CVS Caremark Corporation (CVS)

5. Reward results achieved short-term and, in the long-term, stockholder value creation.

In defining and designing the specific elements of CVS Caremark’s executive compensation program, the Committee intends to structure a balance between achieving robust short-term, or annual, results and ensuring the long-term success of the Company. To reinforce the importance of balancing these perspectives, the executive officers are regularly provided both short- and long-term incentive award opportunities. Opportunities in CVS Caremark’s long-term incentive programs increase at higher levels of responsibility, as executive officers in these leadership roles have the greatest influence on the Company’s strategic direction and results over time. Performance metrics for both short- and long-term incentive compensation programs are defined financial indicators, such as operating profit or EPS, each of which are objectively measured and publicly disclosed.

The Committee believes that each of the components of our overall executive compensation program, which will be discussed later in this Discussion and Analysis, must contribute to the furtherance of one or more of our five Core Principles, as outlined below:

The Committee references specific policies and guidelines to ensure adherence to the philosophy statements outlined above when considering the initial design and any subsequent changes to CVS Caremark’s executive compensation programs. In particular, the Committee examines the competitive positioning of total direct compensation, the ratio of current to long-term compensation, the relative levels of cash and non-cash compensation, and the mix of fixed and variable compensation. In addition, when considering changes to the benefits and perquisite components of compensation, the Committee assesses competitive market practice and the impact of any such change on the overall total compensation package offered to CVS Caremark executives.

5. Reward results achieved short-term and, in the long-term, stockholder value creation.

In defining and designing the specific elements of CVS’ executive compensation program, the Committee seeks to structure a balance between achieving robust short-term, or annual, results and ensuring the long-term success of the Company. To reinforce the importance of balancing these perspectives, the executive officers are regularly provided both short- and long-term incentives. Participation in CVS’ long-term incentive programs increases at higher levels of responsibility, as executive officers in these leadership roles have the greatest influence on the Company’s strategic direction and results over time. Performance metrics for both short- and long-term incentive compensation programs are defined financial indicators, such as operating profits or EPS, which are objectively measured and publicly disclosed.

In its consideration of initial design and any subsequent changes to CVS’ executive compensation programs, the Committee references specific policies and guidelines to ensure adherence to the philosophy statements outlined above. In particular, the Committee examines the competitive positioning of total direct compensation, the ratio of current to long-term compensation, the relative levels of cash and non-cash compensation, and the mix of fixed and variable compensation. In addition, when considering changes to the benefits and perquisite components of compensation, the Committee assesses competitive market practice and the impact of any such change on the overall total compensation package offered to CVS executives.

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