01:00 AM EDT on Friday, May 12, 2006

BY PAUL GRIMALDI
Journal Staff Writer

WOONSOCKET -- CVS Corp. shareholders yesterday voted down a number of proposals that could have changed the way the drugstore chain does business -- including initiatives to overhaul its corporate governance and one to alter some of the cosmetics it sells.

Shareholders rejected calls for an independent chairman and, in a close vote, that board nominees receive a majority of the votes cast.

By a wide margin, they killed a proposal to study whether it would be feasible for CVS to reformulate its private-label cosmetics to free them of chemicals linked to cancer and other adverse health effects.

The company's board of directors opposed all three proposals, which were included with three others in a proxy statement the company released in March.

The votes were announced yesterday during CVS' annual meeting, held at the drugstore chain's headquarters in Woonsocket.

The United Brotherhood of Carpenters Pension Fund had introduced a shareholder resolution asking the company to require that board nominees receive a majority of the votes cast to be elected or reelected, instead of just a plurality.

The pension fund introduced the same proposal last month at Textron Inc.'s annual meeting. Shareholders of the Providence-based conglomerate approved the proposal, over the objection of the company's board of directors.

The CVS board also opposed the voting-format change, a position it outlined in the company's proxy statement:

"In light of our history of electing strong and independent boards, and given the current, uncertain state of play on majority voting for election of directors, we believe that moving to a majority voting election system is unwarranted."

The proposal garnered slightly more than 49 percent of the shares voted, a point not lost on the company's directors, said Tom Ryan, CVS chairman, president and chief executive officer.

"Obviously, it was a close vote," he said.

CVS board members will take up the issue at a meeting later this year, he said.

A separate proposal, introduced by a shareholder from New York, would have required the company's chairman to have no management duties, titles or responsibilities as a way of fostering independence and reducing potential conflicts of interest when making decisions affecting the company.

"When a person acts as both a company's chairman and CEO, a vital separation of power is eliminated," the proposal stated.

The proposal received slightly less than 40 percent of the 670.3 million shares voted.

A proposal to seek shareholder approval for "any future extraordinary retirement benefits for senior executives" was withdrawn before the meeting.

Two investment groups -- Brethren Benefit Trust and Citizens Funds -- sought to have CVS evaluate the feasibility of reformulating the company's private-label cosmetics, of following stringent European cosmetics safety rules and of pushing the chain's cosmetics suppliers to rid their own products of harmful chemicals.

"Companies have adopted such practices to build public trust, protect brand reputation and safeguard market position in anticipation of prospective legislation," according to the proxy proposal.

Vesela Veleva, a spokeswoman for Citizens Funds, appealed yesterday to shareholders' wallets.

"CVS risks losing customers who are concerned about cosmetics safety," she said.

The proposal garnered less than 10 percent of the shares voted.

In other votes, shareholders:

Elected nine board members, including David W. Dorman, who replaces company cofounder Stanley P. Goldstein, who is retiring. Dorman is the former chairman and CEO of AT&T Corp.

Appointed KPMG LLP as the company's independent auditor.

pgrimald@projo.com / (401) 277-7356