8-KLeadership ChangesExhibits & Filings

CVS HEALTH Corp 8-K Report, Executive Changes (Aug 29, 2019)

Filed August 29, 2019For Securities:CVS

Summary

CVS Health Corporation (CVS) filed an 8-K on August 28, 2019, disclosing a performance stock unit (PSU) award granted to its CEO, Larry J. Merlo, effective August 28, 2019. This grant is intended to align Mr. Merlo's incentives with the successful integration of Aetna and the initial phase of the company's healthcare transformation initiatives. The PSU award, with a target value of $10,125,000, replaces his expected 2020 PSU award and is contingent upon achieving specific performance metrics, including Earnings Per Share growth, de-levering, and relative Total Shareholder Return, with targets consistent with previously provided guidance. The performance measurement period extends through December 31, 2021, aligning with other 2019 performance awards. The award includes provisions for vesting under specific separation circumstances such as separation without cause or qualified retirement. This disclosure is important for investors as it sheds light on executive compensation strategy and its direct link to key strategic objectives and financial performance targets for the company's leadership.

Key Highlights

  • 1CVS Health granted a 2020 performance stock unit (PSU) award to CEO Larry J. Merlo, effective August 28, 2019.
  • 2The PSU grant replaces Mr. Merlo's planned 2020 PSU award.
  • 3The award's value is set at a target of $10,125,000, representing the target value of his 2019 PSU award.
  • 4Performance metrics include Earnings Per Share (EPS) growth, de-levering, and relative Total Shareholder Return.
  • 5Performance targets for EPS growth and de-levering are consistent with guidance provided at the June 2019 Investor Day.
  • 6The performance period for the award runs through December 31, 2021.
  • 7The award includes provisions for vesting upon separation without cause and pro-rated vesting upon qualified retirement.

Frequently Asked Questions

The PSU award for 2020 is being granted in August 2019 to align CEO Larry J. Merlo's incentives with the crucial Aetna integration and the initial phase of the company's broader healthcare transformation initiatives. This advance grant ensures his compensation is directly tied to achieving these significant strategic milestones.

The payout of Mr. Merlo's PSU award is contingent upon achieving pre-defined performance targets. These metrics, developed in consultation with stockholders, include Earnings Per Share (EPS) growth, de-levering of the company's balance sheet, and relative Total Shareholder Return (TSR). Specific targets for EPS growth and de-levering are aligned with guidance previously communicated in June 2019.

The award includes specific provisions for vesting in different separation scenarios. If Mr. Merlo is separated from the company without cause, the award will vest based on the actual performance achieved. In the event of qualified retirement, there will be pro-rated vesting based on actual performance. However, the award will be forfeited if Mr. Merlo resigns or is terminated for cause.

This PSU grant is in lieu of his 2020 PSU award. It is expected that Mr. Merlo will receive a stock option grant in April 2020 as part of the company's regular equity grant practices.