CVS Caremark Adopts My Proposal and Amends its By-laws

Editor’s Note: This post is from Lucian Bebchuk of Harvard Law School.

CVS Caremark and I have reached an agreement under which the company adopted a by-law provision limiting the adoption of poison pills. The adopted by-law is based on a shareholder proposal to amend the company’s by-laws that I submitted for the company’s upcoming annual meeting. Following the agreement that the company and I reached, the company’s board adopted the new by-law earlier this week, and I withdrew my shareholder proposal. The amended by-laws of CVS, including the new section 8 of Article VI, were filed yesterday and are available here.

Under the new by-law provision, any extension of a poison pill plan not ratified by the shareholders must be approved by at least 75% of the members of the board of directors, and a pill not so extended will expire one year after its adoption or last such extension.

My shareholder proposal and the by-law adopted by CVS are based on a model by-law that was the subject of litigation and a court decision in the CA case, which led CA to abandon its attempt to exclude my proposal from the corporate ballot. An article about the litigation and my model by-law is available here.

CVS is the third company to adopt a by-law provision based on this model by-law. The adoption by CVS was preceded by an adoption by Disney, which adopted a version of my proposal after the proposal won 57% of the votes in Disney’s annual meeting, as well as an adoption by Bristol-Myers Squibb.

I commend the board of CVS for its adoption of the pill-limiting by-law. I hope that boards of other public companies will follow the example set by the boards of CVS, Disney, and Bristol-Myers and adopt similar by-law provisions.

I would like to thank the law firm of Grant & Eisenhofer for its valuable legal advice and legal representation in connection with my shareholder proposals in general and the pill by-law proposals in particular. I also wish to thank Spotlight Capital Management for advising me on engagement with companies.

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One Comment

  1. Gretchen Smith
    Posted Thursday, February 14, 2008 at 12:09 pm | Permalink

    We have been following the corporate governance advocacy of Professor Bebchuk, with regard to Poison Pills as well as Executive Pay.

    Click on the link below to access background information on Professor Bebchuk’s proposals as well as other corporate governance proposals that will be prominent during the 2008 prosy season.

    Click here:

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  1. By » February 2008 on Monday, September 5, 2011 at 8:07 pm

    […] based on a model by-law that was the subject of litigation and a court decision in the CA case. (Harvard Law corpgov blog) See The Bebchuk Bylaw: Devilish…but brilliant. Bebchuk not only sets a new standard for the […]