DEF 14A of Mckesson Corp
Filed Jun 21, 2024 · FY20240000927653-24-000065
VOTING METHODS
| 2024 Summary Compensation Table | | 69 | | 2024 Grants of Plan-Based Awards Table | | 72 | | 2024 Outstanding Equity Awards Table | | 73 | | 2024 Option Exercises and Stock Vested Table | | 74 | | 2024 Nonqualified Deferred Compensation Table | | 75 | | Severance and Change in Control Policies | | 77 | | Potential Payments upon Termination or Change in Control | | 78 | | CEO Pay Ratio | | 81 | | Pay Versus Performance | | 82 | | Item 4 | | | | | Approve Amendment to Certificate of Incorporation to Provide for Officer Exculpation | 87 | | Item 5 | | | | | Shareholder Proposal on Independent Board Chairman | 88 | | Item 6 | | | | | Shareholder Proposal on Report on Risks of State Policies Restricting Reproductive Health Care | 90 | | Principal Shareholders | | 92 | | Security Ownership of Certain Beneficial Owners | | 92 | | Security Ownership of Directors and Executive Officers | | 93 | | Annual Meeting Information | | 94 | | Appendix A — Supplemental Information | | A-1 |
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Director Independence 10 director nominees are independent
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| Female | lll | | Ethnic or Racial Diversity | llll | | Veteran | ll |
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| 0-4: | lllllll | | 5-10: | lll |
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| 2024 Proxy Statement | | 9 |
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| Skills and Experience Highlights that Advance Company Priorities |
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| The following table provides summary information about the 11 director nominees and their committee memberships immediately after the Annual Meeting if all director nominees are elected. | | | | | | | Name | | Age | Director Since | Committee Memberships | Other Public Company Boards | | | Richard H. Carmona, M.D. Chief of Health Innovations of Canyon Ranch, Inc. and 17th Surgeon General of the United States | 74 | 2021 | | 1 | | | Dominic J. Caruso Retired EVP and CFO, Johnson & Johnson | 66 | 2018 | | 1 | | | W. Roy Dunbar Retired CEO and Chairman, Network Solutions, LLC | 63 | 2022 | | 3 | | | Deborah Dunsire, M.D. Retired President and CEO, H. Lundbeck A/S | 62 | 2024 | | 2 | | | James H. Hinton Operating Partner, Welsh, Carson, Anderson & Stowe | 65 | 2022 | | 0 | | | Donald R. Knauss Retired Chairman and CEO, The Clorox Company | 73 | 2014 | | 2 | | | Bradley E. Lerman EVP and Chief Legal Officer, Starbucks Corporation | 68 | 2018 | | 0 | | | Maria N. Martinez Retired EVP and COO, Cisco Systems, Inc. | 66 | 2019 | | 1 | | | Kevin M. Ozan Retired EVP and CFO, McDonald's Corporation | 61 | 2024 | | 1 | | | Brian S. Tyler CEO, McKesson Corporation | 57 | 2019 | – | 1 | | | Kathleen Wilson-Thompson Retired EVP and Global CHRO, Walgreens Boots Alliance, Inc. | 66 | 2022 | | 2 |
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| | Committee Chair | | Audit | | Compensation and Talent | | | Compliance | | Finance | | Governance and Sustainability | | | Independent | | | | |
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We believe that our director nominees possess the right mix of skills, qualifications and experience that provide us with the optimal composition for the McKesson Board. A snapshot of our director nominees' skills include: Focus on People and Culture Drive Sustainable Core Growth Expand Oncology and Biopharma Platforms Evolve and Grow the Portfolio
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| Sustainability and Human Capital Management |
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| Distribution / Supply Chain Experience |
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| Healthcare Industry Experience |
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| Business Transformation / M&A |
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| 10 | | 2024 Proxy Statement |
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Governance Highlights Focused oversight responsibilities. Our Governance and Sustainability Committee is responsible for the oversight of corporate governance and sustainability matters, including an annual review of sustainability strategy. Our Compensation and Talent Committee is responsible for the oversight of senior management succession planning and topics related to our best talent strategy and talent development, employee engagement and culture matters. Our Compliance Committee, in coordination with the Audit Committee, reviews among other things the Company's approach to risk identification and mitigation plans for certain cybersecurity and technology-related risks. These focused committee-level responsibilities allow our Board to effectively address issues salient to our Company strategy and the broader market environment. Leading corporate governance practices. We highlight some of the key features of our corporate governance practices below. Please see “Corporate Governance” beginning on page 26 of this proxy statement for more information about McKesson’s corporate governance practices.
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| | | | | Shareholder Rights | Board of Directors | Corporate Governance | | •Annual election of directors with majority voting standard for uncontested elections •Proxy access •Meaningful right to call special meeting of shareholders (15% ownership threshold) •No supermajority vote provisions | •Independent Chair of the Board •10 of 11 director nominees are independent •Regular executive sessions of independent directors •Annual Board and committee evaluation process •Policy requiring directors with over 12 years of tenure to offer to resign •Policies on other public company board service and retirement age | •Pay for performance alignment •No poison pill •Comprehensive Board and senior management succession planning process •Robust shareholder engagement program •Enhanced risk oversight policies •Stock ownership guidelines for executives and directors |
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| 2024 Proxy Statement | | 11 |
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| Item | | Your Board’s Recommendation | | 2 | RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2025 Deloitte & Touche LLP (D&T) is an independent accounting firm with the breadth of expertise and knowledge necessary to audit the Company. Their institutional knowledge of our business and control framework results in effective and efficient audits. The Audit Committee has reviewed the independence, qualifications and performance of D&T and has determined that their retention is in the best interests of McKesson and its shareholders. | FOR (See Page 42) |
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| Item | | Your Board’s Recommendation | | 3 | ADVISORY VOTE ON EXECUTIVE COMPENSATION Our executive compensation program is the result of thorough Compensation and Talent Committee review, and it continues to emphasize pay for performance and reflects shareholder feedback. | FOR (See Page 44) |
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Executive Compensation Highlights As discussed in detail under “Compensation Discussion and Analysis,” we have developed an executive compensation program designed to strike the right balance of pay for performance, attract and retain an exceptionally talented executive team, steer McKesson’s leadership to meet ambitious goals without taking undue risk, and build long-term value for our shareholders.
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| Shareholders expressed support for our compensation structure and design, including the addition in FY 2023 of sustainability priority areas to our Management Incentive Plan (MIP) awards as a discretionary, downward modifier tied to McKesson’s strategic business objectives and our Company purpose of Advancing Health Outcomes for All®. We were pleased to receive positive feedback from shareholders regarding our program over the past year, which was reflected in the vote results from our 2023 Annual Meeting of Shareholders where approximately 89% of votes cast were in favor of our say-on-pay proposal. This level of support validated the enhancements that we have made to our executive compensation program over the years, and therefore the Compensation and Talent Committee did not implement changes to our program for FY 2024. | | | | Approximately 89% of votes cast were in favor of our say-on-pay proposal at our 2023 Annual Meeting |
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Our executive compensation program is predominantly performance-based, consisting of four primary compensation elements that each serve a unique purpose. The metrics below incentivize our executives to focus on operational objectives that are expected to drive shareholder value.
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| Pay Element | Performance Metric | Rationale | Target Pay | | Base Salary | — | Attracts and retains high-performing executives by providing market-competitive fixed pay | — | | Management Incentive Plan (annual cash incentive) | Adjusted EPS | Rewards operational performance and profitability; important driver of share price valuation and shareholder expectations | 100% — 185% of Base Salary | | | Adjusted Operating Profit | Rewards operational performance and profitability; important driver of share price valuation and shareholder expectations | | | | Free Cash Flow | Rewards generating cash to invest in growth and return capital to shareholders; important valuation metric | | | | Sustainability Priority Areas | Ensures sustainability priorities are aligned with business strategic objectives and Company purpose | Discretionary Downward-Only Modifier | | Performance Stock Units (long-term equity incentive) | 3-Year Cumulative Adjusted EPS | Measures long-term earnings power, drives returns for the Company and directly correlates to share price performance | 60% of Target LTI Value | | | 3-Year Average ROIC | Encourages leaders to make sound investments that generate returns for shareholders; important valuation metric | | | | MCK TSR vs. Comparator Group | Rewards share price performance relative to comparator group over time | | | Restricted Stock Units (long-term equity incentive) | — | Directly aligns with value delivered to shareholders | 40% of Target LTI Value |
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| 2024 Proxy Statement | | 13 |
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| Item | | Your Board’s Recommendation | | 4 | APPROVE AMENDMENT TO CERTIFICATE OF INCORPORATION TO PROVIDE FOR OFFICER EXCULPATION Officer exculpatory provisions are permissible under Delaware law and they allow companies to recruit and retain highly qualified individuals to serve as officers. | FOR (See Page 87) |
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| Item | | Your Board’s Recommendation | | 5 | SHAREHOLDER PROPOSAL ON INDEPENDENT BOARD CHAIRMAN Management is recommending a vote against this shareholder proposal. | AGAINST (See Page 88) |
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| Item | | Your Board’s Recommendation | | 6 | SHAREHOLDER PROPOSAL ON REPORT ON RISKS OF STATE POLICIES RESTRICTING REPRODUCTIVE HEALTH CARE Management is recommending a vote against this shareholder proposal. | AGAINST (See Page 90) |
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| 14 | | 2024 Proxy Statement |
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| | ITEM 1 | | | | Election of Directors | | | | There are 11 director nominees for election to the Board. The directors elected at the Annual Meeting will hold office until the 2025 Annual Meeting of Shareholders and until their successors have been elected and qualified, or until their earlier resignation, removal or death. Linda P. Mantia, who is no longer an independent director, and Susan R. Salka, who has served on the Board for almost ten years, will not be standing for re-election. Both of their terms will end effective at the Annual Meeting. The Governance and Sustainability Committee has recommended, and the Board has approved, the re-election of the eleven director nominees listed in Item 1 for the Annual Meeting. Each director nominee has informed the Board that he or she is willing to serve as a director. If any director nominee should decline or become unable or unavailable to serve as a director for any reason, your proxy authorizes the individuals named in the proxy to vote for a replacement nominee, or the Board may reduce its size. | | | | | Your Board recommends a vote FOR each director nominee. |
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Diverse Skills, Experiences and Qualifications The skills matrix below identifies our eleven director nominees’ prominent experiences and qualifications to effectively serve on our Board. Our director nominees bring unique backgrounds and ranges of expertise, knowledge and experience, which we believe provide an appropriate and diverse mix of qualifications necessary for our Board to effectively fulfill its oversight responsibilities. By its nature, the information contained in this summary is not intended to be exhaustive but aims to convey the general breadth of experience and qualifications that our director nominees bring to their work on the Board to oversee strategy, performance, culture and risk at McKesson.
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| | | | | | | | | | | | | | | | | | Business Transformation / M&A Business transformation and M&A experience helps provide oversight of McKesson’s strategic planning decisions, including significant transactions | | | | | | | | | | | | | | | Healthcare Industry Experience Relevant industry experience ensures knowledge of the unique challenges faced by our business, including our regulatory environment, customer base and competitive landscape | | | | | | | | | | | | | | | Distribution / Supply Chain Experience Supply chain and distribution experience ensures thorough understanding of a key business model and aids in oversight of our operations | | | | | | | | | | | | | | | Sustainability and Human Capital Management Experience with sustainability priorities is important to our Board as we strive to improve care in every setting and attract and retain top talent | | | | | | | | | | | | | | | Senior Executive Leadership Experience in a leadership role (CEO, CFO or other executive position) provides expertise in shaping strategy and overseeing the performance of our management team | | | | | | | | | | | | | | | Other Public Company Board Service Experience as a public company director provides knowledge of corporate governance and understanding of board accountability and oversight | | | | | | | | | | | | | | | Financial / Accounting Experience in the preparation and review of financial statements and internal controls over financial reporting provides background in advising and overseeing capital structure and accurate reporting | | | | | | | | | | | | | | | Risk Management and Compliance Compliance expertise or experience in the identification, assessment and mitigation of enterprise risks facing our company helps to assess and provide oversight of potential threats | | | | | | | | | | | | | | | Cybersecurity / Technology Experience with technology helps us accelerate our strategic growth initiatives and oversee cybersecurity and technology-related risks | | | | | | | | | | | | | | | Global / International Experience International experience is important for our Board as we maintain a global presence through our supply chain | | | | | | | | | | | | | | | Marketing / Public Relations / Communications These skills provide the ability to oversee our communications and work with management on effective disclosures | | | | | | | | | | | | | | | Female | | | | | | | | | | | | | | | Ethnic or Racial Diversity | | | | | | | | | | | | | | | Military Service or Veteran | | | | | | | | | | | |
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Director Nominees The following section provides a brief description of each of the eleven director nominees, including their age, principal occupation, position and business experience, including other public company directorships for at least the past five years. Each director nominee’s biographical information includes a description of the nominee’s experience, qualifications, attributes or skills that qualify the nominee to serve on the Company’s Board at this time.
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| | Richard H. Carmona, M.D. | | | | | Chief of Health Innovations, Canyon Ranch, Inc. and 17th Surgeon General of the United States | | | | | Age: 74 Director since: 2021 | Committees: Compensation and Talent Compliance | Director Qualification Highlights: Public Health and Healthcare Industry |
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| PROFESSIONAL EXPERIENCE AND BACKGROUND •Dr. Carmona has served as chief of health innovations of Canyon Ranch Inc., a life-enhancement company, since 2017. •He has also served in several other executive roles since joining Canyon Ranch in 2006, including vice chairman, chief executive officer of the Canyon Ranch health division and president of the nonprofit Canyon Ranch Institute. •Prior to Canyon Ranch, Dr. Carmona served as the 17th Surgeon General of the United States from 2002 through 2006, achieving the rank of Vice Admiral. Prior to serving as the Surgeon General, he was chairman of the State of Arizona Southern Regional Emergency Medical System and chief executive officer of the County Hospital and Healthcare System. •Dr. Carmona is a Laureate Professor of Public Health Policy and Administration at the University of Arizona. •Dr. Carmona also was a professor of surgery, public health, and family and community medicine at the University of Arizona, and surgeon and deputy sheriff of the Pima County, Arizona Sheriff’s Department. | •He served in the United States Army and the Army’s Special Forces and is a combat-decorated veteran. SKILLS AND QUALIFICATIONS Dr. Carmona brings to the Board valuable public company experience having served on public company boards and committees for the past 15 years. In addition, he brings hands-on experience in public health, clinical sciences and healthcare management. He is well-versed in the international and domestic legislative and policy aspects of the healthcare industry through his experience as the 17th U.S. Surgeon General and as the CEO of a hospital and health care system. OTHER PUBLIC COMPANY BOARDS Current: Herbalife Nutrition Ltd. Past Five Years: Axon Enterprises, Inc. (2007 - 2022); Better Therapeutics, Inc. (2017 - 2024); The Clorox Company (2007 - 2022) |
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| | Business Transformation / M&A | | Distribution / Supply Chain Experience | | Senior Executive Leadership | | Marketing / Public Relations / Communications | | Ethnic or Racial Diversity | | | Cybersecurity / Technology | | Financial / Accounting | | Healthcare Industry Experience | | Sustainability and Human Capital Management | | Military Service or Veteran | | | Other Public Company Board Service | | Risk Management and Compliance | | Global / International Experience | | Female | | |
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| | Dominic J. Caruso | | | | | Retired Executive Vice President and Chief Financial Officer, Johnson & Johnson | | | | | Age: 66 Director since: 2018 | Committees: Audit (Chair) Compliance | Director Qualification Highlights: Financial Expertise Risk Management and Controls |
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| PROFESSIONAL EXPERIENCE AND BACKGROUND •Mr. Caruso retired as executive vice president and chief financial officer of Johnson & Johnson, a manufacturer of medical devices and pharmaceutical products, in August 2018, having served in the role since 2007. •He led the company’s financial and investor relations activities, as well as the procurement organization. •Mr. Caruso joined Johnson & Johnson in October 1999 as chief financial officer for Centocor, Inc., upon the completion of the merger of Centocor and Johnson & Johnson. •Prior to joining Centocor, he had varied industry experiences with KPMG. •Mr. Caruso was actively involved in government relations activities globally, including having served as co-chair of the U.S. Chamber of Commerce Global Initiative on Health and the Economy. | •He currently serves on the Board of Trustees of the Cystic Fibrosis Foundation. SKILLS AND QUALIFICATIONS Mr. Caruso brings to the Board financial expertise and leadership, as well as a deep familiarity with investors’ perspectives, having previously served as an executive officer of a publicly traded healthcare company. With a focus on healthcare compliance throughout his career at Johnson & Johnson, Centocor, Inc. and KPMG, Mr. Caruso also brings experience in financial and compliance risk oversight. OTHER PUBLIC COMPANY BOARDS Current: Kyndryl Holdings, Inc. Past Five Years: None |
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| | W. Roy Dunbar | | | | | Retired Chief Executive Officer and Chairman, Network Solutions, LLC | | | | | Age: 63 Director since: 2022 | Committees: Audit Governance and Sustainability | Director Qualification Highlights: Technology Sustainability and Human Capital Management |
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| PROFESSIONAL EXPERIENCE AND BACKGROUND •Mr. Dunbar most recently served as chief executive officer and chairman at Network Solutions, LLC, an IT service management company, from 2008 to 2010. •From 2004 to 2008, he served as president of global technology and operations for MasterCard where he was responsible for its global payments platform and operations. •Prior to that, he spent over a decade at Eli Lilly and Company where he served as president for the intercontinental region, vice president of information technology and chief information officer. •Mr. Dunbar graduated from Manchester University in the United Kingdom with a pharmacy degree and a master’s degree in business administration from Manchester Business School. | SKILLS AND QUALIFICATIONS Mr. Dunbar brings to the Board experience in technology, operations and healthcare, as well as data governance and cybersecurity. He also brings additional experience in sustainability matters to help guide the Company’s increasing focus on global impact initiatives. Mr. Dunbar has served in various executive capacities where he was accountable for international operations. OTHER PUBLIC COMPANY BOARDS Current: Duke Energy Corp., Johnson Controls International plc, SiteOne Landscape Supply, Inc. Past Five Years: Humana Inc. (2005 - 2020) |
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| | Business Transformation / M&A | | Distribution / Supply Chain Experience | | Senior Executive Leadership | | Marketing / Public Relations / Communications | | Ethnic or Racial Diversity | | | Cybersecurity / Technology | | Financial / Accounting | | Healthcare Industry Experience | | Sustainability and Human Capital Management | | Military Service or Veteran | | | Other Public Company Board Service | | Risk Management and Compliance | | Global / International Experience | | Female | | |
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| | Deborah Dunsire, M.D. | | | | | Retired President and Chief Executive Officer, H. Lundbeck A/S | | | | | Age: 62 Director since: 2024 | Committees: Compensation and Talent Finance | Director Qualification Highlights: Healthcare Industry Business Transformation |
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| PROFESSIONAL EXPERIENCE AND BACKGROUND •Dr. Dunsire served as President and CEO of H. Lundbeck A/S, a biopharmaceutical company specializing in developing and delivering transformative therapies for brain diseases, from 2018 to 2023. •From 2017 to 2018, she served as President and CEO of XTuit Pharmaceuticals, a biopharmaceutical company focused on cancer treatments. •Prior to her employment with XTuit Pharmaceuticals, Dr. Dunsire held various executive leadership roles at FORUM Pharmaceuticals, Millennium: The Takeda Oncology Company and Millennium Pharmaceuticals. •Dr. Dunsire started her career as a primary care physician in Johannesburg, South Africa and received her medical degree from the University of Witwatersrand in Johannesburg, South Africa. | SKILLS AND QUALIFICATIONS Dr. Dunsire brings to the Board deep healthcare and clinical experience, including leadership of large, complex biopharmaceutical companies, as well as experience in healthcare operations and clinical research. She also brings a unique perspective with her clinical background and expertise within the pharmaceutical and oncology arenas, which align with McKesson's strategic growth priorities. OTHER PUBLIC COMPANY BOARDS Current: Syros Pharmaceuticals, Inc., Ultragenyx Pharmaceutical Inc. Past Five Years: Alexion Pharmaceuticals Inc. (2018 – 2021) |
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| | James H. Hinton | | | | | Operating Partner, Welsh, Carson, Anderson & Stowe | | | | | Age: 65 Director since: 2022 | Committees: Compensation and Talent Finance | Director Qualification Highlights: Healthcare Industry Compliance |
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| PROFESSIONAL EXPERIENCE AND BACKGROUND •Mr. Hinton currently serves as an operating partner for the private equity firm Welsh, Carson, Anderson & Stowe. •From 2017 to 2021, he served as the CEO of Baylor Scott & White Health, the largest not-for-profit health system in Texas and one of the largest in the U.S. •Mr. Hinton joined Presbyterian Healthcare Services, New Mexico’s largest not-for-profit healthcare provider, in 1983 and he served as their CEO from 1995 to 2016. •During that time, he was a member of the American Hospital Association Board of Trustees and served as its Chair in 2014. •Mr. Hinton holds a master’s degree in healthcare administration from Arizona State University and a bachelor’s degree in economics from the University of New Mexico. | SKILLS AND QUALIFICATIONS Mr. Hinton brings to the Board broad-based healthcare experience, including in all aspects of leading a complex healthcare services organization, as well as experience in healthcare operations and compliance. He also brings experience in the development of integrated systems, adding value to the customer experience and affordability. OTHER PUBLIC COMPANY BOARDS Current: None Past Five Years: None |
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| | Business Transformation / M&A | | Distribution / Supply Chain Experience | | Senior Executive Leadership | | Marketing / Public Relations / Communications | | Ethnic or Racial Diversity | | | Cybersecurity / Technology | | Financial / Accounting | | Healthcare Industry Experience | | Sustainability and Human Capital Management | | Military Service or Veteran | | | Other Public Company Board Service | | Risk Management and Compliance | | Global / International Experience | | Female | | |
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| | Donald R. Knauss | | | | | Retired Chairman and Chief Executive Officer, The Clorox Company | | | | | Age: 73 Director since: 2014 | Committees: Compensation and Talent (Chair) Finance Governance and Sustainability | Director Qualification Highlights: Human Capital Management Distribution / Supply Chain Experience |
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| PROFESSIONAL EXPERIENCE AND BACKGROUND •Mr. Knauss retired from The Clorox Company, a multinational manufacturer and marketer of consumer and professional products, in 2015, having served as executive chairman of the board from November 2014 until July 2015 and chairman and chief executive officer from October 2006 until November 2014. •He was executive vice president of The Coca-Cola Company and president and chief operating officer for Coca-Cola North America from February 2004 until September 2006. •Prior to his employment with The Coca-Cola Company, he held various positions in marketing and sales with PepsiCo, Inc. and Procter & Gamble, and he also served as an officer in the United States Marine Corps. •Mr. Knauss also serves on the board of trustees for the University of San Diego. | SKILLS AND QUALIFICATIONS Mr. Knauss brings to the Board substantial board leadership skills through his chairmanship role at The Clorox Company. He also brings substantial executive experience through which he has developed valuable operational insights and strategic and long-term planning capabilities, as well as extensive international business management and retail experience, which includes experience in the retail pharmacy area. Mr. Knauss also has significant public company board experience. OTHER PUBLIC COMPANY BOARDS Current: Kellanova (formerly Kellogg Company), Target Corporation Past Five Years: None |
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| | Bradley E. Lerman | | | | | Executive Vice President and Chief Legal Officer, Starbucks Corporation | | | | | Age: 68 Director since: 2018 | Committees: Audit Compliance (Chair) | Director Qualification Highlights: Risk Management and Compliance Sustainability and Human Capital Management |
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| PROFESSIONAL EXPERIENCE AND BACKGROUND •Mr. Lerman currently serves as the executive vice president and chief legal officer of Starbucks Corporation, a company with a multinational chain of coffeehouses and roastery reserves. •Previously, Mr. Lerman served as the senior vice president, general counsel and corporate secretary of Medtronic plc, an American medical device company, from 2014 to January 2022. •At Medtronic, he led the company’s global legal, government affairs and ethics and compliance functions. Prior to Medtronic, Mr. Lerman served as executive vice president, general counsel and corporate secretary for the Federal National Mortgage Association (Fannie Mae). •Previous to Fannie Mae, he served as senior vice president, associate general counsel and chief litigation counsel for Pfizer. •Mr. Lerman also served as a litigation partner at Winston & Strawn LLP in Chicago and as an assistant U.S. attorney in the Northern District of Illinois. | •He received a law degree from Harvard Law School and his bachelor’s degree in economics from Yale University. SKILLS AND QUALIFICATIONS Mr. Lerman brings to the Board significant legal and regulatory experience gained from years of large law firm practice and government positions with law enforcement responsibilities. He also brings a multilayered understanding of the healthcare industry and experience linking compliance and legal consideration with corporate strategy and sustainability initiatives. OTHER PUBLIC COMPANY BOARDS Current: None Past Five Years: None |
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| | Business Transformation / M&A | | Distribution / Supply Chain Experience | | Senior Executive Leadership | | Marketing / Public Relations / Communications | | Ethnic or Racial Diversity | | | Cybersecurity / Technology | | Financial / Accounting | | Healthcare Industry Experience | | Sustainability and Human Capital Management | | Military Service or Veteran | | | Other Public Company Board Service | | Risk Management and Compliance | | Global / International Experience | | Female | | |
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| | Maria N. Martinez | | | | | Retired Executive Vice President and Chief Operating Officer, Cisco Systems, Inc. | | | | | Age: 66 Director since: 2019 | Committees: Compliance Governance and Sustainability (Chair) | Director Qualification Highlights: Technology International Experience |
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| PROFESSIONAL EXPERIENCE AND BACKGROUND •Ms. Martinez served as executive vice president and chief operating officer from March 2021 to May 2024 and was executive vice president and chief customer experience officer from April 2018 until March 2021 at Cisco Systems, Inc., a multinational digital communications technology company. •Prior to joining Cisco, Ms. Martinez served in a variety of senior executive roles at Salesforce, Inc., including president, Global Customer Success and Latin America from March 2016 to April 2018; president, Sales and Customer Success from February 2013 to March 2016; executive vice president and chief growth officer from February 2012 to February 2013; and executive vice president, Customers for Life from February 2010 to February 2012. •Prior to joining Salesforce, she managed the global services business for Microsoft Corporation, including professional services and customer support for all products. •Ms. Martinez also has held a number of other leadership positions at Motorola, Inc. and AT&T Inc., and served as chief executive officer of Embrace Networks, Inc. | •Ms. Martinez has received several distinctions for her leadership, including the No. 2 ranking on the ALPFA (Association for Latino Professionals for America) list of the 50 Most Powerful Latinas. •Ms. Martinez holds a bachelor’s degree in electrical engineering from the University of Puerto Rico and a master’s degree in computer engineering from Ohio State University. SKILLS AND QUALIFICATIONS Ms. Martinez brings to our Board leadership experience at leading technology companies, which enhances the Board’s depth of experience in business and digital transformation. She also brings a global leadership perspective, as well as a focus on customer success and customer experience. OTHER PUBLIC COMPANY BOARDS Current: Tyson Foods, Inc. Past Five Years: Cue Health Inc. (2021 - 2024) |
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| | Kevin M. Ozan | | | | | Retired Executive Vice President and Chief Financial Officer, McDonald's Corporation | | | | | Age: 61 Director since: 2024 | Committees: Audit Finance (Chair) | Director Qualification Highlights: Financial Expertise International Experience |
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| PROFESSIONAL EXPERIENCE AND BACKGROUND •Mr. Ozan most recently served as senior executive vice president, strategic initiatives from September 2022 to June 2023 and executive vice president and chief financial officer from March 2015 to August 2022 of McDonald’s Corporation, a leading global food service retailer. •Mr. Ozan held various roles of increasing responsibility across the financial and investor relations teams at McDonald’s from 1997 to 2015. •Prior to joining McDonald’s, he worked for over a decade in Ernst & Young’s audit and mergers and acquisitions practices. •Mr. Ozan currently serves on the board of directors of Cineworld, a private company with one of the largest cinema businesses in the world. | •Mr. Ozan has a bachelor’s degree in accounting from the University of Michigan and a master’s degree in business from the Kellogg School of Management at Northwestern University. SKILLS AND QUALIFICATIONS Mr. Ozan brings to the Board considerable experience in the areas of finance, mergers and acquisitions, risk management and international operations having served as a former senior financial executive at a global company. OTHER PUBLIC COMPANY BOARDS Current: The Hershey Company Past Five Years: None |
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| | Business Transformation / M&A | | Distribution / Supply Chain Experience | | Senior Executive Leadership | | Marketing / Public Relations / Communications | | Ethnic or Racial Diversity | | | Cybersecurity / Technology | | Financial / Accounting | | Healthcare Industry Experience | | Sustainability and Human Capital Management | | Military Service or Veteran | | | Other Public Company Board Service | | Risk Management and Compliance | | Global / International Experience | | Female | | |
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| | Brian S. Tyler | | | | | Chief Executive Officer, McKesson Corporation | | | | | Age: 57 Director since: 2019 | Committees: None | Director Qualification Highlights: Business Transformation Health Care Experience |
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| PROFESSIONAL EXPERIENCE AND BACKGROUND •Mr. Tyler has served as chief executive officer of McKesson Corporation since April 2019 and previously served as the Company’s president and chief operating officer from August 2018 to March 2019. •Mr. Tyler served as chairman of the Management Board of McKesson Europe AG from 2017 to 2018, president and chief operating officer of McKesson Europe from 2016 to 2017, president of McKesson's North American Pharmaceutical Distribution and Services from 2015 to 2016, and McKesson's executive vice president, corporate strategy and business development from 2012 to 2015. •Mr. Tyler previously served in various other leadership roles at McKesson, including as president of U.S. Pharmaceutical, president of McKesson Medical-Surgical, and president of McKesson Specialty Health. •Mr. Tyler is a member of the board of directors of the International Federation of Pharmaceutical Wholesalers (IFPW) and a member of the IFPW Foundation board of directors. | •He is a member of the American Cancer Society’s CEOs Against Cancer group in the North Texas chapter. •Mr. Tyler earned his Ph.D. from the University of Chicago, Department of Economics specializing in industrial organization, labor economics and public finance / project evaluation. SKILLS AND QUALIFICATIONS Mr. Tyler brings over 25 years of business and healthcare experience to the Board. As McKesson’s CEO and a long-time leader of McKesson’s businesses, Mr. Tyler has extensive knowledge of the Company’s culture and workforce, and its challenges and opportunities. OTHER PUBLIC COMPANY BOARDS Current: Republic Services, Inc. Past Five Years: None |
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| | Kathleen Wilson-Thompson | | | | | Retired EVP and Global Chief Human Resources Officer, Walgreens Boots Alliance, Inc. | | | | | Age: 66 Director since: 2022 | Committees: Compensation and Talent Governance and Sustainability | Director Qualification Highlights: Healthcare Industry Sustainability and Human Capital Management |
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| PROFESSIONAL EXPERIENCE AND BACKGROUND •Ms. Wilson-Thompson most recently served as executive vice president and global chief human resources officer of Walgreens Boots Alliance, Inc., a healthcare and retail pharmacy company, from December 2014 to January 2021, after serving as senior vice president and chief human resources officer from January 2010 to December 2014. •Previously, she served as senior vice president, global human resources and chief labor and employment counsel at Kellanova (formerly Kellogg Company). •Ms. Wilson-Thompson earned an A.B. degree from the University of Michigan, and J.D. and LL.M. (Corporate and Finance Law) degrees from Wayne State University. •Ms. Wilson-Thompson is also the immediate past chair of the board of directors of the University of Michigan Alumni Association. | SKILLS AND QUALIFICATIONS Ms. Wilson-Thompson brings to the Board more than a decade of senior executive level experience leading human resources and human capital management strategy at global healthcare companies. She also brings experience through her extensive public company board service in the manufacturing and retail industries. OTHER PUBLIC COMPANY BOARDS Current: Tesla, Inc., Wolverine Worldwide, Inc. Past Five Years: None |
Director Independence
| | Business Transformation / M&A | | Distribution / Supply Chain Experience | | Senior Executive Leadership | | Marketing / Public Relations / Communications | | Ethnic or Racial Diversity | | | Cybersecurity / Technology | | Financial / Accounting | | Healthcare Industry Experience | | Sustainability and Human Capital Management | | Military Service or Veteran | | | Other Public Company Board Service | | Risk Management and Compliance | | Global / International Experience | | Female | | |
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Director Qualifications, Nomination and Diversity To fulfill its responsibility to recruit and recommend to the Board nominees for election as directors, the Governance and Sustainability Committee considers all qualified candidates who may be identified by any of the following sources: current or former Board members, a professional search firm, Company employees, shareholders or other parties. Dr. Dunsire and Mr. Ozan were elected to the Board, effective June 3, 2024 and January 8, 2024, respectively. Both directors were recommended by a third-party search firm. Shareholders may make a recommendation for a director candidate by submitting the candidate’s name, resume and biographical information and qualifications to the attention of the Corporate Secretary’s Office by email at corpsecretary@mckesson.com. Qualifying recommendations received by the Corporate Secretary will be presented to the Governance and Sustainability Committee for its consideration. The Governance and Sustainability Committee will consider director candidates who meet the criteria described below, and it will recommend to the Board nominees who best suit the Board’s needs. In order for a shareholder to make a nomination of a director candidate for election at an upcoming meeting of shareholders, such shareholder’s nomination must comply with the requirements set forth in the Company’s By-Laws. In evaluating candidates for the Board, the Governance and Sustainability Committee reviews each candidate’s independence, skills, experience and expertise against the criteria adopted by the Board. Members of the Board should have the highest professional and personal ethics, integrity and values, and represent diverse perspectives and experiences consistent with the Company’s requirements. They should have broad experience at the policy-making level in business, technology, healthcare or public interest, or have achieved prominence in a relevant field. The Governance and Sustainability Committee will consider whether the candidate’s background and experience demonstrate the ability to make the kind of important and sensitive judgments that the Board is called upon to make, and whether the nominee’s skills are complementary to the existing Board members’ skills. In addition, Board members must be willing to consider different perspectives and able to devote sufficient time and energy to the performance of their duties as a director. Other Board Memberships As part of its Corporate Governance Guidelines, the Board has adopted a policy on the number of other public company boards on which its directors may serve. This policy guides the Board's annual review of outside director commitments to ensure that each McKesson director is able to devote the time required to fulfill the increasingly complex role of a public company director. The Company appreciates the experience directors bring from their service on other boards, and the policy provides that directors should not serve on more than four other public company boards in addition to McKesson’s Board. The policy also requires that directors use their best efforts to provide notice to the Chair, along with the Corporate Secretary, prior to accepting a board seat, advisory role or assignment to a committee on another company board, whether public, private or not for profit. Directors also must offer to tender their resignations when they change employment or their major responsibilities. The Governance and Sustainability Committee has reviewed the board commitments of all director nominees and determined that their involvement with other public company boards are in compliance with our Corporate Governance Guidelines.
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Diversity Considerations The Board does not maintain a formal policy regarding Board diversity. However, the Governance and Sustainability Committee does consider diversity of backgrounds, cultures, education, experience, skills, thought, perspectives, personal qualities and other attributes, as well as race, ethnicity, gender, national origin, veteran status and other categories when it considers director nominees. Our Governance and Sustainability Committee and the Board believe that a diverse representation on the Board fosters a robust, comprehensive and balanced deliberation and decision-making process that is essential to the continued effective functioning of the Board and continued success of the Company. Tenure and Retirement Policies
Director Independence
| Under our Corporate Governance Guidelines, non-employee directors with more than 12 years of service on the McKesson Board must offer to resign from the Board. In addition, non-employee directors who reach the age of 75 by the next annual meeting of shareholders generally are not re-nominated to the Board. | | OUR TENURE AND RETIREMENT POLICIES | | | | | | | | | | | 12-Year Term Limit | | 75 Retirement Age | |
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Evaluating Board Composition, Performance and Effectiveness Board evaluations play a critical role in assessing the effective functioning of our Board. The directors or a third-party evaluator conducts an annual evaluation to consider where the Board functions most effectively, and more importantly, to identify areas in which they believe the Board can make a better contribution to the Company. The core elements of our Board’s evaluation process include the following:
Director Independence
| Establish Annual Workplan | | Conduct Annual Review | | Director Self-Assessments | | | | | | | | Report to Board | | Independent Chair Conversations | | Enhancements |
Director Independence
| 1 | Establish Annual Workplan | | •Our Governance and Sustainability Committee leads the evaluation of the Board and the performance of the Independent Chair of the Board. Each committee is responsible for evaluating its own performance and determining their workplan for the following year. The Governance and Sustainability Committee also establishes a workplan for the Independent Chair and Board, and it reviews periodically the Board’s evaluation process and makes enhancements based on the Company’s evolving business strategies and risks. | | | | | | | 2 | Conduct Annual Review | | •Each committee annually evaluates its performance against pre-established workplan items. | | | | | | | 3 | Director Self-Assessments | | •A director self-assessment is disseminated and used as a discussion guide for directors to use in reflecting upon their own performance as a director and overall Board dynamic. | | | | | | | 4 | Enhancements | | •For FY 2023, an independent third-party facilitator conducted the Board evaluation and provided feedback on Board effectiveness and strengthening Board oversight. | | | | | | | 5 | Independent Chair Conversations | | •Our Independent Chair also speaks to directors individually. The Governance and Sustainability Committee uses the results of individual director conversations as part of the nomination process for the next annual meeting. | | | | | | | 6 | Report to Board | | •As a result of its evaluation process, the Board has enhanced its processes in the following areas over the past year: •Board Refreshment •Oversight of Strategy and Risk •Oversight of Cybersecurity and Technology |
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Corporate Governance We are committed to continually assessing our governance policies and structures to incorporate best practices. We highlight some of our corporate governance practices below.
Director Independence
| Key Governance Attributes | | | Independent Chair We have maintained an independent chair structure since 2019. Donald R. Knauss has served as the Independent Chair since April 2022. | Other Governance Best Practices •Regular executive sessions of the independent directors •Proxy access right •No supermajority voting requirements •Majority voting standard for uncontested director elections •Annual director elections •No poison pill | | CEO and Senior Management Succession Planning Recognizing that succession planning is a key component of the Company’s continued success, the Board is committed to CEO and senior management succession planning. | | | Reduced Ownership Threshold to Call a Special Meeting to 15% In 2019, the Company reduced the ownership threshold required to call a special meeting of shareholders from 25% to 15%. | | | | The following governance materials appear on our website at www.mckesson.com/investors/corporate-governance: •Certificate of Incorporation •By-Laws •Corporate Governance Guidelines •Committee Charters •Director Independence Standards •Code of Conduct | | Committed to Board Refreshment Seven of our 11 director nominees have served on our Board for less than five years. We also have a policy that requires non-employee directors with a tenure of more than 12 years to offer to resign from the Board. | | | Significant Strategy and Risk Oversight The Board and its committees devote significant time and effort to understanding and reviewing strategy and enterprise risks. This includes oversight of our Company’s strategy and review of risks related to financial reporting, compensation practices, cybersecurity, technology, sustainability and distribution of controlled substances, among other risks. The Board has maintained a standing Compliance Committee since 2019. The purpose of the Compliance Committee is to assist the Audit Committee and the Board in oversight of management’s identification and evaluation of our primary legal and regulatory compliance risks, compliance program to address such risks and certain cybersecurity and technology-related risks. | | | Code of Conduct McKesson’s Code of Conduct describes fundamental principles, policies and procedures that shape our work and help our employees, officers and directors make ethical decisions. Our Code of Conduct is available in multiple languages. Please visit www.mckesson.com/Investors/Corporate-Governance/Code-of-Conduct/ for more information. | |
Director Independence
Director compensation at McKesson includes a combination of cash and equity-based compensation. The Governance and Sustainability Committee periodically reviews the level and form of compensation paid to our non-employee directors and, if it deems appropriate, recommends changes to the Board. In reviewing our non-employee director compensation program, the committee is guided by these principles: •Our non-employee directors should be compensated at competitive levels for the work required in a company of our size and scope, differentiating among directors where appropriate to reflect different levels of responsibilities; •A significant portion of compensation should be in the form of stock, to align the directors’ interests with our shareholders; and •The structure of the program should be simple and transparent. Each non-employee director of the Company is paid an annual cash retainer and an annual restricted stock unit (RSU) award. Our Independent Chair is provided additional compensation that the Board believes is commensurate with that role. Our non-employee director compensation is structured as follows:
Annual Director Retainer
| n | $200,000 Annual RSU | n | $115,000 Annual Cash Retainer |
Annual Director Retainer
| Supplemental Fees for Independent Chair and Committee Chairs •Independent Chair annual premium of $240,000 (50% cash, 50% RSUs) •Annual cash retainer of $20,000 for chairing a standing committee (excluding Audit Committee) •Annual cash retainer of $25,000 for chairing the Audit Committee |
Annual Director Retainer
Equity Compensation Non-employee directors receive an annual grant of RSUs with an approximate grant date fair value of $200,000. The actual number of RSUs granted is determined by dividing $200,000 by the closing price of the Company’s common stock on the grant date (with any fractional unit rounded up to the nearest whole unit); provided, however, that the number of units granted in any annual grant will in no event exceed 5,000, in accordance with the terms of our 2022 Stock Plan. As noted above, the Board Chair receives an additional annual grant of RSUs with an approximate grant date fair value of $120,000. The RSUs granted to non-employee directors are vested upon grant. If a director meets the director stock ownership guidelines (currently $690,000, six times the annual cash retainer), then the director will, on the grant date, receive the shares underlying the RSUs, unless the director elects to defer receipt of the shares. The determination of whether a director meets the director stock ownership guidelines is made as of the last day of the deferral election period preceding the applicable RSU award. If a non-employee director has not met the stock ownership guidelines as of the last day of such deferral election period, then issuance of the shares underlying the RSUs will automatically be deferred until the director’s separation from service. Recipients of RSUs are entitled to dividend equivalents at the same dividend rate applicable to the Company’s common shareholders, which is determined by our Board and currently is $0.62 per share each quarter. Dividend equivalents are not distributed until the shares underlying the RSUs are issued to the director. Dividend equivalents on RSUs granted prior to April 28, 2020 are credited to an account that accrues interest at the default interest rate set forth in DCAP III, which is 120% of the long-term applicable federal rate published by the IRS for December of the immediately preceding calendar year. Interest accrual on dividend equivalents was eliminated for RSU awards granted after April 28, 2020. Director Stock Ownership Requirement Under our Corporate Governance Guidelines, our non-employee directors are expected to own shares or share equivalents of McKesson common stock equal to six times the annual Board retainer, within six years of joining the Board.
Annual Director Retainer
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Total ($) | | Richard H. Carmona, M.D. | 115,000 | 200,083 | 315,083 | | Dominic J. Caruso | 140,000 | 200,083 | 340,083 | | W. Roy Dunbar | 115,000 | 200,083 | 315,083 | | James H. Hinton | 115,000 | 200,083 | 315,083 | | Donald R. Knauss | 235,000 | 320,215 | 555,215 | | Bradley E. Lerman | 135,000 | 200,083 | 335,083 | | Linda P. Mantia | 135,000 | 200,083 | 335,083 | | Maria N. Martinez | 135,000 | 200,083 | 335,083 | | Kevin M. Ozan | 26,538 | 112,804 | 139,342 | | Susan R. Salka | 135,000 | 200,083 | 335,083 | | Kathleen Wilson-Thompson | 115,000 | 200,083 | 315,083 |
Annual Director Retainer
(1)Consists of the director annual cash retainer, committee chair fee and Independent Chair fee, whether paid or deferred. (2)Represents the aggregate grant date fair value of RSUs, computed in accordance with Accounting Standards Codification issued by the Financial Accounting Standards Board, Topic 718, labeled “Compensation — Stock Compensation” (ASC Topic 718) disregarding any estimates of forfeitures related to service-based vesting conditions. Such values do not reflect whether the recipient has actually realized a financial benefit from the award. For information on the assumptions used to calculate the value of the awards, refer to Financial Note 4 of the Company’s consolidated financial statements in its Annual Report on Form 10-K for the fiscal year ended March 31, 2024, as filed with the SEC on May 8, 2024. In connection with his initial election to the Board in FY 2024, Mr. Ozan was granted a prorated portion of the automatic annual grant of RSUs made to non-employee directors in July 2023.
The Compensation and Talent Committee
Executive Transitions during FY 2024 Ms. Schechter. On October 27, 2023, Ms. Schechter, the Company’s Executive Vice President, Chief Legal Officer and General Counsel, gave notice of her intention to retire. On November 1, 2023, we announced that Ms. Lau, former Chief Legal Officer for GoDaddy, was expected to become the Company’s Executive Vice President and Chief Legal Officer, which became effective on January 1, 2024. Ms. Schechter remained with the Company as Board and Enterprise Risk Advisor, assisting with transition activities, until her retirement on June 3, 2024. Because Ms. Schechter voluntarily retired, she was not entitled to severance benefits. Upon her departure on June 3, 2024, Ms. Schechter satisfied the standard age and service requirements (attainment of age 60 with 10 years of service) to qualify for retirement treatment under the Stock Plans, which is described in more detail under "Benefits and Payments upon Voluntary Termination” on page 79 of this proxy statement. Ms. Lau. In connection with Ms. Lau’s appointment as Chief Legal Officer, the Company entered into an offer letter with Ms. Lau, which provided for: •Annual base salary of $700,000, to be effective January 1, 2024; •A target MIP award equal to 100% of her annual base salary pro-rated from her start date to the end of our fiscal year; and •Target long-term incentive awards of $2,850,000, comprised of 60% PSUs and 40% RSUs. We determined Ms. Lau's compensation based on competitive market data derived from our Compensation Peer Group, as well as her experience. In addition, the offer letter provided that Ms. Lau receive a one-time sign-on cash award of $1,500,000 within 30 days of her hire date and a sign-on RSU award of $4,000,000 vesting on the first and second anniversaries of the grant date, the sole purpose of these awards being to address compensation forfeited at her prior employer. Ms. Avila. On September 29, 2023, we announced that Ms. Avila would cease to be Executive Vice President, Chief Information Officer and Chief Technology Officer as of October 2, 2023. Ms. Avila remained with the Company through January 1, 2024, to assist with transition activities. In connection with her involuntary termination without cause on January 1, 2024, Ms. Avila did not receive any additional compensation, benefits or vesting of long-term awards beyond what she was otherwise entitled to under the standard terms of the Company’s Executive Severance Policy, Management Incentive Plan and the Stock Plans. Ms. Avila received 16 months’ salary continuation having an aggregate value of $897,600, a prorated FY 2024 award (based on actual performance) under the Management Incentive Plan, accelerated vesting of RSUs that would have vested within six months following her termination date and continued participation in PSU awards that would have vested within six months of her termination date under the Stock Plans. Integration of Regulatory, Compliance and Legal Considerations In 2018, the Compensation and Talent Committee codified its long-standing practice of considering regulatory, compliance and legal issues when making compensation decisions. The Compensation and Talent Committee carefully considered the work that was done to address regulatory, compliance and legal aspects of McKesson’s business during FY 2024. The committee has integrated those considerations into its compensation decisions. The Board’s Compliance Committee, in coordination with the Audit Committee, is actively engaged in overseeing management’s identification and evaluation of principal legal and compliance risks and, as part of its oversight role, reviews the Company’s efforts to foster a culture of compliance, ethics and regulatory excellence. Prior to making its decisions regarding FY 2024 incentive payouts, the Compensation and Talent Committee reviewed the Compliance Committee’s report regarding senior management’s compliance efforts during FY 2024, including the performance of our NEOs. This review was a factor in the Compensation and Talent Committee’s evaluation of executive officer performance with respect to the FY 2024 sustainability priority areas, as discussed on page 55 of this proxy statement.
The Compensation and Talent Committee
FY 2024 Pay Elements and Performance Metrics McKesson’s executive compensation program consists of three direct pay elements — base salary, annual cash incentive and long-term incentives — each of which serves a unique purpose. The metrics below incentivize our executives to focus on operational objectives that are expected to drive shareholder value. All incentives are performance-based, and all long-term incentive (LTI) awards have total performance or vesting periods of three years. Beginning with FY 2023 Management Incentive Plan (MIP) awards for our executive officers, the Compensation and Talent Committee introduced consideration of the Company’s performance in key sustainability priority areas, which are discussed on page 55 of this proxy statement. This consideration can only be utilized by the committee to adjust payouts downward. In light of the positive feedback we received from shareholders with respect to our sustainability priority areas as well as the other aspects of our executive compensation program, the committee did not make any additional adjustments to the plans for FY 2024.
The Compensation and Talent Committee
| Name | Base Salary ($)(1) | MIP Target (Annual Incentive) (% of Salary) | MIP Target (Annual Incentive) ($) | Target Long-Term Incentives | | Total Target Direct Compensation ($) | | | | | | PSUs ($) | RSUs ($) | | | Brian S. Tyler | 1,500,000 | 185% | 2,775,000 | 8,100,237 | 5,400,171 | 17,775,408 | | Britt J. Vitalone | 1,000,000 | 125% | 1,250,000 | 2,610,358 | 1,740,038 | 6,600,396 | | Michele Lau(2) | 700,000 | 100% | 700,000 | 1,711,187 | 1,140,070 | 4,251,257 | | LeAnn B. Smith | 637,500 | 100% | 637,500 | 1,200,339 | 800,040 | 3,275,379 | | Thomas L. Rodgers | 615,700 | 100% | 615,700 | 1,050,534 | 700,182 | 2,982,116 |
The Compensation and Talent Committee
| Key Considerations in Development of Annual and Long-Term Goals | | | | External Factors | Competitive Environment | McKesson’s Objectives | | •Analyst & Shareholder Expectations •Market Outlook •Tax Policy •Public Policy | •Competitor Performance and Plans •Competitive Landscape •Market Growth •Industry Trends | •Historical Performance and Trends •Long Range Planning •Capital Deployment Opportunities •Long Range Corporate Strategy |
Target Setting for Long-Term Plans
Target Setting for Long-Term Plans The Company’s three-year plan, which is reviewed by the Board each year, considers business strategies that will take longer than 12 months to accomplish and reflects capital deployment, including projected acquisitions, along with other external, public policy and competitive risks, opportunities and challenges. Our FY 2022 – FY 2024 PSU awards were based on three-year Cumulative Adjusted EPS, three-year average ROIC, and TSR performance relative to a comparator group of companies (rTSR). The Compensation and Talent Committee chose Cumulative Adjusted EPS to evaluate performance because it serves as an operational metric – including operating profit growth, tax strategy and capital deployment – that directly correlates to share price performance. Adjusted EPS is also the key metric underpinning our guidance to investors. ROIC encourages leaders to make sound investments that generate strong returns for shareholders. For the portion of PSU awards tied to rTSR performance, payout at target level continues to require above-median performance at the 55th percentile of the rTSR comparator group. In addition, the number of shares earned for the rTSR portion of the award is capped at the target amount if absolute TSR is negative during the three-year performance period. No shares are earned for the rTSR portion of the award if rTSR for the three-year period falls below the 35th percentile of the rTSR comparator group.
Target Setting for Long-Term Plans
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Target Setting for Long-Term Plans
Each Compensation Element Serves a Unique Purpose Our executive compensation program seeks to motivate our executive officers, and to reward them when they meet and exceed challenging business goals and deliver sustained performance growth. McKesson’s executive compensation program consists of four compensation elements, each of which serves a unique purpose. We provide three direct compensation elements: base salary, annual cash incentive and long-term incentives. The fourth element consists of other compensation and benefits (for example, limited perquisites, severance and change in control benefits). Our incentive plans incorporate metrics that we believe are the key measures of our success and will drive long-term shareholder returns. We focus on Adjusted EPS in our incentive plans because earnings per share is one of the principal measures used by investors to assess financial performance results and establish a price for the Company’s equity, and it is a central component of our guidance to investors. Adjusted EPS aligns our executives’ interests with the broader set of strategic objectives they are tasked to manage, keeping enterprise value and shareholder interests at the forefront of management decisions on both a short- and long-term basis. Accordingly, given that an increase in Adjusted EPS can drive an increase in shareholder value, the Compensation and Talent Committee determined it was important to include Adjusted EPS as a key component of both our annual and long-term incentives. Annual Compensation Annual compensation is delivered in cash with a substantial portion at-risk and contingent on the successful accomplishment of pre-established performance targets.
Management Incentive Plan
Management Incentive Plan Overview. The Management Incentive Plan (MIP) is our enterprise annual cash incentive plan. MIP awards are conditioned on the achievement of Company financial and operational performance goals. The maximum MIP payout for executive officers is 200% of target. MIP financial, operational and sustainability priorities are established shortly after the beginning of the fiscal year. Consistent with FY 2023, our executive officers' FY 2024 MIP awards include the Compensation and Talent Committee’s discretionary consideration of the Company’s progress on the key sustainability priority areas discussed below. Based on a competitive market assessment, the Compensation and Talent Committee determined to adjust Mr. Tyler's MIP opportunity to 185% of his base salary and Mr. Vitalone’s MIP opportunity to 125% of his base salary, each beginning in FY 2024. FY 2024 MIP Performance Metrics. In May 2023, the Compensation and Talent Committee selected Adjusted EPS, Adjusted Operating Profit and Free Cash Flow as the financial metrics for the FY 2024 MIP, the same metrics used for the prior fiscal year, as they are key areas of focus to drive our near-term success and advance our long-term strategy. The Compensation and Talent Committee aligned FY 2024 MIP targets to our Adjusted EPS outlook. For additional information about target setting for MIP, please refer to "Target Setting for Annual Plans" on page 53. The following summarizes our FY 2024 MIP financial performance metrics: •Adjusted EPS (50% of award). Adjusted EPS is an important driver of share price valuation and shareholder expectations. Consistent with prior years, our FY 2024 targets assumed, among other things, capital deployment in the form of share repurchases. The Compensation and Talent Committee applied an Adjusted EPS result of $27.44 for purposes of calculating FY 2024 MIP payouts. A related metric, three-year Cumulative Adjusted EPS, is used as a metric for Performance Stock Units. Adjusted EPS is highly relevant in both short- and long-term contexts, and the Compensation and Talent Committee believes it is useful to measure Adjusted EPS across both periods with greater economic opportunity in the long-term portion of the program to ensure that short-term gains are not sought at the expense of long-term performance. See Appendix A to this proxy statement for a reconciliation of diluted earnings per share from continuing operations as reported under U.S. generally accepted accounting principles (GAAP) to the Adjusted EPS result used for incentive payout purposes. •Adjusted Operating Profit (25% of award). Adjusted Operating Profit (AOP) rewards focus on operational performance and profitability. The Compensation and Talent Committee applied an AOP result of $4,901 million for purposes of calculating the FY 2024 MIP payouts. See Appendix A to this proxy statement for a reconciliation of operating profit as reported under U.S. GAAP to the AOP result used for incentive payout purposes. •Free Cash Flow (25% of award). Free Cash Flow (FCF) provides the basis for our disciplined approach to capital deployment. For purposes of calculating FY 2024 MIP payouts, the Compensation and Talent Committee applied a FCF result of $3,627 million. Cash flow is highly relevant in both short- and long-term contexts, as it measures effective generation and management of cash. See Appendix A to this proxy statement for a reconciliation of operating cash flow as reported under U.S. GAAP to the FCF result used for incentive payout purposes. FY 2024 Sustainability Priority Areas. Fostering a culture of environmental awareness, social responsibility, and sound and effective governance has long been a priority for McKesson. Beginning in FY 2023, our executive officers’ MIP awards may be adjusted downward based on the Compensation and Talent Committee’s discretionary consideration of the Company’s progress on key sustainability priority areas. As a company, we take a holistic approach to sustainability matters. Our goal is to build long-term value for the Company’s shareholders and strengthen the culture of the Company through monitoring our overall performance with respect to certain sustainability matters. We strongly believe that this starts at the top, with our executive officers focusing on these key objectives. In May 2023, considering McKesson’s strategic business objectives and our Company purpose of Advancing Health Outcomes for All®, the Compensation and Talent Committee selected the following sustainability objectives for discretionary consideration and potential adjustment (downward only) of FY 2024 MIP payouts for our executive officers, including our NEOs: •Establishment of our enterprise environmental targets roadmap and implementation of our environmental measurement tool; •Advancement of our best talent strategy as measured by engagement and inclusion scores from our Employee Opinion Survey and diverse representation; and
Management Incentive Plan
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Management Incentive Plan
•Successful fulfillment of our executive officers’ governance duties to prioritize regulatory excellence, risk management, compliance and ethics. In light of McKesson’s focus on advancing our sustainability priorities, the Compensation and Talent Committee determined, when incorporating the sustainability priority areas into executive officers' MIP awards, that their discretion in considering success against these objectives would only be used to adjust MIP payouts downward in the event executive officers fail to meet the key objectives in these areas. Following a comprehensive review of executive officer performance in the selected sustainability priority areas, the Compensation and Talent Committee determined that our executive officers largely met the FY 2024 sustainability objectives; therefore, they determined not to make a downward adjustment to the FY 2024 MIP payouts. FY 2024 MIP Payout Formula. Based on these results, our NEO participants received 114% of their FY 2024 MIP target awards. As is the case for all of the Company’s performance-based payout scales, when a result falls between reference points, we use linear interpolation to determine the result. In determining the Company’s performance for purposes of payouts under our incentive plans, the Compensation and Talent Committee has discretion to include or exclude special charges or unusual and infrequent items incurred during the performance period if it determines that such adjustments are appropriate. On a quarterly basis, the committee reviews reconciliations of non-GAAP to GAAP financial results. As part of its fiscal year-end approval of executive incentive compensation, the committee considers a number of factors, including but not limited to, the magnitude and impact of the special charge and whether the special charge is: (i) nonrecurring or unforeseeable, (ii) attributable to unexpected circumstances beyond the control of management, and/or (iii) reflective of the Company’s underlying operating performance. Rite Aid Bankruptcy. During FY 2024, the Compensation and Talent Committee considered the Rite Aid bankruptcy and its financial impact when determining incentive compensation payouts. The committee concluded that the impacts of the Rite Aid bankruptcy should be excluded from the non-GAAP earnings results for incentive compensation purposes (the Adjusted EPS and AOP metrics), consistent with how these results were reported publicly in the Company's FY 2024 quarterly earnings releases. The committee deemed the Rite Aid bankruptcy as an unusual, discrete event unrelated to normal operations. Results for the three metrics in the MIP are shown below: (1)The FY 2024 MIP non-GAAP financial metrics shown above generally exclude the impact of items that are included in our GAAP financial measures, such as amortization of acquisition-related intangibles, transaction-related expenses and adjustments, LIFO inventory-related adjustments, gains from antitrust legal settlements, restructuring, impairment, and related claims, net litigation recoveries or charges, and other adjustments. See Appendix A to this proxy statement for detailed reconciliations of the GAAP to non-GAAP metrics used for incentive payout purposes.
Management Incentive Plan
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Management Incentive Plan
The table below summarizes MIP payouts to our current NEOs for FY 2024:
Management Incentive Plan
| | | | | | | MIP Payout Earned = 114% | | | | | | | | | Name | Eligible Earnings ($)(1)X | MIP Target (%) | = | MIP Target Award ($)X | | Adjusted EPS Result (%) 50% Weight | + | AOP Result (%) 25% Weight | + | FCF Result (%) 25% Weight | | = | FY 2024 MIP Payout ($) | | Brian S. Tyler | 1,490,000 | 185% | | 2,756,500 | | 122% | | 111% | | 100% | | | 3,142,410 | | Britt J. Vitalone | 937,500 | 125% | | 1,171,875 | | 122% | | 111% | | 100% | | | 1,335,938 | | Michele Lau(2) | 175,000 | 100% | | 175,000 | | 122% | | 111% | | 100% | | | 199,500 | | LeAnn B. Smith | 635,418 | 100% | | 635,418 | | 122% | | 111% | | 100% | | | 724,377 | | Thomas L. Rodgers | 611,750 | 100% | | 611,750 | | 122% | | 111% | | 100% | | | 697,395 |
Management Incentive Plan
(1)Eligible earnings refers to regular wages earned by and paid to the NEO during the fiscal year, excluding certain items such as earnings received during a paid leave. (2)Ms. Lau’s FY 2024 eligible earnings were prorated to reflect her January 1, 2024 hire date. Long-Term Incentive Compensation Long-term incentive (LTI) compensation is a critical component of our executive compensation program. It is in our shareholders’ interests that our executives foster a long-term view of the Company’s financial results. Long-term incentives are also an important retention tool that management and the Compensation and Talent Committee use to align the financial interests of executives and other key contributors with sustained shareholder value creation. For FY 2024, the Company’s LTI compensation program for NEOs included two awards: •Performance Stock Units (60% of target LTI value) •Restricted Stock Units (40% of target LTI value)
Performance Stock Unit Program
Performance Stock Unit Program Overview. The Performance Stock Unit (PSU) program is a long-term equity incentive program with payouts conditioned on achievement against pre-established performance goals. A new three-year performance period begins each fiscal year, and PSU performance goals and the target awards for our executive officers are established shortly after the beginning of the performance period. FY 2022 — FY 2024 PSU Performance Metrics. In May 2021, the Compensation and Talent Committee established three-year Cumulative Adjusted EPS, three-year average Return on Invested Capital (ROIC) and the Company’s Total Shareholder Return (TSR) relative to a comparator group as the performance metrics for FY 2022 — FY 2024 PSU payouts. For additional information about target setting for the PSU program, please refer to "Target Setting for Long-Term Plans" on page 53. The following summarizes our FY 2022 — FY 2024 PSU performance metrics: •Cumulative Adjusted EPS (50% of payout). Cumulative Adjusted EPS was selected as a metric because of the importance of earnings as a driver of share price valuation and shareholder expectations. Consistent with prior performance periods, our Cumulative Adjusted EPS target assumed, among other things, capital deployment in the form of share repurchases. For FY 2022 — FY 2024, the Compensation and Talent Committee applied a Cumulative Adjusted EPS result of $79.17 for purposes of calculating PSU payouts. A related metric, one-year Adjusted EPS, is used as a metric for the Management Incentive Plan. Adjusted EPS is highly relevant in both short- and long-term contexts, and the Compensation and Talent Committee believes it is useful to measure Adjusted EPS across both periods, with greater economic opportunity in the long-term portion of the program to ensure that short-term gains are not sought at the expense of long-term performance. See Appendix A to this proxy statement for a reconciliation of diluted earnings per share from continuing operations as reported under U.S. GAAP to the Adjusted EPS result used for incentive payout purposes. •Average ROIC (25% of payout). Return on Invested Capital (ROIC) measures the Company’s ability to create value by generating a return that is above our weighted average cost of capital. ROIC encourages leaders to make sound investments that generate strong returns for shareholders. Adjusted three-year average ROIC measures, as a percentage, the average of our annual after-tax adjusted operating income divided by invested capital over the
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Performance Stock Unit Program
three-year performance period. For FY 2022 — FY 2024, the Compensation and Talent Committee applied a three-year average ROIC result of 17.54% for purposes of calculating PSU payouts. •Total Shareholder Return (25% of payout). TSR is calculated as share price appreciation (or reduction) over the performance period, including reinvestment of dividends when paid, divided by the share price at the beginning of the period; provided, that the stock price we use at the beginning and at the end of the period is the average closing price of Company common stock over the 30-day period preceding the applicable date. At the end of the performance period, performance is determined by ranking the Company’s TSR against the TSR of the companies in our FY 2022 — FY 2024 relative TSR comparator group, described below. Payout at target level continues to require above-median performance at the 55th percentile of the relative TSR comparator group. In addition, for the relative TSR portion of the award, the number of shares earned is capped at the target amount if absolute TSR is negative during the three-year performance period. No shares are earned for the relative TSR portion of the award if McKesson’s TSR for the three-year period falls below the 35th percentile of the relative TSR comparator group. Upon certification of the result, participants receive shares of Company common stock if the performance threshold is met. For FY 2022 — FY 2024, the Company’s TSR was at the 100th percentile relative to our relative TSR comparator group over the three-year period ending March 31, 2024, and the Compensation and Talent Committee applied this result for purposes of calculating PSU payouts. FY 2022 — FY 2024 PSU Payout Formula. Based on these results, our NEO participants received 200% of their FY 2022 — FY 2024 PSU target awards. When a metric’s result falls between reference points, we use linear interpolation to determine the result. Ms. Lau joined McKesson during FY 2024 and was not awarded FY 2022 — FY 2024 PSUs. Results for the three metrics in the PSUs are shown below: The table below summarizes PSU payouts for our current NEOs for the FY 2022 — FY 2024 performance period:
Performance Stock Unit Program
| | | | PSU Payout Earned: 200% | | | | | | | | | Name(1) | FY 2022 — FY 2024 Target PSUs (#)X | | Cumulative Adjusted EPS Result (%) 50% Weight | + | Average ROIC Result (%) 25% Weight | + | Relative TSR Result (%) 25% Weight | | = | FY 2022 — FY 2024 Earned PSUs (#) | | Brian S. Tyler | 36,013 | | 200% | | 200% | | 200% | | | 72,026 | | Britt J. Vitalone | 10,290 | | 200% | | 200% | | 200% | | | 20,580 | | LeAnn B. Smith(2) | 995 | | 200% (67% Weight) | | 200% (33% Weight) | | N/A | | | 1,990 | | Thomas L. Rodgers | 3,823 | | 200% | | 200% | | 200% | | | 7,646 |
Performance Stock Unit Program
(1)Ms. Lau joined McKesson during FY 2024 and was not granted a FY 2022 — FY 2024 PSU target award.
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Performance Stock Unit Program
(2)In May 2021, prior to becoming an executive officer, Ms. Smith was awarded FY 2022 — FY 2024 PSUs with performance metrics consisting of 67% Cumulative Adjusted EPS and 33% Average ROIC. FY 2022 — FY 2024 Relative TSR Comparator Group. For the FY 2022 — FY 2024 PSU awards, the Compensation and Talent Committee approved a relative TSR comparator group originally comprised of 14 public companies that served as a representative index of our most direct competitors and healthcare supply chain indicator companies. One company was subsequently removed from the comparator group due to a corporate transaction, reducing the comparator group to 13 companies. The committee reaffirmed that this comparator group of companies more closely aligns with our core business operations than the Compensation Peer Group listed on page 63, which more closely aligns with the market for our executive talent. The relative TSR comparator group includes seven companies in the Compensation Peer Group that are considered McKesson’s most direct competitors based on their talent pool, size and business focus, as well as six companies that are not viewed as competitors for talent, but are in at least two of the following categories: (i) companies with extensive business overlap; (ii) companies with similar market exposure; (iii) the largest pure play manufacturers representative of the pharmaceutical industry; and/or (iv) manufacturers with large generic pharmaceutical market presence. These criteria help ensure that our relative TSR comparator group serves as a diversified representation of companies in McKesson’s supply chain and broader healthcare platforms and acts as an appropriate gauge of overall Company performance.
Performance Stock Unit Program
| FY 2022 — FY 2024 Relative TSR Comparator Group(1) | | | | Cardinal Health (CAH) | Kroger (KR) | Teva Pharmaceutical (TEVA) | | Cencora (COR) | Owens & Minor (OMI) | Viatris (VTRS) | | CVS Health (CVS) | Pfizer (PFE) | Walgreens Boots Alliance (WBA) | | Henry Schein (HSIC) | Rite Aid (RAD)(2) | | | Johnson & Johnson (JNJ) | Sanofi (SNY) | |
Performance Stock Unit Program
(1)The comparator group includes seven companies that are also included in the Compensation Peer Group. (2)In October 2023, Rite Aid filed for bankruptcy protection. Based on McKesson's peer ranking methodology, Rite Aid was considered a relevant data point and was included in the FY 2022 — FY 2024 relative TSR comparator group. FY 2024 — FY 2026 PSU Performance Metrics. PSUs comprise 60% of the target LTI awards granted in FY 2024 and will be earned based on Cumulative Adjusted EPS (50%), three-year average Return on Invested Capital (ROIC) (25%) and TSR relative to a comparator group (25%). The Compensation and Talent Committee believes that the combination of Cumulative Adjusted EPS, three-year average ROIC and relative TSR will drive value creation and ensure alignment with shareholders. Beginning with the FY 2023 — FY 2025 PSU awards, the Compensation and Talent Committee, in consultation with its independent compensation consultant, updated the relative TSR comparator group to remove Rite Aid (RAD) and add Cigna (CI), Elevance Health (ELV) and UnitedHealth Group (UNH) to the companies listed in the FY 2022 — FY 2024 Relative TSR Comparator Group table above. The committee believes the resulting 15 companies in the group represent our most direct competitors and healthcare supply chain indicator companies for the FY 2024 — FY 2026 performance period. The Company must achieve above-median performance (55th percentile) relative to the comparator group to earn a target payout for the relative TSR portion of the award. If the Company’s TSR is negative for the performance period, then the relative TSR result is capped at target regardless of ranking relative to the comparator group. No shares are earned for the relative TSR portion of the award if the Company’s TSR for the three-year period falls below the 35th percentile. The payout formula illustrated below applies to our NEOs: We generally do not disclose forward-looking goals for our multi-year incentive programs, because the Company does not provide forward-looking guidance to our shareholders with respect to multi-year periods, and it is competitively sensitive information. Consistent with our past and current practice, we will disclose multi-year performance goals in our regular programs in full after the close of the performance period.
Performance Stock Unit Program
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Performance Stock Unit Program
FY 2024 — FY 2026 Performance Stock Unit Awards. At its May 2023 meeting, following a review of all direct compensation components and market data derived from our Compensation Peer Group, the Compensation and Talent Committee approved FY 2024 — FY 2026 PSU target awards for our current NEOs as follows:
Performance Stock Unit Program
| Name | FY 2024 — FY 2026 PSUs (#) | FY 2024 — FY 2026 PSU Grant Value ($)(1) | | Brian S. Tyler | 19,084 | 8,100,237 | | Britt J. Vitalone | 6,150 | 2,610,358 | | Michele Lau(2) | 3,051 | 1,711,187 | | LeAnn B. Smith | 2,828 | 1,200,339 | | Thomas L. Rodgers | 2,475 | 1,050,534 |
Performance Stock Unit Program
(1)A portion of the grant date fair value of PSU awards was determined by an independent third party using a Monte Carlo simulation model because the performance goals applicable to the PSU awards include a combination of operational and market-based (rTSR) criteria. (2)Ms. Lau's FY 2024 — FY 2026 PSU awards were granted in February 2024, which was the first date following her January 1, 2024 hire date on which awards could be granted in compliance with McKesson's equity grant policy.
Restricted Stock Units
Restricted Stock Units Overview. Restricted Stock Unit (RSU) awards are time-vested equity grants that generally vest one-third on each of the first three anniversaries of the grant date. RSU awards directly align the interests of executives with those of shareholders by tying long-term incentive compensation value to Company share price performance. The Compensation and Talent Committee determines the proportion of total target long-term incentives that will be awarded as RSUs by considering the balance of cash and equity in our annual and long-term incentive plans, our strategic and operational objectives, our NEOs' responsibilities, a review of similar grants made at companies in our Compensation Peer Group and other factors the committee deems relevant. FY 2024 Restricted Stock Unit Awards. At its May 2023 meeting, following a review of all direct compensation components and market data derived from our Compensation Peer Group, the Compensation and Talent Committee granted FY 2024 RSU awards to our current NEOs as follows:
Restricted Stock Units
| Name | FY 2024 RSUs (#) | FY 2024 RSU Grant Value ($)(1) | | Brian S. Tyler | 13,736 | 5,400,171 | | Britt J. Vitalone | 4,426 | 1,740,038 | | Michele Lau(2) | 2,274 | 1,140,070 | | LeAnn B. Smith | 2,035 | 800,040 | | Thomas L. Rodgers | 1,781 | 700,182 |
Restricted Stock Units
(1)The RSUs awarded in May 2023 were granted at a fair market value of $393.14 per unit. (2)In February 2024, Ms. Lau was awarded 2,274 RSUs as part of her annual LTI award at a fair market value of $501.35 per unit. To address compensation forfeited at her prior employer, Ms. Lau was also awarded 7,979 RSUs (vesting 50% on each of the first and second anniversaries of the grant date) as part of her sign-on equity award, which are excluded from the table above.
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Restricted Stock Units
Other Compensation and Benefits The Company provides an array of benefits to all employees. These benefits are comparable to those offered by employers in our industry and geographic footprint, including a competitive suite of health and life insurance and retirement benefits. In providing these benefits, both management and the Compensation and Talent Committee determined that they are appropriate for the attraction and retention of talent. In addition to the discussion of benefits below, the compensation associated with these benefits is described in footnote 4 to the 2024 Summary Compensation Table. The Company offers two voluntary nonqualified, unfunded deferred compensation plans: (i) the Supplemental Retirement Savings Plan (SRSP) and (ii) the Deferred Compensation Administration Plan III (DCAP III). The SRSP is offered to all employees, including executive officers, who may be impacted by compensation limits that restrict participation in the McKesson Corporation 401(k) Retirement Savings Plan (401(k) Plan). Participation in DCAP III is offered to all senior-level management and executive-level employees, including our executive officers, and certain additional categories of senior-level professionals who are highly compensated employees. Our employees, including our executive officers, are eligible to participate in the McKesson Foundation’s Matching Gifts Program. Under this program, employee gifts to schools, educational associations or funds and other public charitable organizations are eligible for a foundation match. In addition, under the Board Service Grant Program, our employees, including our executive officers, may apply to the foundation for an annual gift in recognition of their service on the board of such an organization. All of McKesson’s employees in the U.S. and Canada may also request a matching contribution, without limitation, under the McKesson Foundation’s Disaster Relief matching program, which matches contributions made to applicable public charitable organizations. A limited number of other benefits are provided to executive officers, because it is customary to provide such benefits or in the best interest of the Company and its shareholders to do so. We pay for executive health services, including annual physical examinations, for our executive officers and their spouses (the spousal benefit was discontinued effective April 1, 2024). The Company provides security services for our CEO, which the Board has determined are reasonable, necessary, and in the best interest of the Company and its shareholders. During FY 2024, we engaged an independent security consultant to conduct a comprehensive study of our security program. Considering the Company’s size, profile, its business activities, as well as safety concerns arising directly as a result of our executive officers' roles at the Company, the independent consultant advised that the security measures currently in place with respect to our executive officers continued to be appropriate. Accordingly, our Executive Officer Security Policy requires our CEO to use the corporate aircraft for both business and personal use. The security services provided to our CEO also include the installation of home security systems and equipment; however, beginning with FY 2021, Mr. Tyler assumed the cost of ongoing home security monitoring. We do not reimburse our NEOs for taxes due on imputed income for items or services provided under the Executive Officer Security Policy. In accordance with SEC disclosure rules, the aggregate incremental cost of these services is reported in the 2024 Summary Compensation Table.
Restricted Stock Units
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Restricted Stock Units
Compensation Peer Group Peer Selection Process Each year, the Compensation and Talent Committee determines which companies best reflect McKesson’s competitors for customers, shareholders and talent. A key objective of our executive compensation program is to ensure that the total compensation package we provide to our executive officers is competitive with the companies we compete against for executive talent. The Compensation and Talent Committee consults with its independent compensation consultant to develop a compensation peer group of companies to serve as the basis for comparing McKesson’s executive compensation program to the market. The Compensation and Talent Committee uses the guiding principles and questions below as a foundational tool to determine McKesson’s Compensation Peer Group.
Restricted Stock Units
| Guiding Principles for McKesson Peer Selection | | Consider Industry to identify companies with similar business model or philosophy •Start with direct distribution peers in the healthcare industry •Expand to other healthcare peers that might interact with McKesson in its value supply chain •Extend search to non-healthcare peers with operationally similar business models (i.e., companies that have a manufacturing, distribution, wholesale and/or retail component) Consider Size to ensure companies are similar in scope Consider other Business Characteristics to identify publicly traded companies headquartered in the U.S. |
Restricted Stock Units
| Questions Addressed in Developing an Effective Peer Group | | | Who are key performance comparators? | •Who is McKesson competing against for customers? •Which companies have similar market demands and influences? | | Who are closest competitors for talent? | •Which companies might try to recruit from McKesson? •If McKesson had to replace the executive team, from which companies might it recruit to attract executives with similar capabilities? | | Who are the peers from an external perspective? | •Who is McKesson competing against for shareholders? •Who do key analysts name as peers? •Who do current peers name as peers? |
Restricted Stock Units
FY 2024 Compensation Peer Group and How We Used the Data As our Company has few direct business competitors, it is difficult to create a peer group based on industry codes, revenues, or market capitalization alone. The Compensation and Talent Committee strives to develop a peer group that best reflects all aspects of McKesson’s complex business. For FY 2024, the committee and its independent compensation consultant used a value supply chain framework to identify companies that may compete with McKesson for executive talent. McKesson’s peers include the following: (i) healthcare companies that may compete or interact with McKesson’s supply chain; (ii) non-healthcare companies that are operationally similar to McKesson or other companies in its supply chain; and (iii) managed care companies. The committee then considered factors such as revenue and market capitalization to derive an appropriate number of peers within our value supply chain framework. The committee believes our diverse selection of peer group companies provides a better understanding of the evolving and competitive marketplace for executive talent.
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Restricted Stock Units
The Compensation and Talent Committee used data derived from our Compensation Peer Group to inform its decisions about overall compensation, compensation elements, optimum pay mix and the relative competitive landscape of our executive compensation program. The committee used multiple reference points when establishing target compensation levels. The committee did not strive to benchmark any individual compensation component or compensation in the aggregate to be at any specific percentile level relative to the market. Our 21 peer companies below are sorted by revenue and market capitalization. They reflect the Compensation Peer Group utilized by the Compensation and Talent Committee at its May 2023 meeting, when it established FY 2024 target direct compensation for our executive officers. To ensure a robust and balanced Compensation Peer Group, select peers fall outside of our preferred market capitalization range due to the difficulty in finding peers of larger revenue with similar business characteristics.
FY 2024 COMPENSATION PEER GROUP
FY 2024 COMPENSATION PEER GROUP (1)Revenues are stated in billions for the most recently completed fiscal year as publicly reported by each company as of June 5, 2024. (2)Market capitalizations are stated in billions as of March 28, 2024, the last trading day of our fiscal year.
FY 2024 COMPENSATION PEER GROUP
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FY 2024 COMPENSATION PEER GROUP
Independent Review Process The Compensation and Talent Committee sets performance goals, payout scales and target award levels for executive officers. The committee also determines incentive payouts for the prior fiscal year based on actual results against performance goals. While performance goals and payout scales are initially developed by senior management and driven by the Board-approved, one-year operating plan and the rolling three-year strategic plan reviewed with the Board, the Compensation and Talent Committee has the authority to approve, modify or amend management’s performance goals and payout scale recommendations. Performance goals are selected to be consistent with the operating and strategic plans reviewed, challenged and approved by the Board and information routinely communicated to employees or shareholders by management.
FY 2024 COMPENSATION PEER GROUP
| Setting Targets for the Fiscal Year | Mid-Year Review | Assessing Year-End Results | | •Compensation and Talent Committee’s independent consultant uses data on the Compensation Peer Group derived from independent surveys and disclosures by public companies to inform the committee of competitive pay levels for executive officers. •Our CEO, in consultation with the Compensation and Talent Committee’s independent compensation consultant and our EVP & CHRO, develops compensation recommendations for the other executive officers, for approval by the committee. •Compensation and Talent Committee sets target pay for all executive officers, including our CEO. | •Compensation and Talent Committee examines the design and purpose of all executive compensation pay elements. •Compensation and Talent Committee reviews and considers feedback from shareholders and proxy advisory firms regarding executive compensation program and policies. •Compensation and Talent Committee reviews compliance with Stock Ownership Policy. •Management updates the Compensation and Talent Committee on performance against incentive plan pre-established targets. •Compensation and Talent Committee reflects on market trends and emerging practices in executive compensation and their potential application at McKesson. | •Compensation and Talent Committee reviews current compensation and estimated separation and change in control benefits. •CEO presents an assessment of his individual performance results to the Board and discusses his goals for the new fiscal year. •Compensation and Talent Committee considers, among other things, progress on sustainability priority areas, including regulatory, compliance and legal issues, in making executive compensation determinations. •Board conducts our CEO’s performance review, discusses his performance in executive session and approves his goals for the new fiscal year. •Compensation and Talent Committee determines our CEO’s incentive compensation payouts in executive session with input from its independent compensation consultant. |
FY 2024 COMPENSATION PEER GROUP
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FY 2024 COMPENSATION PEER GROUP
Role of Independent Compensation Consultant Pursuant to its charter, the Compensation and Talent Committee may retain and terminate the services of any consultant or other advisor, as well as approve the advisor’s fees and other engagement terms. Each year, the committee evaluates the qualifications, performance and independence of its independent compensation consultant. To ensure it receives independent and unbiased advice and analysis, the committee adopted a formal independence policy certified annually by its compensation consultant. During FY 2024, the Compensation and Talent Committee agreed to continue its engagement of Korn Ferry as its independent compensation consultant. As discussed throughout this proxy statement, the Compensation and Talent Committee’s independent compensation consultant advises on compensation matters concerning our executive officers. Representatives from Korn Ferry attended all Compensation and Talent Committee meetings during FY 2024 and communicated directly with committee members. The fees incurred for FY 2024 services provided by Korn Ferry to the Compensation and Talent Committee totaled $328,333. During FY 2024, Korn Ferry provided other services to the Company requested by Company management consisting of Board succession and search consulting, executive assessments, and sales training programs and tools, for fees totaling approximately $596,618. Services requested by Company management were approved by the Chair of the Compensation and Talent Committee and were contracted for with members of Korn Ferry that were not part of Korn Ferry’s engagement with the Compensation and Talent Committee. The Compensation and Talent Committee believes Korn Ferry’s other work for the Company does not raise a conflict of interest and does not impair Korn Ferry’s ability to provide independent advice to the committee concerning executive compensation matters. In reaching its conclusion, Compensation and Talent Committee members took into account, among other things, the factors set forth in Exchange Act Rule 10C-1 and the NYSE listing standards. Role of Management Our CEO provides the Compensation and Talent Committee with pay recommendations for executive officers other than himself. The Compensation and Talent Committee, with input from the committee’s independent compensation consultant, determines our CEO’s compensation in executive session. Our Executive Vice President and Chief Human Resources Officer attends committee meetings to provide perspective and expertise relevant to the agenda. Management supports the committee’s activities by providing analyses and recommendations as requested. Management also reports to the committee on a regular basis regarding feedback received in the course of year-round shareholder engagement. Information on Other Compensation-Related Topics Severance and Change in Control Benefits Our Severance Policy for Executive Employees (Executive Severance Policy) affords benefits to selected management employees, including our executive officers. We provide severance benefits to give executives a measure of financial security following the loss of employment, and to protect the Company from competitive activities after their departure. We believe these benefits are important to attract and retain executives in a highly competitive industry. This policy applies if an executive officer is terminated by the Company for reasons other than for cause and the termination is not covered by the Company’s Change in Control Policy for Selected Executive Employees (CIC Policy). Award agreements under our 2022 Stock Plan and 2013 Stock Plan include change in control provisions which provide for “double-trigger” vesting upon an involuntary or constructive termination of employment following a change in control. Our CIC Policy provides for cash severance benefits to selected management employees in the event of an involuntary or constructive termination of employment occurring in connection with a change in control. We believe our CIC Policy is in our shareholders’ best interest, so that senior management can remain focused on important business decisions and not on how a potential transaction may affect them personally. The CIC Policy is administered by the Compensation and Talent Committee and benefits are consistent with current market practice. More detailed descriptions of the Executive Severance Policy and the CIC Policy are provided below at “Severance and Change in Control Policies" on page 77.
FY 2024 COMPENSATION PEER GROUP
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FY 2024 COMPENSATION PEER GROUP
Stock Ownership Policy The Company maintains robust guidelines for stock ownership by executive officers. Our CEO’s ownership requirement is six times base salary, and the ownership requirement for each of the Company’s other executive officers is three times their respective base salaries. Shares subject to stock options and PSU target awards do not count toward ownership under the policy. The Company reserves the right to restrict sales of the underlying shares of vesting equity awards if executives fail to meet the ownership requirements specified in the policy. Additionally, executives are required to hold 75% of the net after-tax shares issued upon the vesting or exercise of an award until the policy’s requirements are met. Once the requirement is met, executives must maintain that level of ownership or again be subject to the 75% holding requirement. Members of our Board are also subject to stock ownership guidelines, which are summarized above at “Director Compensation – Equity Compensation.” The Compensation and Talent Committee reviews executive officer compliance with our Stock Ownership Policy each year. As of March 31, 2024, all current NEOs satisfied their stock ownership requirement.
FY 2024 COMPENSATION PEER GROUP
| Name | Stock Ownership Policy | | | | | | | Target Ownership | | Actual Ownership | | | | | Multiple of Base Salary | Multiple Expressed in Dollars | Multiple of Base Salary(1) | Value of Shares Held by Executives in Dollars(2) | | | Brian S. Tyler | 6 | 9,000,000 | 27.3 | | 40,946,674 | | Britt J. Vitalone | 3 | 3,000,000 | 13.2 | | 13,221,718 | | Michele Lau | 3 | 2,100,000 | 8.0 | | 5,578,373 | | LeAnn B. Smith | 3 | 1,912,500 | 4.8 | | 3,047,161 | | Thomas L. Rodgers | 3 | 1,847,100 | 5.6 | | 3,428,324 |
FY 2024 COMPENSATION PEER GROUP
(1)Current NEO ownership is stated as of March 31, 2024, using FY 2024 salary levels. The ownership requirement may be met through any combination of the following: •Direct stock holdings of the Company’s common stock, including shares held in a living trust, a family partnership or corporation controlled by the officer, unless the officer expressly disclaims beneficial ownership of such shares; •Shares of the Company’s common stock held in the 401(k) Plan; •Shares of the Company’s common stock underlying outstanding restricted stock and restricted stock unit awards; and/or •Shares of the Company’s common stock underlying restricted stock units that are vested and deferred under a Company-sponsored deferral program. (2)Based on the $536.85 closing price of the Company’s common stock as reported by the NYSE on March 28, 2024. Anti-Hedging and Pledging Policies and Practices The Company’s framework of insider trading policies and procedures prohibits all directors and executive officers from engaging in any hedging transaction with respect to Company securities. These individuals are also prohibited from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan. Pledges of Company securities arising from certain types of hedging transactions are also prohibited. See page 27 for more detailed information. Equity Grant Policy and Procedures Under the Company’s written equity grant policy, the grant date of equity awards is generally the date on which the Board or the Compensation and Talent Committee approves the award by meeting or unanimous written consent or a later date designated in such approval. In the case that an award is approved when the Company’s directors or employees may be in possession of material non-public information, the grant date of the equity award is deferred until the earlier of (i) the completion of one NYSE core trading session after the Company publicly discloses its quarterly earnings, or (ii) the passage of 24 hours after the Company has publicly disclosed its quarterly earnings. The Company’s annual grants generally occur at the end of May each year, close in time to our public announcement of financial results for the prior completed fiscal year and publication of our forward estimate of earnings for the current fiscal year.
FY 2024 COMPENSATION PEER GROUP
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FY 2024 COMPENSATION PEER GROUP
The annual PSU program has a three-year performance period and the shares that are earned are not subject to any further vesting conditions. RSU awards generally vest over three years. For the time being, the Company has discontinued the grant of stock options. The Company’s equity grant policy states that stock options will be awarded at an exercise price equal to the closing price of the Company’s common stock on the date of grant. Under the terms of our 2022 Stock Plan and 2013 Stock Plan, stock option re‑pricing is not permitted without shareholder approval. Recoupment Policies The Board is dedicated to maintaining and enhancing a culture focused on integrity and accountability which discourages conduct detrimental to the Company’s sustainable growth. The Company maintains two recoupment policies. Compensation Recoupment Policy. Our Compensation Recoupment Policy, originally adopted in 2010, was most recently amended by the Compensation and Talent Committee on January 30, 2024 as described below. This Recoupment Policy is incorporated by reference into all of our incentive plans, including those plans in which our NEOs participate. The policy applies to any employee who receives a cash or equity award. Under the Recoupment Policy, the Company may recover, or “claw back,” incentive compensation if an employee: •Engages in misconduct pertaining to a financial reporting requirement under the federal securities laws that in turn would require the Company to file a restatement of its audited financial statements with the SEC to correct an error; •Receives incentive compensation based on an inaccurate financial or operating measure that when corrected causes significant harm to the Company; •Engages in any fraud, theft, misappropriation, embezzlement or dishonesty to the detriment of the Company’s financial results as filed with the SEC; or •Engages in conduct which is not in good faith and which disrupts, damages, impairs or interferes with the business, reputation or employees of McKesson or any of its subsidiaries or affiliates. The committee may recover incentive compensation after consideration of factors it deems appropriate, such as, for example, the passage of time since the occurrence of the act and any pending or threatened legal proceeding relating to the employee’s conduct. On January 30, 2024, the Recoupment Policy was amended to provide that in the event that incentive compensation is recovered from current or former Section 16 officers pursuant to the Financial Restatement Recoupment Policy described below, the Company has the discretion to recover erroneously awarded incentive compensation from other non-officer employees who are not subject to the Financial Restatement Recoupment Policy. If triggered, then to the fullest extent permitted by law, the Company may require the employee to reimburse the Company for all or a portion of any incentive compensation received in cash within the last 12 months, and remit to the Company any compensation received from the vesting or exercise of equity-based awards occurring within the last 12 months. The Company will publicly disclose the results of any deliberations about whether to recoup compensation from an executive officer unless, in individual cases and consistent with any legally mandated disclosure requirements, the Board or the Compensation and Talent Committee concludes that legal or privacy concerns would prevent such disclosure. Financial Restatement Recoupment Policy. On October 25, 2023, the Board adopted an executive compensation recoupment policy intended to comply with the requirements of Section 10D of the Exchange Act and the rules of the New York Stock Exchange under which the Company must recover certain excess incentive-based compensation paid to Section 16 officers in the event of a restatement of our financial statements due to our material noncompliance with any financial reporting required under U.S. federal securities laws. Recovery under the Financial Restatement Policy is mandatory and no misconduct is required.
FY 2024 COMPENSATION PEER GROUP
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FY 2024 COMPENSATION PEER GROUP
Compensation and Talent Committee Report on Executive Compensation We have reviewed and discussed with management the Compensation Discussion and Analysis. Based on such review and discussions, the Compensation and Talent Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference to McKesson Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
Compensation and Talent Committee of the Board of Directors
| Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($)(2) | Stock Awards ($)(3) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($)(4) | Total ($) | | Brian S. Tyler Chief Executive Officer | 2024 | 1,490,000 | -0- | 13,500,408 | 3,142,410 | 864,725 | 18,997,543 | | | 2023 | 1,433,333 | -0- | 13,000,596 | 5,016,667 | 770,729 | 20,221,325 | | | 2022 | 1,375,000 | -0- | 12,250,438 | 4,210,938 | 315,706 | 18,152,082 | | Britt J. Vitalone Executive Vice President and Chief Financial Officer | 2024 | 937,500 | -0- | 4,350,396 | 1,335,938 | 158,827 | 6,782,661 | | | 2023 | 870,834 | -0- | 4,000,708 | 2,002,917 | 163,254 | 7,037,713 | | | 2022 | 845,001 | -0- | 3,500,404 | 1,700,564 | 87,763 | 6,133,732 | | Michele Lau Executive Vice President and Chief Legal Officer | 2024 | 175,000 | 1,500,000 | 6,851,529 | 199,500 | 80,225 | 8,806,254 | | LeAnn B. Smith Executive Vice President and Chief Human Resources Officer | 2024 | 635,418 | 100,000 | 2,000,379 | 724,377 | 80,941 | 3,541,115 | | | 2023 | 515,083 | 100,000 | 2,050,834 | 676,177 | 33,435 | 3,375,529 | | Thomas L. Rodgers Executive Vice President and Chief Strategy and Business Development Officer | 2024 | 611,750 | -0- | 1,750,716 | 697,395 | 119,115 | 3,178,976 | | | 2023 | 589,167 | -0- | 1,450,503 | 1,178,334 | 82,201 | 3,300,205 | | | 2022 | 570,834 | -0- | 1,300,339 | 998,960 | 58,564 | 2,928,697 | | Lori A. Schechter(1) Former Executive Vice President, Chief Legal Officer and General Counsel | 2024 | 843,833 | -0- | 2,900,395 | 961,970 | 134,765 | 4,840,963 | | | 2023 | 827,500 | -0- | 2,605,652 | 1,655,000 | 122,406 | 5,210,558 | | | 2022 | 812,500 | -0- | 2,605,261 | 1,421,875 | 429,141 | 5,268,777 | | Nancy Avila(1) Former Executive Vice President, Chief Information Officer and Chief Technology Officer | 2024 | 505,250 | -0- | 2,050,646 | 575,985 | 942,043 | 4,073,924 | | | 2023 | 645,833 | -0- | 2,000,904 | 1,291,667 | 29,829 | 3,968,233 | | | 2022 | 570,834 | -0- | 1,450,112 | 998,960 | 35,100 | 3,055,006 |
Compensation and Talent Committee of the Board of Directors
| Name | 401(k) Plan Match ($)(a) | Nonqualified Deferred Compensation Plan Match ($)(b) | Financial Counseling ($)(c) | Executive Officer Security Policy ($)(d) | International Assignment and Housing Relocation ($)(e) | Other Perquisites and Severance Benefits ($)(f) | Total All Other Compensation ($) | | Brian S. Tyler | 13,200 | 412,638 | 19,598 | 327,964 | 12,000 | 79,325 | 864,725 | | Britt J. Vitalone | 13,200 | 104,417 | 18,246 | 18,722 | -0- | 4,242 | 158,827 | | Michele Lau | 13,200 | -0- | 4,668 | -0- | 59,857 | 2,500 | 80,225 | | LeAnn B. Smith | 13,200 | 39,264 | 18,246 | -0- | -0- | 10,231 | 80,941 | | Thomas L. Rodgers | 13,200 | 58,403 | 18,246 | -0- | -0- | 29,266 | 119,115 | | Lori A. Schechter | 13,200 | 86,753 | 18,246 | -0- | -0- | 16,566 | 134,765 | | Nancy Avila | 13,200 | -0- | 18,246 | -0- | -0- | 910,597 | 942,043 |
Compensation and Talent Committee of the Board of Directors
| Fiscal Year | Summary Compensation Table Total to PEO ($) | Compensation Actually Paid to PEO ($) | Average Summary Compensation Table Total for Non-PEO NEOs ($) | Average Compensation Actually Paid for Non-PEO NEOs ($) | Value of Initial Fixed $100 Investment Based On: | | Net Income ($ in millions) | Adjusted EPS ($) | | | | | | | Company TSR ($) | Peer Group TSR ($) | | | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2024 | 18,997,543 | 51,712,052 | 5,203,982 | 8,863,859 | 408.88 | 178.46 | 3,002 | 27.44 | | 2023 | 20,221,325 | 38,806,464 | 4,898,008 | 8,070,799 | 269.71 | 153.73 | 3,560 | 26.37 | | 2022 | 18,152,082 | 65,282,708 | 4,509,999 | 14,158,069 | 230.55 | 159.63 | 1,114 | 23.26 | | 2021 | 14,840,073 | 33,045,127 | 4,271,746 | 9,719,606 | 145.67 | 134.04 | (4,539) | 17.04 |
PEO SCT Total to CAP Reconciliation
| Fiscal Year | SCT Total ($) | Deductions from SCT Total ($) | Additions to SCT Total ($) | Compensation Actually Paid ($) | | | | (i) | (ii) | | | 2024 | 18,997,543 | 13,500,408 | 46,214,917 | 51,712,052 | | 2023 | 20,221,325 | 13,000,596 | 31,585,735 | 38,806,464 | | 2022 | 18,152,082 | 12,250,438 | 59,381,064 | 65,282,708 | | 2021 | 14,840,073 | 11,500,289 | 29,705,343 | 33,045,127 |
Average Non-PEO NEOs SCT Total to CAP Reconciliation
| Fiscal Year | SCT Total ($) | Deductions from SCT Total ($) | Additions to SCT Total ($) | Compensation Actually Paid ($) | | | | (i) | (ii) | | | 2024 | 5,203,982 | 3,317,343 | 6,977,220 | 8,863,859 | | 2023 | 4,898,008 | 2,664,524 | 5,837,315 | 8,070,799 | | 2022 | 4,509,999 | 2,326,573 | 11,974,643 | 14,158,069 | | 2021 | 4,271,746 | 2,226,561 | 7,674,421 | 9,719,606 |