Board selection and composition

• Board Selection
• Board Membership Criteria
• Board Independence
• Board Leadership
• Presiding Director
• Board Leadership
• Size of the Board
• Board Orientation and Continuing Education
• Continuation of Service
• Voting for Directors

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, among other things, an individual’s business experience, qualifications, attributes and skills (including skills in core areas such as operations, management, technology, healthcare industry knowledge, accounting and finance, leadership, strategic planning and international markets), independence, judgment, integrity and ability to commit sufficient time and attention to the activities of the Board, as well as the absence of potential conflicts with the Company’s interests. The Nominating and Governance Committee considers these criteria in the context of an assessment of the operation and goals 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 Directors who meet the New York Stock Exchange definition of “independence,” as determined by the Board. Under standards that the Board has adopted to assist it in assessing independence, the Board defines an “independent Director” to be a Director who:

• is not and has not been during the last three years an employee of, and whose immediate family member is not and has not been during the last three years an executive officer of, the Company (provided however, that, in accordance with New York Stock Exchange listing standards, service as an interim executive officer, by itself, does not disqualify a director from being considered independent under this test following the conclusion of that service);
• has not received, and whose immediate family member has not received other than for service as an employee (who is not an executive officer), more than $120,000 in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), in any 12-month period during the last three years (provided however, that, in accordance with New York Stock Exchange listing standards, compensation received by a director for former service as an interim executive officer need not be considered in determining independence under this test);
• (a) is not a current partner or employee of a firm that is the Company’s internal or external auditor; (b) does not have an immediate family member who is a current partner of the Company’s internal or external auditor; and (c) is not and was not during the last three years, and whose immediate family member is not and was not during the last three years, a partner or employee of the Company’s internal or external auditor who personally worked on the Company’s audit within that time;
• is not and has not been during the last three years employed, and whose immediate family member is not and has not been during the last three 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 whose immediate family member is not, serving as a paid consultant or advisor to the Company or to any executive officer of the Company, or a party to a personal services contract with the Company or with any executive officer of the Company;
• is not a current employee of, and whose immediate family member is not a current executive officer of, a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues;
• is not, and whose spouse is not, an executive officer of a non-profit organization to which the Company or the Company foundation has made contributions during the past three years that, in any single fiscal year, exceeded the greater of $1 million or 2% of the non-profit organization’s consolidated gross revenues (Amounts that the Company contributes under matching gifts programs are not included in the contributions calculated for purposes of this standard); 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).

The Board assesses on a regular basis and at least annually the independence of Directors and, based on the recommendation of the Nominating and Governance Committee, makes a determination as to which members are independent. References to the “Company” above would include any subsidiary in a consolidated group with Cardinal Health. The terms “immediate family member” and “executive officer” above have the same meaning specified for such terms in the New York Stock Exchange listing standards.

In addition to the independence standards applicable to Directors generally, Audit Committee members may not accept, directly or indirectly, any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries, other than director fees and any regular benefits that other Directors receive for services on the Board or Board Committees. In addition, no Audit Committee member can be an affiliated person of the Company or any of its subsidiaries.

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

Presiding Director. An independent Director elected annually by the remaining independent Directors serves as the Presiding Director. The Presiding Director presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent Directors; has the authority to call additional executive sessions of the independent Directors as appropriate; serves as a liaison between the Chairman and the independent Directors; advises on the flow of information sent to the Board, and reviews the agenda, materials and schedule for Board meetings; is available, as deemed appropriate by the Board, for consultation and direct communication with major shareholders; and performs such additional functions as designated by the Board.

Board Leadership. The Board is responsible for the selection of the Chairman of the Board and the Chief Executive Officer. The Board believes that it is in the best interests of the Company for the Board to make a determination regarding whether or not to separate the roles of Chairman and Chief Executive Officer based upon the circumstances. The Board periodically reviews and assesses its leadership structure.

Size of the Board. Under the Company’s Restated Code of Regulations, as amended (the “Restated Code of Regulations”) the number of the Directors in no case shall be fewer than nine (9) or more than sixteen (16).

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. The orientation includes presentations by senior management to familiarize new Directors with the Company’s strategic plans, its significant financial, accounting and risk management issues, its compliance programs, its standards of business conduct and ethics, its principal officers, and its internal and independent auditors. 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.

Continuation of Service.

• Re-Nomination. The Nominating and Governance Committee assesses the contributions and independence of Directors on an annual basis 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.
• Retirement Age. A director will not be nominated for re-election after his or her 72nd birthday; provided, however, the Board may nominate candidates over the age of 72 under special circumstances.
• Change of Responsibility of Non-Management Director. When a non-management director’s principal occupation or business association changes substantially during his or her tenure as a Director, that Director shall tender his or her resignation for consideration by the Board. The Nominating and Governance Committee will consider the tendered resignation and recommend to the Board the action, if any, to be taken with respect to the resignation.
• 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. The Nominating and Governance Committee will consider the tendered resignation and recommend to the Board the action, if any, to be taken with respect to the resignation.
• Number of Other Directorships. Non-management Directors should not serve on more than four public company boards in addition to the Company’s Board. Non-management Directors should advise the Chairman of the Board, the Chairman of the Nominating and Governance Committee and the Secretary in advance of accepting an invitation to serve on another board.

Voting for Directors. Article Eleventh (“Article Eleventh”) of the Company’s Amended and Restated Articles of Incorporation, as amended, provides, among other things, that, at each meeting of shareholders for the election of Directors at which a quorum is present, a nominee for election as a Director in an uncontested election (as defined in Article Eleventh) shall be elected to the Board if the number of votes cast for such nominee’s election exceeds the number of votes cast against such nominee’s election. Any nominee for Director, who is not elected by shareholders in an uncontested election because he or she did not receive a greater number of votes for his or her election than against such election, and who remains on the Board as a Director in accordance with Section 2.5 of the Restated Code of Regulations, will promptly tender his or her resignation to the Chairman of the Board following certification of the shareholder vote. Within 90 days following the certification of the shareholder vote, the Nominating and Governance Committee will make a recommendation to the Board as to whether to accept the tendered resignation. Thereafter, the Board will promptly act on the tendered resignation and publicly disclose its decision regarding the tendered resignation and the rationale behind the decision. Any Director who tenders his or her resignation pursuant to this provision is expected to recuse himself or herself from voting on the recommendation of the Nominating and Governance Committee or the decision of the Board with respect to his or her resignation.