WOONSOCKET – The president and CEO of CVS Health Corp., Larry J. Merlo, realized a 36.6 percent – or $10.6 million – decline in his total compensation in 2016 compared with the prior year, largely because of an anticipated end of pension payments.
The top executive at the Woonsocket-based retail and pharmacy benefits giant earned $18.3 million in 2016, representing a decline from $28.9 million in 2015.
The company’s previous pension system, which closed to new participants in 2010, contributed annual retirement benefits equaling 1.6 percent of a three-year average of total compensation for each year of service up to 30 years. Merlo, the only executive plan participant, reached his 30 years of service under the capped plan, resulting in a sudden year-over-year drop in pension contributions, which the U.S. Securities and Exchange Commission tallies as part of total compensation.
Merlo last year received $6.1 million for his pension, which now has a present value of $43.7 million, according to federal documents filed Friday.
Excluding the year-over-year pension compensation change, however, Merlo’s pay total fell 19.7 percent. The drop was largely because of a 40.7 percent decrease in stock awards, which totaled $4 million compared with $6.7 million in 2015. Merlo’s base salary increased $70,000 to $1.6 million, which was offset by a $1.8 million decrease in nonequity incentives. Merlo’s option awards remained relatively flat at $4 million.
CVS pays its executives based on metrics tied to company performance, also known as “pay for performance.” The company ended the year profitable, but was negatively impacted by public discussion related to the rising costs of prescription drugs, and the possible repeal and replacement of the Affordable Car Act, known also as Obamacare, according to a letter to stockholders.
“Additionally, the loss of retail pharmacy prescriptions associated with a few pharmacy network changes announced in late 2016 is expected to challenge our retail pharmacy business and make this year a rebuilding year,” according to the letter.
Stockholders of record can vote on the company’s executive compensation plan at the annual meeting of stockholders scheduled for 9 a.m. on May 10 at the company’s headquarters in Woonsocket.
The four next highest paid CVS executives included:
Jonathan C. Roberts: $8.6 million (executive vice president and president of CVS Caremark, as well as the recently named chief operating officer)
David M. Denton: $5.5 million (executive vice president and chief financial officer)
Helena B. Foulkes: $5.2 million (executive vice president and president of CVS Pharmacy)
Thomas M. Moriarty: $5 million (executive vice president, chief strategy officer and general counsel)
