CVS Health (CVS) DEF 14ADefinitive proxy

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

CVS Health Corporation

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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2023

Notice of Annual
Meeting of Stockholders
and Proxy Statement

May 18, 2023

Virtual Meeting at 8:00 a.m., Eastern Time
www.virtualshareholdermeeting.com/CVS2023

CVS Health Corporation
One CVS Drive
Woonsocket, Rhode Island 02895

The Annual Meeting will be held solely by means of remote communication, to allow our stockholders to more easily participate regardless of their geographic location and for the health and safety of our stockholders and employees. This Notice of 2023 Annual Meeting and Proxy Statement is being mailed or transmitted beginning on or about April 7, 2023 to stockholders of record at the close of business on March 20, 2023.

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Our strategic imperatives

			Grow our foundational businesses
			Create new sources of value in care delivery and health services offerings
			Enhance our omnichannel health capabilities and drive engagement
			Deliver cutting edge tech to elevate customer and colleague experiences
			Power a purpose-driven culture and consumer mindset

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Message from Our Independent Chair and Chief Executive Officer

Dear Fellow Stockholders:

This was Roger’s first year as Independent Chair of the Board, and we directed efforts on refreshment and committee membership and leadership along with an enhanced Board evaluation process. In September, Dr. Jeffrey Balser joined the Board bringing relevant insight gathered from his experiences in a range of health care roles, including as CEO of Vanderbilt University Medical Center and as a member of the National Academy of Medicine. William Weldon is not standing for re-election at the 2023 Annual Meeting as he has reached the Board’s mandatory retirement age. We thank Bill for his counsel during his tenure on our Board.

Environmental, Social and Governance Focus

Healthy 2030, our ESG approach, is focused on achieving our economic, environmental and social imperatives and shaping a more equitable and sustainable future for all—across multiple dimensions of health. Our diverse and inclusive workforce reflects the communities we serve and is committed to advancing health equity, bringing care to more people and protecting our environment. Our ESG strategy and initiatives are supported by a strong governance framework, including Board-level oversight, thoroughly reviewed goals, an ESG Steering Committee and regular reporting and disclosures.

Annual Meeting of Stockholders

Our 2023 Annual Meeting will be held virtually on Thursday, May 18, 2023, at 8:00 a.m., Eastern Time, to allow our stockholders to participate more easily regardless of location. We ask you to please vote at your earliest convenience. Your vote is important.

Thank you for your continued interest and investment in CVS Health. We appreciate your support as we continue to transform the health care system and deliver value-based care to improve health care for consumers.

Sincerely,

Roger N. Farah		Karen S. Lynch
Independent Chair of the Board		President and Chief Executive Officer

2023 Proxy Statement    i

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i	Message from Our Independent Chair and Chief Executive Officer
1	Notice of Annual Meeting of Stockholders
4	Proxy Statement Highlights
12	Corporate Governance and Related Matters
12		Item 1: Election of Directors
22	The Board’s Role and Activities in 2022
29	Board Structure and Processes
30	Committees of the Board
40	Audit Committee Matters
40		Item 2: Ratification of the Appointment of Our Independent Registered Public Accounting Firm for 2023
42	Executive Compensation and Related Matters
42		Item 3: Say on Pay, a Proposal to Approve, on an Advisory Basis, the Company’s Executive Compensation
44		Item 4: Proposal to Recommend, on an Advisory Basis, the Frequency of Advisory Votes on Executive Compensation
45	Letter from the Management Planning and Development Committee
46	Compensation Committee Report
47	Compensation Discussion and Analysis
50	Summary
54	2022 Business and Performance Highlights
55	Executive Compensation Program Discussion
76	Compensation of Named Executive Officers
76	Summary Compensation Table
78	Grants of Plan-Based Awards
79	Outstanding Equity Awards at Fiscal Year-End
80	Option Exercises and Stock Vested
81	Nonqualified Deferred Compensation
82	Payments/(Forfeitures) Under Termination Scenarios

88	CEO Pay Ratio
89	Pay Versus Performance
94	Stockholder Proposals
94		Item 5: Stockholder Proposal Requesting Paid Sick Leave for All Employees
97		Item 6: Stockholder Proposal for Reducing our Ownership Threshold to Request a Special Stockholder Meeting
100		Item 7: Stockholder Proposal Regarding “Fair Elections” and Requiring Stockholder Approval of Certain Types of By-law Amendments
103		Item 8: Stockholder Proposal Requesting a Report on a “Worker Rights Assessment”
106		Item 9: Stockholder Proposal to Prevent Company Directors from Simultaneously Sitting on the Boards of Directors of Any Other Company
109	Ownership and Trading in Our Stock
109	Executive Officer and Director Stock Ownership Requirements
110	Share Ownership of Directors and Certain Executive Officers
111	Share Ownership of Principal Stockholders
112	Other Information
112	Information About the Annual Meeting and Voting
115	Stockholder Proposals and Other Business for Our Annual Meeting in 2024
116	Other Matters
A-1	Annex A – Reconciliation of Certain Amounts to the Most Directly Comparable GAAP Measure

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Notice of Annual Meeting of Stockholders

May 18, 2023 8:00 a.m., Eastern Time The Annual Meeting will be held exclusively online at www.virtualshareholdermeeting. com/CVS2023

 

How to Vote
Your vote is important to the future of CVS Health. You are eligible to vote if you were a stockholder of record at the close of business on March 20, 2023. Even if you plan to attend the Annual Meeting virtually, please vote as soon as possible using one of the following methods. In all cases, you should have your proxy card in hand:
	USE THE INTERNET www.proxyvote.com
	USE A MOBILE DEVICE Scan this QR Code
	CALL TOLL-FREE 1-800-690-6903
	MAIL YOUR PROXY CARD Follow the instructions on your voting form
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to Be Held on May 18, 2023:
The proxy statement and 2022 Annual Report to Stockholders (the “2022 Annual Report”), which includes our Annual Report on Form 10-K and our audited financial statements, are available at www.cvshealthannualmeeting.com and at www.proxyvote.com.
Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote and submit your proxy in advance of the meeting by one of the methods described in the proxy materials.

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The Value We Create

2    CVS Health

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Our Purpose: Bringing our heart to every moment of your health™

At CVS Health, we are a dedicated and diverse team – more than 300,000 colleagues strong – focused on a bold vision to reimagine health care by putting our colleagues and consumers at the heart.

We are committed to building a workplace where every person is welcome, valued, and can fulfill their potential. A workplace fueled by our culture – one where our colleagues are not only measured by what they do, but by how they do it. Our Heart At Work Behaviors™ guide our actions – from how we treat each other, to responding to our customers’ needs or serving our communities. We put people first, rise to the challenge, join forces, create simplicity, inspire trust, and champion safety and quality – empowering every person to achieve our goals and shared purpose.

We are proud of the contributions we make and to have a company that reflects the communities we serve. Together we are accountable for creating the culture we want, need, and deserve – helping us on our journey to bring our heart to every moment of your health.

Put people first			Rise to the challenge
We are customer obsessed. We walk in others’ shoes to improve the customer and colleague experience. We create an engaging and inclusive work environment where our colleagues reflect the diversity of our customers.			We boldly innovate to care for our customers. We act swiftly and adapt to feedback. We think big and are willing to take smart risks to innovate. We welcome different points of view and learn from mistakes.
Join forces			Create simplicity
We unite around our goal of serving the customer. We work across teams to provide the best care possible. We listen and learn from each other. We are conscious of our impact on customers, colleagues and the company.			We design for our customers. We continuously simplify by removing extra steps and innovating to create streamlined solutions. We focus on what matters most to our customers and empower those colleagues closest to the work to make the right call.
Inspire trust			Champion safety and quality
We work to earn the trust of our customers and colleagues by meeting our commitments and acting with integrity. We bravely do the right thing, even when it is hard. We speak up to challenge ideas and do so with heart.			We are relentless in our pursuit of the safest and highest quality care. We know that in order to keep patients and consumers safe, our colleagues must also feel safe and protected. We ensure safety is at the heart of every decision we make and everything we do.

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Proxy Statement Highlights

This summary highlights selected information in this proxy statement – please review the entire document before voting.

All of our Annual Meeting materials are available at www.cvshealthannualmeeting.com. There, you can download electronic copies of our Annual Report and proxy statement and use the link to vote.

Voting Items

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Proxy Statement Highlights

The CVS Health Board

William C. Weldon, an independent member of the Board of Directors (the “Board” or “our Board”) who has reached our mandatory retirement age, is retiring from the Board at the 2023 Annual Meeting. Upon the retirement of Mr. Weldon, the size of the Board will be reduced to 11 directors.

You are asked to vote on the election of the following 11 nominees to serve on the Board of CVS Health Corporation (“CVS Health” or the “Company”). All directors are elected by a majority of votes cast, and all presently serve on the Board. The information below reflects the expected leadership and membership of each of the Board’s committees after the Annual Meeting.

Director

Other Public

Committees

Name

Since

Independent

Company Boards

A

I&F

MP&D

N&CG

MA

E

Fernando Aguirre, 65 Former Chairman, President and CEO of Chiquita Brands International, Inc.

2018

YES

2

Jeffrey R. Balser, M.D., Ph.D., 61 President and Chief Executive Officer of Vanderbilt University Medical Center

2022

YES

None

C. David Brown II, 71 Partner and Former Member of Executive Committee of Nelson Mullins Riley & Scarborough LLP

2007

YES

None

��

Alecia A. DeCoudreaux, 68 President Emerita of the former Mills College, now Mills College at Northeastern University, and Former Executive at Eli Lilly and Company

2015

YES

2

Nancy-Ann M. DeParle, 66 Managing Partner and Co-Founder of Consonance Capital Partners, LLC and Former Director of White House Office of Health Reform

2013

YES

1

Roger N. Farah, 70 Independent Chair of the Board of CVS Health Corporation; Former Chairman of the Board of Tiffany & Co. and Former Executive at Tory Burch and Ralph Lauren

2018

YES

1

Anne M. Finucane, 70 Chair of the Board of Rubicon Carbon and Former Vice Chairman of Bank of America Corporation

2011

YES

1

Edward J. Ludwig, 71 Former Chairman and CEO of Becton, Dickinson and Company

2018

YES

1

Karen S. Lynch, 60 President and CEO of CVS Health Corporation

2021

NO

None

Jean-Pierre Millon, 72 Former President and CEO of PCS Health Systems, Inc.

2007

YES

None

Mary L. Schapiro, 67 Vice Chair of Global Public Policy and Special Advisor to the Chairman of Bloomberg L.P. and Former Chairman of the U.S. Securities and Exchange Commission

2017

YES

1

Key
	Member	A	Audit	MP&D	Management Planning and Development		MA	Medical Affairs
	Committee Chair	I&F	Investment and Finance	N&CG	Nominating and Corporate Governance		E	Executive

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Proxy Statement Highlights

Our Directors Nominated for Election at the Annual Meeting

The demographic information presented below is based on voluntary self-identification by each director nominee. Additional biographical information on each director nominee is set out starting on page 13.

Director Independence		Financial Expertise		Director Tenure		Diversity of Gender and Background
10 directors are independent of the Company and management. Ms. Lynch, our President and CEO, is our only non-independent director nominee.		Four members of our Audit Committee are designated Audit Committee Financial Experts. Three other Board members have qualifications to be financial experts, and the remainder are financially literate.		Our directors bring a balance of experience and fresh perspective to our boardroom. The average tenure of our director nominees is ~7.6 years.		Approximately 45% of our director nominees are women. Two of our committees are chaired by female directors. Our director nominees come from varied backgrounds, including three who identify as racially or ethnically diverse and two who were born outside of the U.S.

Director Nominee Expertise, Skills and Experience

Our director nominees possess relevant experience, skills and qualifications that allow the Board to effectively oversee the Company’s strategy and management. The Board has identified key skills, qualifications and experience that are important to the Board as a whole in light of our current business strategy and expected needs. Our director nominees have developed competencies in these skills through education, direct experience and oversight responsibilities. The graphics below summarize each of our director nominees’ five principal areas of expertise. This summary is not intended to be an exhaustive list of their skills or areas of principal contributions to the Board, and each director possesses skills in addition to those utilized for these graphics. See page 20 for details on how these skills and expertise link to the Company’s strategy.

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Proxy Statement Highlights

Board and Corporate Governance Highlights

The 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
2022-2023 Board and Corporate Governance Developments
●	In September 2022, Jeffrey R. Balser, M.D., Ph.D., was elected to our Board of Directors, strengthening our Board’s clinical and health information technology expertise and complementing the Board’s collective skill set and experience.		page 13
●	With the retirement of William C. Weldon at the time of the Annual Meeting, our Board size will decrease to 11 directors. The Nominating and Corporate Governance Committee (“N&CG Committee”), with the assistance of an outside search firm that it retained, is continuing its search to identify, evaluate and conduct due diligence on potential director candidates to further strengthen our Board in the future.		pages 5, 19, 21
●	The N&CG Committee reviewed and updated the board skills/experience list with the skills and experience most relevant to CVS Health and its business and strategy. The Committee removed “International Business Operations” and reflected the Company’s expanded focus on health care delivery by adding “Health Care and Health Services. ” It also broadened our focus on regulatory matters by including “Regulated Industries,” referring to business areas other than health care.		pages 19, 20
●	In September 2022, the N&CG Committee approved an amendment to the Executive Committee charter that reduced the number of Executive Committee members from seven to five, set the minimum number of members at three, and implemented a formal, annual rotation of membership. Having fewer members with broader reach is expected to make it easier to assemble the Executive Committee quickly to address emergent issues. The annual rotation helps to ensure that new perspectives are available to the Independent Chair of the Board.		page 38
●	In November 2022, the Board approved amendments to the Company’s by-laws (the “By-laws”) to revise notification and other requirements related to nominations of directors and solicitations of proxies, including to reflect new procedures to comply with Rule 14a-19 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), also known as the universal proxy rules. The amendments to the By-laws were moderate and reflect best practices in this area.		pages 21, 115-116
●	In December 2022, the Board increased the Company’s quarterly cash dividend by 10%, from $0.55 to $0.605, effective with the dividend distribution on February 1, 2023. It also authorized a $10.0 billion share repurchase program in November 2022, to supplement the remaining authorization under the share repurchase program approved by the Board in December 2021.		pages 22, 32, 55

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Proxy Statement Highlights

			Further Information
Board Communication and Stockholder Rights
●	Our Board supports and participates in our stockholder outreach program and has responded to stockholder input with changes in our compensation program and other areas including:		pages 9-11, 28, 51-53
	●  Majority voting in director elections		page 21
	●  Proxy access by-law		page 21
	●  Annual election of all directors		page 12
	●  Annual say on pay vote		pages 42-43
	●  Right to act by written consent that is less than unanimous and to call special meetings of stockholders		See our Certificate of Incorporation and By-laws at https://investors. cvshealth.com under “Governance Documents”
Director Alignment with Stockholder Interests
●	Working in collaboration with management on an appropriate settlement of the vast majority of pending opioid lawsuits was a board-level priority; the Board also agreed to a one-time a reduction in non-employee director compensation of 10% for fiscal year 2023.		pages 10-11, 38-39, 52-53
●	At least 75% of our directors’ annual retainer mix is paid in shares of CVS Health common stock.		pages 38-39
●	Directors must own at least 10,000 shares of CVS Health common stock.		page 109
●	Director nominee meeting attendance averaged 98%, and each director nominee attended at least 98% of the meetings of the Board and the committees of which he or she was a member.		page 38
●	The Board is focused on diversity of Board and Board committee leadership.		pages 5, 6, 30
Board Oversight of Risk
●	Full Board and individual committees focus on understanding and assessing Company risks.		pages 24-27
●	Our Independent Chair and our CEO are focused on the Company’s and the Board’s risk management efforts and ensure that enterprise risks are appropriately brought to the Board and/or its committees for review.		pages 24-27
●	The Board also reviews the Company’s succession planning, including succession planning in the case of the incapacitation, retirement or removal of the CEO. The CEO provides an annual report to the Board recommending potential successors and the Board reviews succession planning with respect to the Company’s other key executives.		pages 23, 29
●	At least 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.		pages 24-25, 31
●	The Management Planning and Development Committee (“MP&D Committee”) is responsible for reviewing and assessing potential risks arising from the Company’s compensation policies and practices.		pages 25, 34-36
●	The N&CG Committee is responsible for oversight of our policies, practices and risks related to cyber security and data and information security governance, as well as other environmental, social and governance (“ESG”) matters.		pages 25, 33
●	The Medical Affairs Committee is responsible for reviewing and assessing risk arising from the Company’s provision of health care services across the enterprise.		pages 25, 37
●	The Investment and Finance Committee (“I&F Committee”) is responsible for oversight of risks related to the Company’s investment portfolio and its capital and financial resources.		pages 25, 32

8    CVS Health

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Proxy Statement Highlights

Stockholder Outreach – Governance and Compensation Actions

Stockholder Engagement

We have a long-standing, robust stockholder outreach program through which we solicit feedback on our corporate governance, executive compensation program, disclosure practices and ESG programs and goals. Our annual engagement program helps us better understand stockholder priorities and perspectives, gives us an opportunity to elaborate upon our initiatives with relevant experts and fosters constructive dialogue. We take feedback and insights from our engagement with stockholders and other stakeholders into consideration as we review and evolve our practices and disclosures and further share them with our Board as appropriate.

Annual Meeting of Stockholders
	Summer	Board, Management			Fall	Board, Management, Stockholders
1. Discuss feedback and Annual Meeting vote results 2. Review regulatory developments and compensation trends 3. Plan Fall engagement (who to contact and proposed topics to discuss)				Comprehensive engagement with stockholders to: ●  Discuss developments in business and strategy, Board and corporate governance matters, executive compensation and the say on pay vote, diversity and inclusion, environmental and social issues ●  Solicit feedback
	Spring	Board, Management, Stockholders			Winter	Board, Management, Stockholders
Re-engage investors after proxy filing: ●  Discuss items on Annual Meeting agenda ●  Gather feedback ●  Provide update on changes				1. Review Fall stockholder feedback with Board and management 2. Determine changes to corporate governance and compensation programs as proxy is being drafted 3. Potential stockholder follow-up

In addition to investor relations meetings throughout the year, in the latter part of 2022 and early 2023, at the Board’s direction, management reached out to stockholders representing approximately 49% of our outstanding shares and engaged with holders of approximately 40% of our outstanding shares. We also held calls with two of the leading proxy advisory firms. The Independent Chair of the Board and the Chair of the MP&D Committee participated in calls with investors representing approximately 31% of our outstanding stock, and the Chair of the MP&D Committee also participated in a call with a proxy advisory firm. We also engaged with each of the stockholders or groups of stockholders who submitted a proposal for inclusion in this proxy statement. Productive discussions led to the withdrawal of two stockholder proposals related to (i) the risks associated with “concealment clauses” and (ii) reproductive rights and data privacy.

We were pleased to engage in productive conversations with our stockholders during which we discussed a number of topics relevant to the Company’s strategy, board composition and oversight, corporate governance and our environmental and social initiatives. We also discussed the structure of our executive compensation program, how to consider the impact of the opioid litigation settlement accrual on compensation decisions, and steps we have taken in recent years to align our compensation program with our evolving business strategy and stockholder experience and reflect their feedback.

2023 Proxy Statement    9

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Proxy Statement Highlights

The key issues we discussed with our stockholders are summarized below:

10    CVS Health

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Proxy Statement Highlights

For details on these compensation actions please see pages 52-53 of the CD&A.

The entire Board appreciated the many positive comments from stockholders about the performance of the Company, the quality of our senior leadership, the fundamental design of our executive compensation program and the Company’s corporate governance practices. Our corporate governance and compensation practices are informed by ongoing dialogue with our stockholders and meet intended objectives.

For more information on changes to our executive compensation program, see the letter from the MP&D Committee beginning on page 45, “Stockholder Outreach and Consideration of 2022 Say on Pay Vote” beginning on page 51 and “Elements of Our Executive Compensation Program” beginning on page 58. For more information on corporate governance at CVS Health, please refer to pages 12-39 of this proxy statement and to the Corporate Governance pages of our Investor Relations website at https://investors.cvshealth.com.

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Corporate Governance and Related Matters

Left to right: Anne Finucane, Edward Ludwig, Mary Schapiro, Jeffrey Balser, Alecia DeCoudreaux, Roger Farah, Karen Lynch, David Brown, Nancy-Ann DeParle, Fernando Aguirre, Jean-Pierre Millon

12    CVS Health

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Corporate Governance and Related Matters

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Corporate Governance and Related Matters

14    CVS Health

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Corporate Governance and Related Matters

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Corporate Governance and Related Matters

16    CVS Health

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Corporate Governance and Related Matters

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Corporate Governance and Related Matters

18    CVS Health

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Corporate Governance and Related Matters

Director Qualification Criteria; Diversity

Recognizing that the selection of qualified directors is complex and crucial to the long-term success of the Company, the N&CG Committee has established in its charter guidelines for the identification and evaluation of candidates for membership on the Board. Under its charter, the N&CG Committee recommends to the Board criteria for Board membership and recommends individuals for membership on the Board. The N&CG Committee’s charter provides that candidates should be distinguished individuals who are prominent in their fields or otherwise possess exemplary qualities that will enable them to effectively function as directors. The N&CG Committee focuses on the following qualities in identifying and evaluating candidates for Board membership:

The N&CG Committee makes these determinations in the context of the existing composition of the Board so as to achieve an appropriate mix of characteristics. Consistent with this philosophy, the N&CG Committee includes in each search qualified candidates who reflect diverse backgrounds, including diversity of gender, race and ethnicity. The N&CG Committee also takes into account all applicable legal, regulatory and stock exchange requirements concerning the composition of the Board and its committees. The N&CG Committee reviews these guidelines from time to time (and in any event at least annually) and modifies them as it deems appropriate.

The N&CG Committee also reviews the composition of the Board in light of the current challenges and needs of the Board and the Company, and determines whether it may be appropriate to add or remove individuals after considering, among other things, the need for audit committee expertise and issues of independence, diversity, judgment, character, viewpoint, reputation, age, skills, background, experience and corporate governance best practices.

The N&CG Committee values diversity, which it broadly views in terms of, among other things, gender, race, ethnicity, background and experience, as a factor in selecting members to serve on the Board. Our nominees reflect that diversity, including in terms of race, gender and ethnic background. In addition, to ensure that it has access to a broad range of qualified, experienced and diverse candidates, the N&CG Committee may use the services of an independent search firm to help identify and assist in the evaluation of candidates.

Using a professional search firm supports the N&CG Committee in conducting a broad search and identifying a diverse pool of potential candidates. The N&CG Committee also maintains an ongoing list of potential candidates and considers recommendations made by the Board’s independent directors and by our stockholders as discussed below. In addition, the N&CG Committee regularly reviews the board skills/experience list with the skills and experience most relevant to CVS Health and its business direction, and in 2022 updated the list to reflect the Company’s current strategy. The N&CG Committee removed “International Business Operations” and reflected the Company’s expanded focus on health care delivery by adding “Health Care and Health Services” and broadened our focus on regulatory matters by adding “Regulated Industries.” Following that, the N&CG Committee sought the feedback of each director regarding their self-assessment of their most relevant skills that they have developed through education, direct experience or oversight responsibilities. The table below reflects how each skill or qualification is linked to our strategy.

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Corporate Governance and Related Matters

Board Evaluation Process

The Board recognizes that a robust and constructive evaluation process is an essential component of good corporate governance and Board effectiveness. The N&CG Committee oversees the Board’s annual evaluation process and periodically reviews the format of the evaluation process. The N&CG Committee has used a third party facilitator in connection with the annual evaluation process to ensure that actionable feedback is solicited on the operation and effectiveness of the Board, Board committees and director performance.

When considering current directors for re-nomination to the Board, the N&CG Committee takes into account the performance of each director, which is part of the N&CG Committee’s annual Board evaluation process. We have enhanced the evaluation process over the last two years, including engaging an independent third party to conduct director interviews for the 2020 evaluations and adding a comprehensive questionnaire to the process for 2021. The following represents the evaluation process conducted in 2022:

2022 Multi-Step Evaluation Process

20     CVS Health

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Corporate Governance and Related Matters

Board Refreshment; Retirement Age

The N&CG Committee and the Board believe that setting a retirement age for CVS Health directors is advisable to facilitate the addition of new directors. Accordingly, our Corporate Governance Guidelines provide that no director who is or would be over the age of 74 at the expiration of his or her current term may be nominated to a new term, unless the Board waives the retirement age for a specific director in exceptional circumstances. In the event any waiver is provided, the Board will disclose the rationale for its decision.

William C. Weldon, who has reached our mandatory retirement age, is retiring from the Board at the Annual Meeting and will not stand for re-election.

Majority Voting

As discussed elsewhere in this proxy statement, directors are elected by a majority of the votes cast at the Annual Meeting (assuming that the election is uncontested). Under our By-laws, each nominee who is a current director is required to submit an irrevocable resignation, which resignation would become effective upon (1) that person not receiving a majority of the votes cast in an uncontested election, and (2) acceptance by the Board of that resignation in accordance with the policies and procedures adopted by the Board. The Board, acting on the recommendation of the N&CG Committee, will no later than at its first regularly scheduled meeting following certification of the stockholder vote, determine whether to accept the resignation of an unsuccessful incumbent. Absent a determination by the Board that a compelling reason exists for concluding that it is in the best interests of the Company for an unsuccessful incumbent to remain as a director, the Board will accept that person’s resignation. In the event any resignation is not accepted, the Board will disclose the rationale for its determination.

Stockholder Submission of Nominees

The N&CG Committee will consider any director candidates proposed by stockholders who submit a written request to our Corporate Secretary (including via our proxy access by-law, described below) in accordance with the procedures set out in the Company’s By-laws. All candidates should meet the Director Qualification Criteria, discussed above. The N&CG Committee evaluates all director candidates and nominees in the same manner regardless of the source.

If a stockholder would like to nominate a person for election or re-election to the Board, he or she must provide notice to the Company as provided in our By-laws and described in this proxy statement. The notice must include, among other things, a written consent indicating that the candidate is willing to be named in the proxy statement for the meeting as a director nominee and to serve a full term as a director of the Company if elected, in addition to the information required by our By-laws and any other information that the SEC would require to be included in a proxy statement when a stockholder submits a proposal. To comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s director nominees must also provide the Company with the notice and other information required by our By-laws and the universal proxy rules. The Company’s Corporate Governance Guidelines provide that the information required of a candidate nominated by a stockholder shall be the same as the information required of a candidate nominated by the Board. See “Other Information – Stockholder Proposals and Other Business for Our Annual Meeting in 2024” for additional information related to proposals, including any nominations, for our 2024 Annual Meeting.

CVS Health has had a proxy access by-law since January 2016. The key terms of our proxy access by-law are: a stockholder, or a group of up to 20 stockholders, owning at least 3% of the Company’s outstanding common stock continuously for at least three years may nominate and include in the Company’s proxy materials director nominees constituting up to the greater of two nominees or 20% of the Board provided that the stockholders and the nominees satisfy the requirements specified in the Company’s By-laws.

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Corporate Governance and Related Matters

Independence Determinations for Directors

Under our Corporate Governance Guidelines, a substantial majority of our Board must be comprised of directors who meet the director independence requirements set forth in the Corporate Governance Rules of the New York Stock Exchange (the “NYSE”) Listed Company Manual. Under NYSE Rules, no director qualifies as “independent” unless the Board affirmatively determines that the director has no material relationship with the Company.

Our Board has adopted categorical standards to assist in making director independence determinations. Any relationship that falls within the following standards or relationships will not, in itself, preclude a determination of independence. These categorical standards are set forth in Annex A to the Company’s Corporate Governance Guidelines, which are available on our website at https://investors.cvshealth.com/investors/corporate-governance/ documents/default.aspx or upon request to our Corporate Secretary.

2023 Independence Determinations

The N&CG Committee undertook its annual review of director independence in March 2023. The N&CG Committee recommended that the Board determine, and the Board determined, that each of Mmes. DeCoudreaux, DeParle, Finucane and Schapiro, Dr. Balser and each of Messrs. Aguirre, Brown, Farah, Ludwig, Millon and Weldon is independent. Ms. Lynch is not an independent director because of her employment as President and CEO of the Company. As noted above, Mr. Weldon, who has reached our mandatory retirement age, will not be standing for re-election at the Annual Meeting.

The Board’s Role and Activities in 2022

The Board acts as the ultimate decision-making body of the Company and advises and oversees management, which is responsible for the day-to-day operations and management of the Company. In carrying out its responsibilities, the Board reviews and assesses CVS Health’s long-term strategy and its strategic, competitive and financial performance.

The Board oversaw CVS Health’s performance that exceeded expectations for 2022 and positioned the Company to build on that momentum as we strengthen our high-growth foundational businesses and advance and enhance our consumer-centric health care strategy and expand our reach in terms of health services and primary care offerings. The Board believes our unique assets and offerings enable us to deliver an approach that will lower costs, increase access to quality care and improve health outcomes while driving profitable growth. The Board also believes that the Company’s strategy capitalizes on the significant opportunity to make health care more convenient, personalized and affordable for consumers. The Board supports the Company’s plan to invest in high-growth areas of the business and introduce new health products, services and technologies to enhance stockholder value.

In 2022, CVS Health delivered total revenues of $322.5 billion, up 10.4% compared to 2021, and continued to generate significant cash flows, with cash flows from operations in 2022 totaling approximately $16.2 billion. During 2022, capital management transactions were completed under the oversight of the Board and its I&F Committee, contributing to the repayment of long-term debt of $4.1 billion and significant savings in go-forward interest payments. The Board approved the Company’s return of approximately $2.9 billion to stockholders in 2022 based on an annual cash dividend of $2.20 per share and approved a quarterly dividend of $0.605 per share in December 2022, an increase of 10% over the previous quarterly dividend, effective with the dividend distribution paid on February 1, 2023. During 2022, the Company also repurchased 34.1 million shares of common stock and Board authorized a new $10.0 billion share repurchase program, to supplement the remaining authorization under the share repurchase program authorized by the Board in December 2021.

In September 2022, the Board approved CVS Health’s acquisition of Signify Health for $30.50 per share in cash, representing a total transaction value of approximately $8 billion, and the Company completed the acquisition at the end of March 2023. Signify Health is a leader in health risk assessments, value-based care and provider enablement. With a network of more than 10,000 clinicians across all 50 states and a nationwide value-based provider network, combined with its proprietary analytics and technology platforms, Signify Health is expected to play a critical role in advancing our health care services strategy.

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The Board and CEO Karen Lynch also made the decision to resolve the vast majority of pending litigation claims related to the dispensing and distribution of opioids, which include allegations dating back more than a decade and which the Company publicly announced in November 2022. In December 2022, CVS Health agreed to a formal global settlement agreement that would resolve substantially all opioid claims against Company entities by states and political subdivisions (such as counties and cities). The Company also separately settled opioid cases with three states, and with a leadership group representing tribes across the United States. The Board provided oversight of the negotiation of the opioid settlement agreements. CVS Health is committed to addressing opioid misuse in collaboration with other health care stakeholders. Please see our 2022 Annual Report, our ESG Report Appendix and Our Opioid Response page on our website for further discussions on the Company’s opioid-related settlements and opioid misuse prevention efforts.

The Board’s Role in Strategy and Succession Planning

The Board reviews the Company’s financial performance on a regular basis at Board meetings and through regular updates from management. The Board also periodically reviews and assesses the Company’s short and long-term strategy and performance, on both an absolute basis and in relation to the performance, practices and policies of its peers. While the Board receives updates regarding strategic matters throughout the year, at least one Board meeting per year is focused almost entirely on the Company’s short- and long-term strategic direction. The Board receives reports from management, and expert speakers often are invited to present to the Board. At this annual strategy-focused meeting, the Board provides input and oversight on short-term strategic goals and sets the long-term strategic direction of the Company.

The Board also reviews the Company’s succession planning, including succession planning in the case of the incapacitation, retirement or removal of the CEO. In that regard, the CEO provides an annual report to the Board recommending and evaluating potential successors, along with a review of any development plans recommended for such individuals. The CEO provides to the Board, on an ongoing basis, his or her recommendation as to a successor in the event of an unexpected emergency. The Board also reviews succession planning with respect to the Company’s other key executive officers and ensures that directors have substantial opportunities to engage with successor candidates, including emerging leaders. The Board has access to external consultants, as needed.

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The Board’s Role in Risk Oversight

The Board’s role in risk oversight involves both the full Board and its committees, as well as members of management.

Risk Oversight Framework

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CVS Health: The Board’s Role in Our Opioid Action Plan

Our Board is committed to supporting the development of solutions to reduce opioid misuse in our communities through expanded education, implementation of safe prescription drug disposal, utilization management, funding for treatment and recovery programs and advocating for legislative and regulatory changes and publishes information on our website that describes its efforts. Within the Board, the Audit Committee, the Medical Affairs Committee, the N&CG Committee and the MP&D Committee each play a significant role in the Board’s oversight efforts.

In 2022, the Board and CEO Karen Lynch made the decision to resolve outstanding litigation claims related to the dispensing and distribution of opioids dating back more than a decade. In November 2022 CVS Health announced that it had reached an agreement in principle designed to resolve substantially all opioid lawsuits against the Company by states, political subdivisions (such as counties and cities), and tribes in the United States. A global settlement agreement was finalized in December 2022 that is aimed at fully resolving claims dating back a decade or more, and does not include an admission of any liability or wrongdoing by the Company. The comprehensive agreement includes both financial and non-financial terms, including an agreement by CVS Health with respect to efforts to help reduce prescription opioid misuse and abuse, many of which are described on our website.

Consideration of the opioid litigation settlement in compensation decisions is described in detail on pages 9-11 and in the CD&A on pages 52-53.

The Board’s Role in Oversight of Cyber Security and Information Governance

The N&CG Committee, pursuant to its charter, is formally charged with oversight of the Company’s cyber security, information governance and its privacy programs. The Company maintains an ERM function that identifies, monitors and mitigates business risks, including information security risks. In addition, the Company’s Information Security Department conducts a thorough quarterly risk review, aimed specifically at identifying and mitigating information security risks. Identified information security and privacy risks are reported to the Audit Committee and the N&CG Committee in accordance with protocols.

The Company’s Executive Vice President and Chief Data, Digital and Technology Officer (“CDDTO”), its Senior Vice President and CISO and its Vice President and CPO also regularly update the N&CG Committee (and, as needed, the Audit Committee or the full Board) on risks and opportunities in these areas. The CDDTO and CISO update the N&CG Committee at least twice annually, and the CPO updates the N&CG Committee at least annually. In addition to updates at Board or committee meetings, the CDDTO, CISO or the CPO periodically update the Board on important information security matters through memoranda. The N&CG Committee is advised regarding the Company’s robust annual information security training programs, including annual enhanced training for specialized personnel and training aimed at senior executives, as well as its regular external audits and certifications to top information security

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standards. The Company’s information technology systems are assessed by independent parties for the following on an enterprise basis: Payment Card Industry Data Security Standards (“PCI DSS”); HIPAA; SOC 1; and National Association of Insurance Commissioners (“NAIC”). Also, certain of the Company’s business units are assessed by independent parties for the following: SOC 2; SOC 2 Type 2; NIST 800-53; and HI-TRUST. In 2022, the Company intends to have all of its business units assessed and certified under the NIST 800-53 standard. As a backstop to its strong information security programs, policies and procedures, the Company annually purchases a cyber security risk insurance policy that would defray the costs of an information security breach.

The Board’s Role in Oversight of Environmental, Social and Governance Matters

The N&CG Committee, pursuant to its charter, is formally charged with oversight of the Company’s ESG strategy and performance. The Company’s Chief Governance Officer, Chief People Officer and Chief Sustainability Officer regularly update the N&CG Committee on ESG risks and opportunities, and the N&CG Committee provides feedback and direction on the Company’s approach to key issues. The N&CG Committee also reviews the Company’s annual ESG Report prior to its publication. Additionally, the Audit Committee regularly reviews and discusses the key risks identified in the ERM process with management, their potential impact on us and our operations, and our risk mitigation strategies and related disclosure matters. These risks may include risks related to climate change, sustainability and other ESG-related matters. Various matters under the purview of the Board’s other committees, namely the I&F Committee, the Medical Affairs Committee and the MP&D Committee, also fall within ESG categories, for example the human capital and culture matters overseen by the MP&D Committee and discussed below. The 2022 ESG Report is available on the Company’s website at www.cvshealth.com/reporting and highlights of our ESG strategy and achievements are included on the back page of this proxy statement.

The Board’s Role in Oversight of Human Capital and Culture

We believe engaged colleagues produce stronger business results and are more likely to build a career with CVS Health. Each year, under the oversight of our Board, we conduct an internal engagement survey that provides colleagues with an opportunity to share their opinions and experiences with respect to their role, their team and the enterprise to help the Board and our management identify areas where we can improve colleague experience. The survey covers a broad range of topics including development and opportunities, diversity management, recognition, performance, well-being, compliance and continuous improvement. In 2022, more than 80% of our colleagues participated in the engagement survey, of which greater than 75% responded that they were actively engaged.

Our Board and CEO also play a leading role in overseeing our human capital strategy, which consists of the following categories: total rewards; diversity, equity and inclusion; colleague development; and health and safety. Our MP&D Committee also reviews our broad-based compensation and benefits programs.

The Board is also regularly updated on key talent metrics for the overall workforce, including metrics related to diversity and inclusion, recruiting and talent development programs. The Board is updated on our human capital development strategy on an annual basis. The Board supported the Company’s commitment to provide additional transparency through disclosure of aggregated EEO-1 workforce diversity data beginning in 2021. For more information on the Company’s approach to talent development, engagement and our efforts in diversity, equity and Inclusion, please see our ESG Reports at www.cvshealth.com/reporting.

The Board’s Role in Oversight of Safety and Quality

The Board provides oversight regarding safety and quality efforts at CVS Health. The Audit Committee (through its review of our health, safety and environment program), the N&CG Committee (through its oversight of ESG matters) and the Medical Affairs Committee (through its review of matters concerning efforts to advance the quality of pharmacy and medical care, colleague and patient safety and experience), receive regular updates on health and safety matters. Given the Company’s strategic move into providing a broader range of health care services, the Board and its committees have impressed upon management the importance of safe and effective operations and quality delivery of care.

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Within this framework, in 2022 the Company adopted a new Heart at Work Behavior, “Champion safety and quality”, to underscore that safety and quality are core to what we do as a company. Whether treating patients, dispensing medications, stocking merchandise or maintaining our workplaces, CVS Health strives to avoid preventable injury and achieve “zero harm.” In 2022, we also enhanced communication and support to field leadership, including through quarterly “safety spotlight” programs, to continue to empower our leaders and retail colleagues. To manage safety risks associated with workforce and labor challenges in our distribution centers and for our fleet drivers, we have developed a safety roadmap that helps ensure a safety-first culture. We administered a new culture of safety survey in 2022 and reported the results to our Medical Affairs Committee; we anticipate using this survey as an annual measurement tool in our enterprise patient safety organization business areas. Enhanced safety metric dashboards give distribution center leaders access to leading indicators and injury data so they can take proactive measures to reduce risk of injury. Initiatives in 2022 included enhanced new hire safety training, a new stretching program provided to colleagues at shift start, and enhancements to our powered industrial truck safety program. Many of the above-mentioned enhancements were reported to our Audit Committee in connection with its annual review of our health, safety and environment program.

Another way we demonstrate both safety and quality of care is by attaining third-party accreditations, which involve meeting or exceeding rigorous standards set by independent organizations that evolve with the latest evidence-based practices. We believe that meeting or exceeding these various accreditation standards is just one way to demonstrate we are delivering quality care in communities throughout the nation. Our third party accreditors include URAC, National Committee for Quality Assurance (“NCQA”), National Association for Boards of Pharmacy (“NABP”), Accreditation Commission for Health Care (“ACHC”) and The Joint Commission. Maintaining our accreditations requires continuous learning and improvement in our call centers, digital solutions, and retail, mail and specialty pharmacies. Some of these accreditations include, but are not limited to:

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Stockholder Outreach

The Company values each of its stockholders and their opinions, and we regularly interact with our stockholders on a variety of matters. In the latter part of 2022 and early 2023, at the direction of the Board, the Company engaged in a proactive stockholder outreach effort to best understand and address any concerns stockholders might have. Additional details regarding our outreach effort and the actions taken are found on pages 9-11 and 51-53 of this proxy statement.

We were pleased to engage in productive conversations with our stockholders during which we discussed a number of topics relevant to the Company’s strategy, board composition and oversight, and our environmental and social initiatives. We also discussed the structure of our executive compensation program, how to consider the impact of the opioid litigation settlement accrual on compensation decisions, and steps we have taken in recent years to align our progress with our evolving business strategy and stockholder experience and reflect to their feedback.

Contact with the Board, the Chair and Other Independent Directors

Stockholders and other parties interested in communicating directly with the Board, the Independent Chair of the Board or with the independent directors as a group may do so by writing to CVS Health Corporation, One CVS Drive, MC 1160, Woonsocket, RI 02895. The N&CG Committee has approved a process for handling letters received by the Company and addressed to the Board, the Independent Chair of the Board or to independent directors as a group. Under that process, our Corporate Secretary reviews all such correspondence and regularly forwards to the Board copies of all correspondence that, in her opinion, deals with the functions of the Board or its committees or that she otherwise determines requires their attention.

Code of Conduct

CVS Health has adopted a Code of Conduct that applies to all of our directors, officers and employees, including our CEO, CFO and Chief Accounting Officer. Our Code of Conduct is available on our website at https://investors.cvshealth.com/investors/corporate-governance/documents/default.aspx and will be provided to stockholders without charge upon request to our Corporate Secretary. We intend to post amendments to, or waivers of, our Code of Conduct (to the extent applicable to our executive officers or directors) at that location on our website within the timeframe required by SEC rules.

Related Person Transaction Policy

In accordance with SEC rules, the Board has adopted a written Related Person Transaction Policy (the “RPT Policy”). The N&CG Committee has been designated as the Board committee responsible for reviewing, approving or ratifying any related person transactions under the Policy, since the N&CG Committee already has responsibility for evaluating the impact of conflicts involving directors on independence. The N&CG Committee reviews the RPT Policy on an annual basis and will amend the Policy as it deems appropriate.

Pursuant to the RPT Policy, all executive officers, directors and director nominees are required to notify our General Counsel or Corporate Secretary of any financial transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships, involving the Company in which an executive officer, director, director nominee, five percent beneficial owner or any immediate family member of such a person has a direct or indirect material interest.

The General Counsel or the Corporate Secretary presents any reported new related person transactions, and proposed transactions involving related persons that might be deemed to be related person transactions, to the N&CG Committee at its next regular meeting, or earlier if appropriate. The General Counsel or Corporate Secretary provides the N&CG Committee with an analysis and recommendation regarding each reported transaction. The N&CG Committee reviews these transactions, including the analysis and recommendation. The N&CG Committee may conclude, upon review of all relevant information, that the transaction does not constitute a related person transaction, and thus that no further review is required under the RPT Policy. If after its review, the N&CG Committee determines not to approve or ratify a related person transaction, the transaction will not be entered into or continued,

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as the N&CG Committee shall direct. The N&CG Committee may ratify or approve a related person transaction if, upon consideration of all relevant information, the transaction is in, or not inconsistent with, the best interests of the Company and its stockholders.

In January 2023, the N&CG Committee reviewed the RPT Policy and determined that no 2022 transactions constituted reportable related person transactions under the RPT Policy.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines, which are available on our investor relations website at https://investors.cvshealth.com/investors/corporate-governance/documents/default.aspx and are also available to stockholders at no charge upon request to our Corporate Secretary. These Guidelines meet the listing standards adopted by the NYSE, the exchange on which our common stock is listed.

Board Structure and Processes

The Board’s Leadership Structure

CVS Health currently has an Independent Chair of the Board, and has since 2011, when the Board adopted its current leadership structure. Our Corporate Governance Guidelines provide for the Board to retain its flexibility to allocate the responsibilities of the offices of Independent Chair and CEO in any way that is in the best interests of the Company at a given point in time. In accordance with the Corporate Governance Guidelines, the Board periodically reviews and makes a determination as to the appropriateness of its leadership structure in connection with the recruitment and succession of the Independent Chair and/or the CEO, and whether the existing leadership and board structure enable strong independent oversight.

The Board believes that independence from, and oversight of, management is currently maintained effectively through the strong corporate governance practices that are in place, including its Independent Chair, the Board’s composition, with all but one of our continuing directors independent, and the composition of the Board committee system, with five standing committees comprised entirely of independent directors.

Roger N. Farah is the Independent Chair of our Board. The Independent Chair presides at all meetings of the Board and works with our CEO to set Board meeting agendas and the schedule of Board meetings. In addition, the Independent Chair has the following duties and responsibilities:

The Board believes that Board independence and oversight of management will be maintained effectively through the Independent Chair, the Board’s composition and its committee system.

Director Education

CVS Health’s Corporate Governance Guidelines establish recommendations for director education. All new members of the Board are encouraged to participate in the Company’s orientation program for directors. Other directors may also attend the orientation program. All directors are encouraged to participate in continuing education programs, with any associated expenses to be reimbursed by the Company, in order to stay current and knowledgeable about the business of the Company. Such orientation and continuing education programs are overseen by the N&CG Committee.

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Committees of the Board

CVS Health’s Board oversees and guides the Company’s management and its business. Committees support the role of the Board on issues that are better addressed by smaller, more focused subsets of directors.

For 2022, the Board utilized five standing committees and also maintained an Executive Committee. The table below presents for the 2022-2023 Board year, the committees of the Board, the membership of such committees at year end and the number of times each such committee met in 2022. For further details regarding committee membership and activities, see pages 31-38. Mr. Weldon will not stand for re-election at the Annual Meeting.

Name

Audit Committee

Investment and Finance Committee

Management Planning and Development Committee

Nominating and Corporate Governance Committee

Medical Affairs Committee

Executive Committee

Fernando Aguirre

*

Jeffrey R. Balser, M.D, Ph.D.

C. David Brown II

Alecia A. DeCoudreaux

Nancy-Ann M. DeParle

Roger N. Farah

Anne M. Finucane

Edward J. Ludwig

*

Karen S. Lynch

Jean-Pierre Millon

*

Mary L. Schapiro

*

William C. Weldon

2022 Meetings

9

4

6

8

4

0

	Committee Chair
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	Audit Committee Meetings in 2022: 9
	2022-2023 Committee Members (all independent)	1  Fernando Aguirre* 2  Alecia DeCoudreaux 3  Edward Ludwig (Chair)* 4  Mary Schapiro* 5  Jean-Pierre Millon*   *  Audit Committee Financial Expert
	Each member of the Audit Committee is financially literate and independent of the Company and management under applicable SEC rules and the Corporate Governance Standards of the NYSE Listed Company Manual. The Board designated each of Messrs. Aguirre, Ludwig and Millon and Ms. Schapiro as an audit committee financial expert, as defined under applicable SEC rules. The Board has approved a charter for the Audit Committee, which can be viewed on our website at https://investors.cvshealth.com/investors/corporate-governance/documents/default.aspx and also is available to stockholders without charge upon request to our Corporate Secretary.
	Primary Responsibilities Pursuant to its charter, the Audit Committee assists the Board in its oversight of: ●  the integrity of our financial statements; ●  the qualifications, independence and performance of our independent registered public accounting firm, for whose appointment the Audit Committee bears principal responsibility; ●  the performance of our internal audit function; ●  our policies and practices with respect to risk assessment and risk management, including discussing with management the Company’s major financial risk exposures and the steps that have been taken to monitor and control such exposures; ●  compliance with, and approval of, our Code of Conduct; ●  the review of our business continuity and disaster recovery program; ●  the review of our health, safety and environment program; and ●  our compliance with legal and regulatory requirements, including the review and oversight of matters related to compliance with Federal health care program requirements. Audit Committee Activities in 2022 The Audit Committee met nine times in 2022, and each member of the Audit Committee attended all of its meetings. Several of the Audit Committee’s meetings were focused primarily on our annual or quarterly financial reports, including our Form 10-K, Forms 10-Q and our related earnings releases. At each of these meetings, the Audit Committee reviewed the documents in depth with our CFO and our Chief Accounting Officer, as well as our CCO, Chief Audit Executive, General Counsel and other key members of management. The Audit Committee also received reports from our internal audit department and our independent registered public accounting firm, Ernst & Young LLP (“Ernst & Young”). The Audit Committee regularly meets with Ernst & Young outside the presence of management, and also meets individually with members of management, including the CCO and the Chief Audit Executive. In addition to its responsibilities related to our financial statements, the Audit Committee plays a primary role in risk oversight, including reviews of our enterprise risk management program and in oversight of our anti-money laundering and sanction screening compliance programs, business continuity and disaster recovery programs, and health, safety and environment program. The Audit Committee also reviews our legal and regulatory compliance program on a quarterly basis, and formerly oversaw the Company’s compliance with our now-expired Corporate Integrity Agreement (“CIA”) related to our institutional pharmacy services (long-term care) operations. During 2022, the Audit Committee provided the final required annual certification of compliance with the CIA. The Audit Committee also provided the report found on page 40 of this proxy statement, and recommended the inclusion of the Company’s audited financial statements in its 2022 Form 10-K.

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	Investment and Finance Committee Meetings in 2022: 4
	2022-2023 Committee Members (all independent)	1  Mary Schapiro 2  Anne Finucane (Chair) 3  Edward Ludwig
	Each member of the I&F Committee is independent of the Company and management under applicable SEC rules and the Corporate Governance Standards of the NYSE Listed Company Manual. The Board has approved a charter for the I&F Committee, which can be viewed on our website at https://investors.cvshealth.com/investors/corporate-governance/documents/default.aspx and also is available to stockholders without charge upon request to our Corporate Secretary. At its meetings, various members of management provide the I&F Committee with updates on areas of its responsibility, including the CFO, Chief Investment Officer and Treasurer.
	Primary Responsibilities Pursuant to its charter, the I&F Committee assists the Board in its oversight of: ●  the investment policies, strategies, programs and portfolio of CVS Health and its subsidiaries; ●  the approval of investment transactions on behalf of the Company that exceed any delegated authority; ●  investment portfolio transactions made on behalf of CVS Health and its subsidiaries; ●  the performance of the investment portfolios of CVS Health and its subsidiaries; ●  the Company’s processes for managing the finances of its employee pension and defined contribution benefit plans; ●  the Company’s capital plan, including the review of significant financial policies and matters of financial corporate governance, such as the Company’s dividend policy, share repurchase program and credit facilities and the issuance or retirement of debt and other securities; ●  the financing of significant mergers, acquisitions, joint ventures and investments in securities issued by third parties; ●  significant multi-year strategic capital project expenditures and management; ●  the review and approval of the Company’s decision to enter into swap transactions that are not cleared and are not traded on a designated contract market or swap execution facility, including establishing policies governing the use of such swaps; ●  the Company’s insurance and self-insurance programs related to third party claims; and ●  the Company’s stock repurchase programs, including assessing whether to recommend modification to such programs to the Board. Investment and Finance Committee Activities in 2022 The I&F Committee met four times in 2022, and each member of the I&F Committee attended all of its meetings while he or she was a member. The I&F Committee spent significant time focused on investment management updates and our capital allocation plans, including several debt redemption transactions during 2022 contributing to the repayment of $4.1 billion in debt and significant savings in go-forward interest payments. The I&F Committee reviewed the Company’s 2022 investment performance as well as an in-depth study of the Company’s investment assets. The I&F Committee also reviewed reports from our treasury department and regularly meets with members of management, including the CFO, the Treasurer and Aetna’s Chief Investment Officer. The I&F Committee reviewed quarterly investment reports and capital allocation reports, as well as various finance programs of the Company, such as certain reinsurance transactions, and made recommendations to authorize resolutions for the Company’s investment and finance activity, including the dividend increase authorized in December 2022 and the Company’s $10.0 billion stock repurchase program authorized in November 2022. The I&F Committee also reviews reports on investments made by the Company’s frozen pension plans and its 401(k) plans, and through its venture investments program.

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	Nominating and Corporate Governance Committee Meetings in 2022: 8
	2022-2023 Committee Members (all independent)	1  Roger Farah 2  Alecia DeCoudreaux 3  David Brown 4  Nancy-Ann DeParle (Chair) 5  Fernando Aguirre 6  William Weldon1   1   As noted previously, Mr. Weldon is retiring from the Board at the Annual Meeting.
	Each member of the N&CG Committee is independent of the Company and management under applicable SEC rules and the Corporate Governance Standards of the NYSE Listed Company Manual. The Board has approved a charter for the N&CG Committee, which can be viewed on our website at https://investors.cvshealth.com/investors/corporate-governance/documents/default.aspx and also is available to stockholders without charge upon request to our Corporate Secretary. At its meetings, various members of management provide the N&CG Committee with updates on areas of its responsibility, including the General Counsel, the Corporate Secretary and Chief Governance Officer, the Senior Vice President of Government Affairs, the Chief Sustainability Officer, the CDDTO and the CISO.
	Primary Responsibilities Pursuant to its charter, the N&CG Committee has responsibility for: ●  identifying individuals qualified to become Board members consistent with criteria approved by the Board; ●  recommending to the Board director nominees for election at the next annual or special meeting of stockholders at which directors are to be elected or to fill any vacancies or newly-created directorships that may occur between such meetings; ●  recommending directors for appointment to Board committees; ●  making recommendations to the Board as to determinations of director independence; ●  evaluating Board and committee performance; ●  the oversight of our information governance framework, including our privacy and information security programs, as well as the cyber security aspects of our information security program and cyber security risk exposures; ●  the review and ratification of any related person transactions in accordance with our policy on such matters; ●  considering matters of corporate governance and reviewing, at least annually, our Corporate Governance Guidelines and overseeing compliance with such Guidelines; ●  review and consideration of the Company’s policies, practices and goals related to environmental sustainability, community engagement and significant issues of corporate social responsibility, including the review of the ESG report issued by the Company; and ●  reviewing and considering our policies and practices on issues relating to charitable contributions, political spending practices and significant public policy issues. Nominating and Corporate Governance Committee Activities in 2022 The N&CG Committee met eight times in 2022. Except for two absences for one member of the N&CG Committee due to unavoidable conflicts, each member of the N&CG Committee attended all of its meetings while he or she was a member. Throughout the year, the N&CG Committee evaluated, and continues to evaluate, potential candidates for future election to the Board. In addition, the N&CG Committee reviewed the Company’s political activities and expenditures in depth, considered significant public policy issues and government affairs’ priorities and activities, reviewed the Company’s ESG framework and the Company’s charitable contribution budget. The N&CG Committee also oversaw the 2022 evaluation process for the Board and its committees, which included an in-depth interview of each director by an independent third party. In addition, the N&CG Committee received updates about legal and regulatory developments concerning corporate governance, business and trends in the health care industry, and our stockholder engagement strategy, as well as updates on the proxy season and stockholder communications. The N&CG Committee also had responsibility for oversight of cyber security and information governance, including privacy and information security, an area in which several N&CG Committee members have expertise, and received regular updates from the CDDTO and CISO. The N&CG Committee reviewed and approved our Related Person Transaction Policy, and made recommendations regarding the director slate, committee composition, independence determinations and audit committee financial experts.

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	Management Planning and Development Committee Meetings in 2022: 6
	2022-2023 Committee Members (all independent)	1  Roger Farah 2  David Brown (Chair) 3  Anne Finucane 4  William Weldon1       1   As noted previously, Mr. Weldon is retiring from the Board at the Annual Meeting.
	Each member of the MP&D Committee is independent of the Company and management under applicable SEC rules and the Corporate Governance Standards of the NYSE Listed Company Manual. The Board has approved a charter for the MP&D Committee, which can be viewed on our website at https://investors.cvshealth.com/investors/corporate-governance/documents/default.aspx and also is available to stockholders without charge upon request to our Corporate Secretary. No MP&D Committee member participates in any of our employee compensation programs and none is a current or former officer or employee of CVS Health or its subsidiaries. At MP&D Committee meetings, non-members, such as the CEO, the CFO, the Chief Accounting Officer, the Chief People Officer, the Corporate Secretary and Chief Governance Officer, other senior human resources and legal officers, or external consultants, may be invited to provide information, respond to questions and provide general staff support. However, no CVS Health executive officer is permitted to be present during any discussion of his or her compensation or performance, and the MP&D Committee regularly exercises its prerogative to meet in executive session without management.
	Primary Responsibilities Pursuant to its charter, the MP&D Committee: ●  oversees our compensation and benefits policies and programs generally; ●  evaluates the performance of designated senior executives, including the CEO; ●  in consultation with our other independent directors, oversees and sets compensation for the CEO; ●  oversees and sets compensation for our designated senior executives; ●  reviews and recommends to the Board compensation (including cash and equity-based compensation) for our non-employee directors; ●  reviews, at least annually, compliance with the Company’s stock ownership guidelines by the Company’s directors and executive officers; ●  reviews results of the Company’s say on pay votes and the frequency of the say on pay votes; ●  reviews and discusses with management or other committees strategies, initiatives and programs relating to human capital management; and ●  prepares and recommends to the full Board for inclusion in this and each other applicable proxy statement a compensation committee report. The Compensation Committee Report for this proxy statement is on page 46. The MP&D Committee may delegate its authority relating to employees other than executive officers and directors as it deems appropriate and may also delegate its authority relating to ministerial matters. Management Planning and Development Committee Activities in 2022 The MP&D Committee met six times in 2022. Except for a total of two absences by two different members of the MP&D Committee due to unavoidable conflicts, each member of the MP&D Committee attended all of its meetings while he or she was a member. In addition to reviewing the independence of its advisor as described below, the MP&D Committee devoted substantial time to its oversight of the Company’s compensation and benefit programs as part of its annual governance process. This review is aimed at ensuring that the Company is providing its employees with compensation and benefit programs that are appropriate. The MP&D Committee received updates on compensation trends and legislative and regulatory developments. The MP&D Committee devoted considerable time to CVS Health’s stockholder outreach efforts and the feedback received from investors. The MP&D Committee also reviewed director compensation. The MP&D Committee’s review of executive compensation matters and its decisions, including changes made in response to input from our stockholders, is discussed in the CD&A beginning on page 47 of this proxy statement.

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Corporate Governance and Related Matters

Compensation Risk Assessment

The MP&D Committee is responsible for reviewing and assessing potential risk arising from the Company’s compensation policies and practices. In 2022, the Company performed a risk assessment of its compensation policies and practices to ascertain any potential material risks that may be created by its compensation programs. The Company’s assessment included all major components of the Company’s compensation programs, including: the mix between annual and long-term compensation; short-term incentive program design; long-term incentive program performance measures; incentive plan performance criteria and corresponding objectives; a comparison of the Company’s programs with those of its peers; the Company’s change in control policies; its recoupment policy; its share retention requirements and ownership guidelines; and the Internal Audit Department’s review of the controls regarding the Company’s long-term incentive program. The MP&D Committee considered the findings of the assessment, in addition to an assessment by its independent consultant, and concluded that the Company’s compensation programs are aligned with the interests of its stockholders, appropriately reward pay for performance, and do not promote excessive risk-taking.

Independent Compensation Consultant

Under its charter, the MP&D Committee has the authority to retain outside consultants or advisors it deems necessary to provide desired expertise and counsel.

Korn Ferry, the MP&D Committee’s independent compensation consultant, provides services to management, including leadership development, executive searches and assessments. The Company also uses a proprietary Korn Ferry-licensed competency product. Fees paid to Korn Ferry in 2022 for these other services, were $2,562,441. The MP&D Committee has determined that Korn Ferry is independent and its work for the Company does not raise any conflicts of interest. The MP&D Committee reached this determination by reviewing the fees paid to Korn Ferry and evaluating its work under applicable SEC and NYSE rules on conflicts of interest and independence. This evaluation included considering all of the services provided to the Company, the amount of fees received as a percentage of Korn Ferry’s annual revenue, its policies and procedures designed to prevent conflicts of interest and maintain independence, any business or personal relationships between Korn Ferry and the members of our MP&D Committee or executive officers and any ownership of our stock by Korn Ferry’s team that provided any executive and director compensation services. The MP&D Committee has implemented a process to approve fees for any non-compensation consulting in advance to insure that Korn Ferry remains independent. Fees paid for services in 2022 to Korn Ferry for compensation consulting to the MP&D Committee were $403,000.

During 2022, the MP&D Committee’s independent compensation consultant:

The MP&D Committee believes that the advice it received from its independent compensation consultant is objective and not influenced by any other business relationship. The MP&D Committee and its independent compensation consultant have policies and procedures in place to preserve the objectivity and integrity of the compensation consulting advice, including:

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Compensation Committee Interlocks and Insider Participation

As of March 20, 2023, the members of the MP&D Committee are Mr. Brown (Chair), Ms. Finucane and Messrs. Farah and Weldon. None of the members of the MP&D Committee has ever been an officer or employee of the Company. There are no interlocking relationships between any of our executive officers and any MP&D Committee member.

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Corporate Governance and Related Matters

	Medical Affairs Committee Meetings in 2022: 4
	2022-2023 Committee Members (all independent)	1  Jeffrey Balser, M.D., Ph.D. 2  Nancy-Ann DeParle 3  Jean-Pierre Millon (Chair) 4  Alecia DeCoudreaux
	Each member of the Medical Affairs Committee is independent of the Company and management under applicable SEC rules and the Corporate Governance Standards of the NYSE Listed Company Manual. The Board has approved a charter for the Medical Affairs Committee, which can be viewed on our website at https://investors.cvshealth.com/investors/corporate-governance/documents/default.aspx and also is available to stockholders without charge upon request to our Corporate Secretary. In light of the Company’s expanded offerings throughout the spectrum of health care, the Medical Affairs Committee was formed in March 2016. The Medical Affairs Committee focuses on oversight of the Company’s medical- and pharmacy-related strategies and initiatives, matters relating to the advancement of quality of pharmacy and medical care, patient safety and patient experience, the enhancement of access to cost-effective quality health care and the promotion of member health.
	Primary Responsibilities Pursuant to its charter, the Medical Affairs Committee: ●  reviews significant medical, pharmacy and other health-related strategies and initiatives of the Company, and matters concerning efforts to (1) advance the quality of pharmacy and medical care, patient safety and experience, (2) enhance access to cost-effective quality health care and (3) promote member health; ●  reviews the Company’s medical, pharmacy and other strategies and initiatives designed to foster health care innovation, lower patient costs and improve the delivery of clinic, in-home and other health care solutions; ●  reviews matters and receives reports concerning the quality performance of the Company’s (1) pharmacy and medical care activity, such as (a) dispensing, compounding and infusion services and (b) nursing and medical clinic operations; (2) patient safety and experience; (3) management of claims against the Company related to pharmacy services and health care provided by the Company; and (4) management of regulatory activity related to pharmacy and health care; and ●  takes such other actions and performs such services as may be referred to it from time to time by the Board, including the conduct of special reviews as it may deem necessary or appropriate to fulfill its responsibilities. Medical Affairs Committee Activities in 2022 The Medical Affairs Committee met four times in 2022, and each member of the Medical Affairs Committee attended all of its meetings while he or she was a member. The Medical Affairs Committee’s meetings focused on a wide variety of matters related to the Company’s provision of health care services across the enterprise, including retail, mail, specialty and long-term care pharmacy, expanded retail clinic services provided by MinuteClinic, behavioral health offerings, health equity programs and complex medical claims issues concerning Aetna. The Medical Affairs Committee reviewed various issues related to patient safety, including matters related to primary care expansion, virtual primary care offerings, enterprise credentialing, and retail pharmacy safety programs. The Medical Affairs Committee also received updates on claims against the Company related to pharmacy services and health care provided by the Company, as well as the steps being taken to minimize and mitigate those claims. The Medical Affairs Committee also reviewed matters related to the Company’s Enterprise Patient Safety Organization and received reports regarding various lines of business across the enterprise and other efforts to measure and improve patient safety and clinical effectiveness. The Medical Affairs Committee was also kept apprised of the Company’s COVID-19 testing and vaccine administration programs, in line with the Company’s strong commitment to testing and vaccine equity.

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Corporate Governance and Related Matters

Executive Committee At all times when the Board is not in session, the Executive Committee may exercise many of the powers of the Board, as permitted by applicable law. In 2022, the N&CG Committee approved an amendment to the Executive Committee charter that reduced the number of Executive Committee members from seven to five, set the minimum number of members at three, and implemented a formal, annual rotation of membership.
	The Executive Committee meets as necessary and all actions by the Executive Committee are reported and ratified at the next succeeding Board meeting. Because the Board addressed all items throughout the year at full Board meetings, no Executive Committee meeting was needed in 2022. Meetings in 2022: None.

Board Meetings and Attendance

During 2022, there were 12 meetings of the Board. Directors are expected to make every effort to attend the Annual Meeting, all Board meetings and the meetings of the committees on which they serve. All of our directors at the time of our 2022 Annual Meeting of Stockholders attended the 2022 Annual Meeting. All nominees for election as a director at the 2023 Annual Meeting attended at least 98% of the meetings of the Board and the committees of which he or she was a member in 2022.

The independent directors also regularly hold executive sessions during regularly scheduled Board meetings in which our management does not participate.

Non-Employee Director Compensation

CVS Health’s approach to compensating non-employee directors for Board service is to provide directors with an annual retainer comprised of a mandatory 75% paid in shares of our common stock and 25% paid in cash (or up to 100% stock at the director’s election). The payment of a significant portion of the annual retainer, and additional retainers as outlined below, in our common stock is consistent with our policy of using equity compensation to better align directors’ interests with stockholders. This also enhances the directors’ ability to meet and continue to comply with our stock ownership guidelines, which are described below.

For the 2022-2023 Board year, the total annual retainer for non-employee directors was $335,000, consisting of shares of our stock valued at $251,250 (the mandatory annual stock retainer) and a cash payment of $83,750 (unless the director elected to receive up to 100% of the annual retainer in shares of our common stock). Each retainer was paid in two equal installments, in May and November. Directors may elect to defer receipt of shares, and deferred shares are credited with dividend reinvestment shares to the extent dividends are paid to stockholders. There are no meeting fees.

Additional retainers were paid to the Chairs of the committees and the Board as follows: Audit, $25,000; each of I&F, MP&D, Medical Affairs, and N&CG, $20,000; and Independent Chair of the Board, $275,000. No additional compensation is paid for service on or chairing the Executive Committee.

Ad hoc committees of the Board may be established from time to time to work on special projects and members may receive additional compensation for these services, as approved by the Board. An ad hoc committee was formed in 2022 regarding a litigation matter, but no additional compensation was paid in respect of service that committee.

The MP&D Committee spent extensive time considering whether and how to reflect the impact of the opioid-related settlement charge in year-end compensation decisions for 2022. The MP&D Committee, along with the full Board, carefully considered a number of factors which are provided in detail in the CD&A. The MP&D Committee

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also sought the perspectives of stockholders in advance of finalizing compensation for our leadership team. Ultimately, recognizing that the choice to settle was a Board-level decision, the Board also agreed to a reduction in non-employee director compensation of 10% for fiscal year 2023. This reduction will be reflected in the 2024 Proxy Statement.

2022 Non-Employee Director Retainer Mix

All Other Non-Employee Director Compensation and Benefits

Directors are eligible to participate in the employee discount program in the Company’s stores and are subject to the same terms of the program as our employees. Directors are generally reimbursed for business expenses incurred directly in connection with their roles and duties on the Board, such as travel, meals, lodging and executive support.

The following table shows amounts paid to each of our non-employee directors in 2022.

Non-Employee Director Compensation – 2022

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Audit Committee Matters

Audit Committee Report

During the 2022-2023 Board year, the Audit Committee was composed of five independent directors. Set forth below is the report of the Audit Committee on its activities with respect to CVS Health’s audited financial statements for the fiscal year ended December 31, 2022 (the “audited financial statements”).

Fernando Aguirre		Alecia A. DeCoudreaux		Edward J. Ludwig (Chair)		Jean-Pierre Millon		Mary L. Schapiro

Independent Registered Public Accounting Firm Independence and Fee Approval Policy

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm. The Audit Committee has retained Ernst & Young as CVS Health’s external audit firm since September 2007. In order to assure continuing external auditor independence, the Audit Committee periodically considers whether there should be a rotation of the audit firm. Further, in conjunction with the mandated rotation of the external audit firm’s lead engagement partner, the Audit Committee and its Chair were directly involved in the selection of Ernst & Young’s new lead engagement partner, who assumed her role in February 2022. Based on its most recent evaluation of Ernst & Young, the members of the Audit Committee believe that the continued retention of Ernst & Young to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its stockholders. Among the factors considered by the Audit Committee in reaching this recommendation are the following: the quality of Ernst & Young’s staff, work and quality control; its capability and technical expertise, given the complexity of the Company’s business; its independence from the Company; the quality and candor of its communications with the Company and the Audit Committee; and the benefits of its tenure as auditors, including enhanced audit quality and competitive fees.

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Audit Committee Matters

All audit services, audit-related services, tax services and other services provided to the Company by Ernst & Young were pre-approved by the Audit Committee, and the Audit Committee is ultimately responsible for audit fee negotiations associated with the retention of Ernst & Young. The Audit Committee has considered whether Ernst & Young’s provision of services is compatible with maintaining Ernst & Young’s independence. The Audit Committee’s charter requires pre-approval of the audit and non-audit services to be provided by the Company’s independent registered public accounting firm. The Audit Committee reviews and approves Ernst & Young’s services on an annual basis. During the year, Ernst & Young also may request pre-approval of additional services, and the Audit Committee considers such requests for approval and approves them as circumstances warrant. The Audit Committee charter authorizes the Audit Committee to delegate to one or more of its members authority to pre-approve permitted services, as long as such pre-approvals are reported to the full Audit Committee at its next meeting.

Representatives of Ernst & Young will be at the Annual Meeting to answer your questions and will have the opportunity to make a statement if they so desire.

If you do not ratify the appointment of Ernst & Young, the Audit Committee will reconsider the appointment of Ernst & Young, although in the event of reconsideration the Audit Committee may determine that Ernst & Young should continue in its role. Even if you ratify the appointment of Ernst & Young, the Audit Committee retains its discretion to reconsider Ernst & Young’s appointment if it believes that reconsideration is necessary in the best interest of the Company and its stockholders.

Fees of Independent Accounting Firm

The following table summarizes the fees paid to Ernst & Young for services rendered during fiscal 2022 and 2021.

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Executive Compensation and Related Matters

Background

We are asking our stockholders to approve, on an advisory basis, the compensation paid to our Named Executive Officers, as described in the Compensation Discussion and Analysis (“CD&A”) and the Executive Compensation sections of this proxy statement. Although the advisory vote is not binding upon the Company, the MP&D Committee (referred to in this Item 3 as the “Committee”), which is responsible for designing and administering our executive compensation program, values our stockholders’ views and will continue to consider the outcome of the vote in its ongoing evaluation of our executive compensation program.

At CVS Health, our executive compensation philosophy and practice reflect our commitment to paying for performance, both short- and long-term. We define performance as the achievement of results measured against challenging internal financial targets that take into account our results relative to that of our peer companies, as well as industry and market conditions. We believe that our multi-faceted executive compensation plans, with their integrated focus on short- and long-term metrics and features that enhance alignment to stockholders, provide an effective framework by which progress toward achieving our strategic goals may be appropriately measured and rewarded.

Following our 2022 Annual Meeting of Stockholders, the Committee considered the result of the stockholder advisory vote on executive compensation, which received support from 91.8% of votes cast. We appreciate our stockholders’ support of our executive compensation program, and we are committed to continuing our annual stockholder outreach program to seek input and ensure we meet ongoing expectations regarding our compensation practices. In the latter part of 2022 and early 2023, we reached out to stockholders representing approximately 49% of our outstanding shares and held calls with holders of approximately 40% along with two of the leading advisory firms. The Independent Chair of the Board and the Chair of the Committee participated in calls with holders of approximately 31% of our stock and the Chair of the MP&D Committee participated in a call with a leading proxy advisory firm.

After considering stockholder feedback, the Committee approved additional enhancements to our executive compensation program for fiscal 2023 that we believe further align the interests of our executives with our stockholders:

These build on enhancements put in place in recent years:

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Executive Compensation and Related Matters

We encourage stockholders to read the letter from the Committee on pages 45-46 of this proxy statement and the CD&A and accompanying compensation tables and narrative discussion beginning on page 47 for a detailed description of our executive compensation program and decisions. Included are the action taken by our Board, the Committee and CEO Karen Lynch after careful consideration of the impact of the opioid-related legal settlement charge in year-end compensation decisions for 2022. The Committee also sought the perspectives of stockholders in advance of finalizing compensation decisions for our Executive Leadership Team and Board.

The Committee and the Board believe that the policies and procedures articulated in the CD&A are effective in achieving our goals and that the compensation of our Named Executive Officers reported in this proxy statement has contributed to CVS Health’s long-term success. Additionally, we believe the 2022 pay outcomes demonstrate alignment between pay and performance and that our executive compensation program remains aligned to the Company’s growth strategy.

Stockholders are being asked to vote on the following resolution:

“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the CVS Health executive officers named in the Summary Compensation Table, as disclosed pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and other narrative executive compensation disclosures).”

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Executive Compensation and Related Matters

Background and Recommendation

As described in Item 3 above, our stockholders have the opportunity to cast an advisory vote to approve the compensation of our named executive officers, the so-called “say on pay” proposal. This Item 4 affords stockholders the opportunity to cast an advisory vote on how often we should include a say on pay proposal in our proxy materials for future stockholder meetings for which we must include executive compensation information in the proxy statement for that meeting (often referred to as the “say-when-on-pay” proposal). Under this Item 4, stockholders may vote to have the say on pay vote every year, every two years, or every three years.

Our stockholders voted on a similar proposal in 2017, with a large majority voting to hold a say on pay vote every year, as then recommended by the Board. Though we currently hold our say on pay votes every year, there are valid arguments regarding the relative benefits of both annual and less frequent say on pay votes. After considering input from our stockholders, the preference evident from voting results at other Fortune 500 companies, and practical commentary that has become widely available with respect to the say-when-on-pay vote since its implementation, our Board is again recommending that the say on pay vote be held on an annual basis.

As an advisory vote, this proposal is not binding on the Company, the Board or the Management Planning and Development Committee. However, the Board and the Management Planning and Development Committee value the opinions expressed by stockholders in their votes on this proposal and will consider the outcome of this vote when making future decisions regarding the frequency of conducting a say on pay vote. Unless and until the Board determines otherwise, the next say-when-on-pay vote will occur at our 2029 Annual Meeting, since this vote is required to be held every six years.

Stockholders may cast a vote on the preferred voting frequency by selecting the option of every year, every two years, or every three years (or abstaining) when voting in response to the resolution set forth below.

“RESOLVED, that the stockholders recommend, on an advisory basis, that after the 2023 Annual Meeting of Stockholders, the Company conduct any required stockholder advisory vote on the executive compensation of the Company’s named executive officers as set forth in the Company’s proxy statement should be every year, every two years, or every three years in accordance with such frequency receiving the greatest number of votes cast for this resolution.”

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Letter from the Management Planning and Development Committee

Dear CVS Health Corporation Stockholder

As the members of the Board’s Management Planning and Development Committee (for purposes of this letter, the “Committee”), our most important responsibilities are to ensure that CVS Health maintains an executive compensation program that emphasizes a pay-for-performance philosophy, aligns management’s execution of our strategic goals with long-term stockholder value creation and supports the retention of our strong executive leadership team.

A priority for this Committee has been to support a realignment of the Executive Leadership Team beginning with the appointment of Karen Lynch as CEO two years ago. Under Ms. Lynch’s leadership, in 2022 we made significant progress on our strategy, delivered strong financial and operational results, and took actions that we expect will enhance the capabilities of our value-based care platform through the Signify Health acquisition (and which actions continued in 2023 with the proposed acquisition of Oak Street Health). Ms. Lynch has demonstrated an adeptness for adding the talent we need to meet our strategic goals. Notably, more than 90% of our Executive Leadership Team is new to their roles in the last two years.

Maintaining an executive compensation program that supports these initiatives and creates appropriate alignment with stockholders in both the short and long term is critical. The Committee places great value in the feedback of our stockholders and our executive compensation program today reflects input we have heard from our stockholders.

The Committee spent extensive time considering whether and how to reflect the impact of the opioid-related settlement charge in our year-end compensation decisions for 2022. The Committee, along with the full Board, carefully considered that there was no admission of fault or wrongdoing and took into account a number of factors and alternatives which are provided in detail in the CD&A. The Committee also sought the perspectives of stockholders in advance of finalizing compensation decisions for our Executive Leadership Team and Board. Ultimately:

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Compensation Committee Report

Absent a material change to the factors considered, the Committee does not intend to take any future discretionary actions related to the resolution of opioid-related litigation.

The Committee approved two enhancements to the executive compensation program effective for 2023:

These updates reflect stockholder input and build on enhancements made in the prior year including, the continuation of the Workforce Diversity Modifier to the 2022 MIP for our most senior leaders and updating our peer group.

In establishing a program that supports our long-term strategy, the Committee aligns management incentives directly with drivers of sustainable performance, which in turn benefit our stockholders over the long term by driving forward our business strategies and goals. The full Board and Committee continue to believe that our executive compensation program’s design supports the Company’s success and is closely aligned with stockholder interests.

The Committee remains committed to the ongoing evaluation and improvement of our executive compensation program, informed by regular discussions with our stockholders. We look forward to continuing this dialogue and encourage you to reach out with any questions or concerns related to our program before making your voting decision. Thank you again for your continued support and investment in CVS Health.

Compensation Committee Report

We met with management to review and discuss the Compensation Discussion and Analysis. Based on that review and discussion, we recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

Roger N. Farah		C. David Brown II (Chair)		Anne M. Finucane		William C. Weldon

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Compensation Discussion and Analysis

The Compensation Discussion and Analysis explains how our executive compensation programs are designed and operate with respect to our named executive officers (“NEOs” or “Named Executive Officers”).

Highlights for our NEOs continuing from 2022 are below:

Karen S. Lynch

CVS Health President and CEO since February 1, 2021 Current and Prior Roles Ms. Lynch has over three decades of experience in the health care industry. Under her leadership, CVS Health touches the lives of more than 100 million people each year through its unique combination of assets. Prior to becoming President and Chief Executive Officer, she was EVP and President of Aetna, responsible for driving the strategy to deliver consumer-focused, high-value health care to the millions of people Aetna serves. She joined the Company through the acquisition of Aetna in November 2018.

Shawn M. Guertin

EVP and Chief Financial Officer since May 28, 2021 Current and Prior Roles Mr. Guertin joined CVS Health in May 2021. He previously served as Executive Vice President, Chief Financial Officer and Chief Enterprise Risk Officer of Aetna Inc. from January 2014 to May 2019 and as Senior Vice President, Chief Financial Officer and Chief Enterprise Risk Officer from February 2013 to January 2014. Prior to that role, he served as Head of Business Segment Finance at Aetna from April 2011 to February 2013 and held various leadership positions at Coventry Health Care, Inc., including Executive Vice President and Chief Financial Officer from January 2005 to December 2009, Senior Vice President and Chief Actuary from February 2003 to December 2005 and Vice President of Finance from April 1998 to February 2003.

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Compensation Discussion and Analysis

Alan M. Lotvin, M.D.

Former EVP and President – Pharmacy Services   Current and Prior Roles Dr. Lotvin served as Executive Vice President of CVS Health and President - Pharmacy   Services, which includes the Company’s pharmacy benefit management (“PBM”) and specialty pharmacy businesses from February 2020 through January 30, 2023. Dr. Lotvin has extensive experience in these industries. Before joining the Company, Dr. Lotvin was President and Chief Executive Officer of ICORE Healthcare, a Magellan Health Services company, and prior to that, Dr. Lotvin held senior positions in the PBM industry. Dr. Lotvin is expected to retire in April 2023 after a 10-year career at CVS Health, where he focused on our PBM business, transformation and specialty pharmacy. He will continue as a Senior Advisor until his retirement.

New NEOs in 2022

In addition, for 2022 there are two new NEOs. Tilak Mandadi joined the Company in July 2022 as EVP and Chief Data, Digital and Technology Officer. Prem S. Shah assumed the newly created role of Chief Pharmacy Officer in November 2021, became Co-President – Retail in January 2022, and as the Chief Pharmacy Officer assumed an expanded role in connection with the dispensing pharmacies in May 2022.

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Compensation Discussion and Analysis

Prem S. Shah
EVP, Chief Pharmacy Officer and Co-President, Retail since January 1, 2022 Current and Prior Roles Mr. Shah is Executive Vice President, Chief Pharmacy Officer and Co-President,   Retail. Prior to his current role, Mr. Shah spent his entire 10-year CVS Health career in roles providing strategic oversight of key Specialty Pharmacy functions. Prior to joining CVS Health, he was Senior Vice President of ICORE Healthcare, a Magellan Health Services company. Previously, Mr. Shah led the startup of the Specialty Pharmacy division at WellCare Health Plans, Inc. and served in other management roles.		2022 Compensation
		Base Salary $950,000
		Annual Cash Incentive (MIP)
		$1.949 million (equal to 149.5% funding for Company, with an individual performance modifier of 100%, based on a pro-rated target at 142.3% of salary)
		2022 Granted Compensation
		Equity Awards $6.0 million grant fair value 50% PSUs, 17% stock options and 33% RSUs
		Mr. Shah’s total target compensation opportunity going forward (base salary, annual cash incentive and annual equity awards) is expected to have the same at-risk profile of his peers in the Company.

The CD&A is organized into the following sections:

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Compensation Discussion and Analysis

Summary

Our Executive Compensation Core Principles

Although we consider a number of factors in our pay decisions, these five core principles drive our executive compensation philosophy:

	Business Strategy Aligned				Shareholder Aligned
	Support our “One Company” business strategy, holding executive officers accountable for leadership and cultural alignment				Encourage a stock ownership and stock price growth mindset
	Attract and Retain				Clear and Transparent
	Attract and retain the highest-caliber talent by providing a competitive total rewards package compared to companies which we compete for business and talent including, but not limited to, our compensation peer group Provide a differentiated value proposition tied to our purpose				Easy to understand, directly correlated to Company and leadership performance
	Pay for Performance   Vast majority of executive officer pay is variable and tied to incentives Focus on profitable growth to drive total shareholder return Balance achievement of financial results with achievement of non-financial results, emphasizing the customer, as well as ESG metrics

2022 – Executing on our Strategy; Leading with Talent

The Company is well-positioned to become the leading health solutions company for consumers, deliver a superior health care experience and drive improved health outcomes, lower costs, higher levels of engagement and broader access to high quality care. Getting the right people to innovate and grow the business is important to achieving our overall goals and business plans, and Ms. Lynch has proven to be adept at adding the talent we need to continue the momentum necessary to meet these goals.

Ms. Lynch has realigned our executive team around our strategy and in 2022 made several additional changes to senior management.

Tilak Mandadi joined the Company as Executive Vice President and Chief Data, Digital and Technology Officer. He leads the Company’s data, digital and technology strategy while overseeing growth and innovation through digital-led, consumer-facing experiences. Upon joining the Company in July 2022, Mr. Mandadi received one-time sign-on awards in the form of a cash bonus of approximately $2.8 million and RSUs with a grant date value of $9.8 million that vest ratably over three years. These sign-on awards were to replace the value of the bonus, equity awards and other variable pay that Mr. Mandadi forfeited from his prior employer when he accepted the position at CVS Health. The cash award is subject to repayment if his employment is terminated for cause in the two-year period after hire and the RSUs are subject to forfeiture if his employment is terminated during the three-year vesting period. Due to the timing of his start date, Mr. Mandadi did not receive PSU or stock options under our long-term incentive program for fiscal 2022. Mr. Mandadi’s at-risk compensation percentage for 2023 is expected to be consistent with that of his peers in the Company. See “Agreements with Named Executive Officers” on page 70 for additional details.

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Compensation Discussion and Analysis

Prem S. Shah was appointed as Co-President of Retail and his role was later expanded to include all of our pharmacy dispensing and associated support functions. This was another step forward in realizing our omnichannel pharmacy strategy. Mr. Shah received an RSU award in recognition of his expanded role which occurred soon after the annual grants were awarded. Mr. Shah’s compensation, including the value of RSUs, was within competitive recommendations made by the MP&D Committee’s independent compensation consultant. The RSU award is time-based and cliff vests on the third anniversary of the grant date. The RSU grant will supplement the existing heavily performance weighted mix of LTI (75% PSUs/25% Stock Options) with additional value that will align Mr. Shah with an ownership stake more appropriate for a senior executive officer. The ultimate value received depends upon the value of CVS Health Corporation’s common stock on the vesting date and is aligned with stockholder value creation. Mr. Shah’s 2023 at-risk compensation percentage is expected to be consistent with that of his peers in the Company.

Stockholder Outreach and Consideration of 2022 Say On Pay Vote

Our annual say on pay vote is one of our opportunities to receive feedback from stockholders regarding our executive compensation program, and the MP&D Committee takes the result of this vote into account when determining the compensation of the Company’s executive officers. Our stockholder advisory vote on executive compensation received strong support in 2022, with 91.8% of votes cast in favor of the proposal.

Stockholder Engagement

We value an open dialogue with our stockholders, and we believe that regular communication with them and other stakeholders is a critical part of enabling our long-term success. In the latter part of 2022 and early 2023, at the Board’s direction, management reached out to 34 stockholders representing approximately 49% of our outstanding stock in the aggregate and held 28 meetings with stockholders representing nearly 40% of our outstanding stock. We also held calls with two of the leading proxy advisory firms. The Independent Chair of the Board and Chair of the MP&D Committee participated in engagements with stockholders representing approximately 31% of our outstanding stock and the Chair of the MP&D Committee participated in a call with a leading proxy advisory firm. In addition, we also engaged with each of the stockholders or groups of stockholder who submitted a proposal for inclusion in this proxy statement.

In our meetings with stockholders, we were pleased to hear that most stockholders did not have concerns with the structure of our executive compensation program and continued to provide positive feedback on the comprehensive changes implemented in recent years to align to our evolving business strategy and in response to their input.

In meetings that took place in early 2023, our Independent Chair of the Board and Chair of the MP&D Committee sought stockholders’ perspectives on how to consider the magnitude of the opioid litigation settlement accrual on compensation decisions. Stockholders generally believed that this should be a consideration in the year-end decision process, but also appreciated that CVS Health’s current leadership team is almost entirely new, the risk that could result from a retention perspective, and the strong alignment to the stockholder experience currently provided through the CVS Health executive compensation program. Stockholders indicated it was important to provide transparency around our decision-making process, which is included above on pages 10-11, and below on pages 52-53.

See pages 9-11 and 28 of this proxy statement for additional information about stockholder engagement.

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Consideration of the Settlement Accrual in Compensation Decisions

In 2022, the CVS Health Board of Directors and CEO Karen Lynch made the decision to resolve the vast majority of pending litigation claims related to the dispensing and distribution of opioids, which include allegations dating back more than a decade. This decision was made in order to:

In preparation for the settlement, we made an accounting accrual of approximately $5.2 billion in the third quarter of 2022. The settlement was announced in November 2022 and provides for the payment of approximately $5 billion over 10 years beginning in 2023.

The MP&D Committee and full Board carefully considered the settlement charge’s impact on the underlying metrics within the executive compensation program in combination with Company-specific circumstances and stockholder feedback. Consistent with our past approach to adjustments, the accrual was excluded from the Adjusted Operating Income metric in our MIP (the MP&D Committee has elected to use certain non-GAAP performance metrics in the executive compensation program to best incent and assess performance, and we provide detailed reconciliation in this proxy statement of non-GAAP performance metrics; see Annex A). However, the MP&D Committee also recognized that certain events, such as the impact from the opioid litigation settlement accrual, should be considered in final executive compensation decisions.

In thinking through the settlement charge’s impact on compensation, the MP&D Committee and full Board carefully considered a number of factors. At the crux of the challenge was how to balance two core points:

With these factors in mind – and after a robust dialogue with our stockholders – our CEO, full Board and the MP&D Committee mutually agreed to take the following actions:

The MP&D Committee considered alternatives to these actions, including applying negative discretion to the MIP payouts for other members of the Executive Leadership Team, impacting 2020 PSUs or recoupment. However, for reasons detailed below – including balancing the feedback from stockholders for alignment with the fact that CVS Health has a brand-new leadership team who has delivered strong performance during their tenure – the MP&D Committee elected not to take such further action. As discussed with stockholders, the MP&D Committee determined that taking action on 2020 PSUs or attempting to recoup outstanding awards would not be appropriate or effective for a variety of reasons, including the transition in the Executive Leadership Team, complications due to tax and accounting implications, outsized costs, and the uncertain likelihood of success.

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Leading Practices in Executive Compensation Programs

The Board is committed to continuing its longstanding practice of soliciting feedback to incorporate stockholder perspectives into our executive compensation program. Our stockholder outreach provides the Board with valuable insights into our stockholders’ perspectives on our executive compensation program and other matters of importance to them. Our pay practices align with our core compensation principles and facilitate our implementation of those principles. They also demonstrate our commitment to sound compensation and governance practices and reflect enhancements made to our executive compensation program in prior years as a result of stockholder input that currently remain in effect.

We apply leading executive compensation practices

2022 Business and Performance Highlights

2022 was a year of progress in advancing our strategy while achieving strong financial results across the Company. These results are evidence of our progress toward the bold vision we set for CVS Health to redefine the health care experience for consumers – providing access to care that is simple, personal, and affordable while providing better outcomes for all.

As we enter our 60th year, we are one of the most trusted health care brands in America. Our ability to engage consumers, whether at our community locations, in the home or virtually, combined with our unique collection of capabilities, positions us to deliver superior health care and address pressing public health challenges like no other company. We are redefining the health care ecosystem by meeting members where they want to receive care and delivering integrated solutions grounded in our deep and diverse expertise.

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2022 Business and Performance Results

Executive Compensation Program Discussion

Our executive compensation program supports our long-term strategy by tying the vast majority of pay for executives to performance-based metrics aligned to the Company’s growth strategy. For our annual executive compensation program, we provide three elements of total direct compensation: base salary, annual cash incentive and long-term incentives in the form of PSUs and stock options, which are all described in detail beginning on page 58.

Executive Compensation 2022 Planning and Review Process

The annual cycle of reviewing and developing the Company’s executive compensation program and pay levels is a multi-step process that includes year-round engagement with our stockholders. It also incorporates consideration of our say on pay results, compensation and relative total shareholder return (“rTSR”) peer group information, both short- and long-term Company results compared to objectives, as well as input and guidance from the MP&D Committee’s independent compensation consultant.

When evaluating pay reported in the 2022 Summary Compensation Table (“SCT”), it is important to consider the timing of the compensation decisions and the periods in which they are reported.

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Executive Compensation Program Summary

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Below are highlights of the MP&D Committee’s review and decision-making process for 2022 executive compensation and incentive program target setting.

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Elements of Our Executive Compensation Program

Our pay-for-performance philosophy places the majority of an executive officer’s compensation at risk and emphasizes long-term incentives tied to individual and Company performance as well as continued service. As a result, the only fixed compensation is base salary, which represents approximately 8% to 13% for our NEOs’ total target compensation in 2022.

The MP&D Committee believes that performance indicators, including profitability, customer satisfaction, market comparability and stock price should be factored into our executive compensation program. By using a variety of pay vehicles and balancing short- and long-term awards, the MP&D Committee believes our executive compensation program supports retention and long-term growth creation because the metrics are measured independently, and no single factor impacts all elements of performance. For 2022, the MIP plan design included a Workforce Diversity Modifier for senior executives because the Committee believes that our workforce should reflect the customers and communities we serve. The modifier (downward only) can reduce the formulaic results of the 2022 MIP by as much 10 percentage points.

The table below outlines each element of our executive compensation program for 2022.

2022 Executive Compensation Program Structure

		Performance-based or performance-aligned (~90%)
	Near-Term		Long-Term
	Base Salary	Annual Cash Incentive (MIP)	PSUs	Stock Options
Performance Period	Ongoing	Annual	3-year performance period plus 2-year holding period post vesting	4-year ratable vest along with 10-year expiration
Performance Metrics		●  MIP Adjusted Operating Income (80%) ●  Retail Customer Service, Pharmacy Services Client Satisfaction and Health Care Benefits Member Satisfaction Results (20%) ●  Individual Performance Modifier (0-120%) ●  Workforce Diversity Modifier for senior leaders, including NEOs (downward only, by as much as 10%)	●  2024 Adjusted EPS (100%) ●  rTSR Modifier (+/- 25%); no upward modifier to any outstanding PSUs if our absolute TSR is negative	●  Stock price appreciation
CEO Target Pay Mix
NEO Target Pay Mix

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Base Salary

The MP&D Committee annually reviews the base salaries of all executive officers, including the NEOs, and adjusts them periodically as needed by evaluating the evolving responsibilities of the position, the experience of the individual and the marketplace in which we compete for executive talent as defined by our compensation peer groups. Informed by this review, and with input from its independent compensation consultant, the MP&D Committee increased Ms. Lynch’s salary by 3% effective April 2022.

Annual Cash Incentive

Our NEOs participate in our annual cash incentive program, the Management Incentive Plan or MIP, under which they are eligible for a cash award based on the achievement of pre-established financial, operating and individual performance objectives. Awards are paid out, if earned, in the first quarter of the following year based on the following formula. The MP&D Committee reserves the discretion to reduce awards for any reason.

NEO Target Annual Incentive

In the first quarter of each year, the MP&D Committee approves for each NEO an annual target bonus opportunity expressed as a percentage of the NEO’s base salary. The current targets are set forth in the 2022 Annual Cash Incentive Award table on page 65. The final award is calculated based on the actual base salary paid during the calendar year, which we call “eligible earnings.” Mr. Shah’s 2022 bonus target was pro-rated to 142.27% to reflect his target bonus opportunity increase to 150% in May 2022 as a result of the increase in his responsibilities during 2022.

Corporate Performance Factor

Rigorous Goal Setting

CVS Health is performance driven, and the MP&D Committee believes there is a strong connection between our impressive track record and the corresponding goals that we set for ourselves under the MIP. Our management and the MP&D Committee worked collaboratively to set targets reflective of our ambitious performance goals and to drive long-term value creation for our stockholders. When setting these goals, the MP&D Committee considers factors relevant to the current fiscal year. Financial results from prior years are used as reference; however, the MP&D Committee focuses on setting annual goals that reflect current business conditions and expectations and will result in an appropriate pay for performance outcome for the fiscal year.

For 2022, the MP&D Committee established Company goals using 2022 MIP Adjusted Operating Income (80% weighting) and retail customer service, pharmacy services client satisfaction and health care benefits member satisfaction results (20% weighting), which emphasizes and reinforces the business objectives of the enterprise. The MP&D Committee established a challenging Adjusted Operating Income target that is consistent with the earnings guidance provided to investors and requires year-over-year growth. Our customer service and client/member satisfaction metrics measure customer and member satisfaction through the use of transaction generated and random survey data and ensure that we are providing excellent service and position us to retain and win new business. Targets were set above the previous year’s actual performance and targets. In 2022, the curves for

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the customer service and client/member satisfaction were aligned with the Adjusted Operating Income scale. The MP&D Committee believed that the targets it established were rigorous yet achievable in light of our internal forecast as well as the macroeconomic and industry environments at the time the goals were established in early March 2022.

In early 2022, the MP&D Committee determined the 2022 Adjusted Operating Income goal for MIP based on the Company’s financial plan that was set to achieve continued growth and support our strategy. When evaluating the goal, the MP&D Committee also considered the baseline results for the year that adjust for items consistent with non-GAAP adjustments to quarterly and annual reported financial results. The MIP uses a target range to ensure that management will not receive above target awards unless 2022 performance exceeds 2021 actual results.

2022 Corporate Performance Results

In determining the funding rate for the Company and our NEOs under the 2022 MIP, the MP&D Committee reviewed the overall financial and operating results of the Company, evaluating them against the MIP performance targets approved by the MP&D Committee in March 2022. The MP&D Committee also considered the leadership of the management team in maintaining the strong core operational performance of the Company and making significant advancements on its strategic priorities, while seeking to mitigate and develop innovative strategies. Consistent with our approach to align executive compensation to reported results, the MP&D Committee has elected to use certain non-GAAP performance metrics in the Company’s executive compensation program to best incent and assess performance, and we provide detailed reconciliation in this proxy statement of non-GAAP performance metrics. In 2022, the primary non-GAAP adjustments related to the opioid reserve discussed below and charges resulting from the execution of our strategy to divest non-core assets including the long term care pharmacy business, PayFlex, bswift and parts of the international business. The adjustments for items were consistent with prior charges and were both positive and negative. The reconciliation can be found in Annex A to this proxy statement.

The Company performance result was 149.5% for 2022 — based on 2022 MIP Adjusted Operating Income (performance of 102.8% of target, resulting in funding of 163.3%, weighted at 80%) and customer service and client/member satisfaction aggregate results (performance of 99.0% of target, resulting in funding of 94.3%, weighted at 20%).

The overperformance on Adjusted Operating Income was bolstered by COVID-19 vaccination and testing, strong front store sales, strength in Pharmacy Services and strong underlying performance of the Health Care Benefits segment. The customer satisfaction result was just slightly below target as Pharmacy Services and Retail scored at or above targets (+1 and target, respectively), while Health Care Benefits (-3) performed slightly below target.