CVS Caremark Corporation (CVS)

Supporting Statement

We are concerned about the significant disparity between the compensation of the CVS Caremark’s CEO and that of the second highest compensated named executive officer (NEO). According to CVS Caremark’s 2008 Compensation Discussion and Analysis, CEO Thomas Ryan’s 2007 total compensation of $26,097,790 was roughly 3.30 times the total compensation of the next-highest-paid NEO. A recent Harvard study shows that greater executive pay inequity is associated with lower firm value and greater CEO entrenchment. (Bebchuk, Lucian et a1., “Pay Distribution in the Top Executive Team” (February 2007).) Large CEO to NEO pay ratios also may indicate inadequate succession planning, since large disparities may be seen as reflecting significant differences in contribution and ability.

We believe that existing U.S. corporate governance arrangements, including SEC rules and stock exchange listing standards, do not provide shareholders with sufficient mechanisms for providing input to boards on senior executive compensation. In contrast to U.S. practice, in the United Kingdom, public companies allow shareholders to cast an advisory vote on the “directors’ remuneration report,” which discloses executive compensation. Such a vote isn’t binding, but gives shareholders a clear voice that could help shape senior executive compensation.

Currently U.S. stock exchange listing standards require shareholder approval of equity-based compensation plans; those plans, however, set general parameters and accord the compensation committee substantial discretion in making awards and establishing performance thresholds for a particular year. Shareholders do not have any mechanism for providing ongoing feedback on the application of those general standards to individual pay packages.

Similarly, performance criteria submitted for shareholder approval to allow a company to deduct compensation in excess of $1 million are broad and do not constrain compensation committees in setting performance targets for particular senior executives. Withholding votes from compensation committee members who are standing for reelection is a blunt and insufficient instrument for registering dissatisfaction with the way in which the committee has administered compensation plans and policies in the previous year.

Accordingly, we urge the board to allow shareholders to express their opinion about senior executive compensation by establishing an annual referendum process. The results of such a vote could provide CVS Caremark with useful information about shareholders’ views on the company’s senior executive compensation, as reported each year, and would facilitate constructive dialogue between shareholders and the board.

We urge shareholders to vote for this proposal.

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Supporting Statement

As long-term shareholders of CVS Caremark Corporation, we support transparency and accountability in corporate spending on political activities. These activities include direct and indirect political contributions to candidates, political parties or political organizations; independent expenditures; or electioneering communications on behalf of a federal, state or local candidate.

CVS Caremark Corporation contributed at least $6 million in corporate funds since the 2002 election cycle. (CQ’s PoliticalMoneyLine: http://moneyline.cq.com/pm1/home.do and National Institute on Money in State Politics: http://www.followthemoney.org/index.phtml.)

However, its payments to trade associations used for political activities are un-disclosed. Disclosure is in the best interest of the company’s shareholders. Absent a system of accountability, company assets can be used for policy objectives that are not shared by and may be inimical to the interests of company and its shareholders.

Trade Associations engage in political activity that may support or conflict with the company’s positions on important issues like universal access to healthcare, biomedical research and women’s health choices.

The recently enacted Honest Leadership and Open Government Act requires greater disclosure of trade association political and lobbying activity including the reporting of all contributions bundled by a

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trade association’s political action committee and the listing of all companies who contribute more than $5,000 in any quarterly period in support of a trade association’s lobbying activity. Company disclosure will help assure that trade associations are meeting their legal obligation in reporting political and lobbying activity and that those activities are consistent with the interests of the company as an association member.

Relying on publicly available data does not provide a complete picture of political expenditures. CVS Caremark Corporation’s Board and shareholders need complete disclosure to evaluate the political use of corporate assets.”

Supporting Statement

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 board’s 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 CVS’s 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.”

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