Company Name: CVS Caremark Corp.
Public Availability Date: January 31, 2008Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 19, 2007
Re: Stockholder Proposal of Catholic Healthcare Partners Exchange Act of
1934Rule 14a-8
U.S. Securities and Exchange Commission
Office of the Chief Counsel
Division of Corporate Finance
100 F Street, NE
Washington, D.C. 20549
Dear Sir or Madam:
This letter is to inform you that cur client, CVS Caremark Corporation, a
Delaware corporation (the "Company" or "CVS"), intends to omit from its proxy
statement and form of proxy for its 2008 Annual Meeting of Shareholders
(collectively, the "2008 Proxy Materials"), a stockholder proposal and
supporting statement (the "Proposal") received from the Catholic Healthcare
Partners, Adrian Dominican Sisters, Trinity Health, Sisters of Charity of the
Incarnate Word, Sisters of St. Francis of Philadelphia and Basilian Fathers of
Toronto (collectively, the "Proponents"), on November 26, 2007. We hereby
request confirmation that the staff of the Office of Chief Counsel (the "Staff")
will not recommend any enforcement action if CVS omits the Proposal from its
2008 Proxy Materials.
Pursuant to Rule 14a-8(j), we have:
enclosed herewith six (6) copies of each of this letter and the Proposal;
filed this letter with the Securities and Exchange Commission (the
"Commission") no later than 80 days before CVS files its definitive 2008 Proxy
Materials; and
concurrently sent a copy of this submission to the Proponents as notification
of the Company's intention to omit the Proposal from its 2008 Proxy Materials.
This letter constitutes the Company's statement of the reasons it deems the
omission of the Proposal to be proper. We have been advised by the Company as to
the factual matters set forth herein.
INTRODUCTION
The Proposal, which is attached hereto as Exhibit A, states:
RESOLVED: shareholders urge the Board of Directors to adopt principles for
comprehensive health care reform (such as those based upon the principles
reported by the Institute of Medicine):
1. Health care coverage should be universal
2. Health care coverage should be continuous.
3. Health care coverage should be affordable to individuals and families.
4. The health insurance strategy should be affordable and sustainable for
society.
5. Health insurance should enhance health and well being by promoting access to
high-quality care that is effective, efficient, safe, timely, patient-centered
and equitable.)
CVS requests that the Staff concur with its view that the Proposal may be
properly omitted from its 2008 Proxy Materials pursuant to Rule 14a-8(i)(7)
because it implicates the Company's ordinary business operations and seeks to
involve it in the political and legislative process.
ANALYSIS
Rule 14a-8(i)(7)
Under Rule 14a-8(i)(7), a proposal may be excluded if it "deals with a matter
relating to the conduct of the ordinary business operations of the registrant,"
provided that it does not have "significant policy, economic or other
implications inherent in" it. The Commission has provided guidance on the policy
behind the Rule 14a-8(i)(7) exclusion for ordinary business operations. In
Exchange Act Release No. 34-40018 (May 21, 1998) (the "1998 Release"), the
Commission stated that the general policy consideration behind the 14a-8(i)(7)
exclusion "is consistent with the policy of most state corporate laws: to
confine the resolution of ordinary business problems to management and the board
of directors, since it is impracticable for shareholders to decide how to solve
such problems at an annual shareholders meeting."
The Proposal requests that the Company adopt universal health care principles
imposing standards on health care coverage and health insurance which would
impact how the Company determines employee health care benefits issues. In
Chrysler Corporation (February 10, 1992), the Staff concluded that a shareholder
proposal requesting that the company "actively support and lobby for universal
health coverage" was excludable as pertaining to ordinary business matters. The
company argued that the proposal sought "to compel Chrysler to actively endorse
a nationwide voucher system of health care coverage" and thus would impact how
it determined employee health care benefit plans which is part of ordinary
business. The Staff has considered a number of no-action letters purporting to
address the "social policy" issue of public healthcare and has consistently
found them to be excludable. See 3M Company (February 20, 2007) (excluding a
proposal requesting that the board prepare a report examining the implications
of rising health care expenses); International Business Machines Corporation
(January 21, 2002) (finding a proposal requiring IBM to provide its shareholders
with information regarding employee health benefits and to join with other
corporations to support the establishment of a national health insurance system
excludable under Rule 14a-8(i)(7)); PepsiCo, Inc. (February 10, 1992)
(concluding that a proposal calling for a board committee to evaluate "various
health care proposals being considered by national policy makers" could be
excluded as ordinary business); GTE Corporation (February 10, 1992) (concluding
that a proposal relating to the preparation of a report by a committee of the
company's board of directors to evaluate various health care proposals being
considered by national policy makers, was excludable under Rule 14a-8(i)(7));
Tribune Company (March 6, 1991) (concluding that a proposal requesting the board
of directors to prepare a special report on the company's health care benefits
program including a number of specified points, such as the total costs of the
company's health care benefits, was excludable under Rule 14a-8(i)(7)).
Furthermore, as a subset of the ordinary business exception, the Staff has found
proposals excludable when they seek to involve the company in the political or
legislative process and are ultimately directed at a company's ordinary business
operations. In their supporting statement to the Proposal, the Proponents' true
objective becomes clear when they "urge the board to report annually about how
it is implementing such principles." Such a report is directly aimed at
involving shareholders in ordinary business decisions in the guise of addressing
social policy issues. Because employee health care benefits matters are very
much a matter of day to day business operations (insofar as they implicate
matters of employee benefits, plan design, scope of coverage, costs and the
like), a proposal requesting the Company to adopt health care reform principles
and to provide a report about how it is implementing such principles directly
implicates the Company's ordinary business operations and may be excluded under
Rule 14a-8(i)(7).
In International Business Machines Corporation (IBM) (March 2, 2000), the
proponent sought a report on the potential impact on the company of
pension-related proposals being considered by national policy makers. IBM had
recently adopted a pension plan that had been subjected to scrutiny in the
public arena, the proponent being one of the plan's most vocal critics.
Ultimately, the Staff concurred with IBM that while the proposal in question may
have touched on certain policy questions being debated in both public and
legislative forums, the true nature of the report was directed at IBM's ordinary
business operationsdeveloping pension plans, making sure they were in legal
compliance with government regulations, and assessing the effect that any future
government action may have on such plans. In their response letter, the Staff
found that the proposal was excludable as it "appear[ed] directed at involving
IBM in the political or legislative process." Applying the Staff's reasoning to
the Proposal, in the midst of the ongoing national debate on healthcare policy,
CVS believes that it should be excludable as seeking to involve the Company in
the political or legislative process.
While attempting to cast this issue as one relating to social policy, the intent
of the Proposal is to impact the Company's health care policies and procedures.
Employee health care plans are complex and necessarily involve careful
assessments by management in an effort to achieve the appropriate balance in the
overall package of employee benefits to employees across a large organization
(including healthcare coverage, compensation, and all other benefits) taking
into account the company's resources, employee incentives, morale and retention,
and shareholder interestsa management exercise integral to the advancement of a
company's ordinary business operations. Management assessments, strategies and
decisions on such matters, while important, are a matter of ordinary business
operations and it is fundamental to management's ability to run CVS that it
should not be subject to shareholder oversight on such business operations.
Accordingly, as the Proposal clearly deals with a matter that involves the
Company's ordinary business operations and seeks to involve it in the political
and legislative process, it is precisely the type of proposal that should be
excluded under Rule 14a-8(i)(7).
CONCLUSION
The Company respectfully requests confirmation that the Staff will not recommend
any enforcement action if, in reliance on the foregoing, CVS omits the Proposal
from its 2008 Proxy Materials. If the Staff does not concur with the Company's
position, we would appreciate an opportunity to confer with the Staff concerning
these matters prior to the issuance of its response.
Please call the undersigned at (212) 450-4539 if you should have any questions
or need additional information or as soon as a Staff response is available.
Please acknowledge receipt of this filing by date-stamping the enclosed
additional copy of this letter and returning it to our messenger.
Respectfully yours,
/s/
Louis Goldberg
Enclosures
cc w/ enc: Thomas S. Moffatt, Esq.
Catholic Healthcare Partners
State Street Bank
Adrian Dominican Sisters
[APPENDIX 1]
EXHIBIT A
VIA FEDERAL EXPRESS
November 26, 2007
Thomas M. Ryan CEO
CVS/Caremark Corp.
One CVS Drive
Woonsockel, RI 02895
Dear Mr. Ryan:
Catholic Healthcare Partners, a Catholic healthcare ministry headquartered in
Cincinnati, Ohio has long been concerned not only with the financial returns of
its Investments, but also (with many other churches and socially concerned
investors) with the social and ethical Implications of its investments. As
background, Catholic Healthcare Partners is one of the largest not-for-profit
health systems in the United States and the largest in Ohio. Catholic Healthcare
Partners is currently the beneficial owner of shares of CVS Caremark.
We believe that a commitment to employees, communites and the environment
fosters long-term business success. As healthcare providers, we are keenly aware
of the challenges in the current health system, including concerns relating to
both the cost and quality of care, and we are concerned as well that all persons
have access to needed services, irrespective of individual ability to pay. As an
employer, we are aware of the economic burden providing health benefits places
on all American businesses. As long term shareholders, we believe it is in the
Interests of this company to ensure all Americans have access to healthcare that
is affordable and provided equitably.
Catholic Healthcare Partners is therefore co-filing with the Adrian Dominican
Sisters the enclosed shareholder proposal for adoption of principles of
comprehensive health reform for inclusion in the 2008 proxy statement, In
accordance with Rule 14a-8 of the General Rules and Regulations of the
Securities Exchange Act of 1934. Catholic Healthcare Partners has been a
shareholder for more than one year and will continue to invest in at least the
requisite number of shares for proxy resolutions through the stockholders'
meeting. We have enclosed a copy of the verification of our ownership position
and will forward the original letter under separate cover. A representative of
the filers will attend the stockholders' meeting to move the resolution as
required by the SEC rules.
Sincerely,
/s/
Michael D. Connelly
President & CEO
Catholic Healthcare Partners
Encl. Resolution Text and Verification of Ownership
c: Interfaith Center for Corporate Responsibility
Margaret Weber Adrian Dominican Sisters
[APPENDIX 2]
Health Care Reform Principles 2008 - CVS Caremark
The overriding domestic policy concern of U.S. citizens involves some form of
universal health care. Besides the Iraqi war, the greatest public policy issue
in the 2008 presidential campaign has been universal health care reform.
Most citizens want their government to "guarantee health insurance for all
Americans," particularly children. They say they'd pay higher taxes to make this
possible, although they disagree about how to achieve this.
Given such findings, health care reform has become an overriding public policy
issue for the health care industry, including our company. Its paid lobbyists
seek to influence elected leaders regarding the company's position. Often this
occurs in less-than-transparent ways and, at times, against the interests of its
stakeholders.
In 2006, the health sector spent $351.1 million to lobby the federal government.
This represents 13.8% of all spending on lobbying, it nearly equals similar
spending by the financial sector. Within the health sector, manufaclurers of
drugs, medical devices, and other health care products spent the most. Between
1998 and 2006, the AMA, the American Hospital Association, AARP, and PhRMA
spent, respectively, the second, fourth, sixth, and seventh most on lobbying.
Although contributions from the health sector to presidential and other federal
candidates may increase, they are projected to be dwarfed by the overall amount
the health industry spends to lobby. Most of this occurs without shareholder
consent and that of other stakeholders whose public policy interests may be
opposed to those of our company.
Currently, there is broad support across most sectors of the United States for
"fundamental changes in" or "completely rebuilding" the health care system, Our
company can no longer hide behind any vell or secrecy or argue that its lobbying
to affect public policy is "ordinary business," especially when polls show that
the goals of such lobbying may be diametrically opposed to the stated interests
of ordinary citizens such as its consumers.
Existing law demands companies reveal the amount they spend on lobbying but not
what they lobby for. Because such lobbying by the health care industry,
including that of our company, actually may counter the underlying interests of
its shareholders, therefore,
RESOLVED: shareholders urge the Board of Directors to adopt principles for
comprehensive health care reform (such as those based upon principles reported
by the Institute of Medicine:
1. Health care coverage should be universal.
2. Health care coverage should be continuous.
3. Health care coverage should be affordable to individuals and families.
4. The health insurance strategy should be affordable and sustainable for
society.
5. Health insurance should enhance health and well being by promoting access to
high-quality care that is effective, efficient, safe, timely, patient-centered,
and equitable).
Supporting Statement
As shareholders, we believe publicly-held companies should be accountable to the
public on their positions on critical public policy issues, such as universal
health care. This is especially urgent for those in the health care industry, We
urge the Board to report annually about how it is implementing such principles
and ask follow shareholders to support this resolution.
[INQUIRY LETTER]
January 31, 2008
Re: Supplement to Rule 14a-8 No-Action Request Regarding Catholic Healthcare
Partners
U.S. Securities and Exchange Commission
Office of the Chief Counsel
Division of Corporate Finance
100 F Street, NE
Washington, D.C. 20549
Dear Sir or Madam:
On behalf of CVS Caremark Corporation, a Delaware corporation ("CVS"), we are
writing to supplement our above-mentioned no-action request filed with the
Office of the Chief Counsel on December 19, 2007, regarding the proposal and
supporting statement submitted by Catholic Healthcare Partners, Adrian Dominican
Sisters, Trinity Health, Sisters of Charity of the Incarnate Word, Sisters of
St. Francis of Philadelphia and Basilian Fathers of Toronto (collectively, the
"Proponents") on 26 November, 2007 (the "Proposal") for inclusion in the proxy
materials CVS intends to distribute in connection with its 2008 Annual Meeting
of Stockholders.
This letter serves to supplement and modify our December 19, 2007 no-action
request so that it covers not only the above six Proponents but also the
additional proponent:
"Dominican Sisters, St. Mary of the Springs"
Attached hereto is the Proposal of each of the seven Proponents.
Please call the undersigned at (212) 450-4539 if you should have any questions
or require additional information.
Respectfully yours,
/s/
Louis Goldberg
Attachments
cc w/ att: Thomas S. Moffatt, Esq.
Catholic Healthcare Partners
Adrian Dominican Sisters
Trinity Health
Sisters of Charity of the Incarnate Word
Sisters of St. Francis of Philadelphia
Basilian Fathers of Toronto
Dominican Sisters, St. Mary of the Springs
[STAFF REPLY LETTER]
January 31, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: CVS Caremark Corporation Incoming letter dated December 19, 2007
The proposal urges the board of directors to adopt principles for health care
reform, such as those based upon principles specified in the proposal, and to
report annually on how it is implementing such principles.
There appears to be some basis for your view that
CVS may exclude the proposal under rule 14a-8(i)(7), as relating to CVS'
ordinary business operations (i.e., employee benefits). Accordingly, we will not
recommend enforcement action to the Commission if CVS omits the proposal from
its proxy materials in reliance on rule 14a-8(i)(7).
Sincerely,
/s/
Eduardo Aleman
Attorney-Adviser
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