This excerpt taken from the CVS DEF 14A filed Mar 28, 2008.
On or about November 8, 2007, the Company received the following proposal from Mr. William Steiner, 112 Abbottsford Gate, Piermont, New York 10968, beneficial owner of 10,000 shares of the Companys stock. In accordance with SEC rules, we are reprinting the proposal and supporting statement (the William Steiner Proposal) in this proxy statement as they were submitted to us:
Special Shareholder Meetings
RESOLVED, Special Shareholder Meetings, Shareholders ask our board to amend our bylaws and any other appropriate governing documents in order that there is no restriction on the shareholder right to call a special meeting, compared to the standard allowed by applicable law on calling a special meeting.
Special meetings allow investors to vote on important matters, such as a takeover offer, that can arise between annual meetings. If shareholders cannot call special meetings, management may become insulated and investor returns may suffer.
Shareholders should have the ability to call a special meeting when they think a matter is sufficiently important to merit expeditious consideration. Shareholder control over timing is especially important regarding a major acquisition or restructuring, when events unfold quickly and issues may become moot by the next annual meeting.
Fidelity and Vanguard support a shareholder right to call a special meeting. The proxy voting guidelines of many public employee pension funds, including the New York City Employees Retirement System, also favor this right.
Eighteen (18) proposals on this topic averaged 56%-support in 2007 including 74%-support at Honeywell (HON) according to RiskMetrics (formerly Institutional Shareholder Services).
The merits of this proposal should also be considered in the context of our companys overall corporate governance structure and individual director performance. For instance in 2007 the following structure and performance issues were reported:
D in Corporate Governance.
Very High Concern in executive pay.
High Overall Governance Risk Assessment
1) Cumulative voting.
2) Act by written consent.
3) Call a special meeting.
The above concerns shows [sic] there is room for improvement and reinforces the reason to take one step forward now and encourage our board to respond positively to this proposal:
Special Shareholder Meetings
Yes on 3
Statement of The Board Recommending a Vote AGAINST the William Steiner Proposal
This proposal requests our board to amend our bylaws and any other appropriate governing documents in order that there is no restriction on the shareholder right to call a special meeting compared to the standard allowed by applicable law on calling a special meeting.
CVS Caremark is strongly committed to good governance practices and is keenly interested in the views and concerns of our stockholders. We believe, however, that the William Steiner Proposal is vague and misleading, in that it is not clear what the proponent is requesting or how the Company would be expected to implement it if it were adopted.
The standard allowed by applicable law for calling a special meeting, is determined by Section 211(d) of the Delaware General Corporation Law (DGCL), which provides that [s]pecial meetings of the stockholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws. This section of the DGCL does not automatically vest the stockholders with the right to call a special meeting and thus there is no standard to define the content of the right to call a special meeting. Accordingly, the William Steiner Proposal does not specify with any reasonable certainty exactly what the stockholders are voting for or determine what actions or measures the Board should take to implement the William Steiner Proposal.
It is possible to read the William Steiner Proposal as saying that stockholders should have an unfettered right to call a special meeting. In that regard, we would observe that calling a special meeting of stockholders is not a matter to be taken lightly. We believe that a special meeting should only be held to cover extraordinary events when fiduciary, strategic, significant transactional or similar considerations dictate that the matter be addressed on an expeditious basis, rather than waiting until the next annual meeting.
Organizing and preparing for a special meeting involve significant management commitment of time and focus. The William Steiner Proposal, if intended by the proponent to remove any restrictions on calling a special meeting (and approved by stockholders and adopted by the Board), would allow unfettered ability
of any stockholder (regardless of size or holding period of ownership stake) to call a special meeting at any time and with any frequency, and potentially covering agenda items relevant to particular constituencies as opposed to stockholders generally. We believe that adopting such a standard for calling special meetings would present a real risk of significant cost, management distraction and diversion of management and financial resources to address a possibly unlimited number of special meetings. We therefore believe that such a standard would not be in the best interest of stockholders.
We also note that the William Steiner Proposal contains an error, in that it asserts that Ms. Heard received 32% withhold votes, when in fact over 92% of the votes cast were in favor of Ms. Heards election at our 2007 annual meeting of stockholders.
Accordingly, the Board recommends a vote AGAINST the William Steiner Proposal.