Cardinal Health, Inc. Board of Directors
Corporate Governance Guidelines

On August 6, 2003 the Cardinal Health, Inc. (the “Company” or “Cardinal Health”) Board of Directors (the “Board”) adopted the following Corporate Governance Guidelines:

Role of the Board

The Board serves as the representative and acts on behalf of all of the shareholders of Cardinal Health. In representing Cardinal Health’s shareholders, the Board’s primary functions are to:

• Oversee management to conduct Cardinal Health’s businesses in conformity with applicable laws and regulations;
• Oversee management to establish and maintain for the Company the highest standards of legal and ethical conduct;
• Review, and where appropriate, approve and evaluate, the Company’s major strategies and plans and its performance against broad financial objectives;
• Select, evaluate and compensate the Chief Executive Officer and other senior officers and review management succession planning;
• Oversee management to protect the assets of Cardinal Health through the maintenance of appropriate accounting, financial reporting and financial and other controls;
• Provide advice and counsel to senior management; and
• Evaluate the overall effectiveness of the Board and its committees, as well as evaluate, select and recommend an appropriate slate of candidates for election as Directors.

Board Selection and Composition

Board Selection. The Board is responsible for selecting candidates for election as Directors based on the recommendation of the Nominating and Governance Committee.

Board Membership Criteria. The responsibilities of the Nominating and Governance Committee include reviewing with the Board from time to time the appropriate skills and characteristics required of Board members in the context of the make-up of the Board and developing criteria for identifying and evaluating candidates for the Board. These criteria include an individual’s business experience and skills, independence, judgment, integrity and ability to commit sufficient time and attention to the activities of the Board, as well as the absence of any potential conflicts with the Company’s interests. The Nominating and Governance Committee considers these criteria in the context of an assessment of the perceived needs of the Board as a whole and seeks to achieve diversity of occupational and personal backgrounds on the Board.

Board Independence. A majority of the Board must be comprised of independent Directors. The Board defines an “independent Director” to be a Director who:

• is not an employee of the Company or any of its subsidiaries or affiliates;
• has not received, and whose immediate family member has not received, more than $100,000 per year in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service, in any of the last five years;
• is not and has not been during the last five years affiliated with or employed by, and whose immediate family member is not and has not been during the last five years affiliated with or employed in a professional capacity by, a present or former (during the last five years) internal or external auditor of the Company;
• is not and has not been during the last five years employed, and whose immediate family member is not and has not been during the last five years employed, as an executive officer of another company during a time when any of the Company’s present executive officers serve on that other company’s compensation committee;
• is not and has not been during the last five years an executive officer or an employee of, and whose immediate family member is not and has not been during the last five years an executive officer of, another company (A) that accounts for at least 2% or $1 million, whichever is greater, of the Company’s consolidated gross revenues, or (B) for which the Company accounts for at least 2% or $1 million, whichever is greater, of such other company’s consolidated gross revenues; and
• has no other material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company).

During the five years immediately following the date on which these Corporate Governance Guidelines are adopted by the Board, each five year “look back” period referenced in the second through fifth bullet points above shall instead be the period since such adoption date. The Board annually assesses the independence of Directors and, based on the recommendation of the Nominating and Governance Committee, makes a determination as to which members are independent.

Board Leadership. The Board is responsible for the selection of the Chairman of the Board and the Chief Executive Officer.

Size of the Board; Classes of Directors. Under the Company’s Restated Code of Regulations, the number of the Directors in no case shall be fewer than nine (9) or more than sixteen (16). The Board is divided into three classes. Directors serve staggered terms of three years each so that the term of one class expires at each annual meeting of shareholders. Thus, Directors typically stand for election every three years.

Board Orientation and Continuing Education. A thorough understanding of the Company’s business is required to enable a Director to make a substantial contribution to the Board. Accordingly, all new Directors participate in an orientation program developed by the Company after their election to the Board. Directors are encouraged to participate in continuing education developed by the Company or programs provided by outside sources. Directors endeavor to meet at key Company locations from time to time to conduct in-depth reviews of particular segments of the Company’s operations, and endeavor to meet at a Company location other than the corporate headquarters within or without the United States at least once every two years.

Stock Ownership. Each non-management Director must own an equity interest in Cardinal Health in accordance with the required ownership levels and other terms stated in the Cardinal Health Guidelines for Stock Ownership adopted by the Board of Directors.

Continuation of Service.

• Re-Nomination. The Nominating and Governance Committee assesses the contributions and independence of Directors whose terms are set to expire in accordance with the criteria set forth in the committee’s charter to determine whether these Directors should be requested to stand for reelection and continue service on the Board.
• Term Limits. The Board has not established term limits for Directors. While term limits can make fresh ideas and viewpoints available to the Board, term limits can also result in the loss of Directors who have been able to develop, over a period of time, an increasing insight into Cardinal Health and its operations. As an alternative to term limits, the Nominating and Governance Committee will review each Director’s continuation on the Board when he or she is considered for re-nomination. This will also allow each Director the opportunity to conveniently confirm his or her desire to continue as a member of the Board.
• Change of Responsibility of Director. The Board believes that an individual Director who retires from his or her employment, or whose position of employment or other personal status materially changes, should notify the Board through the Nominating and Governance Committee. Notification to the Board provides an opportunity for the Board to review the continued appropriateness of Board membership under the changed circumstances.
• Former Chief Executive Officer. When the Chief Executive Officer resigns or retires, he or she should tender his or her resignation from the Board to the Nominating and Governance Committee at that time. Whether the individual continues to serve on the Board is a matter for discussion at that time with the Board.
• Number of Other Directorships. Non-management Directors are encouraged to limit the number of other boards on which they serve, taking into account potential board attendance, participation and effectiveness on these boards. Non-management Directors should advise the Chairman of the Board and the Chairman of the Nominating and Governance Committee in advance of accepting an invitation to serve on another board.

Committee Matters

Number, Structure and Independence of Committees. The four committees of the Board are the Audit, Human Resources and Compensation, Executive and Nominating and Governance Committees. From time to time, the Board may form a new committee or disband a current committee, depending upon the circumstances. The Audit, Human Resources and Compensation and Nominating and Governance Committees are comprised of only independent Directors. Members of the Audit Committee must satisfy additional independence criteria, in accordance with requirements of the New York Stock Exchange and the Securities and Exchange Commission. Each of the Audit, Human Resources and Compensation and Nominating and Governance Committees has a written charter setting forth its duties, authority and responsibilities.

Assignment of Committee Members. The Nominating and Governance Committee is responsible for recommending to the Board the assignment of Board members to various committees and the selection of committee Chairs. Consideration should be given to periodically rotating Committee members. However, the Board does not have a firm policy mandating rotation of committee assignments since special knowledge or experience may warrant a particular Director serving for an extended period on one committee.

Frequency of Committee Meetings. With the exception of the Executive Committee, which is empowered to perform all duties of the full Board when the Board is not in session (other than to fill vacancies among the Directors or on any committee of the Board), each committee generally meets at least four times per year. Committees report regularly to the full Board with respect to their activities.

Committee Agenda. The Chair of each committee, in consultation with the Chief Executive Officer, Corporate Secretary and appropriate management liaisons, establishes the committee’s agenda for its meetings. Committee members are free to suggest the inclusion of items on the agenda.

Meetings of the Board

Agenda. The Chairman of the Board, in consultation with the Directors, the Corporate Secretary, and members of management, establishes the agenda for each Board meeting. Each Director is free to suggest the inclusion of items on the agenda.

Advance Distribution of Board Materials. Information and material that are important to the Board’s understanding of the business to be conducted at each Board meeting are distributed to the Board before the Board meets. Highly confidential or sensitive matters, and matters that arise immediately prior to Board meetings, may be presented and discussed without prior distribution of background material.

Executive Session of Non-Management Directors. The non-management Directors of the Board will meet without the Company’s management at least four times each year. The Chairman of the Nominating and Governance Committee of the Board or another Director selected by the non-management Directors will chair these meetings.

Director Attendance. Absent unusual circumstances, each Director is expected to attend all Board meetings and all meetings of the committee(s) of which the Director is a member.

Board Access to Senior Management. At all times, Directors have open access to the Company’s senior management. Members of the Company’s management are invited to attend and participate in Directors’ meetings from time to time to brief the Board and the committees on particular topics. The Board encourages senior management to bring into Board or committee meetings and other scheduled events managers who can provide additional insight into matters being considered and/or whom senior management believes have future growth potential with the Company and should be given exposure to the members of the Board.

Board Access to Independent Advisors. The Board and the Audit, Human Resources and Compensation and Nominating and Governance Committees, consistent with their respective charters, have the authority to retain such outside counsel, experts and other advisors as they determine appropriate to assist them in the full performance of their functions.

Assessment and Leadership Development

Evaluation and Compensation of the Chief Executive Officer. The Board, through the Human Resources and Compensation Committee, will conduct an annual evaluation of the performance of the Chief Executive Officer against criteria established by the Board. This evaluation will be shared with the Chief Executive Officer and will be used by the Human Resources and Compensation Committee in setting the Chief Executive Officer’s compensation.

Assessing Board and Committee Performance. The Nominating and Governance Committee will conduct an annual assessment of the Board’s performance, the results of which will be discussed with the full Board. The assessment should include a review of any areas in which the Board or management believes the Board can make a better contribution to the governance of the Company. Each of the Audit, Human Resources and Compensation and Nominating and Governance Committees will conduct an annual self-assessment.

Management Development and Succession Planning. The Board is responsible for planning for the succession to the position of Chief Executive Officer and other senior management positions. To assist the Board, the Chief Executive Officer annually will provide the Human Resources and Compensation Committee with an assessment of senior managers and their potential to succeed him or her. The Chief Executive Officer also will make available to the Board, on a continuing basis, recommendations as to who should assume the role of Chief Executive Officer in the event that the Chief Executive Officer becomes unwilling or unable to perform his or her duties. The Chief Executive Officer also will provide the Human Resources and Compensation Committee with an assessment of persons considered potential successors to certain senior management positions, including a review of any development plans recommended for such individuals. The results of these reviews will be reported to and discussed with the Board.
Other Matters

Review of Strategic Plans. The Board reviews and evaluates at least annually the long-term strategic and business plans of the Company.

Director Compensation. Senior management of the Company reports periodically to the Human Resources and Compensation Committee on the status of the Company’s Director compensation practices in relation to other companies of comparable size and the Company’s competitors. Changes in Director compensation, if any, are recommended by the Human Resources and Compensation Committee, and approved by the full Board. Non-management Directors receive quarterly fees for service on the Board. Directors who chair committees receive additional quarterly compensation for their service as committee Chairs. To more closely align the interest of the Directors with those of Cardinal Health’s shareholders, a portion of Directors’ fees is paid in the form of Company common shares or options to purchase Company common shares. No additional compensation is paid to members of management for serving on the Board.

Periodic Review

The Nominating and Governance Committee is responsible for periodically reviewing these guidelines, and making recommendations for appropriate changes to the Board.

Posted as of August 11, 2003