RESOLVED, that shareholders of Walgreens Boots Alliance Inc. (“Walgreens”) urge the Board of Directors (“Board”) to report to shareholders by June 30, 2020 describing the corporate governance changes Walgreens has implemented since 2012 to more effectively monitor and manage financial and reputational risks related to the opioid crisis, including whether and how the Board oversees Walgreens’ opioid-related programs and AmerisourceBergen’s opioid-related risks, and whether and how Walgreens has changed senior executive incentive compensation arrangements.

The report should be prepared at reasonable cost and should omit confidential and proprietary information.

SUPPORTING STATEMENT: A resolution much like this one received a majority vote of 60.53% at the 2018 Walgreens annual meeting. Opioid abuse continues to be a public health crisis: The Centers for Disease Control and Prevention reported that opioid abuse caused more than 47,000 U.S. deaths in 2017. The economic and social effects of the crisis are profound. A recent report pegged the cumulative economic toll of the opioid epidemic at over $1 trillion. Walgreens’ 2018 corporate social responsibility (CSR) report characterizes prescription drug abuse as a material, “higher priority” CSR issue for the company. (https://www.walgreensbootsalliance.com/content/1110/files/Walgreens-Boots-Alliance-2018-Corporate-Social-Responsibility-Report.pdf, at 11-12)

Walgreens has repeatedly come under fire for irresponsible opioid dispensing and distribution. In 2013, Walgreens paid a record civil penalty to settle claims that it committed an “unprecedented number” of federal Controlled Substances Act violations by failing to report suspicious orders, maintaining inadequate controls against diversion and dispensing opioids despite red flags. (https://www.justice.gov/usao-sdfl/pr/walgreens-agrees-pay-record-settlement-80-million-civil-penalties-under-controlled)

Walgreens is a defendant in the Ohio multidistrict opioid litigation. The states of Delaware, Kentucky and Florida, the Cities of New York and Miami and the Cherokee Nation have also sued Walgreens for improperly dispensing opioids. (The Kentucky lawsuit contends that Walgreens also acted as a wholesale distributor in that state.) In March 2018, the Drug Enforcement Administration conducted an administrative inspection of a California Walgreens pharmacy that had unusually large opioid purchases and an “unexplained loss” of 8,000 hydrocodone tablets. (https://www.revealnews.org/article/this-walgreens-gets-5-times-us-average-of-oxycodone-the-dea-is-asking-why/; https://www.documentcloud.org/documents/4452667-Return-Accounting-for-Items-Seized.html)

Walgreens owns 26% of distributor AmerisourceBergen, which faces significant financial and reputational consequences for its role in the opioid epidemic, and the two companies have talked about combining. (https://www.cnbc.com/2018/02/27/walgreens-and-amerisourcebergen-deal-talks-of-cooled-.html; https://www.washingtonpost.com/national/drug-executives-to-testify-before-congress-about-their-role-in-us-opioid-crisis/2018/04/12/89e7ccf2-3db6-11e8-974f-aacd97698cef_story.html?utm_term=.5670fdc325f6)

In our view, corporate governance can play an important role in effectively addressing opioid-related risks and we think shareholders would benefit from a fuller understanding of how Walgreens’ governance has changed since 2012 to serve that function. For example, Walgreens’ most recent proxy statement asserts that individual performance is considered in determining salary and annual incentive awards but does not indicate whether any opioid-related objectives, such as promoting ethical conduct, are part of that assessment. Walgreens’ 2018 CSR report does not indicate whether the Board’s Nominating and Governance Committee actively oversees opioid-related initiatives or anti-diversion efforts, stating only that the committee “reviews, at least annually, [Walgreens’] policies and activities regarding sustainability and CSR and assesses our management of risks in those areas.” (CSR Report, at 8).

We urge shareholders to vote for this proposal.