This excerpt taken from the CVS DEF 14A filed Apr 4, 2007.
On or about November 30, 2006, the Company received the following proposal from Amalgamated Bank LongView Collective Investment Fund, 11-15 Union Square, New York, NY 10003, beneficial owners of 306,954 shares of the Companys stock. In accordance with SEC rules, we are reprinting the proposal and supporting statement (the Amalgamated Proposal) in this proxy statement as they were submitted to us:
RESOLVED, that the shareholders of CVS Corporation (CVS or the Company) urge the board of directors (the board) to disclose in a separate report to shareholders the Companys relationships with its executive compensation consultants or firms. Specifically, the Company should, as to each firm or consultant retained by management, the board or a board committee to advise on executive compensation policies or plans (each a Consultant):
To ensure that executive compensation is aligned with the interests of shareholders, we believe compensation issues should be decided by a committee of independent directors who have access to unbiased advice and analyses.
CVS noted in its 2006 proxy statement that the boards compensation committee utilizes a compensation consultant, but the proxy did not disclose enough information to allow shareholders adequately to assess the independence of the consultant being utilized.
Questions have been raised about the independence of compensation consultants. One article linked escalating executive pay to the fact that if the consultants want to be rehired in future years, they will not want to hurt their chances by suggesting that a chief receive less than his or her peers do. (How to Slow Runaway Executive Pay, THE NEW YORK TIMES, Oct. 23, 2005)
Moreover, the independence of compensation consultants may be compromised as a result of additional business relationships. According to another report, compensation consultants are often motivated to produce big paydays for managers. After all, the boss can hand their company lucrative contracts down the road. (Off to the Races Again, Leaving Many Behind, THE NEW YORK TIMES, April 9, 2006)
We believe that there is a strong case for greater transparency on the role of consultants at CVS. An analysis by the Investor Responsibility Research Center disclosed that the total direct compensation for CVS chairman and CEO was approximately $29 million in the last year for which data are available. By contrast, the median pay level for CEOs in CVS peer group was $8.5 million.
For these reasons, we believe that the disclosure of CVSs relationships with its compensation consultants and its policies and procedures regarding non-compensation-related services will help ensure that executive compensation decisions are rendered independently and in the interests of shareholders.
We urge you to vote FOR this resolution.
Statement of The Board Recommending a Vote AGAINST the Amalgamated Proposal
The Companys Board of Directors unanimously recommends that you vote against the Amalgamated Proposal because it is unnecessary and it is not in the best interests of the Company or its stockholders.
The Amalgamated Proposal calls for the Company to publish a separate report disclosing its relationships with executive compensation consultants and firms, detailing, among other things, whether any members of our senior management were involved in the retention of the consultant and whether the consultant has provided non-compensation related services to the Company at any time in the preceding five years.
The Companys executive compensation policies are administered by the Management Planning and Development Committee of the Board of Directors (the Committee), which is composed entirely of independent directors. The Committee takes steps to ensure that the Companys compensation programs are appropriate for retaining and properly incentivizing its executives, as well as being in line with industry standards and the programs of peer companies, and to that end, engages an independent compensation consulting firm to assist the Committee. The consulting firm reports to the Chair of the Committee.
This proxy statement already contains extensive disclosure on executive compensation matters, consistent with the rules and regulations of the SEC. See the Executive Compensation and Related Matters section of this proxy statement. Significantly, our proxy statement already contains pertinent disclosure on the engagement of and relationship with Mercer, the independent compensation consulting firm retained by the Committee. See page 17 of this proxy statement, where we disclose: the roles and work undertaken by Mercer in assisting the Committee in 2006; that the Committee has the authority to determine the scope of the external compensation consultants services and may terminate the engagement at any time; that the external compensation consultant reports to the Committee Chair; and that the executive compensation services performed for the Committee are by far the most significant component of the relationship that the Company has with Mercer (fees for those services accounted for over 87% of the total services provided by Mercer to the Company in 2006).
Given that the independent compensation consulting firm reports to the Committee Chair, that our proxy statement already contains all pertinent disclosure on our relationship with Mercer, and that our disclosure is in accordance with SEC rules, we believe that such a separate report as requested by the proponent would not be in the best interest of stockholders and would be an unnecessary application and diversion of resources.
The Board of Directors recommends a vote AGAINST the Amalgamated Proposal.