Board and Corporate Governance Highlights

The CVS Health Board continues to evaluate the Company’s corporate governance policies and practices to ensure that the right mix of individuals are present in our boardroom, to best serve the stockholders we represent by ensuring effective oversight of our strategy and management. We are committed to maintaining the highest standards of corporate governance, and have established a strong and effective framework by which the Company is governed and reviewed.

FURTHER INFORMATION
2016-2017 Board
and Corporate
Governance
Developments
Formation of a new Committee focused on patient safety and clinical quality in March 2016 page 27
We adopted a proxy access by-law that allows holders of at least 3% of our stock for a period of three years the right to nominate candidates for up to 20% of board seats, with a minimum of two seats page 18
In March 2017 we nominated Mary Schapiro for election to our Board of Directors; if elected, Ms. Schapiro will strengthen our Board and increase its gender diversity pages 16-17
Board
Communication
and Stockholder
Rights
Our Board supports our stockholder outreach program and has responded to stockholder input with changes in our compensation program and other areas pages 6-7, 20,
32,42
Right to act by written consent and to call special meetings page 20
Majority voting in director elections page 18
Annual election of all directors, annual “say-on-pay” vote pages 10, 34-35
Director Alignment
with Stockholder
Interests
At least 75% of our directors’ annual retainer mix is paid in shares of CVS Health common stock pages 32-33
Directors must own at least 10,000 shares of CVS Health common stock page 77
All directors except one had 100% meeting attendance page 28
Board Oversight
of Risk
Full Board and individual Committee focus on understanding Company risks page 19
Annually, the Audit Committee reviews our policies and practices with respect to risk assessment and risk management, including discussing with management our major risks and the steps that have been taken to monitor and mitigate such risks page 23
The Management Planning and Development Committee is responsible for reviewing and assessing potential risk arising from the Company’s compensation policies and practices page 26
Our independent Chairman and our CEO are focused on the Company’s risk management efforts and ensure that risk matters are appropriately brought to the Board and/or its Committees for review pages 19-20

STOCKHOLDER OUTREACH – GOVERNANCE AND COMPENSATION ACTIONS

During the fall of 2016, we reached out to our 50 largest stockholders, holders of more than 50% of our outstanding common stock in the aggregate, and offered to discuss corporate governance, our compensation programs and any other matters of interest. We had discussions with many stockholders and one of the leading proxy advisory firms. During those discussions, we heard several themes that caused us to take action:

WHAT WE HEARD WHAT WE HAVE DONE
IN RESPONSE
INTENDED OUTCOME WHEN EFFECTIVE
Proxy access is a right that is important to stockholders Discussed our proxy access by-law, which was adopted early in 2016, with our stockholders Provide stockholders the right to nominate candidates for election to our Board and have their nominees included in our proxy statement 2016
Diversity of the Board may be improved by ensuring that diverse candidates are included in director searches
Amended our Nominating and Corporate Governance Committee Charter to specifically include a requirement for diverse candidates Memorialize and formalize our existing practice of including diverse candidates in all director searches 2017
Annual stockholder advisory votes on executive compensation (“say-on-pay”) allow us to evaluate the Company’s compensation practices Recommended “annual” as the frequency for future stockholder advisory votes on executive compensation Maintain a regular dialogue and receive annual feedback from our stockholders on our executive compensation practices The 2017 proxy statement
Your ability to use discretion in determining bonus payments is unclear and allows substantial increases Reduced cap on our Executive Incentive Plan (EIP) to be aligned with the broad-based Management Incentive Plan (MIP) and better articulated guidelines that the Committee uses for discretionary adjustments Improved transparency; program design reflects the Management Planning and Development (MP&D) Committee’s intentions The MP&D Committee applied the new limits to the 2016 performance year EIP awards; improved disclosure in the proxy statement related to the Committee’s use of discretion
Describe how the incentive plan metrics support the Company’s growth strategy Improved disclosure Improve stockholders’ understanding of why we use certain incentive plan metrics The 2017 proxy statement
Practice of paying dividend equivalents on unvested restricted stock units (RSUs) at the same time and rate as stockholders is inconsistent with time vesting requirements Dividend equivalents on unvested RSUs will be paid only to the extent the underlying award vests Align the dividend equivalent awards with the vesting provisions of RSUs; simplify accounting treatment of awards Beginning with 2017 awards
WHAT WE HEARD WHAT WE HAVE DONE
IN RESPONSE
INTENDED OUTCOME WHEN EFFECTIVE
Proxy access is a right that is important to stockholders Discussed our proxy access by-law, which was adopted early in 2016, with our stockholders Provides stockholders the right to nominate candidates for election to our Board and have their nominees included in our proxy statement 2016
Diversity of the Board may be improved by ensuring that diverse candidates are included in director searches
Amended our Nominating and Corporate Governance Committee Charter to specifically include a requirement for diverse candidates Memorialize and formalize our existing practice of including diverse candidates in all director searches 2017
Annual stockholder advisory votes on executive compensation (“say-on-pay”) allow us to evaluate the Company’s compensation practices Recommended “annual” as the frequency for future stockholder advisory votes on executive compensation Maintain a regular dialogue and receive annual feedback from our stockholders on our executive compensation practices The 2017 proxy statement
Your ability to use discretion in determining bonus payments is unclear and allows substantial increases Reduced cap on our Executive Incentive Plan (EIP) to be aligned with the broadbased incentive plan (MIP) and better articulated guidelines that the Committee uses for discretionary adjustments Improved transparency; program design reflects the Management Planning and Development (MP&D) Committee’s intentions The MP&D Committee applied the new limits to the 2016 performance year EIP awards; improved disclosure in the proxy statement related to the Committee’s use of discretion
Describe how the incentive plan metrics support the Company’s growth strategy Improved disclosure Improve stockholders’ understanding of why we use certain incentive plan metrics The 2017 proxy statement
Practice of paying dividend equivalents on unvested restricted stock units (RSUs) at the same time and rate as stockholders is inconsistent with time vesting requirements Dividend equivalents on unvested RSUs will be paid only to the extent the underlying award vests Align the dividend equivalent awards with the vesting provisions of RSUs; simplify accounting treatment of awards Beginning with 2017 awards
For more information on corporate governance at CVS Health, please refer to pages 17-29 of the proxy statement and to our website at http://investors.cvshealth.com/corporate-governance.
For more information on corporate governance at CVS Health, please refer to pages 17-29 of the proxy statement and to our website at http://investors.cvshealth.com/
corporate-governance
.