Other Practices

Executive Compensation

CVS Caremark’s management and Board of Directors recognize that executive compensation is an important and relevant issue in corporate governance; our policies and programs continue to be designed to ensure an appropriate link between pay, Company and individual performance and shareholder returns. With the oversight of the Management Planning and Development Committee, our executive compensation policies and programs are designed to attract, retain and motivate talented leaders to drive Company performance. This Committee also evaluates and monitors our executive compensation strategy to ensure our approach is aligned with best practices among our peer group.

We are committed to a “pay-for-performance” philosophy, and we demonstrate that commitment by delivering a significant portion of our executives’ annual compensation in long-term, multi-year “at risk” equity awards whose ultimate value, if any, will depend on the Company’s future financial and stock performance. It is not only financial performance that is important to us as a company; customer service and satisfaction metrics are an important factor in the determination of annual incentive award funding not only for executives, but for all annual incentive award recipients. In addition, we have a “claw back” provision that allows the Company to recoup annual and long-term incentive awards if it is determined that fraud or financial misconduct, which allowed the executive to receive an award, had occurred. All of these actions further reinforce a strong alignment of our executives’ interests with those of our stockholders.

As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, we asked our stockholders at the 2011 annual meeting to provide advisory approval of the compensation paid to our executives. While this is not binding on the Company, the Management Planning and Development Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by stockholders and will consider the outcome of the vote in connection with its ongoing evaluation of the Company’s executive compensation program. Furthermore, our Board of Directors has determined that an advisory vote on executive compensation that occurs annually is the most appropriate alternative for the Company. In formulating its recommendation, our Board considered that an annual advisory vote on executive compensation would allow stockholders to provide us with their direct input on our compensation philosophy, policies and practices as disclosed in our proxy statement each year.

Additionally, we have policies in place that address concerns raised by stockholders at many companies regarding benefits payable under a supplemental executive retirement plan (SERP) and tax gross-up payments available to executives. Under these policies, our SERP plan is now closed, and no excise tax gross-up, or any other kind of tax gross-up, will be offered to additional executive officers in the future.

Political Contributions and Activities

CVS Caremark seeks to be an effective participant in the political process by making prudent political contributions consistent with federal, state and local laws. It is CVS Caremark policy that the CEO and the Board are exclusively responsible for determining the Company’s political interests and, subject to compliance with applicable laws and with the advice of counsel, deciding how to further those interests. Corporate contributions by the Company are prohibited at the federal level, therefore, CVS Caremark does not make any at that level. Political contributions to federal candidates, political party committees and political action committees are made by the Company’s federal political action committee (CVS Caremark-FPAC) which is funded by voluntary contributions. The activities of the CVS Caremark-FPAC are subject to comprehensive regulation by the federal government, including detailed disclosure requirements. CVS Caremark-FPAC files monthly reports of receipts and disbursements with the Federal Election Commission (FEC), as well as pre-election and post-election FEC reports. All political contributions over $200 are shown in the public information made available to the FEC. Under the Lobbying Disclosure Act of 1995, CVS Caremark submits to Congress semi-annual reports, which are publicly available.

At the state level, the Company’s political contributions are also subject to regulation. Although some states have not banned corporate contributions to candidates or political parties, all states require that such contributions be disclosed either by the recipient or by the donor. Information regarding the corporate contributions made by CVS Caremark to state candidates or political parties is publicly available.