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CVS » Topics » Progress Begins with One Step

This excerpt taken from the CVS DEF 14A filed Mar 24, 2006.

Progress Begins with One Step

It is important to take one step forward in our corporate governance and adopt the above RESOLVED statement since our 2005 governance standards were not impeccable. For instance in 2005 it was reported (and certain concerns are noted):

 

  n   The Corporate Library (TCL), an independent investment research firm in Portland, Maine rated our company:

 

“D” in Overall Board Effectiveness.

 

“D” in Board Composition.

 

“D” in CEO Compensation.

 

“D” in Takeover Defenses.

 

Overall Governance Risk Assessment = High

 

  n   We had no Independent Chairman and not even a Lead Director – Independent oversight concern.

 

  n   Cumulative voting was not allowed.

 

  n   There are too many active CEOs on our board (3) – Over-commitment concern.

 

  n   Three directors had non-director business with our company – Independence concern.

 

  n   Six of our 9 directors were each allowed to hold 4 to 8 directorships – Over-commitment concern.

 

  n   CVS’ dual class stock played a major part in lowering The Corporate Library’s takeover defense score from a “C” to a “D.”

 

Additionally:

 

  n   Four of our 9 directors were rated “problem directors” by The Corporate Library:

 

1) Stanley Goldstein – due to his involvement with Footstar, Inc. – filed for Chapter 11 bankruptcy.

 

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2) Marian Heard – due to her involvement with the FleetBoston board, which approved a major round of executive rewards even as FleetBoston was under investigation by regulators for multiple instances of improper activity.

 

3) Terrence Murray – For the same reason as Ms. Heard.

 

4) Thomas Ryan – For the same reason as Ms. Heard and Mr. Murray.

 

With the above room for improvement it is important to take one-step forward and make our Board more accountable by adopting an independent board chairman requirement.

 

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