RESOLVED, that shareholders request the board of directors of Merck & Co., Inc. (“Merck” or the “Company”) to issue a report, prepared at a reasonable cost and omitting proprietary information, describing how the company plans to allocate tax savings that result from the Tax Cuts and Jobs Act (“TCJA”).

Supporting Statement: The TCJA reduced the corporate tax rate from 35 to 21%, and transformed the provisions requiring companies pay taxes on money earned abroad. These changes helped reduce federal corporate income tax collections by nearly $100 billion, representing more than a 30% decline.[1] One of the overarching goals of the legislation was to boost companies’ long-term investment in the American economy. While still early, there has been no discernible boost in capital formation since the tax reform.[2] Without more detailed information, investors cannot tell whether a company’s strategy on how to allocate its tax savings aligns with long-term value creation.

We believe this information is important for investors. BlackRock CEO Larry Fink recently stated: “Companies have not been explicit enough about their long-term strategies. In the United States, for example, companies should explain to investors how the significant changes to tax law fit into their long-term strategy. What will you do with increased after-tax cash flow, and how will you use it to create long-term value? This is a particularly critical moment for companies to explain their long-term plans to investors.”

Merck received an estimated $1.2 billion in tax savings in 2018 from two provisions of the TCJA. Through 2025, the Company will receive an estimated $6.9 billion tax cut on previously un-taxed offshore profits.[3]

Merck has an opportunity to strengthen its longer-term value creation by investing in workers, benefits, jobs, communities, capital investments, and R&D. Yet, in contrast to dozens of companies which have shared how they will spend the tax savings to create long-term value,[4] Merck has not done so adequately. Without any specificity or discussion of these investments, investors cannot understand how the tax law affects the Company’s long-term strategy to create value.

When polled, 52% of Americans thought the tax savings should go towards worker pay, new jobs, and giving back to communities. Passing savings onto shareholders ranked as the lowest priority.[5]

Merck more than doubled its share repurchases from $4 billion in 2017 to $9 billion last year. The Company increased its property plant and equipment by just 3%, and its R&D dropped $456 million in 2018.[6] All told, Merck was reported to have allocated 81% of its tax cuts to shareholders.[7] These practices suggest the Company is not prioritizing long-term value creation.

We urge shareholders to vote for this Proposal.

[1] See https://www.cbo.gov/publication/54647

[2] See https://www.aei.org/economics/dont-give-up-on-the-tax-cuts-and-jobs-act-just-yet/

[3] See https://www.oxfamamerica.org/explore/research-publications/hazardous-your-health/

[4] See https://www.businessinsider.com/fedex-boeing-jpmorgan-chase-tax-savings-just-capital-2018-3

[5] See https://justcapital.com/reports/the-just-capital-rankings-on-corporate-tax-reform/

[6] See Oxfam analysis of Company’s end-of-year 10-K financial statements filed at the Securities and Exchange Commission (SEC).

[7] See https://justcapital.com/reports/the-just-capital-rankings-on-corporate-tax-reform/