
|
Jean-Pierre Millon |
|
Tony L.
White |
Independent
Accounting Firm Independence and Fee Approval Policy
The Committee is directly responsible for the appointment,
compensation, retention and oversight of the independent registered public
accounting firm. The Committee has retained Ernst & Young as CVS Healths
external audit firm since September 2007. In order to assure continuing external
auditor independence, the Committee periodically considers whether there should
be a rotation of the audit firm. Further, in conjunction with the mandated
rotation of the external audit firms lead engagement partner, the Committee and
its chair are directly involved in the selection of Ernst & Youngs new lead
engagement partner. Based on its most recent evaluation of Ernst & Young,
the members of the Committee believe that the continued retention of Ernst &
Young to serve as the Companys independent registered public accounting firm is
in the best interests of the Company and its stockholders.
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|
|
31 |
Table of Contents
All audit services, audit-related services
and tax services were pre-approved by the Committee, and the Committee is
ultimately responsible for audit fee negotiations associated with the retention
of Ernst & Young. The Committee has considered whether Ernst & Youngs
provision of services is compatible with maintaining Ernst & Youngs
independence. The Committees audit approval policy provides for pre-approval of
audit, audit-related and tax services that are specifically described on an
annual basis to the Committee and, in addition, individual engagements
anticipated to exceed pre-established thresholds must be separately approved.
The policy also requires specific approval by the Committee if total fees for
audit-related and tax services would exceed total fees for audit services in any
fiscal year. The policy authorizes the Committee to delegate to one or more of
its members pre-approval authority with respect to permitted services, so long
as such pre-approvals are reported to the full Committee at its next scheduled
meeting.
Representatives of Ernst & Young will
be at the Annual Meeting to answer your questions and will have the opportunity
to make a statement if they so desire.
If you do not ratify the appointment of
Ernst & Young, the Committee will reconsider its appointment, although in
the event of reconsideration the Committee may determine that Ernst & Young
should continue in its role. Even if you do ratify the appointment, the
Committee retains its discretion to reconsider its appointment if it believes
that reconsideration is necessary in the best interest of the Company and the
stockholders.
Fees of Independent
Accounting Firm
The following table
summarizes the fees paid to Ernst & Young for services rendered during
fiscal 2015 and 2014.
|
|
|
FISCAL YEAR ENDED 12/31/15 |
|
FISCAL YEAR ENDED 12/31/14 |
|
|
Audit Fees 1 |
|
$10,680,969 |
|
$8,846,157 |
|
|
Audit Related Fees 2 |
|
$228,564 |
|
$709,335 |
|
|
Tax
Fees 3 |
|
$2,001,278 |
|
$1,800,550 |
|
|
All
Other Fees |
|
|
|
|
|
1 |
Represents the aggregate fees and
expenses billed for the audit of our consolidated financial statements and
the audit of our internal control over financial reporting for the fiscal
year, the reviews of the condensed consolidated financial statements
included in our Quarterly Reports on Form 10-Q, audits of our insurance
captives, services provided in connection with statutory and regulatory
filings for the fiscal year, and consultations on technical matters. In
2015 and 2014, approximately $1.4 million and $0.6 million, respectively,
relates to audit fees incurred in connection with the Companys
acquisitions. |
2 |
Represents the aggregate fees
billed for audit and other services that are typically performed by
auditors, including audits of our employee benefit plans and independent
review organization services, compliance reporting, non-financial metric
reporting and certain agreed upon procedures. |
3 |
Represents the aggregate fees
billed for tax compliance, consulting and related
services. |
32 |
|
2016 Proxy
Statement |
Table of Contents
EXECUTIVE
COMPENSATION AND RELATED MATTERS
ITEM 3: PROPOSAL TO
APPROVE, ON AN ADVISORY BASIS, THE COMPANYS EXECUTIVE COMPENSATION AS DISCLOSED
IN THIS PROXY STATEMENT
Background
We are
asking our stockholders to approve, on an advisory basis, the compensation paid
to our named executive officers, as described in the Compensation Discussion and
Analysis (CD&A) and the Executive Compensation section of this proxy
statement. Although the advisory vote is not binding upon the Company, the
Management Planning and Development Committee (for purposes of this Item 3, the
Committee), which is responsible for designing and administering our executive
compensation program, values our stockholders opinions and will continue to
consider the outcome of the vote in its ongoing evaluation of our executive
compensation program.
At CVS Health, our executive compensation
philosophy and practice reflect our unwavering commitment to paying for
performance both short- and long-term. We define performance as the
achievement of results against challenging internal financial targets that take
into account our results relative to that of our peer companies, as well as
industry and market conditions. We believe that our multi-faceted executive
compensation plans, with their integrated focus on short- and long-term metrics,
provide an effective framework by which progress against our strategic goals may
be appropriately measured and rewarded.
Our 2015 Vote;
Stockholder Outreach
During the
fall of 2014, we reached out to stockholders and offered to discuss our
compensation programs, corporate governance and any other matters. We also had
discussions with one of the leading proxy advisory firms, and obtained feedback
from our institutional investors by means of an independent, third-party
platform that provided collective data and comments. These conversations led us
to redesign our 2015 proxy statement, clarify the explanation regarding our
prohibition on tax gross-ups, modify our peer group and amend our stock option
grant policy to explicitly prohibit the re-pricing of stock options without stockholder
approval.
In 2015 we received a high level of
stockholder support for our executive compensation program, with a 94% vote in
favor. During the fall of 2015, we contacted our 50 largest stockholders,
holders of approximately 50% of our outstanding common stock, and offered to
discuss our compensation programs, corporate governance and any other matters.
We had discussions with several stockholders and all were generally pleased with
our business results and the link between performance and the compensation
earned by key executives. Some key takeaways from our 2015 discussions
were:
● |
The design of our long-term
incentive plan (LTIP). The current structure for this plan is for awards
that are subject to overlapping three-year cumulative performance periods,
earned based on a Return on Net Assets metric, with settlement being
equally divided between CVS Health common stock and cash. Several
stockholders expressed a preference for the settlement of LTIP awards
fully in common stock. The Committee discussed this matter in early 2016,
and decided that beginning with LTIP grants for the 2016-2018 performance
period, settlement will be made fully in common stock that will continue
to have a required two-year holding period following settlement
date. |
● |
CEO long-term incentive components.
Some stockholders suggested that the components should be more heavily
weighted towards performance-based awards rather than time-based awards.
For 2015, the weighting was 60% time-based RSUs and stock options and 40%
performance-based LTIP. Beginning with the 2016 long-term incentive
grants, we provided our CEO with a target long-term incentive pay mix that
is split evenly between the performance-based LTIP program, and time-based
RSUs and stock options. The Committee believes that this combination of
long-term elements provides appropriate balance in support of the
long-term growth of the Company. |
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|
33 |
Table of Contents
Executive Compensation and Related Matters |
|
|
Our 2015
Performance and Pay Actions
2015
was a successful year for the Company, with record net revenues of $153.3
billion and profitable growth in both of our main business segments. CVS Health
performed favorably against the S&P 500 and the Retail index on several
critical measures including net revenues, operating profit and operating income.
Our positive 2015 results are reflected in the 2015 Executive Incentive Plan
payouts to our named executive officers, or NEOs; similarly, the positive
performance from 2013-2015 to improve Return on Net Assets is reflected in the
LTIP payouts to our NEOs.
The Committee approved the following
changes that became effective in 2015:
● |
We
modified our peer group to more closely align it with the Companys retail
and health care businesses; and |
● |
We affirmed our existing commitment
to our broad policy against tax gross-ups, particularly as it pertains to
our executive officers. |
Conclusion;
Resolution
We urge stockholders to
read the CD&A beginning on page 35 of this proxy statement, which describes
in more detail how our executive compensation policies and procedures operate
and are designed to achieve our compensation objectives, as well as the Summary
Compensation Table and other related compensation tables and
narrative appearing on pages 53 through 63, which provide detailed information on
the compensation of our NEOs. The Committee and the Board of Directors believe
that the policies and procedures articulated in the CD&A are effective in
achieving our goals and that the compensation of our NEOs reported in this proxy
statement has contributed to CVS Healths long-term success.
Stockholders are being asked to vote on
the following resolution:
RESOLVED, that the stockholders approve, on an advisory basis, the
compensation of the CVS Health executive officers named in the Summary
Compensation Table, as disclosed pursuant to the SECs compensation disclosure
rules (which disclosure includes the Compensation Discussion and Analysis, the
compensation tables and other narrative executive compensation
disclosures).
The Board
of Directors unanimously recommends a vote FOR
this proposal. |
34 |
|
2016 Proxy Statement |
Table of Contents
|
|
Executive Compensation and Related
Matters |
Compensation Discussion
And Analysis Overview
Our Performance
For CVS Health, 2015 was a successful year. Here are some
highlights:
Financial
highlights
● |
We generated record revenues and
healthy profit growth across the enterprise. |
● |
Year-over-year, our pharmacy
services segment revenues were up 13.5% and our retail/long-term care
segment revenues rose 6.2%. |
● |
We had a successful 2016 PBM selling
season, with gross client wins of $14.8 billion and net new client
business of $12.7 billion. |
● |
Operating Profit, a component of our
management incentive plan, increased by 7.4%
year-over-year. |
● |
Return on Net Assets (RoNA), the
performance measure for our three-year long-term incentive plan, exceeded
its target for the 2013-2015 performance period by
1.9%. |
● |
Total shareholder return (TSR) for
2015 was 2.9%, outpacing both the retail sector index and the S&P 500
index as a whole. |
● |
The Company generated free cash flow
of $6.5 billion and returned more than $6 billion to stockholders through
dividends and share buybacks. |
|
Net Revenues
($ billions) |
|
|
Operating
Profit ($ billions) |
|
|
2013-2015
Return on Net Assets (%) |
|
|
1 year growth of 10.0% |
|
|
1 year growth of 7.4% |
|
|
Exceeded target by 1.9% |
|
|
|
|
|
|
|
|
|
|
|
Total
Shareholder Return (TSR) (%) |
|
|
Annual Cash
Dividends ($ per share) |
|
|
Outperformed S&P 500 in all three
periods |
|
|
1 year increase of 27.3% |
|
|
|
|
|
|
|
For more information on our financial
performance and strategy, please refer to our Annual Report available at
www.cvshealthannualmeeting.com. |
CVSHealthannualmeeting.com
|
|
35 |
Table of Contents
Executive Compensation and Related
Matters |
|
|
Our Compensation
Core Principles
Our executive compensation program has
five core principles that drive our executive compensation philosophy.
Management and the Committee believe these principles motivate our executive
officers to take personal responsibility for the performance of the business and
deliver long-term stockholder value, consistent with CVS Healths core values of
Innovation, Collaboration, Caring, Integrity and Accountability:
|
|
Support, Communicate and Drive
Achievement |
|
Of our business strategies and
goals. |
|
|
Attract and Retain |
|
The highest-caliber executive officers by providing
compensation opportunities comparable to those offered by other companies
with which we compete for business and talent. |
|
|
Motivate
High Performance |
|
From executive officers in an incentive-driven culture by
delivering greater rewards for superior performance and reduced awards for
underperformance. |
|
|
Align Interests |
|
Of our executive officers and our stockholders, and
foster an equity ownership environment. |
|
|
Reward Achievement |
|
Of short-term results as well as long-term stockholder
value creation. |
How We Pay Our Executives |
|
|
Our 2015 Executive Pay |
|
|
|
|
We achieve these objectives by
employing the following elements of pay for our executives:
●Base
salary
●Annual cash
incentives
●Annual equity incentives,
generally vesting over three to five years, in the form of RSUs and stock
options
●Long-term performance-based
incentives to reward achievement over a three-year period, generally
payable in cash and common stock; beginning with the 2016 grant (to be
reported in our 2017 proxy statement), long-term incentive plan awards
will be settled 100% in common stock that will remain subject to a
two-year holding period
●Retirement and health
benefits
●Limited
perquisites
|
|
|
The following shows the breakdown of
reported 2015 compensation for our CEO and our other named executive
officers.
|
For
more information on our compensation core principles, and how we pay our
executives, please refer to pages 39-40 of this proxy statement. |
|
|
For
more information on reported 2015 compensation for our CEO and our other
named executive officers, please refer to the Summary Compensation Table
on page 53 of this proxy statement. |
36 |
|
2016 Proxy
Statement |
Table of Contents
|
|
Executive Compensation and Related
Matters |
Leading Practices
in Compensation Programs
Our pay practices align with our core
compensation principles and facilitate our implementation of those principles.
They also demonstrate our commitment to sound compensation and governance
practices.
Our executive compensation program motivates
executive officers to take personal responsibility for the
performance of CVS Health |
|
✓ |
Core Executive
Compensation Principles Designed to Promote Company Growth |
|
✓ |
Performance Measures Aligned with Stockholder
Interests |
|
✓ |
Majority of the Total Compensation Opportunity is
Performance-Based |
|
✓ |
LTIP
Awards Settled in Common Stock that is Subject to Retention Requirement
(Holding Period) |
|
✓ |
Stock Ownership
Guidelines |
We apply leading
executive compensation practices |
|
✓ |
No Excise Tax Gross-Ups |
|
✓ |
No Option
Repricing |
|
✓ |
No
Recycling of Shares |
|
✓ |
Recoupment
Policy |
|
✓ |
Broad
Anti-Pledging and Hedging Policies |
|
✓ |
Executive Severance Policy |
|
✓ |
Limited Perquisites and Personal Benefits |
|
✓ |
SERP
Closed to New Participants |
|
✓ |
Double Trigger Vesting of Equity Awards |
|
✓ |
Board Committee
Oversight of Comprehensive Annual Compensation Program Risk
Assessment |
For more information on our compensation
practices, please refer to pages 39-52 of this proxy
statement. |
Stockholder
Outreach - Compensation Actions
During the fall of 2014, we reached out to stockholders and offered to
discuss our compensation programs, corporate governance and any other matters.
We also had discussions with one of the leading proxy advisory firms, and
obtained feedback from our institutional investors by means of an independent,
third-party platform that provided collective data and comments. These
conversations led us to redesign our 2015 proxy statement, clarify the
explanation regarding our prohibition on tax gross-ups, modify our peer group
and amend our stock option grant policy to explicitly prohibit the re-pricing of stock
options without stockholder approval.
In 2015 we received a high level of
stockholder support for our executive compensation program, with a 94% vote in
favor. During the fall of 2015, we
contacted our 50 largest stockholders, holders of
approximately 50% of our common stock, and offered to discuss our compensation
programs, corporate governance and any other matters. We had discussions with
several stockholders and all were generally pleased with our business results
and the link between performance and the compensation earned by key
executives.
The design of our long-term incentive plan
(LTIP) was a common discussion point. The current structure for this plan is
for awards that are subject to overlapping three-year cumulative performance
periods, earned based on a Return on Net Assets metric, with settlement being
equally divided between CVS Health common stock and cash. Several stockholders
expressed a preference for the settlement of LTIP awards fully in common stock.
The Committee discussed this matter in early 2016, and decided that beginning
with LTIP grants for the 2016-2018 performance period, settlement will be made
fully in common stock that will continue to have a required two-year holding
period following settlement date.
Also during our 2015 outreach program,
several stockholders suggested that the CEO long-term incentive components
should be more heavily weighted towards performance-based awards rather than
time-based awards. For 2015, the weighting was 60% time-based RSUs and stock
options and 40% performance-based LTIP. Beginning with the 2016 long-term
incentive grants, we provided our CEO with a target long-term incentive pay mix
that is split evenly between the performance-based LTIP program, and time-based
RSUs and stock options. The Committee believes that this combination of
long-term elements provides appropriate balance in support of the long-term
growth of the Company.
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Executive Compensation and Related
Matters |
|
|
WHAT WE HEARD |
|
WHAT WE HAVE DONE IN RESPONSE |
|
INTENDED OUTCOME |
|
WHEN EFFECTIVE |
You deliver a portion of performance-based
long-term incentives in cash; the Company should consider settling future
LTIP awards fully in common stock |
➔ |
Shift to 100% common stock-settled awards starting with the
2016-2018 LTIP cycle |
➔ |
Brings our practices into better alignment with the
marketplace |
➔ |
2016 awards vesting in 2018; outstanding awards vesting in
2016 and 2017 will continue to be paid in equal amounts of cash and common
stock |
The Company should consider increasing the
portion of CEO long-term incentive pay that is based on awards considered
to be performance-based |
➔ |
Rebalanced the CEOs long-term incentive mix at target to be
evenly split between performance-based LTIP and time-based RSU and stock
option awards, versus current mix of 60% time-based and 40%
performance-based |
➔ |
Increases the portion of the CEOs compensation that is
considered to be performance-based |
➔ |
2016 awards |
Supporting our
Executive Compensation Program
We believe that our executive compensation
program is consistent with our core compensation principles and is
structured to assure that those principles are implemented. Through our
stockholder outreach program, we have obtained helpful feedback on the
program and have made certain modifications to implement our stockholders
suggestions. With those changes, we believe that our major stockholders
generally approve of our core compensation principles and our executive
compensation program, and we believe our stockholders as a whole should
support them as well. |
38 |
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2016 Proxy
Statement |
Table of Contents
|
|
Executive Compensation and Related
Matters |
Compensation Discussion
and Analysis
Introduction
This
section explains how our executive compensation programs are designed and
operate with respect to our named executive officers, who for 2015
are:
● |
Larry J. Merlo, President and Chief
Executive Officer (CEO); |
● |
David M. Denton, Executive Vice
President (EVP) and Chief Financial Officer
(CFO); |
● |
Helena B. Foulkes, EVP and President
CVS Pharmacy; |
● |
Jonathan C. Roberts, EVP and
President CVS Caremark; and |
● |
Thomas M. Moriarty, EVP, Chief
Health Strategy Officer and General
Counsel. |
CVS Health
Values
When determining compensation awards and
incentive payments, the Committee validates that results were achieved in line
with the Companys five core values:
● |
Innovation: Demonstrating openness, curiosity and
creativity in the relentless pursuit of delivering
excellence. |
● |
Collaboration: Sharing and partnering with people to
explore and create things that we could not do on our
own. |
● |
Caring:
Treating people with respect and compassion so they feel valued and
appreciated. |
● |
Integrity: Delivering on our promises; doing what we
say and what is right. |
● |
Accountability: Taking personal ownership for our
actions and their results. |
Executive
Compensation Philosophy and Core Principles
The Committee establishes our executive compensation
philosophy and oversees its implementation. The Committee has identified five
core principles that drive our philosophy and that management and the Committee
believe motivate our executive officers to continually improve our performance
and operations, encourage personal responsibility for performance and deliver
long-term stockholder value.
|
|
Support, Communicate and Drive
Achievement |
|
Of our business strategies and
goals. |
|
|
Attract and Retain |
|
The highest-caliber executive officers by providing
compensation opportunities comparable to those offered by other companies
with which we compete for business and talent. |
|
|
Motivate
High Performance |
|
From executive officers in an incentive-driven culture by
delivering greater rewards for superior performance and reduced awards for
underperformance. |
|
|
Align Interests |
|
Of our executive officers and our stockholders, and
foster an equity ownership environment. |
|
|
Reward Achievement |
|
Of short-term results as well as long-term stockholder
value creation. |
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Executive Compensation and Related
Matters |
|
|
Elements of
Compensation
The Committee believes
each component of our executive compensation program furthers one or more of our
five core principles, as outlined in the following chart:
|
PRINCIPLES SUPPORTED |
COMPENSATION ELEMENT AND KEY
FEATURES |
SUPPORT, COMMUNICATE AND DRIVE ACHIEVEMENT |
ATTRACT
AND RETAIN |
MOTIVATE
HIGH PERFORMANCE |
ALIGN INTERESTS |
REWARD ACHIEVEMENT |
Base Salary
●Provides minimum, fixed level of cash compensation
commensurate with experience, role and responsibility
●Reviewed annually and adjusted periodically based on
comparability to market peers, position responsibility, individual
qualifications, Company and individual performance and corporate
profitability |
|
|
|
|
|
Annual Cash Incentive
●Rewards near-term value-added decisions
●Targets are set as percentage of base
salary
●Payments reflect performance against operating profit
target
●Maximum pool based on small percentage of Adjusted Net
Income and maximum payouts are capped as a percentage of base
salary |
|
|
|
|
|
Long-Term Incentive Plan (LTIP)
●Rewards multi-year financial success
●Target awards are established at start of cycle based on
competitive pay information, level of responsibility, and desired mix of
long-term incentive pay relative to other pay components
●Historically have been paid equally in cash and common
stock based on meeting pre-established performance goals during
performance cycles; starting with the 2016-2018 performance cycle, awards
will be settled 100% in common stock
●Minimum performance threshold (below which no payment
will be made) and capped maximum payouts
●Executive prohibited from selling or trading shares for
two years following payment date |
|
|
|
|
|
Stock Options and Restricted Stock Units
(RSUs)
●Rewards creation of long-term value by encouraging
executives to focus on long-term financial progress
●Annual nonqualified stock option grants with seven-year
terms that vest in four equal installments on first, second, third and
fourth anniversaries of the grant date and return value only to extent
that stock price appreciates
●Annual RSU awards vest upon continued employment; annual
RSU awards for named executive officers vest in two equal installments, on
third and fifth anniversaries of grant date
●Target awards established based on competitive pay
information, level of responsibility and emphasis on long-term incentive
pay as key component of the executive pay program |
|
|
|
|
|
Deferred Compensation Plan and Deferred Stock
Compensation Plan (DSP)
●Provide savings in a tax-efficient manner and enhance
focus on stock ownership
●Offers variety of investment choices, none of which
represents an above-market return, with up to a 5% match on eligible
deferred compensation, offset by match under qualified defined
contribution plan
●DSP units fluctuate in value based on the performance of
common stock |
|
|
|
|
|
40 |
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2016 Proxy
Statement |
Table of Contents
|
|
Executive Compensation and Related
Matters |
Linking Pay to
Performance
For 2015, as in
previous years, the Committee reviewed an historical assessment of the
relationship between CVS Healths performance and executive pay relative to our
2015 Peer Group (as described below). The following graphs illustrate the
results of the Committees core assessment and illustrate the relationship
between:
|
(1) |
our CEOs real compensation (base salary earned,
incentives earned, value of restricted shares or RSUs that vest during the
period, value of stock options exercised during the period, and changes in
value of unvested restricted shares/RSUs and unexercised options held
during the period); and |
|
|
|
(2) |
CVS Healths performance as measured by total
shareholder return (TSR) over one-year (2014) and three-year (2012
2014) periods (the most recent periods for which financial and
compensation data were available at the time). |
In the following graphs, data points that
are within the shaded area designate ideal pay-performance relationships. Data
points below the shaded area identify peer companies where pay was lower than
expected given the organizations performance, and those data points above the
shaded area suggest the opposite.
1-Year CEO Compensation Realized Percentile vs. Total
Shareholder Return Percentile |
|
|
3-Year CEO Compensation Realized Percentile vs. Total
Shareholder Return Percentile |
|
|
|
|
In the
graph above, compensation realized by CVS Healths CEO in 2014 ranked at
the 84th percentile, our TSR ranked at the 89th
percentile, indicating that our CEOs realized compensation was in the
range that characterizes an ideal pay-for-performance alignment. |
|
|
Similarly, the graph above illustrates the relationship between CEO
pay rank and the relative return to stockholders for CVS Health and the
2015 Peer Group over the 3-year period 2012 to 2014. Relative compensation
rests just outside of the range that characterizes ideal
pay-for-performance alignment. |
These assessments demonstrate the
Committees commitment to maintaining practices that ensure our executive
compensation aligns with results in a manner that benefits our
investors.
Annual
Decision-Making Process
Pay
Positioning. Each year, our management
recommends for Committee approval financial performance targets that are
challenging and, if achieved, would deliver superior value to stockholders.
Consistent with these ambitious performance targets, CVS Health positions its
aggregate target total direct compensation (base salary plus annual and
long-term incentives) for its executive officers at competitive pay levels using
the median of our peer group for reference. Positioning varies by job and the
Committee considers a number of factors including market competitiveness,
specific duties and responsibilities of the executive versus those of peers and
succession planning. The Committee believes it is appropriate to reward the
executive management team with compensation above the competitive median if the
ambitious financial targets associated with the variable pay programs are
exceeded in a way that is consistent with the Companys core values. Conversely,
if the financial targets are not met, awards are reduced to levels that rest
below the median.
Benchmarking. Each year, the Committee reviews the peer group against which financial
performance and compensation competitiveness are assessed. The 2015 Peer Group
was constructed to recognize that CVS Health competes for talent outside of its
specific industry segments. The 2015 Peer Group consisted of the
following
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Matters |
|
|
companies from across general industry
that are similar to CVS Health in terms of industry affiliation, labor market,
and operating and character image:
2015 PEER GROUP MEMBERS |
|
REVENUES FOR 12 MONTHS ENDED DECEMBER 31, 2015
($B) |
|
MARKET CAPITALIZATION AS OF DECEMBER 31, 2015
($B) |
AmerisourceBergen Corp. |
|
$139.1 |
|
$21.5 |
The
Boeing Company |
|
96.1 |
|
97.0 |
Comcast Corporation |
|
74.5 |
|
138.7 |
Costco Wholesale Corporation |
|
116.6 |
|
71.0 |
Express Scripts Holding Company |
|
101.8 |
|
59.1 |
The
Home Depot, Inc. |
|
86.7 |
|
167.7 |
Johnson & Johnson |
|
70.1 |
|
284.3 |
The
Kroger Co. |
|
108.9 |
|
40.4 |
Lowes Companies, Inc. |
|
58.4 |
|
69.7 |
McKesson Corporation |
|
189.1 |
|
45.4 |
Merck & Co., Inc. |
|
39.5 |
|
148.0 |
PepsiCo, Inc. |
|
63.1 |
|
146.1 |
Pfizer Inc. |
|
48.9 |
|
199.3 |
The
Procter & Gamble Company |
|
69.4 |
|
216.0 |
Target Corporation |
|
73.9 |
|
44.9 |
UnitedHealth Group Incorporated |
|
157.1 |
|
112.1 |
Walgreens Boots Alliance, Inc. |
|
112.9 |
|
92.4 |
Wal-Mart Stores, Inc. |
|
484.0 |
|
196.8 |
The
Walt Disney Company |
|
54.3 |
|
178.6 |
CVS Health Corporation |
|
$153.3 |
|
$107.6 |
Percentile,
Relative to 2015 Peer Group |
|
88% |
|
48% |
2016 Peer
Group
In late 2015, the Committee approved a new
peer group to be used to make award recommendations and set target compensation
levels for 2016. In consultation with its independent compensation consultant,
the Committee removed Lowes Companies, Inc. from the peer group, as there was a
lower level of overall comparability to CVS Health than the other peer group
companies. No other changes were made. The Committee believes that the peer
group is a good representation of the market in which CVS Health competes for
talent, when taking into consideration CVS Healths size, industry affiliation,
and operating model.
Annual
Decision-Making
Preliminary financial results and total
compensation market data for our executives are reviewed in November of each
year, together with any stockholder comments received on our executive
compensation program.
The following January, the Committee
reviews preliminary financial results with respect to TSR, growth in revenue,
GAAP operating income growth, and diluted GAAP EPS growth and considers
incentive award payouts for the completed fiscal year. For named executive
officers other than the CEO, final decisions on actual incentive awards for the
prior year are made in February after Committee review of the CEOs assessment
of individual executive contribution and performance.
The CEOs performance is reviewed
separately. In January, the CEO presents to the independent directors a
self-assessment of his performance against his Board-approved strategic,
operational and financial goals. The Chairman of the Board and the Committee
Chair then meet privately with all of the independent directors to consider the
CEOs performance. Committee members consult with their independent compensation
consultant and consider the independent directors assessments in reviewing the
CEOs total compensation and determining his annual incentive compensation award
and equity compensation grants.
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2016 Proxy
Statement |
Table of Contents
|
|
Executive Compensation and Related
Matters |
The final step in the annual planning and
decision making process occurs in the February March timeframe, when the
Committee establishes financial targets and approves any base salary changes and
individual target incentive award levels for the current year. The annual cycle
of reviewing and developing the Companys executive compensation programs and
pay levels is a multi-step process that incorporates input from management, peer
group information, consideration of say-on-pay results, and both short- and
long-term Company results compared to objectives, as well as consultation with
an independent compensation consultant.
Throughout the annual compensation cycle,
Committee decisions incorporate and reflect our deep commitment to the Companys
five core values: Innovation, Collaboration, Caring, Integrity, and
Accountability.
Pay
Mix
Cash
versus Non-Cash Compensation
The Committee recognizes the competitive
need for an appropriate amount of cash compensation, comprised of base salary,
annual incentive pay and the cash portion of a long-term target incentive award.
As part of its annual review of the competitiveness and effectiveness of our
compensation program, the Committee monitors the relative levels of cash and
non-cash compensation to ensure that the mix includes appropriate amounts of
both components.
Fixed
versus Variable Compensation |
|
|
|
|
|
|
|
|
|
The annual incentive program,
long-term target incentive plans and service-based equity award program
tie a significant amount of variable compensation to an executives
continued employment (subject to the vesting and forfeiture provisions of
our incentive plan and individual equity grant agreements) and the
performance of CVS Health common stock over the vesting and option
exercise periods.
For fiscal year 2015, the percentage
of target total direct compensation represented by at-risk pay (target
annual incentives and long-term incentives consisting of stock options,
RSUs and long-term performance incentive awards) for CVS Healths named
executive officers was as set forth in the table to the
right: |
|
|
Target Total
Direct Compensation Mix (%)
|
|
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|
|
Components of
Executive Compensation Program and 2015 Compensation
Decisions
The Committee recognizes
that while stock prices are generally a good indicator of corporate performance
over time, external factors that are beyond CVS Healths influence may impact
its stock price. Consequently, in addition to stock price, the Committee
believes that other performance indicators, including profitability and sound
financial management of our working capital, should also be factored into our
executive compensation program. The Committee has designed its executive
compensation program in a manner intended to achieve these objectives by
balancing fixed and variable pay, as well as long- and short-term
incentives.
Base
Salary
The Committee annually reviews the base
salaries of all senior officers, including the named executive officers, and
adjusts them as needed to maintain competitiveness and consistency with evolving
responsibilities. The process includes an analysis by our independent
compensation consultant of the responsibilities and associated total
compensation of each executive as related to the total compensation of
comparable executives in our peer group. Upon consideration of this competitive
market analysis as well as consideration of contributions and results, the base
salaries for our named executive officers were increased in April 1, 2015 as
illustrated below. The primary factors for the salary increases for Messrs.
Denton and Roberts and Ms. Foulkes were market adjustments, in conjunction with
their ongoing contributions and performance. Other considerations in addition to
the market review that were incorporated into the changes include: for Mr.
Merlo, his critical role in rebranding our company to CVS Health, enhancing our
focus towards a greater commitment to improving consumer health care
experiences, and for driving related innovations; and for Mr. Moriarty,
expansion of his responsibilities to include health care strategy, enterprise
business development, pharmaceutical purchasing and retail network
contracting.
EXECUTIVE NAME AND 2015 TITLE(S) |
|
2014 SALARY |
|
2015 SALARY |
|
PERCENTAGE INCREASE |
Larry J. Merlo, President and CEO |
|
$1,350,000 |
|
$1,630,000 |
|
21% |
David M. Denton, EVP and CFO |
|
$825,000 |
|
$850,000 |
|
3% |
Helena B. Foulkes, EVP and |
|
$850,000 |
|
$950,000 |
|
12% |
President CVS Pharmacy |
|
|
|
|
|
|
Jonathan C. Roberts, EVP and |
|
$900,000 |
|
$950,000 |
|
6% |
President CVS Caremark |
|
|
|
|
|
|
Thomas M. Moriarty, EVP, Chief
Health |
|
$670,000 |
|
$750,000 |
|
12% |
Strategy Officer and General Counsel |
|
|
|
|
|
|
Annual Incentive
Awards
The Executive Incentive Plan (the EIP)
was originally established in 2014 and is designed to provide flexibility around
incentive payouts to named executive officers by rewarding achievement of
certain objectives and strategic growth initiatives while preserving the tax
deductibility of those payments under Internal Revenue Code Section 162(m) (IRC
162(m)). Under the EIP, a maximum pool is created that can be used to pay
annual incentives to named executive officers. For 2015, the pool formula was
0.5% of Adjusted Income from Continuing Operations Attributable to CVS Health.
At the beginning of 2015, the Committee established a target for each named
executive officer as a reference point to determine actual payouts. The target
award opportunity is expressed as a percentage of base salary and is determined
using a variety of factors, including CVS Healths 2015 Peer Group practices and
the desired ratios of cash to non-cash and fixed to variable compensation for
each named executive officer. The Committee also set individual limits on
awards, expressed as a percentage of the pool and salary.
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2016 Proxy
Statement |
Table of Contents
|
|
Executive Compensation and Related
Matters |
Since market compensation practices,
including incentive opportunity, differ by job, our target bonus opportunities
as a percentage of base salary vary for our named executive officers, as
follows:
EXECUTIVE NAME |
|
TARGET OPPORTUNITY AS A PERCENTAGE
OF SALARY |
|
MAXIMUM PORTION OF POOL |
|
MAXIMUM PAYOUT AS A PERCENTAGE
OF SALARY |
Larry J. Merlo |
|
200% |
|
30.0% |
|
500% |
David M. Denton |
|
150% |
|
15.0% |
|
400% |
Helena B. Foulkes |
|
150% |
|
15.0% |
|
400% |
Jonathan C. Roberts |
|
150% |
|
15.0% |
|
400% |
Thomas M. Moriarty |
|
150% |
|
15.0% |
|
400% |
2015 Management
Incentive Plan Funding
As a starting point for evaluating annual
EIP awards, the Committee considered performance results under our Management
Incentive Plan (the MIP), a program maintained for a broad portion of the
employee population, and for our named executive officers prior to the
establishment of the EIP.
The 2015 performance targets under the MIP
were as follows:
|
|
OPERATING PROFIT (80% WEIGHTING) |
|
RETAIL CUSTOMER SERVICE/PBM
CLIENT SATISFACTION (20% WEIGHTING) |
|
|
LEVEL OF PERFORMANCE ACHIEVED |
|
LEVEL OF PAYOUT % OF TARGET |
|
Below Minimum |
|
<96.9% of Target |
|
0% |
|
0% |
Threshold |
|
96.9% of Target |
|
30% |
|
25% |
Target |
|
$9,563.0 million |
|
100% |
|
100% |
Maximum |
|
>102.5% of Target |
|
200% |
|
100% |
Actual |
|
$9,586.0 million |
|
100% |
|
96.5% |
Funding (adjusted for Retail Customer Service/PBM Client
Satisfaction) |
|
|
|
99.3% |
|
|
The Committee used MIP funding of 99.3% as
its starting point for evaluating actual payments under the EIP because it
believes that Operating Profit, Retail Service and PBM Client Satisfaction are
appropriate performance metrics for annual incentives and that each named
executive officer is responsible for delivering on those metrics. The Committee
also believed that these metrics were challenging and would serve as an
appropriate measure of managements success in delivering short-term stockholder
value while maintaining momentum toward the achievement of longer-term financial
progress.
The Committee exercises judgment in
determining individual EIP awards and does not assign specific weights to the
factors it considers. Mr. Merlos annual incentive award for 2015 was modestly
above his applicable reference point and significantly below his maximum payout
allowed under the EIP, as shown in the table on page 46. His award was
determined based on his overall contributions to enterprise performance,
including leadership during the acquisitions of Omnicare, Inc. and the pharmacy
and clinic businesses of Target Corporation (the Target transaction), while
positioning the Company for further growth and improvements in the consumer
health care business. Specifically, Mr. Merlo expanded the breadth of the
Companys leading assets by adding the long-term pharmacy care channel and expanding
the retail outlet through the Target transaction. The addition of these
integrated assets enables the Company to partner more broadly across the health
care landscape with payors, patients and providers. In making its incentive
award decision, the Committee acknowledged that Mr. Merlo provided outstanding
leadership in driving the growth of the Company. The primary factors in
determining the 2015 annual incentive awards for the remaining named executive
officers were: for Mr. Denton, his efforts to generate free cash flow,
strengthen our balance sheet and improve our working capital position, in
addition to providing critical leadership with the financing transactions
associated with acquisitions; for Ms. Foulkes, continued strong performance in
the retail/long-term care segment with year-over-year revenue growth of 6.2% and
the successful consummation of the Target transaction; for
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Table of Contents
Executive Compensation and Related
Matters |
|
|
Mr. Roberts, significant contributions to
the Company and continued strong performance in the pharmacy services business,
including the successful 2016 PBM selling season with gross client wins of $14.8
billion and net new client business of $12.7 billion, in addition to
year-over-year pharmacy services segment revenue growth of 13.5%; and for Mr.
Moriarty, significant achievement in advancing our position on strategic matters
including health care strategy, enterprise business development, and oversight
of our leading generic sourcing venture, Red Oak, as well as providing
substantial leadership related to our acquisitions.
The following table shows the actual
annual incentive award payouts earned based on the factors outlined
above:
2015 Executive
Incentive Plan Awards
|
|
RANGE OF POTENTIAL
PAYMENTS |
EXECUTIVE NAME |
|
BASE SALARY |
|
MINIMUM |
|
99.3% OF REFERENCE TARGET BASED ON MIP
RESULTS |
|
MAXIMUM PERMITTED UNDER CAP AS A %
OF SALARY |
|
ACTUAL EIP AWARD FOR 2015 |
Larry J. Merlo |
|
$1,630,000 |
|
$0 |
|
$3,237,180 |
|
$8,150,000 |
|
$3,725,000 |
David M. Denton |
|
$850,000 |
|
$0 |
|
$1,266,075 |
|
$3,400,000 |
|
$1,450,000 |
Helena B. Foulkes |
|
$950,000 |
|
$0 |
|
$1,415,025 |
|
$3,800,000 |
|
$1,415,000 |
Jonathan C. Roberts |
|
$950,000 |
|
$0 |
|
$1,415,025 |
|
$3,800,000 |
|
$1,770,000 |
Thomas M. Moriarty |
|
$750,000 |
|
$0 |
|
$1,117,125 |
|
$3,000,000 |
|
$1,300,000 |
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Incentive Compensation
The
Committee believes strongly in the use of long-term incentive compensation
for executives to reinforce four strategic
objectives: |
● |
Focus on the importance of
returns to stockholders; |
● |
Promote the achievement of
long-term performance goals; |
● |
Encourage executive retention;
and |
● |
Promote meaningful levels of Company stock
ownership by executives. |
The key elements of the Companys
long-term incentive compensation plans (the LTI plans) are:
|
(1) |
an annual stock option and RSU
grant, which vest upon continued employment with the Company,
and |
|
|
|
(2) |
long-term performance incentive
awards under our long-term incentive plan (LTIP), generally paid equally
in cash and Company common stock, to reward financial success over periods
greater than one year. |
The Committee believes that the LTI plans
properly balance the incentives required to drive achievement of the four
strategic objectives above, with the amount and timing of the rewards dependent
on the successful achievement of Company objectives. The structure also
reinforces the alignment between executive and stockholder interests. All three
of these long-term compensation elements are delivered under the provisions of
our 2010 Incentive Compensation Plan (ICP).
On the following pages we discuss targets
set for long-term performance incentive awards for the 2015-2017 performance
period, as well as payouts for the 2013-2015 performance period. Payouts for
these cycles, as well as for the 2014-2016 performance period, will be paid
equally in cash and Company common stock. Starting with the 2016-2018
performance cycle, awards will be settled 100% in Company common stock.
Executives will be permitted to have the Company withhold shares to satisfy tax
withholding obligations. Shares issued will continue to be subject to a two-year
holding requirement.
As described above, this modification is
responsive to suggestions received from our stockholders during our 2015
stockholder outreach effort. Settling the long-term performance incentive awards
in this way will result in a change to our Summary Compensation Table disclosure
methodology starting with the 2017 proxy statement because future awards will be
reported entirely in the non-equity incentive plan column in the year of
payment, following the three-year performance cycle.
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Executive Compensation and Related
Matters |
To determine the overall opportunity and
appropriate mix of equity instruments, the Committee considers a variety of
factors, including competitive market positioning against comparable executives
of the companies in the 2015 Peer Group, potential economic value realized,
timing of vesting and taxation. Along with a review of 2015 Peer Group long-term
incentive award practices, the Committee considers the retentive value of the
unvested equity awards held by each executive officer to determine whether
additional awards to secure continued employment with the Company are warranted.
For named executive officers other than the CEO, the Committee also considers
the CEOs recommendations.
2015
Long-Term Incentive Opportunities and Awards |
|
|
|
|
|
|
|
|
|
The Committee reviewed all aspects
of our LTI plans, including competitiveness of the executives target
award opportunities, the impact on shares outstanding and the timing and
potential economic impact offered by future vesting of RSU grants and
vesting and exercise of stock option grants. Based on this review, the
Committee adopted the target mixes for long-term incentives for named
executive officers in 2015 set forth in the table to the right. The target
for LTIP reflects awards granted in 2015 for the 2015-2017 performance
period. Payment, if any, with respect to the award depends on performance
against long-term goals and would not be made until 2018. The targets for
options and RSUs reflect targets for awards that will be granted in 2016
based on 2015 performance. Actual awards vary based on individual
performance.
The Committee annually reviews the
weighting and components of our long-term incentive (LTI) compensation
programs. The structure currently in place provides for an equal weighting
of performance-based LTI (LTIP) and time-based LTI (RSUs and stock
options) for NEOs other than the CEO. During our 2015 outreach program, several stockholders suggested that
the CEO LTI weighting should also be equally split, rather than the
current weighting of 60% time-based and 40% performance-based. Beginning
with the 2016 LTI grants, we will align the CEO with the other NEOs by
providing our CEO with an LTI pay mix that is split evenly between the
LTIP program on one hand, and RSUs and stock options on the other
hand. |
|
|
Long-Term
Incentive Target Mix (%)
|
|
As in the past, each of our performance-
and equity-based long-term incentives will continue to be earned independently,
meaning that successful achievement of any of the financial goals established
for any of the LTI plans will not trigger or accelerate vesting of the RSU or
stock option grants; similarly, any awards payable under the LTIP will be based
solely on results as measured against the relevant performance metric and will
not be affected by any value realized by the RSU or stock option
grants.
2015 Option and RSU Grants. Equity
grants are made on a predetermined date consistent with the Committees equity
grant practices. For fiscal 2015, the grant date was April 1, the first business
day of the second quarter. The full grant date fair value of stock options and
RSUs granted to each named executive officer during fiscal 2015 is shown in the
Summary Compensation Table on page 53. Options have a term of seven years and
typically vest in four equal annual installments. The annual RSU grants to our
named executive officers vest in two equal installments: 50% on the third
anniversary of the grant date and 50% on the fifth anniversary of the grant
date.
Additional information about the 2015
awards to each of our named executive officers, including stock option exercise
price and the number of shares subject to each award, is shown in the Grants of
Plan-Based Awards Table on page 55.
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|
2015-2017 LTIP Awards. The LTIP focuses on
sustainable financial progress and optimal use of the Companys assets, to
improve our working capital and free cash flow, modified by the markets view of
the Companys achievements through TSR. The LTIP for the three-year performance
period from 2015-2017 is based on performance against our three-year return on
net assets goal. The Committee included a relative shareholder return modifier
to the LTIP awards. As a result, LTIP awards will be reduced or increased if
total shareholder return over the three-year performance period relative to the
S&P 500 falls outside of a defined range. Specifically, after the return on
net assets performance results are certified, the award will be modified up or
down as follows:
IF TOTAL SHAREHOLDER RETURN OVER THE THREE-YEAR PERFORMANCE
PERIOD IS: |
|
THEN THE MULTIPLIER IS: |
At
or above 66th percentile |
|
125% |
At
or above the 33rd percentile and below the 66th
percentile |
|
100% |
Below the 33rd percentile |
|
75% |
The Committee believes that the modifier
is designed to result in meaningful adjustments to awards based on relative
total shareholder return, rewarding performance in the top third of the S&P
500 and penalizing performance in the bottom third, and further believes that
this is a common approach used in the market.
LTIP awards for the 2015-2017 performance
period are paid in a combination of common stock and cash. Beginning with awards
granted in 2016 for the 2016-2018 performance period, awards will be settled
only in common stock. In either case, all common stock awarded is subject to a
mandatory two-year holding period, which further reinforces an alignment of
executives interests with that of our stockholders. The cash portion of LTIP
awards prior to 2016 is consistent with the overall pay mix determined by the
Committee, and participants may elect to use some or all of the cash portion for
payment of withholding taxes. The target cash portion of the long-term incentive
compensation component generally will not exceed 25% of the total target
long-term compensation.
2015-2017
Performance Period Target Awards
EXECUTIVE NAME |
|
TARGET LTI PLAN AWARD FOR 2015-2017 PERFORMANCE
PERIOD |
Larry J. Merlo |
|
$5,500,000 |
David M. Denton |
|
$2,000,000 |
Helena B. Foulkes |
|
$1,750,000 |
Jonathan C. Roberts |
|
$2,250,000 |
Thomas M. Moriarty |
|
$1,750,000 |
2013-2015 LTIP Awards Payments. All of
the executive officers listed in the Summary Compensation Table received
payments in 2015 for awards granted in 2013 for the 2013-2015 LTIP performance
period. The target performance goal was Return on Net Assets (RoNA) of 36.42%.
The following table sets forth minimum, threshold and maximum goals, the range
of potential payouts as a percent of target and the actual results for the
2013-2015 performance period:
|
|
% OF RoNA TARGET |
|
PAYOUT LEVEL AS A % OF TARGET |
Minimum |
|
<98.2% |
|
0% |
Threshold |
|
98.5% |
|
40% |
Target (36.42%) |
|
100.0% |
|
100% |
Maximum |
|
102.6% |
|
200% |
Actual (37.11%) |
|
101.9% |
|
173% |
Relative total shareholder return vs. the
S&P 500 over the three-year period was at the 84th percentile. When the 125%
multiplier was applied, the resulting payout percentage for the 2013-2015 LTIP
was 217%.
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Executive Compensation and Related Matters |
2013 2015 LTI
Plan Opportunities and Actual Award Payments
EXECUTIVE NAME |
|
MINIMUM AWARD (% OF TARGET) |
|
THRESHOLD AWARD (% OF TARGET) |
|
TARGET AWARD (% OF TARGET) |
|
MAXIMUM AWARD (% OF TARGET) |
|
MAXIMUM AWARD AFTER TSR MULTIPLIER (%
OF TARGET) |
|
ACTUAL TOTAL AWARD AT 217% |
|
ACTUAL CASH PORTION OF AWARD ($) |
|
ACTUAL STOCK PORTION OF AWARD (#
OF SHARES) |
|
Larry J. Merlo |
|
0% |
|
40% |
|
100% |
|
200% |
|
250% |
|
$11,935,000 |
|
$5,967,596 |
|
61,412 |
|
David M. Denton |
|
0% |
|
40% |
|
100% |
|
200% |
|
250% |
|
$3,255,000 |
|
$1,627,597 |
|
16,748 |
|
Helena B. Foulkes |
|
0% |
|
40% |
|
100% |
|
200% |
|
250% |
|
$1,736,000 |
|
$868,078 |
|
8,932 |
|
Jonathan C. Roberts |
|
0% |
|
40% |
|
100% |
|
200% |
|
250% |
|
$3,255,000 |
|
$1,627,597 |
|
16,748 |
|
Thomas M. Moriarty |
|
0% |
|
40% |
|
100% |
|
200% |
|
250% |
|
$2,712,500 |
|
$1,356,298 |
|
13,957 |
|
Supplemental
Executive Retirement Plan
We
maintain an unfunded supplemental retirement plan (the SERP), which is
designed to supplement the retirement benefits of selected executive officers.
The SERP is a legacy plan in which participation has decreased over the years as
individuals have retired, and we have not provided SERP benefits to new
participants since 2010. Mr. Merlo is the only active executive officer in the
SERP. Mr. Merlo has reached the maximum amount of service under the SERP based
on his more than 30 years with the Company. As a result, any increase to his
benefit would be primarily as a result of performance-based bonuses. See the
Pension Benefits Table on page 59 for more information.
Other
Benefits
The Company maintains
medical and dental benefits, life insurance and short- and long-term disability
insurance programs for all of its employees. Executive officers are eligible to
participate in these programs on the same basis and with the same level of
financial subsidy as our other salaried employees.
Executive officers may participate in the
CVS Future Fund, which is our qualified defined contribution, or 401(k), plan.
An eligible CVS Health employee may defer up to 85% of his or her total eligible
compensation, defined as salary plus annual incentive, to a maximum defined by
the IRS; in 2015, that maximum was $18,000 plus an additional $6,000 for those
age 50 and above. After the first full year of employment, CVS Health will match
the employees deferral dollar-for-dollar up to a maximum equaling 5% of total
eligible compensation. CVS Healths matching cash contributions into the CVS
Health Future Fund for the named executive officers who participated are a
component of the All Other Compensation Table on page 54.
We offer other benefits that are available
to eligible employees, including executive officers, as follows.
Deferred
Compensation Plan and Deferred Stock Plan
Eligible executive officers may choose to
defer earned and vested compensation into the CVS Health Deferred Compensation
Plan (the DCP) and the CVS Health Deferred Stock Compensation Plan (the
DSP), which are available to any U.S. employees meeting the Plans eligibility
criteria. The plans are intended to provide retirement savings in a
tax-efficient manner and to enhance stock ownership. The DCP offers a variety of
investment crediting choices, none of which represents an above-market return.
The individual contributions of each of the named executive officers during
fiscal 2015 to the DCP and the DSP, including earnings on those contributions,
any distributions during 2015 and total account balances as of the end of 2015,
are shown in the Nonqualified Deferred Compensation Table on page 60.
Perquisites and
Other Personal Benefits
We provide the following personal benefits
to our named executive officers:
● |
Financial planning: An allowance to cover the cost of a
Company-provided financial planner to assist with personal financial and
estate planning. We believe it is important to provide to our executives
the professional expertise required to ensure that they maximize the
efficiencies of our compensation and benefit programs and are able to
devote their full attention to the management of the
Company. |
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|
● |
Limited personal use of corporate aircraft: We maintain corporate
aircraft that may be used by our employees to conduct Company business.
Pursuant to an executive security program established by the Board upon
the Committees recommendation, the CEO is required to use our aircraft
for all travel needs, including personal travel, in order to minimize and
more efficiently use his travel time, protect the confidentiality of his
travel and our business, and enhance his personal security. Certain other
named executive officers were also permitted to use our corporate aircraft
for personal travel on a very limited basis during fiscal
2015. |
● |
Home
security: An allowance to the named executive officers to cover the costs
of the installation and maintenance of home security monitoring systems.
While the Committee believes these security costs are business expenses,
disclosure of these costs as personal benefits is
required. |
The value of all of these items is treated
as income taxable to the executives. We provide no reimbursement nor do we pay
the taxes or any other expenses associated with these costs on behalf of the
executives.
The aggregate incremental cost to the
Company of providing these personal benefits to each of the named executive
officers during fiscal 2015 is shown in the Summary Compensation Table on page
53.
Key Policies
Related to Compensation
Recoupment
Effective with performance cycles
beginning in 2009, we have maintained a recoupment policy that applies to all
annual and long-term incentive awards granted to executive officers. The policy
applies in cases where financial or operational results used to determine an
award amount are meaningfully altered based on fraud or material financial
misconduct (collectively, Misconduct), as determined by the Board, and apply
to any executive officer determined to have been involved in the
Misconduct.
The policy applies to Misconduct committed
during the performance period that is discovered during the performance period
or the three-year period following the performance period. The policy allows us
to recoup the entire award, not only excess amounts generated by the Misconduct,
subject to the determination of the Board, and the policy may apply even where
there is no financial restatement.
CVS Healths
Anti-Gross-Up Policy
CVS Health adopted a broad policy against
tax gross-ups several years ago. It is notable that when the policy was first
adopted, there was an exception for gross-ups payable pursuant to pre-existing
agreements. However, in 2012 our executives amended their existing employment
and change in control agreements to eliminate any tax gross-ups potentially
payable in connection with a change in control. This was done voluntarily, and
without any additional compensation. The only current exception to our
anti-gross-up policy is for tax payments that may be due under our broad-based
relocation policy, which is applicable to a large number of employees (i.e.,
those who must relocate upon hire, transfer or promotion).
Insider Trading
Policy, Including Anti-Pledging and Hedging
A significant percentage of executive
compensation is payable in CVS Health common stock, in the form of RSUs and
stock options. The Board and executive management of CVS Health take seriously
their responsibilities and obligations to exhibit the highest standards of
behavior relative to selling and trading our stock. All transactions in our
stock contemplated by any director, executive officer or designated employee who
has a significant role in, or access to, our financial reporting process
(collectively lnsiders), must be pre-cleared by either the General Counsel or
the Corporate Secretary. Insiders are generally prohibited from trading in any
of our securities except during periods of varying length beginning shortly
after the release of our financial results for each quarter, and Insiders and
other employees may be required to refrain from trading during other designated
periods when significant developments or announcements are anticipated. In
addition, it is our policy that Insiders and other employees may not engage in
any of the following activities with respect to our securities:
● |
Trading in our securities on a short-term basis (stock purchased in
the open market must be held for at least six
months); |
● |
Purchasing stock on margin or
pledging our stock or any stock incentive award as collateral for a loan
or margin account; |
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|
Executive Compensation and Related Matters |
● |
Engaging in short sales or purchases of our
stock; |
● |
Buying or selling puts, calls, exchange traded options or other
derivative securities; or |
● |
Engaging in any other hedging transactions, which includes
transactions designed to offset any decrease in the market value of equity
securities. |
Our most senior executives and Board
members are generally required to transact in our stock pursuant to a 10b5-1
trading plan, and our other executives are encouraged to use trading plans. A
trading plan is a contract that allows the individual to sell a pre-determined
number of shares at a time in the future when conditions in the plan are met.
However, there are extensive guidelines that govern the use of 10b5-1 trading
plans including the timing of entry or modification of a plan, the price at
which shares will be traded, a cooling off period during which no trades can
take place, minimum and maximum terms, restrictions on the number of plans an
individual can maintain, a prohibition on trading outside of the plan, and
pre-approval of plans (and any modification of plans) by the General Counsel or
Corporate Secretary.
Agreements with
Executive Officers
As previously
disclosed, we have an employment agreement (the Employment Agreement) with Mr.
Merlo and change in control agreements (the CIC Agreements, and together with
the Employment Agreement, the Agreements) with Messrs. Denton, Roberts and
Moriarty and Ms. Foulkes.
The Committee believes that the interests
of stockholders are best served by ensuring that the interests of our senior
management are aligned with our stockholders. The change-in-control provisions
of the Agreements are intended to eliminate, or at least reduce, the reluctance
of senior management to pursue potential change-incontrol transactions that may
be in stockholders best interests. The Agreements serve to eliminate
distraction caused by uncertainty about personal financial circumstances during
a period in which CVS Health requires focused and thoughtful leadership to
ensure a successful outcome. Accordingly, the Agreements provide certain
specified double trigger severance benefits to the covered executives in the
event of their termination under certain circumstances following a change in
control. The Committee believes a double trigger severance benefit provision
is more appropriate, as it provides an incentive for greater continuity in
management following a change in control. Double trigger benefits require that
two events occur in order for severance to be paid, typically a change in
control followed by the executives involuntary termination of employment. The
2010 ICP was also amended in 2012 to require a double trigger equity vesting
of change in control benefits.
The Committee reviews the severance
benefits annually with the assistance of its compensation consultant to evaluate
both their effectiveness and competitiveness. The review for fiscal 2015 found
the current level of benefits to be within competitive norms for design. Details
of payments made to the executives upon a change in control and various
termination scenarios; provisions for the treatment of equity awards, SERP and
other benefits; and estimated payments that would be made to the executives
whose employment terminates following a change in control may be found in
Payments/(Forfeitures) Under Termination Scenarios beginning on page
60.
Compliance with IRC
162(m)
IRC 162(m) generally
disallows a tax deduction to public companies for compensation over $1 million
paid to a companys chief executive officer and the three other most highly
compensated executive officers at year end, other than the chief financial
officer. However, qualifying performance-based compensation is not subject to
the deduction limit if certain requirements are met.
The Committee considers the deductibility
of executive compensation under IRC 162(m), but may authorize certain
non-deductible payments in excess of $1 million. As a matter of compensation
design, the Board adopted and stockholders approved the 2010 ICP, under which
the Committee may grant annual equity awards, stock options and certain other
LTI plan awards to senior executives, including the named executive officers.
Certain of the awards granted thereunder are intended to qualify as
performance-based compensation and therefore are not subject to the $1 million
limitation on deductibility. Awards under the EIP, which are earned based on
performance relative to predetermined financial and operating targets, are
designed with the intention that amounts paid to the named executive officers
will qualify as performance-based compensation and therefore be deductible by
CVS Health. However, it is possible that payments under the LTI plans and/or the
EIP could be non-deductible.
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|
The Committee generally intends to design
certain portions of named executive officer compensation that are over $1
million in order to qualify such compensation as performance-based compensation
under IRC 162(m). The Committee believes it is important to retain flexibility
to structure the Companys executive compensation program and practices in a
manner that the Committee determines is in the best interests of the Company and
its stockholders. The Committee retains discretion to operate the Companys
executive compensation programs in a manner designed to promote varying company
goals. As a result, the Committee may from time to time conclude that certain
compensation arrangements are in the best interest of CVS Health and its
stockholders and consistent with its compensation philosophy and strategy
despite the fact that the arrangements might not qualify for tax deductibility.
Elements of the executive compensation program that do not comply with the
deduction rules of IRC 162(m) include base salaries above $1 million and
time-vested RSU awards.
Non-GAAP Financial
Measures Used in Compensation Discussion and Analysis
Throughout this Compensation Discussion and Analysis, we refer
to various financial measures. The majority of these financial measures are
calculated in accordance with U.S. generally accepted accounting principles
(GAAP). However, there are some financial measures that management adjusts in
order to assess our year-over-year performance. These adjusted financial
measures are commonly referred to as non-GAAP. An explanation of how we
calculate these non-GAAP financial measures is included below.
Adjusted Income from Continuing
Operations
Adjusted Income from continuing operations
attributable to CVS Health is defined as follows:
● |
Income before income tax provision |
● |
Plus
(minus): Non-GAAP adjustments not part of the underlying business
performance |
● |
Less:
Adjusted income tax provision (using the adjusted effective tax rate,
adjusted for the items above) |
● |
Plus (minus): Net loss (income)
attributable to noncontrolling interest |
● |
Less: Earnings allocated to
participating securities |
EBIT or Operating Profit
EBIT or Operating Profit is defined as
earnings before interest and taxes adjusted for certain items. For the purposes
of measuring performance against established targets in any period, when
applicable those excluded items comprise certain legal settlements and activity
related to newly acquired or divested businesses.
Free Cash Flow
We define free cash flow as net cash
provided by operating activities less net additions to property and equipment
(i.e., additions to property and equipment plus proceeds from sale-leaseback
transactions).
RoNA or Return on Net
Assets
In calculating RoNA, or return on net
assets, we divide four quarter rolling adjusted net income (loss) attributable
to CVS Health (less the after-tax impact of the excluded items outlined in the
EBIT or Operating Profit description, above) by the most recent eight quarters
average net assets. Net assets for the purposes of this calculation is defined
as current assets plus net fixed assets less accounts payable and accrued
expenses, similarly adjusted to exclude, when applicable, certain legal
settlements and amounts related to newly acquired or divested
businesses.
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|
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Executive Compensation
Tables
Summary
Compensation Table
The following
Summary Compensation Table shows information about the compensation received by
our CEO, CFO and each of our three other most highly compensated executive
officers for services rendered in all capacities during the 2015 fiscal
year.
Summary
Compensation Table
|
NAME & PRINCIPAL 2015 POSITIONS
1 |
|
YEAR |
|
SALARY ($) |
|
BONUS ($) |
|
STOCK AWARDS ($) 2
3 |
|
OPTION AWARDS ($) 3 |
|
NON-EQUITY INCENTIVE PLAN COMPENSATION ($)
4 |
|
CHANGE IN PENSION VALUE
AND NONQUALIFIED DEFERRED COMPENSATION EARNINGS ($)
5 |
|
ALL OTHER COMPENSATION ($) 6 |
|
TOTAL ($) |
|
|
Larry J.
Merlo President and Chief Executive
Officer |
|
2015 |
|
1,560,000 |
|
|
|
6,749,900 |
|
3,999,993 |
|
9,692,596 |
|
6,087,680 |
|
852,885 |
|
28,943,054 |
|
|
|
2014 |
|
1,350,000 |
|
|
|
6,749,996 |
|
3,999,998 |
|
11,465,052 |
|
8,065,273 |
|
720,414 |
|
32,350,733 |
|
|
|
2013 |
|
1,337,500 |
|
|
|
6,750,048 |
|
4,000,002 |
|
8,501,412 |
|
8,467,509 |
|
2,273,691 |
|
31,330,162 |
|
|
David M.
Denton Executive Vice President and
Chief Financial Officer |
|
2015 |
|
843,750 |
|
|
|
1,874,937 |
|
874,999 |
|
3,077,597 |
|
|
|
289,298 |
|
6,960,581 |
|
|
|
2014 |
|
825,000 |
|
|
|
8,928,958 |
|
749,997 |
|
3,975,043 |
|
|
|
205,582 |
|
14,684,580 |
|
|
|
2013 |
|
793,750 |
|
|
|
2,125,028 |
|
1,375,006 |
|
3,430,504 |
|
|
|
1,004,604 |
|
8,728,892 |
|
|
Helena
B. Foulkes Executive Vice President and
President CVS Pharmacy |
|
2015 |
|
925,000 |
|
|
|
1,749,937 |
|
874,999 |
|
2,283,078 |
|
|
|
232,314 |
|
6,065,328 |
|
|
|
2014 |
|
850,000 |
|
|
|
1,249,927 |
|
624,992 |
|
3,165,044 |
|
|
|
174,119 |
|
6,064,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan
C. Roberts Executive Vice
President and President CVS Caremark |
|
2015 |
|
937,500 |
|
|
|
2,124,898 |
|
999,995 |
|
3,397,597 |
|
|
|
280,559 |
|
7,740,549 |
|
|
|
2014 |
|
900,000 |
|
|
|
1,749,988 |
|
874,991 |
|
3,915,058 |
|
|
|
246,386 |
|
7,686,423 |
|
|
|
2013 |
|
900,000 |
|
|
|
1,625,043 |
|
875,007 |
|
3,037,514 |
|
|
|
1,623,783 |
|
8,061,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
M. Moriarty Executive Vice
President, Chief Health Strategy Officer and
General Counsel |
|
2015 |
|
730,000 |
|
|
|
1,624,975 |
|
749,989 |
|
2,656,298 |
|
|
|
163,131 |
|
5,924,393 |
|
|
|
2014 |
|
670,000 |
|
|
|
1,374,958 |
|
749,997 |
|
2,412,573 |
|
|
|
208,194 |
|
5,415,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
Ms. Foulkes became President
CVS Pharmacy effective January 1, 2014; she was previously Chief Health
Care Strategy and Marketing Officer. Mr. Moriarty was given the additional
title of Chief Health Strategy Officer in March 2014; he was previously,
and remains, Executive Vice President and General Counsel. |
2 |
Included in the stock award
column is the full grant date fair value of all RSU awards made to the executive in 2015. Also included is the
portion of the LTIP award for performance years 2015 2017 that would be
made in non-transferable shares at the target level of performance at the
completion of the performance cycles. The amount of the 2015 2017 LTIP
award that is payable in cash at the completion of the performance cycles
will be reported in the 2018 proxy statement. For 2015, the amounts
reported with respect to 2015 RSUs and the LTIP award, respectively, for
each of the named executive officers are as follows: for Mr. Merlo,
$3,999,900 and $2,750,000; for Mr. Denton, $874,937 and $1,000,000; for
Ms. Foulkes, $874,937 and $875,000; for Mr. Roberts, $999,898 and
$1,125,000; and for Mr. Moriarty, $749,975 and $875,000. |
3 |
The figures shown are the full
fair value on the date of grant. For a discussion of the assumptions and
methodologies used to value the stock and option awards, please see the
discussion of stock awards and option awards contained in our 2015 Annual
Report to Stockholders, Notes to Consolidated Financial Statements at Note
10, Stock Incentive Plans. |
4 |
The figures shown include amounts
earned in 2015 as annual cash incentive awards (see page 46) and the cash
portion of the 2013 2015 LTIP cycle (see page 49). |
5 |
The amounts reported in this
column represent only changes in pension value, as the Company does not
pay above-market earnings on deferred compensation. The Company adopted a
policy in 2010 stating that it will not offer SERP benefits to new
participants. Mr. Merlo is the only executive participant in the SERP. For
additional information on the SERP, see Pension Benefits beginning on
page 58. |
6 |
Set forth below is additional
information regarding the amounts disclosed in the All Other Compensation
column for 2015. |
CVSHealthannualmeeting.com
|
|
53 |
Table of Contents
Executive Compensation and Related Matters |
|
|
All Other
Compensation 2015
|
NAME & PRINCIPAL 2015 POSITIONS |
|
PERQUISITES & OTHER
PERSONAL BENEFITS
A ($) |
|
COMPANY CONTRIBUTIONS TO
DEFINED CONTRIBUTION PLANS B ($) |
|
OTHER C ($) |
|
|
Larry J. Merlo |
|
82,592 |
|
307,500 |
|
462,793 |
|
|
President and |
|
|
|
|
|
|
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
|
David M. Denton |
|
16,548 |
|
24,000 |
|
248,750 |
|
|
Executive Vice President and |
|
|
|
|
|
|
|
|
Chief Financial Officer |
|
|
|
|
|
|
|
|
Helena B. Foulkes |
|
19,347 |
|
154,500 |
|
58,467 |
|
|
Executive Vice President and |
|
|
|
|
|
|
|
|
President CVS Pharmacy |
|
|
|
|
|
|
|
|
Jonathan C. Roberts |
|
27,832 |
|
161,375 |
|
91,352 |
|
|
Executive Vice President and |
|
|
|
|
|
|
|
|
President CVS Caremark |
|
|
|
|
|
|
|
|
Thomas M. Moriarty |
|
15,000 |
|
110,250 |
|
37,881 |
|
|
Executive Vice President, |
|
|
|
|
|
|
|
|
Chief Health Strategy Officer |
|
|
|
|
|
|
|
|
and
General Counsel |
|
|
|
|
|
|
|
A |
The amounts above reflect the
following: for Mr. Merlo, $15,000 for financial planning services, $11,141
for home security, $51,201 associated with personal use of company
aircraft and $5,250 associated with the CVS Health Charity Classic; for
Mr. Denton, $15,000 for financial planning services and $1,548 for home
security; for Ms. Foulkes, $15,000 for financial planning services, $2,397
for home security and $1,950 associated with the CVS Health Charity
Classic; for Mr. Roberts, $15,000 for financial planning services, $1,171
for home security, $6,411 associated with personal use of company aircraft
and $5,250 associated with the CVS Health Charity Classic; for Mr.
Moriarty, $15,000 for financial planning services. The Company determines
the amount associated with personal use of Company aircraft by calculating
the incremental cost to the Company based on the cost of fuel,
trip-related maintenance, deadhead flights, crew travel expenses, landing
fees, trip-related hangar costs and smaller variable
expenses. |
B |
For 2015, this amount includes
Company matching contributions to the CVS Health Future Fund of $13,250
for each of Messrs. Merlo, Denton, Roberts and Moriarty and Ms. Foulkes.
It also includes Company matching contributions credited to notional
accounts in the unfunded Deferred Compensation Plan equal to: for Mr.
Merlo $294,250; for Mr. Denton, $10,750; for Ms. Foulkes, $141,250; for
Mr. Roberts, $148,125; and for Mr. Moriarty, $97,000. |
C |
This amount includes cash
dividend equivalents paid by the Company on unvested RSUs as follows: for
Mr. Merlo, $344,249; for Mr. Denton, $248,750; for Ms. Foulkes, $58,467;
for Mr. Roberts, $83,196; and for Mr. Moriarty, $37,881. Also includes
cash dividend equivalents paid by the Company on deferred RSUs, as noted
in the Nonqualified Deferred Compensation table, equal to: for Mr. Merlo,
$118,544 and for Mr. Roberts, $8,156. |
54 |
|
2016 Proxy
Statement |
Table of Contents
|
|
Executive Compensation and Related Matters |
Grants of
Plan-Based Awards
This table reflects awards granted under our annual cash incentive
plan for 2015, the 2015 2017 LTIP cycle, and the
annual equity awards for 2015, which include stock options and RSUs.
Grants of
Plan-Based Awards 2015
|
NAME & PRINCIPAL 2015
POSITIONS |
|
AWARD TYPE |
|
DATE OF COMMITTEE ACTION |
|
GRANT DATE |
|
EST. FUTURE PAYOUTS UNDER
NON-EQUITY INCENTIVE PLAN AWARDS |
|
EST. FUTURE
PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS 1 |
|
ALL OTHER STOCK AWARDS: NUMBER
OF SHARES OF STOCK OR UNITS (#) |
|
ALL OTHER OPTION AWARDS: NUMBER
OF SECURITIES UNDERLYING OPTIONS (#) |
|
EXERCISE OR BASE PRICE
OF OPTION AWARDS ($ / SH) |
|
GRANT DATE FAIR VALUE OF STOCK
AND OPTION AWARDS ($) |
|
THRESHOLD ($) |
|
TARGET ($) |
|
MAXIMUM ($) |
|
THRESHOLD (#) |
|
TARGET (#) |
|
MAXIMUM (#) |
|
Larry J.
Merlo President and Chief
Executive Officer |
|
Stock Options |
|
2/18/2015 |
|
4/1/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
273,929 |
|
102.26 |
|
3,999,993 |
|
|
|
Annual RSUs |
|
2/18/2015 |
|
4/1/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
39,115 |
|
|
|
|
|
3,999,900 |
|
|
|
Annual Cash |
|
|
|
|
|
0 |
|
3,260,000 |
|
8,150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTIP (15-17) |
|
2/18/2015 |
|
2/18/2015 |
|
1,100,000 |
|
2,750,000 |
|
5,500,000 |
|
10,566 |
|
26,416 |
|
52,832 |
|
|
|
|
|
|
|
2,750,000 |
|
|
David M.
Denton Executive Vice
President and Chief Financial Officer |
|
Stock Options |
|
2/18/2015 |
|
4/1/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,922 |
|
102.26 |
|
874,999 |
|
|
|
Annual RSUs |
|
2/18/2015 |
|
4/1/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
8,556 |
|
|
|
|
|
874,937 |
|
|
|
Annual Cash |
|
|
|
|
|
0 |
|
1,275,000 |
|
3,400,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTIP (15-17) |
|
2/18/2015 |
|
2/18/2015 |
|
400,000 |
|
1,000,000 |
|
2,000,000 |
|
3,842 |
|
9,606 |
|
19,212 |
|
|
|
|
|
|
|
1,000,000 |
|
|
Helena B.
Foulkes Executive Vice
President and President CVS Pharmacy |
|
Stock Options |
|
2/18/2015 |
|
4/1/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,922 |
|
102.26 |
|
874,999 |
|
|
|
Annual RSUs |
|
2/18/2015 |
|
4/1/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
8,556 |
|
|
|
|
|
874,937 |
|
|
|
Annual Cash |
|
|
|
|
|
0 |
|
1,425,000 |
|
3,800,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTIP (15-17) |
|
2/18/2015 |
|
2/18/2015 |
|
350,000 |
|
875,000 |
|
1,750,000 |
|
3,362 |
|
8,405 |
|
16,810 |
|
|
|
|
|
|
|
875,000 |
|
|
Jonathan C.
Roberts Executive Vice
President and President CVS Caremark |
|
Stock Options |
|
2/18/2015 |
|
4/1/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,482 |
|
102.26 |
|
999,995 |
|
|
|
Annual RSUs |
|
2/18/2015 |
|
4/1/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
9,778 |
|
|
|
|
|
999,898 |
|
|
|
Annual Cash |
|
|
|
|
|
0 |
|
1,425,000 |
|
3,800,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTIP (15-17) |
|
2/18/2015 |
|
2/18/2015 |
|
450,000 |
|
1,125,000 |
|
2,500,000 |
|
4,322 |
|
10,806 |
|
21,612 |
|
|
|
|
|
|
|
1,125,000 |
|
|
Thomas M.
Moriarty Executive
Vice President, Chief Health Strategy Officer and General
Counsel |
|
Stock Options |
|
2/18/2015 |
|
4/1/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,361 |
|
102.26 |
|
749,989 |
|
|
|
Annual RSUs |
|
2/18/2015 |
|
4/1/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
7,334 |
|
|
|
|
|
749,975 |
|
|
|
Annual Cash |
|
|
|
|
|
0 |
|
1,125,000 |
|
3,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTIP (15-17) |
|
2/18/2015 |
|
2/18/2015 |
|
350,000 |
|
875,000 |
|
1,750,000 |
|
3,362 |
|
8,405 |
|
16,810 |
|
|
|
|
|
|
|
875,000 |
|
1 |
Share numbers determined based on
the closing price of our stock on the applicable grant
date. |
The stock option awards shown above vest in equal
installments on the
first, second, third and fourth anniversaries
of the date of grant and expire in seven years from the
date of grant. As described above, our policy is to establish the exercise price for stock options as the closing price of
our common stock
on the grant date. Annual RSU grants typically vest in increments of 50% on the third
anniversary of the grant
and 50% on the fifth anniversary of the grant. If earned,
a portion of the 2015 2017 LTIP cycle awards will be reported in the
Non-Equity Incentive Plan Compensation column of
the Summary
Compensation Table for
the relevant year
in which payment may be made.
CVSHealthannualmeeting.com
|
|
55 |
Table of
Contents
Executive Compensation and Related
Matters |
|
|
Outstanding Equity
Awards at Fiscal Year-End
This table
reflects stock option and RSU awards granted to our named executive officers
under our 1997 and 2010 ICPs that were outstanding as of December 31,
2015.
Outstanding Equity
Awards at 2015 Year-End
|
STOCK OPTION AWARDS |
|
STOCK AWARDS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NUMBER OF |
|
|
|
EQUITY INCENTIVE |
|
EQUITY
INCENTIVE |
|
|
|
|
NUMBER OF |
|
NUMBER OF |
|
|
|
|
|
|
|
SHARES OR |
|
|
|
PLAN AWARDS: |
|
PLAN AWARDS: |
|
|
|
|
SECURITIES |
|
SECURITIES |
|
|
|
|
|
|
|
UNITS OF |
|
MARKET VALUE OF |
|
NUMBER OF |
|
MARKET VALUE OF |
|
|
|
|
UNDERLYING |
|
UNDERLYING |
|
OPTION |
|
|
|
|
|
STOCK THAT |
|
SHARES OR UNITS |
|
SHARES OR UNITS |
|
SHARES OR UNITS |
|
|
|
|
UNEXERCISED |
|
UNEXERCISED |
|
EXERCISE |
|
OPTION |
|
|
|
HAVE NOT |
|
OF STOCK THAT |
|
OF STOCK THAT |
|
OF STOCK THAT |
NAME &
PRINCIPAL |
|
GRANT |
|
OPTIONS (#) |
|
OPTIONS (#) |
|
PRICE |
|
EXPIRATION |
|
GRANT |
|
VESTED |
|
HAVE NOT |
|
HAVE NOT |
|
HAVE NOT |
2015 POSITIONS |
|
DATE |
|
EXERCISABLE |
|
UNEXERCISABLE |
|
($) |
|
DATE |
|
DATE |
|
(#) |
|
VESTED ($) 1 |
|
VESTED (#) |
|
VESTED ($) 1 |
Larry J. Merlo |
|
4/1/2009 |
|
92,786 |
|
2 |
|
28.10 |
|
4/1/2016 |
|
4/1/2011 |
|
32,180 5 |
|
3,146,239 |
|
|
|
|
President and |
|
4/1/2010 |
|
152,988 |
|
2 |
|
36.23 |
|
4/1/2017 |
|
4/2/2012 |
|
41,602 6 |
|
4,067,428 |
|
|
|
|
Chief Executive
Officer |
|
4/1/2011 |
|
241,150 |
|
3 |
|
34.96 |
|
4/1/2018 |
|
4/1/2013 |
|
73,355 6 |
|
7,171,918 |
|
|
|
|
|
|
4/2/2012 |
|
249,552 |
|
83,184 3 |
|
45.07 |
|
4/2/2019 |
|
4/1/2014 |
|
53,843 6 |
|
5,264,230 |
|
|
|
|
|
|
4/1/2013 |
|
157,356 |
|
157,357 3 |
|
54.53 |
|
4/1/2020 |
|
4/1/2015 |
|
39,115 6 |
|
3,824,274 |
|
|
|
|
|
|
4/1/2014 |
|
83,924 |
|
251,773 3 |
|
74.29 |
|
4/1/2021 |
|
2/18/2014 |
|
|
|
|
|
39,106 9 |
|
3,823,394 |
|
|
4/1/2015 |
|
|
|
273,929 3 |
|
102.26 |
|
4/1/2022 |
|
2/18/2015 |
|
|
|
|
|
26,416 9 |
|
2,582,692 |
David M. Denton |
|
3/5/2008 |
|
12,420 |
|
4 |
|
40.28 |
|
3/5/2018 |
|
4/1/2010 |
|
4,313 7 |
|
421,682 |
|
|
|
|
Executive Vice
President |
|
4/1/2010 |
|
95,618 |
|
2 |
|
36.23 |
|
4/1/2017 |
|
4/1/2011 |
|
14,303 5 |
|
1,398,404 |
|
|
|
|
and Chief Financial Officer |
|
4/1/2011 |
|
107,178 |
|
3 |
|
34.96 |
|
4/1/2018 |
|
4/2/2012 |
|
13,868
6 |
|
1,355,874 |
|
|
|
|
|
|
4/2/2012 |
|
83,184 |
|
27,728 3 |
|
45.07 |
|
4/2/2019 |
|
4/1/2013 |
|
25,216 6 |
|
2,465,368 |
|
|
|
|
|
|
4/1/2013 |
|
54,091 |
|
54,092 3 |
|
54.53 |
|
4/1/2020 |
|
4/1/2014 |
|
10,095 6 |
|
986,988 |
|
|
|
|
|
|
4/1/2014 |
|
15,735 |
|
47,208 3 |
|
74.29 |
|
4/1/2021 |
|
4/1/2014 |
|
100,000 8 |
|
9,777,000 |
|
|
|
|
|
|
4/1/2015 |
|
|
|
59,922 3 |
|
102.26 |
|
4/1/2022 |
|
4/1/2015 |
|
8,556 6 |
|
836,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2014 |
|
|
|
|
|
10,665 9 |
|
1,042,717 |
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2015 |
|
|
|
|
|
9,606 9 |
|
939,179 |
Helena B. Foulkes |
|
4/1/2011 |
|
12,058 |
|
3 |
|
34.96 |
|
4/1/2018 |
|
4/1/2009 |
|
2,670 7 |
|
261,046 |
|
|
|
|
Executive Vice
President |
|
4/1/2011 |
|
14,303 |
|
14,304 4 |
|
34.96 |
|
4/1/2021 |
|
4/1/2010 |
|
2,416 7 |
|
236,212 |
|
|
|
|
and |
|
4/2/2012 |
|
9,982 |
|
9,983 3 |
|
45.07 |
|
4/2/2019 |
|
4/1/2011 |
|
4,595 5 |
|
449,278 |
|
|
|
|
President CVS |
|
4/1/2013 |
|
19,670 |
|
19,670 3 |
|
54.53 |
|
4/1/2020 |
|
4/1/2011 |
|
6,436 5 |
|
629,248 |
|
|
|
|
Pharmacy |
|
4/1/2014 |
|
13,113 |
|
39,339 3 |
|
74.29 |
|
4/1/2021 |
|
4/2/2012 |
|
4,993 6 |
|
488,166 |
|
|
|
|
|
|
4/1/2015 |
|
|
|
59,922 3 |
|
102.26 |
|
4/1/2022 |
|
4/1/2013 |
|
9,170 6 |
|
896,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/1/2014 |
|
8,412 6 |
|
822,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/1/2015 |
|
8,556 6 |
|
836,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2014 |
|
|
|
|
|
8,887 9 |
|
868,882 |
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2015 |
|
|
|
|
|
8,405 9 |
|
821,757 |
56 |
|
2016 Proxy
Statement |
Table of
Contents
|
|
Executive Compensation and Related
Matters |
|
STOCK OPTION
AWARDS |
|
STOCK AWARDS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NUMBER OF |
|
|
|
EQUITY
INCENTIVE |
|
EQUITY INCENTIVE
|
|
|
|
|
NUMBER OF |
|
NUMBER OF |
|
|
|
|
|
|
|
SHARES OR |
|
|
|
PLAN
AWARDS: |
|
PLAN AWARDS:
|
|
|
|
|
SECURITIES |
|
SECURITIES |
|
|
|
|
|
|
|
UNITS OF |
|
MARKET VALUE
OF |
|
NUMBER OF |
|
MARKET VALUE OF
|
|
|
|
|
UNDERLYING |
|
UNDERLYING |
|
OPTION |
|
|
|
|
|
STOCK THAT |
|
SHARES OR
UNITS |
|
SHARES OR
UNITS |
|
SHARES OR UNITS
|
|
|
|
|
UNEXERCISED |
|
UNEXERCISED |
|
EXERCISE |
|
OPTION |
|
|
|
HAVE NOT |
|
OF STOCK
THAT |
|
OF STOCK
THAT |
|
OF STOCK THAT
|
NAME &
PRINCIPAL |
|
GRANT |
|
OPTIONS
(#) |
|
OPTIONS
(#) |
|
PRICE |
|
EXPIRATION |
|
GRANT |
|
VESTED |
|
HAVE NOT |
|
HAVE NOT |
|
HAVE NOT
|
2015
POSITIONS |
|
DATE |
|
EXERCISABLE |
|
UNEXERCISABLE |
|
($) |
|
DATE |
|
DATE |
|
(#) |
|
VESTED ($) 1 |
|
VESTED (#) |
|
VESTED ($) 1 |
Jonathan C.
Roberts |
|
4/1/2010 |
|
61,196 |
|
2 |
|
36.23 |
|
4/1/2017 |
|
4/1/2011 |
|
11,442 5 |
|
1,118,684 |
|
|
|
|
Executive Vice
President |
|
4/1/2011 |
|
85,743 |
|
3 |
|
34.96 |
|
4/1/2018 |
|
4/2/2012 |
|
9,708 6 |
|
949,151 |
|
|
|
|
and |
|
4/2/2012 |
|
58,229 |
|
19,410 3 |
|
45.07 |
|
4/2/2019 |
|
9/4/2012 |
|
11,413 5 |
|
1,115,859 |
|
|
|
|
President CVS |
|
9/4/2012 |
|
36,290 |
|
72,580 4 |
|
45.93 |
|
9/4/2022 |
|
4/1/2013 |
|
16,047 6 |
|
1,568,915 |
|
|
|
|
Caremark |
|
4/1/2013 |
|
34,422 |
|
34,422 3 |
|
54.53 |
|
4/1/2020 |
|
4/1/2014 |
|
11,778 6 |
|
1,151,535 |
|
|
|
|
|
|
4/1/2014 |
|
18,358 |
|
55,075 3 |
|
74.29 |
|
4/1/2021 |
|
4/1/2015 |
|
9,778 6 |
|
955,995 |
|
|
|
|
|
|
4/1/2015 |
|
|
|
68,482 3 |
|
102.26 |
|
4/1/2022 |
|
2/18/2014 |
|
|
|
|
|
12,443 9 |
|
1,216,552 |
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2015 |
|
|
|
|
|
10,806 9 |
|
1,056,503 |
Thomas M.
Moriarty |
|
10/1/2012 |
|
20,456 |
|
41,094 4 |
|
48.67 |
|
10/1/2022 |
|
10/1/2012 |
|
6,462 5 |
|
631,777 |
|
|
|
|
Executive Vice
President |
|
4/1/2013 |
|
24,586 |
|
24,588 3 |
|
54.53 |
|
4/1/2020 |
|
4/1/2013 |
|
11,462 6 |
|
1,120,640 |
|
|
|
|
Chief Health Strategy |
|
4/1/2014 |
|
15,735 |
|
47,208 3 |
|
74.29 |
|
4/1/2021 |
|
4/1/2014 |
|
10,095 6 |
|
968,988 |
|
|
|
|
Officer and General |
|
4/1/2015 |
|
|
|
51,361 3 |
|
102.26 |
|
4/1/2022 |
|
4/1/2015 |
|
7,334 6 |
|
717,045 |
|
|
|
|
Counsel |
|
|
|
|
|
|
|
|
|
|
|
2/18/2014 |
|
|
|
|
|
8,887 9 |
|
868,882 |
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2015 |
|
|
|
|
|
8,405 9 |
|
821,757
|
1 |
The value of the RSUs is based on
$97.77, which was the closing price of our stock on December 31, 2015, the
last trading day of our fiscal year. |
2 |
The stock options vest in
one-third increments on each of the first, second and third anniversaries
of the date of grant. |
3 |
The stock options vest in
one-quarter increments on each of the first, second, third and fourth
anniversaries of the date of grant. |
4 |
The stock options vest in
one-third increments on each of the third, fourth and fifth anniversaries
of the date of grant and expire ten years from the date of
grant. |
5 |
RSUs vest on the fifth
anniversary of the date of grant. |
6 |
RSUs vest in increments of 50% on
the third anniversary of the grant date and on the fifth anniversary of
the grant date. |
7 |
RSUs vest on the executives 55th
birthday. |
8 |
RSUs vest on the seventh
anniversary of the date of grant. |
9 |
Represents non-transferable
shares to be delivered to each of the executives for outstanding LTIP
performance cycles in effect for 2014-2016 cycle and 2015-2017 cycle,
assuming in each case that the target level of performance will be
achieved. |
CVSHealthannualmeeting.com
|
|
57 |
Table of
Contents
Executive Compensation and Related
Matters |
|
|
Option
Exercises and Stock Vested
The table below
reflects information for the fiscal year ended December 31, 2015 concerning
options exercised and the vesting of previously granted RSUs and
non-transferable shares for each of the executive officers specified in the
table. The value of the shares acquired upon exercise of the options and the
shares represented by the vesting of RSUs is based on the closing price of our
stock on the date of exercise and the date of vesting, respectively.
Option Exercises
and Stock Vested 2015
|
|
OPTION AWARDS |
|
STOCK AWARDS |
|
|
NUMBER OF |
|
|
|
NUMBER OF |
|
|
|
|
SHARES |
|
VALUE |
|
SHARES |
|
VALUE |
|
|
ACQUIRED |
|
REALIZED |
|
ACQUIRED |
|
REALIZED |
|
|
ON EXERCISE |
|
ON EXERCISE |
|
ON VESTING |
|
ON VESTING |
NAME & PRINCIPAL 2015 POSITIONS |
|
(#) |
|
($) |
|
(#) 1 |
|
($) 2 |
Larry J. Merlo |
|
144,144 |
|
7,658,537 |
|
123,716 |
|
12,357,332 |
President and Chief Executive
Officer |
|
|
|
|
|
|
|
|
David M. Denton |
|
|
|
|
|
30,615 |
|
3,051,683 |
Executive Vice President and
Chief Financial Officer |
|
|
|
|
|
|
|
|
Helena B. Foulkes |
|
|
|
|
|
13,924 |
|
1,380,651 |
Executive Vice President and
President CVS Pharmacy |
|
|
|
|
|
|
|
|
Jonathan C. Roberts |
|
86,487 |
|
4,682,064 |
|
29,216 |
|
2,906,749 |
Executive Vice President and
President CVS Caremark |
|
|
|
|
|
|
|
|
Thomas M. Moriarty |
|
|
|
|
|
13,957 |
|
1,356,202 |
Executive Vice President, Chief
Health Strategy Officer |
|
|
|
|
|
|
|
|
and General Counsel |
|
|
|
|
|
|
|
|
1 |
Includes RSUs vested and deferred
during 2015: for Mr. Merlo, 20,702; and for Mr. Roberts,
2,761. |
2 |
Includes the value of RSUs vested
and deferred during 2015 as of respective deferral dates also shown in the
Nonqualified Deferred Compensation Table: for Mr. Merlo, $2,116,987; and
for Mr. Roberts, $282,340. |
Pension
Benefits
We maintain an unfunded
supplemental retirement plan (the SERP), which is designed to supplement the
retirement benefits of select executives in lieu of a qualified defined benefit
plan. The SERP is a legacy plan in which participation has decreased over the
years as participants have retired, and the Company has not provided SERP
benefits to new participants since 2010. Mr. Merlo is the only active executive
officer participating in the SERP.
Under the SERPs benefit formula,
participants (including Mr. Merlo and certain retired executives) will receive
an annual benefit commencing on the later of age 55 or retirement, equal to 1.6%
of a three-year average of final compensation (as defined in the SERP) for each
year of service up to 30 years, with no offset for any amounts provided by our
qualified plans, Social Security or other retirement benefits. Final
compensation for purposes of the SERP benefit formula is the average of the
executives three highest years of annual salary and annual cash bonus during
the last ten years of service. The estimated credited years of benefit service
for Mr. Merlo as of the measurement date of December 31, 2015 was 30 years (Mr.
Merlos years of service are capped at 30, in accordance with the terms of the
SERP). Benefits under the SERP formula are payable in annual installments for
the life of the executive, unless the executive has made an advance election in
accordance with plan and IRS rules to have the benefit paid in the form of a
lump sum or joint and survivor annuity of equivalent actuarial value. Mr. Merlo
has made an election to receive his entire benefit payable on account of
termination of employment in the form of a lump sum.
No benefits are payable to an eligible
executive until he terminates employment. As of the measurement date, Mr. Merlo
was eligible for an immediate benefit.
58 |
|
2016 Proxy
Statement |
Table
of Contents
|
|
Executive Compensation and Related Matters |
As Mr. Merlo has reached the maximum
amount of service under the plan based on his more than 30 years with the
Company, his benefit increases are primarily as a result of performance-based
bonuses. In addition, because the plan is a defined benefit plan, it is subject
to certain actuarial variations including discount rates and mortality table
assumptions. This means that if interest rates increase, Mr. Merlos benefit
will decrease and if interest rates decrease, Mr. Merlos benefit will
increase.
The accumulated value in the Pension
Benefits Table and Summary Compensation Table is based on the benefit accrued as
of the measurement date payable as a lump sum commencing on the earliest
unreduced retirement age (55) using assumptions which include a 2.50% discount
rate as of December 31, 2015. Mr. Merlo is fully vested in his accrued benefit.
For further information regarding pension assumptions, please see the Notes to
the Consolidated Financial Statements in our Annual Report to Stockholders for
the fiscal year ended December 31, 2015.
Pension Benefits
2015
NAME &
PRINCIPAL 2015 POSITIONS |
|
PLAN NAME |
|
NUMBER OF YEARS OF
CREDITED SERVICE (#) |
|
PRESENT VALUE
OF ACCUMULATED BENEFIT ($) |
|
PAYMENTS DURING LAST FISCAL YEAR ($) |
Larry J. Merlo |
|
SERP |
|
30 |
|
44,412,985 |
|
|
President and
Chief Executive Officer |
|
|
|
|
|
|
|
|
David M. Denton |
|
N/A |
|
|
|
|
|
|
Executive Vice
President and Chief Financial Officer |
|
|
|
|
|
|
|
|
Helena B. Foulkes |
|
N/A |
|
|
|
|
|
|
Executive Vice
President and President CVS Pharmacy |
|
|
|
|
|
|
|
|
Jonathan C. Roberts |
|
N/A |
|
|
|
|
|
|
Executive Vice
President and President CVS Caremark |
|
|
|
|
|
|
|
|
Thomas M. Moriarty |
|
N/A |
|
|
|
|
|
|
Executive Vice President, Chief Health
Strategy Officer |
|
|
|
|
|
|
|
|
and General
Counsel |
|
|
|
|
|
|
|
|
Nonqualified Deferred
Compensation
Executive officers and selected members of
senior management may participate in the CVS Health Deferred Compensation Plan
(the DCP) and the CVS Health Deferred Stock Plan (the DSP). The DCP allows
participants to defer payment of a portion of their salary and all or a portion
of their annual cash incentive (and in the case of executive officers, all or a
portion of any LTI plan cash award) to facilitate their personal retirement or
financial planning. For participants in the DCP, we provide a maximum match of
up to 5% of the salary and annual cash incentive deferred, plus an additional
match for matching contributions only on amounts that cannot be deferred into
qualified 401(k) plans due to IRS plan limits.
The investment crediting options for the
DCP mirror those offered for the CVS Health Future Fund. Each year, the amount
of a participants deferred compensation account increases or decreases based on
the appreciation and/ or depreciation in the value of the investment crediting
alternatives selected by the participant. There are no vesting requirements on
deferred compensation accounts.
Executive officers and selected members of
management are eligible to participate in the DSP, in which they may elect to
defer settlement of RSUs beyond the scheduled vesting date. Dividend equivalents
are reinvested during the deferral period. Messrs. Merlo, Roberts and Moriarty
deferred portions of their equity-based compensation in the DSP. Executive
officers are not permitted to defer proceeds of stock option
exercises.
The amounts shown in the table below for
Cash and Stock were deferred pursuant to the DCP and the DSP,
respectively.
CVSHealthannualmeeting.com |
|
59 |
Table of
Contents
Executive Compensation and Related
Matters |
|
|
Nonqualified
Deferred Compensation 2015
NAME &
PRINCIPAL 2015 POSITIONS |
|
TYPE |
|
EXECUTIVE CONTRIBUTIONS IN LAST FY ($) 1 |
|
REGISTRANT CONTRIBUTIONS IN LAST FY ($) 2 |
|
AGGREGATE EARNINGS IN LAST FY ($) 3 |
|
AGGREGATE WITHDRAWALS/ DISTRIBUTIONS ($) 4 |
|
AGGREGATE BALANCE
AT LAST FYE ($) 5 |
Larry
J. Merlo |
|
Cash |
|
307,500 |
|
294,250 |
|
(2,807) |
|
|
|
4,381,759 |
President and Chief |
|
Stock |
|
2,116,987 |
|
|
|
2,399,460 |
|
118,544 |
|
89,242,840 |
Executive
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
David
M. Denton |
|
Cash |
|
|
|
10,750 |
|
(135) |
|
|
|
14,515 |
Executive Vice President |
|
Stock |
|
|
|
|
|
|
|
|
|
|
and Chief
Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
Helena
B. Foulkes |
|
Cash |
|
154,500 |
|
141,250 |
|
4,061 |
|
|
|
1,632,554 |
Executive Vice President and |
|
Stock |
|
|
|
|
|
72,864 |
|
|
|
2,580,978 |
President
CVS Pharmacy |
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan C. Roberts |
|
Cash |
|
729,014 |
|
148,125 |
|
(26,557) |
|
|
|
3,233,537 |
Executive Vice President and |
|
Stock |
|
282,340 |
|
|
|
190,245 |
|
8,156 |
|
7,333,283 |
President
CVS Caremark |
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
M. Moriarty |
|
Cash |
|
1,475,000 |
|
97,000 |
|
6,833 |
|
|
|
3,731,695 |
Executive Vice President, |
|
Stock |
|
702,992 |
|
|
|
(34,590) |
|
|
|
668,402 |
Chief Health Strategy Officer |
|
|
|
|
|
|
|
|
|
|
|
|
and General
Counsel |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
The cash contributions include amounts shown for 2015 in the Salary
column of the Summary Compensation Table as follows: for Mr. Merlo,
$78,000; for Ms. Foulkes, $46,250; and for Mr. Roberts, $93,750. All other
amounts represent non-equity incentive compensation deferred during 2015.
The stock contributions for Messrs. Merlo and Roberts represent deferred
settlement under the DSP of RSUs granted in prior years that vested in
2015. The stock contribution for Mr. Moriarty represents deferred
settlement under the DSP of shares granted under the LTIP for the
2012-2014 cycle that were credited to his account in 2015. |
2 |
All amounts shown are also
disclosed in the Summary Compensation Table under All Other Compensation
and reflect amounts credited and/or earned in 2015. |
3 |
All earnings shown on the Stock
line are attributable to dividend equivalents credited as additional
deferred RSUs and an increase in our common stock price. |
4 |
All amounts distributed from the
DSP include cash dividend equivalent payments. |
5 |
The following amounts included in
this column have been previously reported in the Summary Compensation
Tables of our annual proxy statement since
2007: |
|
CASH |
|
STOCK
|
Mr. Merlo |
$ |
2,690,423 |
|
$ |
18,736,334 |
Mr. Denton |
|
20,925 |
|
|
|
Ms. Foulkes |
|
393,551 |
|
|
|
Mr. Roberts |
|
1,347,539 |
|
|
|
Mr. Moriarty |
|
1,600,750 |
|
|
|
Payments/(Forfeitures) Under
Termination Scenarios
The tables below
show the amounts that would be received or forfeited by each named executive
officer under various termination scenarios, assuming (1) that the termination
occurred on December 31, 2015 and (2) that amounts that have been paid or are
payable in all events, such as the non-equity incentive amounts earned with
respect to fiscal year 2015 and disclosed in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table on page 53, the amounts
payable under the pension plans discussed beginning on page 58, and the amounts
in the nonqualified deferred compensation plans discussed beginning on page 59,
are not included in the tables below, nor is any amount for stock options that
are vested and exercisable as of December 31, 2015.
60 |
|
2016 Proxy
Statement |
Table of
Contents
|
|
Executive Compensation and Related
Matters |
With respect to the tables
below:
● |
Messrs. Denton and
Moriarty and Ms. Foulkes were not eligible for retirement benefits as of
December 31, 2015. |
● |
The amounts paid as
base salary upon voluntary termination for Mr. Merlo reflects the
Companys option to continue to pay 50% of his salary for 18 months in
consideration for compliance with a non-competition
provision. |
● |
The option value is
determined by multiplying the number of unvested options outstanding as of
December 31, 2015 by the difference between the exercise price and $97.77,
the closing price on December 31, 2015, the last trading day of the
Companys fiscal year. Generally, the option grant agreements provide for
the following post-termination exercise periods, but in no case will the
post-termination exercise period be longer than the original option
term: |
|
● |
In the case of termination due
to death, during the one-year period following
termination; |
|
● |
In the case of constructive
termination without cause prior to a change in control of the Company (a
CIC), during the severance period; |
|
● |
In the case of constructive
termination without cause after a CIC, during the remainder of the option
term; and |
|
● |
In the cases of termination
for cause or voluntary termination, generally there is no post-termination
exercise period. |
● |
The value of the
RSUs is determined by multiplying the number of RSUs as of December 31,
2015 by the closing price on that date, $97.77, which was the last trading
day of our fiscal year. |
● |
Upon a CIC and
subsequent termination of employment, all outstanding unvested stock
options will vest in full and restrictions will lapse on all
RSUs. |
● |
The value of LTIP
cycles assumes that pro-rated payments are made for the outstanding 2014
2016 LTIP cycle (two-thirds) and 2015 2017 LTIP cycle (one-third); all
outstanding performance cycles are assumed to be achieved at target and
the value of payments are made at target. |
In the event of his covered termination
prior to a CIC, Mr. Merlo would receive a cash severance payment equal to two
times the sum of his annual base salary and his then-current annual cash
incentive at target. In the event of a covered termination following a CIC, Mr.
Merlo would receive a cash severance payment equal to three times the sum of his
annual base salary and his then-current annual cash incentive at target, but
under his amended employment contract such cash severance would be reduced to
avoid the excise tax under IRC Section 280G if that would give Mr. Merlo a
better after-tax result. Early retirement is defined in Mr. Merlos Employment
Agreement and in his various stock option and RSU agreements. See Agreements
with Executive Officers on page 51 for additional information.
LARRY J.
MERLO PRESIDENT
AND CHIEF
EXECUTIVE OFFICER |
|
DEATH ($) |
|
TERMINATION FOR CAUSE ($) |
|
VOLUNTARY TERMINATION ($) |
|
TERMINATION W/O CAUSE
OR CONSTRUCTIVE TERMINATION W/O CAUSE PRIOR TO
CIC ($) |
|
TERMINATION W/O CAUSE
OR CONSTRUCTIVE TERMINATION W/O CAUSE AFTER
CIC ($) |
|
APPROVED EARLY RETIREMENT ($) |
Cash Severance Value |
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary |
|
|
|
|
|
1,222,500 |
|
3,260,000 |
|
4,890,000 |
|
|
Bonus |
|
|
|
|
|
|
|
6,520,000 |
|
9,780,000 |
|
|
Immediate Vesting
of Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Value of Options |
|
17,099,544 |
|
(17,099,544) |
|
(17,099,544) |
|
17,099,544 |
|
17,099,544 |
|
17,099,544 |
Value of RSUs |
|
23,474,088 |
|
(23,474,088) |
|
(23,474,088) |
|
23,474,088 |
|
23,474,088 |
|
16,797,767 |
Value of LTIP Cycles |
|
5,500,000 |
|
(5,500,000) |
|
(5,500,000) |
|
5,500,000 |
|
11,000,000 |
|
5,500,000 |
Benefits and Other |
|
|
|
|
|
|
|
|
|
|
|
|
Health Insurance |
|
|
|
|
|
|
|
35,820 |
|
53,729 |
|
|
SERP |
|
|
|
|
|
|
|
|
|
|
|
|
Excise Tax Gross-Up |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
46,073,632 |
|
(46,073,632) |
|
(44,851,132) |
|
55,889,452 |
|
66,297,361 |
|
39,397,311 |
CVSHealthannualmeeting.com
|
|
61 |
Table of
Contents
Executive Compensation and Related
Matters |
|
|
With respect to each of the remaining
named executive officers, in the event of his or her termination without cause
or constructive termination prior to a CIC, pursuant to a restrictive covenant
agreement and the Companys Severance Plan for Non-Store Employees, the named
executive officer is eligible for severance payments, provided that he or she
executes a separation agreement with CVS Health that includes, among other
things, standard restrictive covenants regarding non-competition and
non-solicitation of customers and employees. In the event the named executive
officer is terminated by the Company without cause or experiences a constructive
termination prior to a CIC, he or she is eligible to receive 18 months of base
salary as severance, paid in equal monthly installments, in consideration for a
general release of claims and compliance with various restrictive covenants,
including non-competition and non-solicitation provisions. Each of the remaining
named executive officers has entered into a CIC Agreement with CVS Health that
specifies payments that would be made to him or her in the event of a CIC. In
the event of a covered termination, the named executive officer would receive a
cash severance payment equal to one and one-half times the sum of annual base
salary and then-current annual cash incentive at target, but under the amended
CIC Agreement such cash severance would be reduced to avoid the excise tax under
IRC Section 280G if that would give the named executive officer a better
after-tax result. Tables for each of the remaining named executive officers are
set forth below.
DAVID M.
DENTON EXECUTIVE VICE
PRESIDENT AND CHIEF FINANCIAL
OFFICER |
|
DEATH ($) |
|
TERMINATION FOR CAUSE ($) |
|
VOLUNTARY TERMINATION ($) |
|
TERMINATION W/O CAUSE
OR CONSTRUCTIVE TERMINATION W/O CAUSE PRIOR TO
CIC ($) |
|
TERMINATION W/O CAUSE
OR CONSTRUCTIVE TERMINATION W/O CAUSE AFTER
CIC ($) |
Cash Severance Value |
|
|
|
|
|
|
|
|
|
|
Base Salary |
|
|
|
|
|
|
|
1,275,000 |
|
1,275,000 |
Bonus |
|
|
|
|
|
|
|
|
|
1,912,500 |
Immediate Vesting of Equity |
|
|
|
|
|
|
|
|
|
|
Value of Options |
|
4,908,648 |
|
(4,908,648) |
|
(4,908,648) |
|
4,539,166 |
|
4,908,648 |
Value of RSUs |
|
17,241,837 |
|
(17,241,837) |
|
(17,241,837) |
|
4,480,408 |
|
17,241,837 |
Value of LTIP Cycles |
|
1,666,667 |
|
(1,666,667) |
|
(1,666,667) |
|
1,666,667 |
|
3,500,000 |
Benefits and Other |
|
|
|
|
|
|
|
|
|
|
Health Insurance |
|
|
|
|
|
|
|
28,925 |
|
28,925 |
SERP |
|
|
|
|
|
|
|
|
|
|
Excise Tax Gross-Up |
|
|
|
|
|
|
|
|
|
|
Total |
|
23,817,152 |
|
(23,817,152) |
|
(23,817,152) |
|
11,990,166 |
|
28,866,910 |
|
HELENA B.
FOULKES EXECUTIVE VICE
PRESIDENT AND PRESIDENT CVS
PHARMACY |
|
DEATH ($) |
|
TERMINATION FOR CAUSE ($) |
|
VOLUNTARY TERMINATION ($) |
|
TERMINATION W/O CAUSE
OR CONSTRUCTIVE TERMINATION W/O CAUSE PRIOR TO
CIC ($) |
|
TERMINATION W/O CAUSE
OR CONSTRUCTIVE TERMINATION W/O CAUSE AFTER
CIC ($) |
Cash Severance Value |
|
|
|
|
|
|
|
|
|
|
Base Salary |
|
|
|
|
|
|
|
1,425,000 |
|
1,425,000 |
Bonus |
|
|
|
|
|
|
|
|
|
2,137,500 |
Immediate Vesting of Equity |
|
|
|
|
|
|
|
|
|
|
Value of Options |
|
3,198,749 |
|
(3,198,749) |
|
(3,198,749) |
|
2,890,856 |
|
3,198,749 |
Value of RSUs |
|
4,619,462 |
|
(4,619,462) |
|
(4,619,462) |
|
2,426,188 |
|
4,619,462 |
Value of LTIP Cycles |
|
1,416,667 |
|
(1,416,667) |
|
(1,416,667) |
|
1,416,667 |
|
3,000,000 |
Benefits and Other |
|
|
|
|
|
|
|
|
|
|
Health Insurance |
|
|
|
|
|
|
|
28,260 |
|
28,260 |
SERP |
|
|
|
|
|
|
|
|
|
|
Excise Tax Gross-Up |
|
|
|
|
|
|
|
|
|
|
Total |
|
9,234,878 |
|
(9,234,878) |
|
(9,234,878) |
|
8,186,971 |
|
14,408,971 |
62 |
|
2016 Proxy
Statement |
Table of Contents
|
|
Executive Compensation and
Related Matters |
JONATHAN C. ROBERTS EXECUTIVE
VICE PRESIDENT AND PRESIDENT
CVS CAREMARK |
DEATH ($) |
TERMINATION FOR CAUSE ($) |
VOLUNTARY TERMINATION ($) |
TERMINATION W/O CAUSE
OR CONSTRUCTIVE TERMINATION W/O CAUSE PRIOR
TO CIC ($) |
TERMINATION W/O
CAUSE OR CONSTRUCTIVE TERMINATION W/O CAUSE
AFTER CIC ($) |
APPROVED RETIREMENT ($) |
Cash
Severance Value |
|
|
|
|
|
|
Base Salary |
|
|
|
1,425,000 |
1,425,000 |
|
Bonus |
|
|
|
|
2,137,500 |
|
Immediate
Vesting of Equity |
|
|
|
|
|
|
Value of Options |
7,567,022 |
(7,567,022) |
(7,567,022) |
5,254,680 |
7,567,022 |
3,804,475 |
Value of RSUs |
6,860,139 |
(6,860,139) |
(6,860,139) |
3,428,012 |
6,860,139 |
5,365,715 |
Value of LTIP
Cycles |
1,916,667 |
(1,916,667) |
(1,916,667) |
1,916,667 |
4,000,000 |
1,916,667 |
Benefits and
Other |
|
|
|
|
|
|
Health Insurance |
|
|
|
29,072 |
29,072 |
|
SERP |
|
|
|
|
|
|
Excise Tax
Gross-Up |
|
|
|
|
|
|
Total |
16,343,828 |
(16,343,828) |
(16,343,828) |
12,053,431 |
22,018,733 |
11,086,857 |
THOMAS M.
MORIARTY EXECUTIVE VICE
PRESIDENT, CHIEF HEALTH
STRATEGY OFFICER AND
GENERAL COUNSEL |
DEATH ($) |
TERMINATION FOR
CAUSE ($) |
VOLUNTARY TERMINATION ($) |
TERMINATION W/O CAUSE
OR CONSTRUCTIVE TERMINATION W/O CAUSE PRIOR
TO CIC ($) |
TERMINATION W/O CAUSE
OR CONSTRUCTIVE TERMINATION W/O CAUSE AFTER
CIC ($) |
Cash Severance
Value |
|
|
|
|
|
Base Salary |
|
|
|
1,125,000 |
1,125,000 |
Bonus |
|
|
|
|
1,687,500 |
Immediate Vesting of
Equity |
|
|
|
|
|
Value of Options |
4,189,344 |
(4,189,344) |
(4,189,344) |
2,811,005 |
4,189,344 |
Value of RSUs |
3,456,450 |
(3,456,450) |
(3,456,450) |
1,053,765 |
3,456,450 |
Value of LTIP Cycles |
1,416,667 |
(1,416,667) |
(1,416,667) |
1,416,667 |
3,000,000 |
Benefits and
Other |
|
|
|
|
|
Health Insurance |
|
|
|
26,502 |
26,502 |
SERP |
|
|
|
|
|
Excise Tax Gross-Up |
|
|
|
|
|
Total |
9,062,461 |
(9,062,461) |
(9,062,461) |
6,432,939 |
13,484,796 |
CVSHealthannualmeeting.com
|
|
63 |
Table of Contents
STOCKHOLDER
PROPOSALS
ITEM 4: STOCKHOLDER
PROPOSAL REGARDING A REPORT ON ALIGNMENT OF CORPORATE VALUES AND POLITICAL
CONTRIBUTIONS
On or about November 20, 2015, the Company
received the following proposal from NorthStar Asset Management, Inc. Funded
Pension Plan, P.O. Box 301840, Boston, MA 02130, which represents that it is the
beneficial owner of 423 shares of the Companys stock. In accordance with SEC
rules, we are reprinting the proposal and supporting statement (the NorthStar
Proposal) in this proxy statement as they were submitted to us:
ALIGNMENT BETWEEN CORPORATE VALUES
AND POLITICAL CONTRIBUTIONS
Whereas:
The corporate standard advocated by The
Conference Board (TCB) in the Handbook on Corporate Political Activity (2010)
recommends corporations review their political expenditures to examine the
proposed expenditures to ensure that they are in line with the companys values
and publicly stated policies, positions, and business strategies and that they
do not pose reputational, legal, or other risks to the company;
Political contributions made by CVS or the
EPAC include inconsistencies between donations and corporate values. For
instance, CVSs Environmental Commitment Statement declares that we are
committed to
contributing to the long-term sustainability of our business. Yet
in 2013-2015, CVS EPAC designated $253,000 (over 40% of its total contributions)
to politicians who were in favor of the Keystone XL Pipeline and/or oil
exploration into areas such as the Outer Continental Shelf;
CVS has an [sic] nondiscrimination policy
which states that our continued success depends on the full participation of
all qualified persons regardless of
gender identity or expression
sexual
orientation
However, since 2009 the CVS EPAC has given at least $56,500 to
Gov. Abbott of Texas and Lt. Gov. Patrick, who were recently described as
spouting hateful rhetoric against transgender individuals. Abbott and Patrick have
appeared in public demonstrations behind signs that slur transgender individuals
as Men in Womens Bathrooms. The Proponent believes that Abbott and Patrick do
not represent the values and policies of our Company;
Shareholders are concerned that such
misalignments between corporate values and political contributions from the
corporation and the EPAC illustrate a lack of oversight from Management;
oversight which can be remedied by more thorough analysis and disclosure to
shareholders.
Resolved: Shareholders request that the Board of Directors report to shareholders
annually at reasonable expense, excluding confidential information, a congruency
analysis between corporate values as defined by CVSs stated policies (including
our Environmental Commitment Statement and our employment policy on Equal
Opportunity) and Company and CVS EPAC political and electioneering
contributions, including a list of any such contributions occurring during the
prior year which raise an issue of misalignment with corporate values, and
stating the justification for such exceptions.
Supporting Statement: Proponents recommend that Company management develop coherent
criteria for determining congruency, such as identifying legislative initiatives that
are considered most germane to core company values, and that the report include
managements analysis of risks to our companys brand, reputation, or
shareholder value, as well as acts of stewardship by the Company to inform funds
recipients of company values, and the recipients divergence from those values,
at the time contributions are made. Expenditures for electioneering
communications means spending directly, or through a third party, at any time
during the year, on printed, internet or broadcast communications, which are
reasonably susceptible to interpretation as in support of or opposition to a
specific candidate.
64 |
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2016 Proxy
Statement |
Table of Contents
Statement of the
Board Recommending a Vote AGAINST the NorthStar Proposal
CVS Health is committed to the development
of sound public policy in health care. To address legislation that has a direct
impact on the Company and to ensure that the interests of our business,
customers and stockholders are fairly represented at all levels of government,
we support candidates that we believe could help to address our focus on
enhancing access to care, lowering overall health care costs, and improving
health outcomes for patients.
We do not expect candidates who receive
contributions from our employee political action committee or our Company to
agree with our positions on all policy issues. When selecting candidates for
funding, priority is given to candidates views on issues that concern the
businesses of CVS Health. Specifically, we work with federal and state
policymakers to ensure that people get the right care, at the right time and in
the right setting, reflecting our Companys purpose of helping people on their
path to better health.
The Board believes that adopting the
policy recommended by this proposal would restrict the ability of the Company to
make political contributions in support of those whose policy positions are
supportive of the legitimate business interests of the Company and its
stockholders, and that the report requested by the proponent would require
significant resources that could otherwise be spent on business
needs.
Furthermore, the Board believes it is in
the best interests of the Company and its stockholders to continue to
participate in a transparent manner in the political process pursuant to its
current policies and procedures. CVS Health publishes an annual report on its
website of the political contributions it makes, along with the public policy
principles that outline the Companys priorities for participating in the public
policy sphere. Disclosure regarding the Companys political contributions,
including the policies and procedures governing those contributions, along with
an annual report regarding its political contributions, can be found at
http://www.cvshealth.com/about-us/
corporate-responsibility/political-activities-contributions. As an indication of
the quality of its disclosure, note that the Company has ranked in the first
tier of the CPA-Zicklin Index of Corporate Political Disclosure and
Accountability, an independent ranking of the policies and practices of hundreds
of leading U.S. public companies, in each of the past two years.
The Board also notes that NorthStar
submitted this same proposal for a vote in 2015, and the Companys stockholders
overwhelmingly rejected it, by a vote of:
● |
For: 5% |
● |
Against: 74% |
● |
Abstain:
21% |
In sum, the Board believes that the
current policies and disclosure are appropriate and effective for ensuring
transparency while preserving the Companys ability to contribute to shaping
public policy in a manner that benefits the interests of the Company, its
customers and its stockholders. Adoption of the NorthStar Proposal would
disadvantage the Company from a competitive standpoint, and would potentially
impact our ability to deliver maximum value to our stockholders.
The Board unanimously
recommends a vote AGAINST the NorthStar
Proposal. |
CVSHealthannualmeeting.com
|
|
65 |
Table of Contents
ITEM 5: STOCKHOLDER
PROPOSAL REGARDING A REPORT ON EXECUTIVE PAY
On or about November 27, 2015, the Company
received the following proposal from Zevin Asset Management, LLC (Zevin), 11
Beacon Street, Suite 1125, Boston, MA 02108, on behalf of its client the Claire
L. Bateman 1991 Trust. Zevin represents that its client is the beneficial owner
of 150 shares of the Companys stock. In accordance with SEC rules, we are
reprinting the proposal and supporting statement (the Bateman Proposal) in
this proxy statement as they were submitted to us:
TOP EXECUTIVES PAY
WHEREAS, Recent events have increased
concerns about the extraordinarily high levels of executive compensation at many
U.S. corporations. Concerns about the structure of executive compensation
packages have also intensified, with some suggesting compensation systems
incentivize excessive risk-taking.
In a Forbes article on Wall Street pay,
the director of the Program on Corporate Governance at Harvard Law School noted
that compensation policies will prove to be quite costlyexcessively costlyto
shareholders. Another study by Glass Lewis & Co. declared that compensation
packages for the most highly paid U.S. executives have been so over-the top
that they have skewed the standards for whats reasonable. That study also
found CEO pay may be high even when performance is mediocre or
dismal.
On July 25, 2015, The New York Times
featured an extended front-page article entitled: Pay Gap Widening as Top
Workers Reap the Raises. Later, a September 5, 2015 article in the same paper
(Low-Income Workers See Biggest Drop in Paychecks) showed the decline in real
wages 2009-2014 for the lowest-paid quintile was -5.7% while that of the
highest-paid quintile was less than half of that: -2.6%.
A September 2015 Harvard Business Review
piece noted that a recent global study found that CEO-to-worker pay ratio in
most countries is at least 50 to one, but in the United States its 354 to
one.
Commenting on the momentum to rein in
runaway pay, a May 16, 2015 piece in The New York Times (For the Highest-Paid
C.E.O.s the Party Goes On) commented: Dodd-Frank introduced new say-on-pay
measures, allowing shareholders to express their discontent. The Securities and
Exchange Commission is developing rules that would require companies to reveal
the ratio of the chief executives pay to that of average workers. And last
month, the S.E.C. proposed requiring companies to disclose how performance
affects executive pay.
RESOLVED: Shareholders request the Boards
Compensation Committee initiate a review of our companys executive compensation
policies and make available, upon request, a summary report of that review by
October 1, 2016 (omitting confidential information and processed at a reasonable
cost). We request that the report include 1) A comparison of the total
compensation package of senior executives and our employees median wage
(including benefits) in the United States in July 2006, July 2011 and July 2016;
2) an analysis of changes in the relative size of the gap and an analysis and
rationale justifying this trend; 3) an evaluation of whether our senior
executive compensation packages (including, but not limited to, options,
benefits, perks, loans and retirement agreements) should be modified to be kept
within boundaries, such as that articulated in the Excessive Pay Shareholder
Approval Act; and 4) an explanation of whether sizable layoffs or the level of
pay of our lowest paid workers should result in an adjustment of senior
executive pay to more reasonable and justifiable levels and how the Company will
monitor this comparison annually in the future.
66 |
|
2016 Proxy
Statement |
Table of Contents
Statement of the
Board Recommending a Vote AGAINST the Bateman Proposal
As required by the SEC, we provide a
detailed report on executive compensation in our annual proxy statement. The
compensation discussion and analysis (CD&A) section of this proxy
statement describes our executive compensation practices in detail, elaborating
on all material elements of our executive compensation program and policies with
accompanying tables that quantify our named executive officer pay in accordance
with SEC requirements. The CD&A also examines the compensation
decision-making process of the Management Planning and Development Committee
(for purposes of this statement, the Committee), describes the material
components of our executive compensation packages and discusses the goals and
underpinnings of our compensation program. The report requested by the Bateman
Proposal is duplicative of this required disclosure, which is provided at pages
35 through 52 above. Additionally, in 2018, as will then be required by SEC
rules, we will disclose the ratio of our CEOs pay to that of our median
employee. Given the extensive compensation-related disclosure already provided
to our stockholders, the requested review and report would divert our resources
and attention while providing stockholders with little or no incremental
information.
Putting aside the Bateman Proposals call
for information that is redundant with information that is already provided, or
that will be required to be provided under newly adopted SEC rules, we are
opposed to the Bateman Proposal in principle. The Committee, which is composed
entirely of independent directors, and the full Board, are best placed to
determine what factors should be considered when making decisions on executive
pay and to implement executive compensation practices that are aligned with the
interests of our stockholders. This proxy statement highlights the Committees
mandate under its charter and describes the rigorous policies and practices we
have implemented to provide appropriate executive compensation. We believe that
adoption of the policy requested by the proponent does not serve to enhance a
compensation decision-making process that is focused on the long-term
performance of CVS Health, taking into account best practices, market
competitiveness and our strategic, operational and financial goals and other
appropriate factors in the Committees judgment. Adoption of the unnecessary and
arbitrary Bateman Proposal would not support these objectives and would not be
in the best interests of our stockholders.
The
Board unanimously recommends a vote AGAINST the
Bateman Proposal. |
CVSHealthannualmeeting.com
|
|
67 |
Table of Contents
OWNERSHIP OF AND
TRADING IN OUR STOCK
EXECUTIVE OFFICER AND
DIRECTOR STOCK OWNERSHIP REQUIREMENTS
CVS Health has long been mindful of the
importance of equity ownership by directors and executive management as an
effective link to stockholders and, as such, the Board maintains stock ownership
guidelines for all directors, as well as for the officers serving on the
Companys Business Planning Committee (BPC), and requires that directors and
BPC members achieve compliance with the ownership requirements within five years
of becoming a director or BPC member. Our named executive officers, who appear
in the Summary Compensation Table on page 53, must maintain ownership levels as
set forth in the table below. Shares included in the calculation to assess
compliance with the guidelines include shares owned outright, unvested
restricted stock units, shares held in the Deferred Stock Compensation Plan and
shares purchased through the Employee Stock Purchase Plan. Unexercised stock
options do not count toward satisfying the guidelines. The Board believes that
these requirements emphasize the importance of equity ownership for the Board
and executive management, which in turn reinforces alignment with stockholder
interests. To further reinforce this commitment, the Board annually reviews the
policy and compliance by directors and executives.
EXECUTIVE NAME |
MULTIPLE OF
SALARY REQUIRED |
MULTIPLE OF
SALARY HELD AS OF MARCH 24, 2016 |
IN
COMPLIANCE |
Larry J. Merlo |
5x |
86x |
Yes |
David M. Denton |
3x |
36x |
Yes |
Helena B. Foulkes |
3x |
12x |
Yes |
Jonathan C. Roberts |
3x |
21x |
Yes |
Thomas M. Moriarty |
3x |
8x |
Yes |
All non-employee directors must own a
minimum of 10,000 shares of CVS Health common stock, which is worth
approximately $1 million based on the March 24, 2016 stock price of $101.43, or
14 times the amount of the annual cash retainer ($70,000). Directors must attain
this minimum ownership level within five years of being elected to the Board and
must retain this minimum ownership level for at least six months after leaving
the Board. The current level of stock pay in the directors mix of annual
compensation is intended to facilitate the directors ability to meet the
ownership level within the timeframe. Each of our directors who has served in
such capacity for at least five years has timely attained the minimum ownership
level. Mmes. DeCoudreaux and DeParle and Mr. Bracken, each of whom has five
years from the date of her or his election to the Board to attain the ownership
requirement, are on track to meet this requirement.
68 |
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2016 Proxy
Statement |
Table of Contents
|
|
Ownership of and Trading In
Our Stock |
SHARE OWNERSHIP OF
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
The following table shows the share
ownership, as of March 24, 2016, of each director, each executive officer
appearing in the Summary Compensation Table found on page 53 and all directors
and executive officers as a group, based on information provided by these
individuals. Each individual beneficially owns less than 1% of our common stock
and, except as described in the footnotes to the table, each person has sole
investment and voting power over the shares. None of the shares listed below has
been pledged as collateral.
|
OWNERSHIP OF COMMON STOCK 1 |
NAME |
NUMBER |
PERCENT |
Richard M.
Bracken |
|
2,832 |
|
|
* |
C. David Brown
II |
|
135,281 |
1 |
|
* |
Alecia A.
DeCoudreaux |
|
3,295 |
1 |
|
* |
David M. Denton |
|
760,980 |
2 3
4 |
|
* |
Nancy-Ann M.
DeParle |
|
7,543 |
1 |
|
* |
David W. Dorman |
|
82,376 |
1 |
|
* |
Anne M. Finucane |
|
17,360 |
1
5 |
|
* |
Helena B.
Foulkes |
|
247,806 |
2 3 4
6 |
|
* |
Larry J. Merlo |
|
2,552,253 |
2 3 4 6
7 |
|
* |
Jean-Pierre
Millon |
|
83,426 |
8 |
|
* |
Thomas M.
Moriarty |
|
167,315 |
2 3
6 |
|
* |
Jonathan C.
Roberts |
|
563,893 |
2 3 4 6
7 |
|
* |
Richard J. Swift |
|
55,464 |
1 |
|
* |
William C.
Weldon |
|
11,291 |
1 |
|
* |
Tony L. White |
|
19,419 |
9 |
|
* |
All directors and
executive officers as a group (23 persons) |
|
6,305,684 |
|
|
0.58% |
* |
Less than
1%. |
1 |
Includes the following shares of
common stock constituting deferred non-employee director compensation,
which do not have current voting rights: Mr. Brown, 44,029; Ms.
DeCoudreaux, 3,295; Ms. DeParle, 3,238; Mr. Dorman, 15,907; Ms. Finucane,
2,641; Mr. Swift, 51,055; Mr. Weldon, 9,700; and all non-employee
directors as a group, 129,865. |
2 |
Includes the following shares of
common stock not currently owned, but subject to options which were
outstanding on March 24, 2016 and were exercisable within 60 days
thereafter: Mr. Denton, 453,716; Ms. Foulkes, 131,341; Mr. Merlo,
1,160,991; Mr. Moriarty, 101,737; Mr. Roberts, 366,337; and all executive
officers as a group, 2,839,751. |
3 |
Includes the following shares of
common stock granted under the Companys 1997 and 2010 ICPs that remain
subject to certain restrictions regarding employment and transfer as
provided in the ICPs: Mr. Denton, 176,351; Ms. Foulkes, 47,269; Mr. Merlo,
240,095; Mr. Moriarty, 35,382; Mr. Roberts, 70,217; and all executive
officers as a group, 834,297. |
4 |
Includes shares of common stock held
by the Trustee of the ESOP that are allocated to the executive officers as
follows: Mr. Denton, 1,656; Ms. Foulkes 3,992; Mr. Merlo, 6,513; Mr.
Roberts, 5,216; and all executive officers as a group,
17,942. |
5 |
Includes 14,719 shares held in a
family trust. |
6 |
Includes the following shares of
common stock that were receivable upon the lapse of restrictions on
restricted stock units or the exercise of options, but the actual receipt
of which was deferred pursuant to the Companys Deferred Stock
Compensation Plan, and which do not have current voting rights: Ms.
Foulkes, 24,094; Mr. Merlo, 563,191; Mr. Moriarty, 6,867; Mr. Roberts,
92,063; and all executive officers as a group, 958,380. |
7 |
Includes the following hypothetical
shares of common stock held in notional accounts in the Companys unfunded
Deferred Compensation Plan, which do not have current voting rights: Mr.
Merlo, 5,131; Mr. Roberts, 1,417 and all executive officers as a group,
7,015. |
8 |
Includes 83,426 shares held in a
family trust. |
9 |
Includes 7 shares held by Mr. Whites
wife. |
CVSHealthannualmeeting.com
|
|
69 |
Table of
Contents
Ownership of and Trading In Our
Stock |
|
|
SHARE OWNERSHIP OF PRINCIPAL
STOCKHOLDERS
We have been notified by the
entities in the following table that each is the beneficial owner (as defined by
the rules of the SEC) of more than five percent of our common stock. According
to the most recent Schedule 13G filed by the beneficial owner with the SEC,
these shares were acquired in the ordinary course of business and were not
acquired for the purpose of, and do not have the effect of, changing or
influencing control over us.
TITLE OF CLASS |
|
NAME AND ADDRESS OF BENEFICIAL
OWNER |
|
NO. OF SHARES BENEFICIALLY
OWNED 1 2 |
|
PERCENT OF CLASS OWNED
1 2 |
Common Stock |
|
BlackRock, Inc. 1 55 East
52nd Street New
York, NY 10022 |
|
70,539,610 |
|
6.4% |
Common Stock |
|
The Vanguard Group, Inc. 2 100 Vanguard Blvd. Malvern, PA
19355 |
|
68,950,833 |
|
6.2% |
|
|
1 |
Information based on a Schedule
13G/A filed February 10, 2016. BlackRock, Inc. (BlackRock) is the parent
holding company of a number of subsidiaries that hold CVS Health common
stock for the benefit of various investors. BlackRock and/or its
subsidiaries have sole voting power with respect to 58,297,852 of these
shares and sole dispositive power with respect to 70,532,756 of these
shares. |
2 |
Information based on a Schedule
13G/A filed February 10, 2016. The Vanguard Group, Inc. (Vanguard)
directly or through its subsidiaries, holds CVS Health common stock for
the benefit of various investors. Vanguard and/or its subsidiaries have
sole voting power with respect to 2,071,330 of these shares, shared
dispositive power with respect to 2,202,757 of these shares and sole
dispositive power with respect to 66,748,076 of these
shares. |
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
executive officers and directors and any persons who own more than 10% of our
common stock (reporting persons) to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the SEC. These reporting persons are required
by SEC regulation to furnish us with copies of all Forms 3, 4 and 5 that they
file with the SEC, though as a practical matter CVS Health assists its directors
and executive officers by monitoring transactions and completing and filing such
forms on their behalf. Based on a review of forms filed with the SEC and written
representations from our reporting persons, CVS Health believes that all forms
were filed in a timely manner during fiscal 2015.
70 |
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2016 Proxy
Statement |
Table
of Contents
OTHER
INFORMATION
INFORMATION ABOUT THE
ANNUAL MEETING AND VOTING
The Board
of Directors of CVS Health is soliciting your proxy to vote at our 2016 Annual
Meeting of Stockholders (or at any adjournment of the meeting; the Meeting or
Annual Meeting). This proxy statement summarizes the information you need to
know to vote at the Meeting.
We began mailing this proxy statement and
the enclosed proxy card on or about April 8, 2016 to all stockholders entitled
to vote. CVS Healths 2015 Annual Report, which includes our financial
statements, is being sent with this proxy statement.
Date, Time and Place of the Annual
Meeting |
Date: |
|
May 19, 2016 |
Time: |
|
9:00 a.m. Eastern Time |
Place: |
|
CVS Health Customer Support
Center |
|
|
(Company Headquarters) |
|
|
One CVS Drive |
|
|
Woonsocket, Rhode Island
02895 |
Stockholders must present a form of personal
photo identification in order to be admitted to the Meeting. No cell
phones, cameras, recording equipment, electronic devices, large bags,
briefcases or packages will be permitted in the
Meeting. |
Shares Entitled to
Vote
Stockholders entitled to vote
are those who owned CVS Health common stock at the close of business on the
record date, which is March 24, 2016. As of the record date, there were
1,092,287,322 shares of common stock outstanding. Each share of CVS Health
common stock that you own entitles you to one vote.
The Bank of New York Mellon presently
holds shares of common stock as Trustee under the 401(k) Plan and the Employee
Stock Ownership Plan of CVS Health Corporation and Affiliated Companies (the
ESOP). Each participant in the ESOP instructs the Trustee of the ESOP how to
vote his or her shares. As to shares with respect to which the Trustee receives
no timely voting instructions, the Trustee, pursuant to the ESOP Trust
Agreement, votes these shares in the same proportion as it votes all the shares
as to which it has received timely voting instructions. The results of the
voting will be held in strict confidence by the Trustee. Please note that the
cut-off date by which participants of the ESOP must submit their vote to the
tabulator in order to be counted is 12:00 p.m. Eastern Time on May 17,
2016.
Types of Ownership
of Our Stock
If your shares are
registered in your name with CVS Healths transfer agent, Wells Fargo Bank,
N.A., you are the stockholder of record of those shares. This proxy statement
and any accompanying materials have been provided directly to you by CVS
Health.
If your shares are held in a stock
brokerage account or by a bank or other holder of record, you are considered the
beneficial owner of those shares, and this proxy statement and any
accompanying documents have been provided to you by your broker, bank or other
holder of record (the nominee). As the beneficial owner, you have the right to
direct your nominee how to vote your shares by using the voting instruction card
provided by your nominee or by following the nominees instructions for voting
by telephone or on the Internet.
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|
71 |
Table of
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Voting
Whether or not
you plan to attend the Annual Meeting, we urge you to vote. Stockholders of
record may vote by calling a toll-free telephone number, by using the Internet
or by mailing your signed proxy card in the postage-paid envelope provided. If
you vote by telephone or the Internet, you do NOT need to return your proxy
card. Returning the proxy card by mail or voting by telephone or Internet will
not affect your right to attend the Annual Meeting and change your vote, if
desired.
If you are a beneficial owner, you will
receive instructions from your nominee that you must follow in order for your
shares to be voted. Many of these institutions offer telephone and Internet
voting.
The enclosed proxy card indicates the
number of shares that you own as of the record date.
Voting instructions are included on your
proxy card. If you properly fill in your proxy card and send it to us in time to
vote, or vote by telephone or the Internet, one of the individuals named on your
proxy card (your proxy) will vote your shares as you have directed. If you
sign the proxy card but do not make specific choices, your proxy will follow the
Boards recommendations and vote your shares:
● |
FOR the election
of all 11 nominees for director (as described beginning on page
11); |
|
|
● |
FOR the
ratification of the appointment of Ernst & Young as our independent
registered public accounting firm for fiscal 2016 (as described beginning
on page 31); |
|
|
● |
FOR approval on
an advisory basis of our executive compensation as disclosed in this proxy
statement (as described beginning on page 33); and |
|
|
● |
AGAINST both
stockholder proposals, if properly presented to the meeting (as described
beginning on page 64). |
The Board of Directors and the Companys
management have not received notice of, and are not aware of, any business to
come before the Meeting other than the agenda items referred to in this proxy
statement.
Revoking your proxy
card
If you are a stockholder of record, you
may revoke your proxy card by:
● |
sending in another
signed proxy card with a later date; |
|
|
● |
providing
subsequent telephone or Internet voting instructions; |
|
|
● |
notifying our
Corporate Secretary in writing before the Annual Meeting that you have
revoked your proxy card; or |
|
|
● |
voting in person
at the Annual Meeting. |
If you are a beneficial owner of shares,
you may submit new voting instructions by contacting your nominee.
Voting in
person
If you plan to attend the Annual Meeting
and vote in person, we will give you a ballot when you arrive. However, if your
shares are held in the name of a nominee, you must bring an account statement or
letter from the nominee indicating that you were the beneficial owner of the
shares on March 24, 2016, the record date for voting.
Appointing your own
proxy
If you want to give your proxy to someone
other than the individuals named as proxies on the proxy card, you may cross out
the names of those individuals and insert the name of the individual you are
authorizing to vote. Either you or that authorized individual must present the
proxy card at the Annual Meeting to vote.
Proxy
solicitation
We are soliciting this proxy on behalf of
our Board of Directors and will bear the solicitation expenses. We are making
this solicitation by mail but we may also solicit by telephone, e-mail or in
person. We have hired Georgeson LLC, 1290 Avenue of the Americas, New York, NY
10104, for a fee of $20,000, plus out-of-pocket expenses, to provide customary
assistance to us in the solicitation. We will reimburse banks, brokerage houses
and other institutions, nominees and fiduciaries, if they so request, for their
expenses in forwarding proxy materials to beneficial owners.
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2016 Proxy
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Table
of Contents
Householding
Under SEC rules, a single set of annual
reports and proxy statements may be sent to any household at which two or more
of our stockholders reside if they appear to be members of the same family. Each
stockholder continues to receive a separate proxy card. This procedure, referred
to as householding, reduces the volume of duplicate information stockholders
receive, conserves natural resources and reduces mailing and printing expenses
for the Company. Nominees with accountholders who are stockholders may be
householding our proxy materials. As indicated in the notice previously provided
by these nominees to our stockholders, a single annual report and proxy
statement will be delivered to multiple stockholders sharing an address unless
contrary instructions have been received from an affected stockholder. Once you
have received notice from your nominee that it will be householding
communications to your address, householding will continue until you are
notified otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in householding and would prefer to receive a
separate annual report and proxy statement, please notify your nominee so that
separate copies may be delivered to you. Beneficial owners who currently receive
multiple copies of the annual report and proxy statement at their address who
would prefer that their communications be householded should contact their
nominee. Stockholders of record who currently receive multiple copies of the
annual report and proxy statement at their address who would prefer that their
communications be householded, or stockholders of record who are currently
participating in householding and would prefer to receive separate copies of our
proxy materials, should contact our transfer agent, Wells Fargo Shareowner
Services, by writing to P.O. Box 64874, St. Paul, MN 55164-0874; by calling
toll-free, 877-287-7526; or by e-mailing to
stocktransfer@wellsfargo.com.
Quorum
Requirement
A quorum of
stockholders is necessary to hold a valid meeting. The presence in person or by
proxy at the Annual Meeting of holders of shares representing a majority of
shares entitled to vote constitutes a quorum. Abstentions and broker non-votes
are counted as present for establishing a quorum. A broker non-vote occurs on an
item when a broker is not permitted to vote on that item absent instruction from
the beneficial owner of the shares and no instruction is given.
Vote Necessary to
Approve Proposals |
Item 1: Election
of directors |
|
Each director is
elected by a majority of the votes cast with respect to that directors
election (at a meeting for the election of directors at which a quorum is
present) by the holders of shares of common stock present in person or by
proxy at the meeting and entitled to vote.
A majority of votes cast means that the
number of votes for a directors election must exceed 50% of the votes
cast with respect to that directors election. Votes against a
directors election will count as a vote cast, but abstentions and
broker non-votes will not count as a vote cast with respect to that
directors election and will have no effect. |
All other items |
|
For Items 2, 3, 4 and 5, approval is by affirmative vote
(at a meeting at which a quorum is present) of a majority of the votes
represented by the shares of common stock present at the meeting in person
or by proxy and entitled to vote. Abstentions are counted as shares
present or represented and voting and have the effect of a vote against.
Broker non-votes are not counted as shares present or represented and
voting and have no effect on the vote. |
Broker
Voting
Under NYSE rules, if the record holder of
your shares (usually a nominee) holds your shares in its name, your nominee is
permitted to vote your shares on Item 2, Ratification of Auditors, in its
discretion, even if it does not receive voting instructions from you. On all
other Items, your nominee is not permitted to vote your shares without your
instructions and uninstructed shares are considered broker non-votes.
CVSHealthannualmeeting.com |
|
73 |
Table of
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STOCKHOLDER PROPOSALS AND
OTHER BUSINESS FOR OUR ANNUAL MEETING IN 2017
If you want to submit a proposal for possible inclusion in our
proxy statement for the 2017 Annual Meeting of Stockholders, you must ensure
your proposal is received by us on or before December 9, 2016 and is otherwise
in compliance with the requirements of SEC rules.
Under our new proxy access by-law, if a
stockholder (or a group of up to 20 stockholders) who has owned at least 3% of
our shares for at least three years and has complied with the other requirements
set forth in the Companys by-laws wants us to include director nominees (up to
the greater of two nominees or 20% of the Board) in our proxy statement for the
2017 Annual Meeting of Stockholders, the nominations must be received by our
Corporate Secretary and must arrive at the Company in a timely manner, between
120 and 150 days prior to the anniversary of the date our proxy statement was
first sent to stockholders in connection with our last annual meeting, which
would be no earlier than November 9 and no later than December 9,
2016.
In addition, if a stockholder would like
to present business at an annual meeting of stockholders that is not to be
included in our proxy statement, the stockholder must provide notice to the
Company as provided in its by-laws. Such notice must be addressed to our
Corporate Secretary and must arrive at the Company in a timely manner, between
90 and 120 days prior to the anniversary of our last annual meeting, which would
be no earlier than January 19 and February 18, 2017. Under our by-laws, any
stockholder notice for presenting business at a meeting must include, among
other things (1) the name and address, as they appear in our books, of the
stockholder giving the notice, (2) the class and number of shares that are
beneficially owned by the stockholder (including information concerning
derivative ownership and other arrangements concerning our stock), (3) a brief
description of the business to be brought before the meeting and the reasons for
conducting such business at the meeting, and (4) any material interest of the
stockholder in such business. See Selecting Our Directors Director
Nominations for a description of the information required for director
nominations.
OTHER
MATTERS
We do not know of any
matters to be acted upon at the Annual Meeting other than those discussed in
this proxy statement. If any other matter is presented, your proxy will vote on
the matter in his best judgment.
April 8, 2016
74 |
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2016 Proxy
Statement |
Table of Contents
REINVENTING
PHARMACY
Were reinventing
pharmacy to have a more active, supportive role in each persons unique health
experience and in the greater health care environmentfrom advising on
prescriptions to helping manage chronic and specialty conditions to providing
quality walk-in medical care and pharmacy benefits
management.
~9,600Retail pharmacies
243K+
Colleagues
in 50 states, Puerto Rico, District of Columbia and
Brazil
30,000+Pharmacists
HEALTH IS
EVERYTHING
Through our unique
integrated model of retail pharmacies, walk-in medical clinics, pharmacy
benefits management, and expanding specialty pharmacy services, we are
increasing access to quality care and delivering better health outcomes, while
effectively managing pharmaceutical costs and lowering overall health care
costs.
1,100+
MinuteClinic
locations
in 33 states and District of
Columbia
28M+
Patient visits since 2000 at
MinuteClinic
4,000+
Nurses, Nurse Practitioners
and
Physician Assistants
Leading Pharmacy
Benefits Manager
(PBM)
75M+
PBM Plan
Members
2,000+
CVS Caremark Clients
______________________
85M+ Prescriptions delivered via mail and Maintenance
Choice® |
|
THE FUTURE OF HEALTH CARE
CVS Health is a pharmacy innovation company that is shaping the future of
health care for people, businesses and communities across the United
States.
9.3.2014
CVS QUITS FOR GOOD
Eliminated the sale of tobacco products, to better align with
payors and providers
Table of Contents
Table of
Contents
|
CVS HEALTH
CORPORATION C/O WELLS
FARGO SHAREOWNER SERVICES P.O. BOX 64945 ST. PAUL, MN 55164-0945
|
|
|
VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above |
Use the Internet to transmit your voting
instructions and for electronic delivery of information up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Follow
the instructions to obtain your records and to create an electronic voting
instruction form. |
|
ELECTRONIC DELIVERY OF FUTURE
PROXY MATERIALS |
If you would like to reduce the costs incurred
by our company in mailing proxy materials, you can consent to receiving
all future proxy statements, proxy cards and annual reports electronically
via e-mail or the Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access proxy materials
electronically in future years. |
|
VOTE BY PHONE -
1-800-690-6903 |
Use any touch-tone telephone to transmit your
voting instructions up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you call
and then follow the instructions. |
|
VOTE BY MAIL |
Mark, sign and date your proxy card and return
it in the postage-paid envelope we have provided or return it to Vote
Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717. |
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, MARK BLOCKS
BELOW IN BLUE OR BLACK INK, DETACH, AND RETURN IN THE ENCLOSED
ENVELOPE: |
E05885-P73365-Z67186 |
|
KEEP THIS PORTION FOR YOUR RECORDS |
|
DETACH AND RETURN THIS PORTION
ONLY |
THIS PROXY CARD IS VALID ONLY
WHEN SIGNED AND DATED. |
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CVS HEALTH
CORPORATION |
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The Board of Directors recommends you vote
FOR the following proposal: |
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1. |
Election of Directors |
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Nominees: |
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For |
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Against |
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Abstain |
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1a. |
Richard M. Bracken |
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☐ |
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☐ |
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☐ |
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1b. |
C. David Brown II |
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☐ |
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☐ |
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☐ |
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1c. |
Alecia A. DeCoudreaux |
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☐ |
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☐ |
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☐ |
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1d. |
Nancy-Ann M. DeParle |
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☐ |
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☐ |
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☐ |
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1e. |
David W. Dorman |
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☐ |
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☐ |
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☐ |
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1f. |
Anne M. Finucane |
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☐ |
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☐ |
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☐ |
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1g. |
Larry J. Merlo |
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☐ |
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☐ |
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☐ |
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1h. |
Jean-Pierre Millon |
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☐ |
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☐ |
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☐ |
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1i. |
Richard J. Swift |
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☐ |
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☐ |
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☐ |
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1j. |
William C. Weldon |
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☐ |
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☐ |
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☐ |
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1k. |
Tony L. White |
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☐ |
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☐ |
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☐ |
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For address changes and/or comments,
please check this box and write them on the back where indicated. |
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☐ |
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The Board of Directors
recommends you vote FOR the following proposals: |
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For |
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Against |
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Abstain |
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2. |
Proposal to ratify independent public
accounting firm for 2016. |
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☐ |
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☐ |
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☐ |
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3. |
Say on Pay - An advisory vote on the approval
of executive compensation. |
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☐ |
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☐ |
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☐ |
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The Board of Directors recommends you vote AGAINST the
following proposals: |
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4. |
Stockholder proposal regarding a report on
alignment of corporate values and political contributions. |
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☐ |
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☐ |
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☐ |
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5. |
Stockholder proposal regarding a report on
executive pay. |
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☐ |
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☐ |
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☐ |
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NOTE: In their
discretion, the proxies may vote on such other business as may properly
come before the meeting or any adjournment thereof. |
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Please sign exactly as your name(s) appear(s) hereon. When
signing as attorney, executor, administrator, or other fiduciary, please
give full title as such. Joint owners should each sign personally. All
holders must sign. If a corporation or partnership, please sign in full
corporate or partnership name by authorized officer. |
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Signature [PLEASE SIGN WITHIN BOX] |
Date |
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Signature (Joint Owners) |
Date |
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Table of Contents
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available
at
www.proxyvote.com and at
www.cvshealthannualmeeting.com.
CVS HEALTH CORPORATION
Annual Meeting of
Stockholders
May 19, 2016, 9:00 AM
This proxy is solicited by the Board of
Directors
The stockholder(s) hereby appoint(s)
Larry J. Merlo and David W. Dorman, or either of them, as proxies, each with the
power to appoint his substitute, and hereby authorizes them to represent and to
vote, as designated on the reverse side of this ballot, all of the shares
of Common
Stock of CVS HEALTH CORPORATION that the stockholder(s) is/are entitled to vote
at the Annual Meeting of Stockholders to be held at 9:00 AM, EDT, on May 19,
2016 at the CVS Health Customer Support Center, One CVS Drive, Woonsocket, RI
02895, and any adjournment or postponement thereof.
Additional Voting Instructions for
Certain CVS Health Employees: To the extent
the undersigned is a participant in the 401(k) Plan and Employee Stock Ownership
Plan of CVS Health Corporation and Affiliated Companies (the "Plan"), the
undersigned hereby instructs The Bank of New York Mellon, as trustee under the
Plan, to vote as indicated on the reverse side, all shares of CVS Health Common
Stock held in the Plan, as to which the undersigned would be entitled to give
voting instructions if present at the Meeting. Shares held under the Plan for
which voting instructions are not properly completed or signed, or received in a
timely manner (no later than noon EDT on May 17, 2016), will be voted in the
same proportion as those shares for which voting instructions were properly
completed and signed and received in a timely manner, so long as such vote is in
accordance with the provisions of the Employment Retirement Income Security Act
of 1974, as amended. All votes will be kept confidential by the
trustee.
This proxy, when properly executed,
will be voted in the manner directed herein. If no such direction is made, this
proxy will be voted in accordance with the Board of Directors'
recommendations.
Address
Changes/Comments: |
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|
(If you noted
any Address Changes/Comments above, please mark corresponding box on the reverse
side.)
Continued and to be signed on reverse
side