Compensation for CVS Caremark Corp. Chairman and CEO Tom Ryan grew 4 percent to $15.5 million in his final year leading the company.
CVS Caremark's profit fell 7 percent in 2010 as the Caremark pharmacy benefits management business struggled with less profitable contract renewals and higher expenses.
Ryan's salary rose to $1.5 million from $1.4 million in 2009. The value of his stock awards totaled $7.1 million, up 11 percent, according to data filed with regulators on Wednesday. The value of Ryan's options declined to $4.4 million from $4.6 million. Ryan received a $2.2 million performance-based cash bonus, down from $3.5 million in 2009. The value of his other compensation, which included company contributions to a defined contribution plan, perks, and other benefits, rose to $281,481 from $268,759.
Ryan received $14.8 million in total compensation in 2009.
The price of CVS shares rose 8 percent in 2010, ending the year at $34.77.
The Woonsocket, R.I., company runs about 7,100 drugstores nationwide, making it the largest chain after Walgreen Co. Caremark is one of the largest pharmacy benefits management networks. CVS and Caremark combined in 2007 in a deal worth $26.5 billion.
Ryan, 58, could have received greater compensation last year if CVS Caremark had performed better. The company said Ryan was eligible for $3.6 million in long-term incentives but did not receive any. He received $1.3 million in restricted stock options but could have received up to $4 million _ although the company said that figure reflects shares he will forfeit upon retirement.
CVS Caremark said Ryan's compensation reflects the fact that the company did not live up to its own expectations for the year. It said it fell short because Caremark had trouble winning new clients, customers cut back on prescription drug use and doctors' visits to save money, and because of regulatory challenges. However, the company credited Ryan with successfully combining the CVS and Caremark units, making important contributions to its sales and marketing strategies, and positioning CVS Caremark for long-term growth.
Ryan is retiring from the company in May after CVS Caremark holds its annual shareholder meeting. He was president of the company until May 2010, and he gave up the CEO position earlier this month. He will remain chairman until the annual meeting. Ryan has led CVS since the mid-1990s and oversaw an enormous expansion of CVS' store network in addition to the combination with Caremark.
He has accumulated $58.4 million in pension benefits during his 36-year tenure with CVS. The company said he has elected to take that entire benefit as a lump sum rather than an annuity. Additionally, Ryan's stock and options vested with a combined value of $50.4 million.
Larry Merlo, former head of the CVS pharmacy business, replaced Ryan as president in 2010 and became CEO earlier this year. When Ryan retires, Larry Dorman will become the non-executive chairman of the company's board.
The Associated Press formula calculates an executive's total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.
The value that a company assigned to an executive's stock and option awards for 2010 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company's stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.
CVS Caremark will hold its annual shareholder meeting May 11 in Woonsocket.