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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to (s)240.14a-12
McKESSON CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required.
Fee paid previously with preliminary materials.
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Focus on People and Culture
Purpose Mission
Advancing Health Outcomes for All Improve care in every setting - one product,
(R) one partner, one patient at a time
What sets McKesson apart as an exceptional place is our people. Our employees understand
that together, unified by our global I^2CARE values, we fulfill our mission and
uphold our reputation as a trusted partner to our customers and their patients. Our
I^2CARE values are foundational to all that we do, and who we are as a company.
INTEGRITY INCLUSION CUSTOMER-FIRST ACCOUNTABILITY RESPECT EXCELLENCE
At McKesson, everyone is a leader. ILEAD (Inspire, Leverage, Execute, Advance, Develop) is
our common definition and shared commitment to leadership. By embracing this commitment,
we bring out the best in ourselves and position McKesson to continue to drive better
health - for our company, our customers, and the patients we touch for years to come.
INSPIRE LEVERAGE EXECUTE ADVANCE DEVELOP
-------------------------------------------------------------------------------
A Letter From Our Independent Chair
"We value shareholder engagement as integral to the Board's oversight and deliberative
processes. Shareholder feedback informs our decisions and enables the Board to be a
more effective steward of shareholder capital."
Donald R. Knauss
Independent Chair
June 21, 2024
Dear Fellow Shareholders,
On behalf of our entire Board of Directors, thank you for your continued
investment in McKesson. As we approach our 2024 Annual Meeting of Shareholders
on July 31, 2024, we'd like to take this opportunity to provide an update on
important strategic, operational and governance developments that highlight
the work we have done on behalf of shareholders throughout the year. As
directors, we take pride in the role we play in overseeing the Company's
execution of our strategy and in setting the tone at the top to ensure
continued focus on our purpose of
Advancing Health Outcomes for All
(R)
.
Strategic Priorities and Performance
McKesson achieved strong financial results in fiscal year 2024 and made
progress on its strategic priorities. Our priorities guide our efforts and
serve as a framework to track and communicate our success. We are proud to
report on the advancements made across McKesson's four strategic priorities:
.
Focus on People and Culture
: Our people and culture are foundational to everything we do. McKesson was
recognized as one of
America's Greatest Workplaces for Diversity in 2024
by Newsweek, an
Equality 100 Award
winner by the Human Rights Campaign Foundation and a
Military Friendly Employer
for the 11th consecutive year. Among our 2024 director nominees, three are
women, four are ethnically or racially diverse and two are U.S. veterans. Our
Board regularly reviews with management the Company's talent management
practices, culture, digital evolution and other key topics and developments.
.
Drive Sustainable Core Growth
: We are making investments in our foundational distribution assets by adding
state-of-the-art automation and integrating artificial intelligence and
machine learning technologies. Over the past year, McKesson opened two new
distribution centers in the U.S. with innovative technologies, sustainability
features and employee-friendly designs to enable faster medication shipments
and greater employee productivity.
.
Expand Oncology and Biopharma Platforms
: We are confident in the scale and depth of our differentiated oncology and
biopharma assets. We saw another year of significant expansion in The U.S.
Oncology Network with growth to support approximately 2,600 providers spanning
across 600 sites in 31 states.
.
Evolve and Grow the Portfolio
: While we continue to invest and grow the Company, evolving the portfolio is
an ongoing process as we ensure our resources and investments are focused on
strategic growth areas. In January 2024, we acquired Compile, Inc., a
healthcare data platform that captures and aggregates data to provide insights
and analytics for biopharma companies.
Our progress to date is underpinned by the execution against these important
strategic priorities. Page
6
provides highlights of some of our more significant financial accomplishments
in fiscal year 2024.
2024 Proxy Statement 1
-------------------------------------------------------------------------------
A Letter From Our Independent Chair
Board Refreshment
Our directors are a highly committed group and they bring a balanced mix of
skills, experiences and backgrounds to their oversight work. We continually
assess the qualifications of our directors as part of our robust Board
evaluation process, while considering McKesson's strategic and other oversight
needs. As part of our Board succession planning, we elected Deborah Dunsire,
M.D. and Kevin M. Ozan to the Board in 2024. Dr. Dunsire previously served as
President and Chief Executive Officer of H. Lundbeck A/S, a biopharmaceutical
company specializing in developing and delivering transformative therapies for
brain diseases, and prior to that, she held executive leadership roles for
several pharmaceutical companies. Mr. Ozan previously served as EVP and Chief
Financial Officer of McDonald's Corporation, a leading global retailer, and he
has over two decades of experience in strategy and finance. The Board is
delighted to welcome Dr. Dunsire and Mr. Ozan and values the perspectives they
bring.
Linda P. Mantia and Susan R. Salka will not be standing for re-election at the
Annual Meeting. On behalf of the entire Board, I would like to thank them both
for their dedicated service on the McKesson Board. We appreciate the
significant contributions they have made over the years, including their
service as committee chairs. Their leadership and valuable insights in service
of our shareholders are much appreciated.
Executive Operating Team Updates
As we advance our strategic priorities, we constantly evaluate our
organizational structure to ensure we have the right leadership to drive
long-term sustainable growth. Our Board is fully aware that everything we do
starts with our talent, and we recognize the important role the Board plays in
ensuring that McKesson has a broad and deep talent pipeline. The Board along
with the Compensation and Talent Committee regularly reviews senior leadership
and CEO succession planning, consulting with management as necessary. McKesson
made several leadership changes in the past year to align our operating team
to our go-forward priorities and drive long-term shareholder value. Our EVP
and Chief Financial Officer, Britt J. Vitalone, assumed expanded leadership
responsibilities for McKesson Technology and mergers and acquisitions, and a
new EVP and Chief Information Officer and Chief Technology Officer, Francisco
Fraga, was appointed, reflecting the importance of technology and data
capabilities in enabling McKesson's enterprise strategy. Michele Lau rejoined
McKesson as EVP and Chief Legal Officer, bringing extensive legal, compliance,
government affairs and sustainability experience, in addition to over a decade
of previous experience at McKesson. The Board would like to express its
gratitude to Lori A. Schechter, who retired as EVP, Chief Legal Officer and
General Counsel at the end of 2023, for her service of over a decade to
McKesson and the Board.
Shareholder Engagement
Our Board appreciates our shareholders' perspectives on critical topics,
including Board, governance, compensation and sustainability-related matters.
We value shareholder engagement as integral to the Board's oversight and
deliberative processes. Shareholder feedback informs our decisions and enables
the Board to be a more effective steward of shareholder capital. In fiscal
year 2024, McKesson proactively reached out to shareholders who collectively
represented approximately 51% of our outstanding common stock, ultimately
engaging with approximately 33%. These conversations provide the Board and
management with invaluable insights, many of which resulted in responsive
actions. I personally have benefited from having conversations directly with
our shareholders, and I know my fellow directors have as well. Discussions
with shareholders over the last year have informed the Board's deliberation on
several topics, including the composition of the Board, human capital
management and the Company's sustainability metrics.
Thank You
We are grateful for your support of McKesson and the over 51,000 employees who
further McKesson's mission and uphold its culture and values. Your vote is
very important to us. We strongly encourage you to read both our proxy
statement and annual report in their entirety prior to the Annual Meeting and
request that you support our voting recommendations.
Donald R. Knauss
Independent Chair of the Board
2 2024 Proxy Statement
-------------------------------------------------------------------------------
Notice of 2024 Annual Meeting of Shareholders To Be Held on July 31, 2024
Time and Date Location Record Date
July 31, 2024 www.virtualshareholdermeeting.com/MCK2024 Shareholders of record at the close of business
08:30 a.m. Central Time on June 5, 2024 are entitled to notice of
and to vote at the Annual Meeting or any
adjournment or postponement of the Annual Meeting.
Items of Business Vote Recommendations For Further Details
1 Elect for a one-year term a slate of 11 directors "FOR" See Page
as nominated by the Board of Directors each nominee 15
2 Ratify the appointment of Deloitte & Touche LLP as the Company's independent "FOR" See Page
registered public accounting firm for the fiscal year ending March 31, 2025 42
3 Conduct a non-binding advisory "FOR" See Page
vote on executive compensation 44
4 Approve an amendment to our Certificate of Incorporation to provide "FOR" See Page
for the exculpation of officers as permitted by Delaware law 87
5-6 Vote on two shareholder "AGAINST" See Pages
proposals, if properly presented 88
and
90
We also will conduct such other business as may properly be brought before the
meeting.
You will be able to attend the Annual Meeting online, vote and submit
questions during the meeting by visiting
www.virtualshareholdermeeting.com/MCK2024
and entering the 16-digit control number included in our Notice Regarding the
Availability of Proxy Materials, voting instructions form or proxy card.
Online access to the audio webcast will open approximately 15 minutes prior to
the start of the Annual Meeting to allow time for you to log in and test the
computer audio system.
On or about June 21, 2024, we began delivering proxy materials to all
shareholders of record at the close of business on June 5, 2024. The mailing
address of our principal executive offices is McKesson Corporation, 6555 State
Highway 161, Irving, Texas 75039.
June 21, 2024
By Order of the Board of Directors
Saralisa C. Brau
Corporate Secretary
VOTING METHODS
Vote via Call Toll-Free Vote by Mail Vote at Meeting
Internet Call the phone Follow the Join our Annual
www.proxyvote.com number located instructions Meeting at
or visit the at the top of on your www.virtualshareholdermeeting.com/MCK2024
URL located your proxy card proxy card
on your
proxy card
Important Notice Regarding the Availability of Proxy Materials for the 2024
Annual Meeting of Shareholders to be held on July 31, 2024. Our 2024 proxy
statement and annual report are available free of charge at proxyvote.com.
2024 Proxy Statement 3
-------------------------------------------------------------------------------
Table of Contents
A Letter From Our Independent Chair 1
Notice of 2024 Annual Meeting of 3
Shareholders To Be Held on July 31, 2024
Proxy Summary 5
Item 1
Election of Directors 15
Diverse Skills, Experiences and Qualifications 16
Director Nominees 17
Director Qualifications, Nomination and Diversity 23
Evaluating Board Composition, Performance and Effectiveness 25
Corporate Governance 26
The Board, Committees and Meetings 28
Shareholder Engagement 37
Onboarding and Continuing Education 38
Related Party Transactions Policy and 38
Transactions with Related Persons
Communications with Directors 38
Director Compensation 39
Cash Compensation 39
Equity Compensation 40
Director Stock Ownership Requirement 40
2024 Director Compensation Table 41
Item 2
Ratification of Appointment of Deloitte & Touche LLP as the 42
Company's Independent Registered Public Accounting Firm
Policy on Audit Committee Pre-Approval of Audit and Permissible 43
Non-Audit Services of Independent Registered Public Accounting Firm
Audit Committee Report 43
Item 3
Advisory Vote on Executive Compensation 44
Executive Compensation 45
Compensation Discussion and Analysis 46
Compensation and Talent Committee Report on Executive Compensation 68
Compensation and Talent Committee 68
Interlocks and Insider Participation
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 Chair 88
man
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
Notable Developments and Where to Read More
Hear from our Independent Chair 1
See our Fiscal Year 2024 Highlights 6
Learn about our Shareholder Engagement 37
Learn about our Risk Oversight 33
Learn about our Directors' Skills Matrix 16
Learn about our Board Evaluation Process 25
4 2024 Proxy Statement
-------------------------------------------------------------------------------
Proxy Summary
This summary highlights certain information in this proxy statement and does
not contain all the information you should consider in voting your shares.
Please refer to the complete proxy statement and our annual report prior to
voting at the Annual Meeting of Shareholders to be held on July 31, 2024
(Annual Meeting).
Our Company Priorities
McKesson Corporation is a diversified healthcare services leader dedicated to
Advancing Health Outcomes for All
(R)
. We partner with biopharma companies, care providers, pharmacies,
manufacturers, governments and others to deliver insights, products and
services to help make quality care more accessible and affordable. Our company
is focused on addressing the changing needs of our customers, their patients
and the broader healthcare ecosystem. We have developed a clear enterprise
strategy centered around a set of four company priorities:
Focus on People and Culture
One of McKesson's defining characteristics is our strong culture. As members of Team
McKesson, we are proud to foster a sense of belonging, find purpose and meaning
in our work, and do everything we can to care for each other, our customers and
all those who depend on us. We believe the best way to realize our purpose of
Advancing Health Outcomes for All
(R)
is to utilize our strengths, live our I^2CARE values (Integrity, Inclusion,
Customer-First, Accountability, Respect and Excellence) and stay grounded in the
ILEAD leadership principles (Inspire, Leverage, Execute, Advance, Develop) that
move our company forward and enable us to make a lasting and meaningful impact.
Drive Sustainable Core Growth
Our operational excellence and ability to leverage our scale and distribution expertise is one of the many reasons
why McKesson continues to be the partner of choice for hospitals, health systems and pharmacies of all sizes.
Expand Oncology and Biopharma Platforms
We are building integrated platforms that leverage our differentiated assets and capabilities. We continue to
develop innovative solutions and services that solve complicated healthcare problems and improve patients' lives.
Evolve and Grow the Portfolio
We are focused on unlocking more innovation and more speed by maximizing the organization's
operational efficiency and allocating our resources on the highest growth opportunities.
2024 Proxy Statement 5
-------------------------------------------------------------------------------
Proxy Summary
Fiscal Year 2024 Highlights
In fiscal year 2024 (FY 2024), McKesson delivered growth in revenue and
adjusted earnings per share. Our results reflect the commitment of our
employees and their dedication to deliver for customers, patients, communities
and shareholders.
Total Revenues
(in billions)
12%
FY 2022 FY 2023 FY 2024
Cash Flow
(in billions)
FY 2022 FY 2023 FY 2024
n Operating Cash Flow n Free Cash Flow*
Shareholder Return
(in billions)
FY 2022 FY 2023 FY 2024
n Total Cash Returned to Shareholders n Share Repurchases
* See
Appendix A
to this proxy statement for a reconciliation of free cash flow, a non-GAAP
metric, to the most directly comparable GAAP metric.
6 2024 Proxy Statement
-------------------------------------------------------------------------------
Proxy Summary
McKesson's Impact
Advancing Health Outcomes for All
(R)
Our People Our Partners Our Community Our Planet
We are committed to improving care in every setting in pursuit of our purpose of
Advancing Health Outcomes for All
(R)
. It is this purpose that drives us to make advancements within our enterprise
and beyond. McKesson is an impact-driven organization that is committed to
providing equitable and dynamic opportunities for people to thrive,
collaborating to improve health outcomes for patients, enhancing the health of
those in our communities and delivering environmental action for health. These
themes support McKesson's purpose and align with our Impact Pillars: Our
People, Our Partners, Our Community and Our Planet.
To learn more about McKesson's impact in these areas, please see our
FY 2024 Impact Report
, which we expect to be available on the Company's website in July 2024. Our
Impact Report is not part of, or incorporated by reference into, this proxy
statement.
Science Based Targets Initiative
In fiscal year 2023, McKesson received approval from the Science Based Targets
initiative (SBTi) for our near-term climate change targets - following through
on our commitment to set science-based targets to guide our greenhouse gas
(GHG) emissions reductions. In doing so, McKesson joined companies across the
globe committed to setting and achieving targets to reduce GHG emissions that
are aligned to the goal of limiting global temperature rise to 1.5degree C.
Our near-term, science-based targets as approved by SBTi are as follows:
Reduce absolute scope one and two GHG emissions Ensure 70% of McKesson suppliers, by spend covering purchased goods
50.4% by FY 2032 from a FY 2020 base year and services, will have their own science-based targets by FY 2027
McKesson's efforts to achieve these science-based targets include projects and initiatives in the following areas:
Energy efficiency Increasing our procurement of
projects in our buildings renewable energy
Improving fleet efficiency and Engaging with our suppliers
using alternative fuel vehicles to set their own SBTi targets
Investing in Our Local Communities
The McKesson Foundation, a 501(c)(3) organization (Foundation), continued to
support our communities and awarded grants to charitable organizations in the
U.S. and Canada working to reduce the burden of cancer, prepare tomorrow's
healthcare workforce and accelerate crisis response. Through its grant-making
program, the Foundation funded nearly 50 organizations and disbursed
approximately $9 million in FY 2024. One third of the grant funds supported
direct patient care and assistance.
The McKesson Foundation Scholarship Program, funded by the Foundation and
administered by Scholarship America, expanded the number of new scholarships
awarded to McKesson family members and increased the scholarship award amount.
Nearly half of the new scholarship recipients are the first in their family to
attend college.
$2 million in employee matching gifts to benefit more than 2,200 charities in FY 2024
Our employees volunteered more than 44,000 hours with charities across the U.S. and Canada
2024 Proxy Statement 7
-------------------------------------------------------------------------------
Proxy Summary
We Welcome Shareholder Feedback Year-Round
Our Board of Directors believes proactive shareholder engagement and
consideration of shareholder feedback are critical to driving long-term growth
and creating shareholder value. Our shareholder engagement program is a
robust, year-round process encompassing meetings held throughout the year with
shareholders during which we encourage ongoing, meaningful dialogue about the
issues they find most important. We report shareholder feedback regularly to
our Board, and our Independent Chair and chair of the Audit Committee
participated in several of these key engagements in FY 2024.
Assess & Prepare Engage with Shareholders
Our Board reviews our annual meeting results, We respond to shareholder feedback by enhancing our policies,
ongoing shareholder feedback and corporate practices and disclosures informed by ongoing dialogue
governance and compensation trends to help with our shareholders. The proxy statement communicates
drive and develop our shareholder engagement important updates and enhancements made during the fiscal year.
priorities. Management also attends various
conferences throughout the year to better
understand our stakeholders' views on corporate
governance trends and other matters.
Respond to Evaluate Shareholder
Shareholder Feedback Feedback
We invite shareholders to engage Our Board reviews shareholder feedback throughout the year and
with us throughout the year. We also identifies key themes, which inform
connect with shareholder proponents to important practices and policies.
learn about concerns they identify.
During our engagements, we provide
important corporate governance and other
updates about the Company and proactively
request shareholders' feedback.
Scope of Outreach and Key Topics
In FY 2024, we proactively reached out to shareholders representing
approximately 51% of our outstanding common stock and engaged with
shareholders representing approximately 33% of our outstanding common stock.
Our Independent Chair and chair of the Audit Committee participated in
meetings with shareholders representing approximately 19% of our outstanding
common stock. Topics discussed with our shareholders included:
.
Board Composition
.
Board Skills and Diversity
.
Board Evaluation
.
Management Succession Planning
.
Sustainability Metrics in Executive Compensation
.
Human Capital Management
.
Emissions Reduction Targets
Moreover, our Chief Executive Officer, Chief Financial Officer and Investor
Relations team attended six healthcare conferences and multiple non-deal road
shows in FY 2024 to discuss the Company's strategic priorities and other
topics.
8 2024 Proxy Statement
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Proxy Summary
Item Your Board's Recommendation
1 ELECTION OF 11 DIRECTOR FOR
NOMINEES FOR A ONE-YEAR TERM each nominee
Our director nominees bring broad and relevant leadership and professional experience
to the McKesson Board. Ten of our eleven director nominees are independent.
(See Page
15
)
Director Nominees and Our Approach to Governance
Our director nominees bring a broad and relevant mix of skills, experience,
backgrounds and perspectives. Additional information about each director
nominee's experience, qualifications and self-identification can be found
beginning on page
15
of this proxy statement.
Board Diversity
50%
of independent director nominees are women and / or ethnically or racially
diverse
Board Refreshment
70%
of independent director nominees have a tenure of less than 5 years
Director Independence
10
director nominees are independent
Female lll
Ethnic or Racial Diversity llll
Veteran ll
0-4: lllllll
5-10: lll
2024 Proxy Statement 9
-------------------------------------------------------------------------------
Proxy Summary
Skills and Experience Highlights that Advance Company Priorities
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. 74 2021 1
Carmona, M.D.
Chief of Health Innovations
of Canyon Ranch, Inc. and 17
th
Surgeon General of
the United States
Dominic J. Caruso 66 2018 1
Retired EVP and CFO,
Johnson & Johnson
W. Roy Dunbar 63 2022 3
Retired CEO
and Chairman,
Network Solutions, LLC
Deborah Dunsire, M.D. 62 2024 2
Retired President
and CEO,
H. Lundbeck A/S
James H. Hinton 65 2022 0
Operating Partner,
Welsh, Carson,
Anderson & Stowe
Donald R. Knauss 73 2014 2
Retired Chairman
and CEO,
The Clorox Company
Bradley E. Lerman 68 2018 0
EVP and Chief
Legal Officer,
Starbucks Corporation
Maria N. Martinez 66 2019 1
Retired EVP and COO,
Cisco Systems, Inc.
Kevin M. Ozan 61 2024 1
Retired EVP and CFO,
McDonald's Corporation
Brian S. Tyler 57 2019 - 1
CEO,
McKesson Corporation
Kathleen 66 2022 2
Wilson-Thompson
Retired EVP and
Global CHRO,
Walgreens Boots
Alliance, Inc.
Committee Chair Audit Compensation and Talent
Compliance Finance Governance and Sustainability
Independent
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
Sustainability and Human Capital Management
Distribution / Supply Chain Experience
Healthcare
Industry Experience
Business
Transformation / M&A
10 2024 Proxy Statement
-------------------------------------------------------------------------------
Proxy Summary
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.
Shareholder Rights Board of Directors Corporate Governance
. . .
Annual election of directors with majority Independent Chair of the Board Pay for performance alignment
voting standard for uncontested elections . .
. 10 of 11 director nominees are independent No poison pill
Proxy access . .
. Regular executive sessions Comprehensive Board and senior
Meaningful right to call special meeting of independent directors management succession planning process
of shareholders (15% ownership threshold) . .
. Annual Board and committee Robust shareholder engagement program
No supermajority vote provisions evaluation process .
. Enhanced risk oversight policies
Policy requiring directors with over .
12 years of tenure to offer to resign Stock ownership guidelines
. for executives and directors
Policies on other public company
board service and retirement age
2024 Proxy Statement 11
-------------------------------------------------------------------------------
Proxy Summary
Item Your Board's Recommendation
2 RATIFICATION OF APPOINTMENT OF
DELOITTE & TOUCHE LLP AS THE COMPANY'S FOR
INDEPENDENT REGISTERED PUBLIC (See Page
ACCOUNTING FIRM FOR FISCAL YEAR 2025 42
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.
Item Your Board's Recommendation
3 ADVISORY VOTE ON EXECUTIVE COMPENSATION
Our executive compensation program is the result of thorough Compensation and Talent Committee FOR
review, and it continues to emphasize pay for performance and reflects shareholder feedback. (See Page
44
)
12 2024 Proxy Statement
-------------------------------------------------------------------------------
Proxy Summary
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.
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
(R)
. 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
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.
Pay Element Performance Metric Rationale
Base Salary - Attracts and retains
high-performing executives
by providing
market-competitive fixed pay
Management Incentive Plan Adjusted EPS Rewards operational performance
(annual cash incentive) and profitability; important
driver of share price valuation
and shareholder expectations
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 Ensures sustainability Discretionary Downward-Only Modifier
Priority Areas priorities are aligned with
business strategic objectives
and Company purpose
Performance Stock Units 3-Year Cumulative Adjusted EPS Measures long-term earnings
(long power, drives returns for the
- Company and directly correlates
term equity incentive) to share price performance
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 - Directly aligns with value
(long-term equity incentive) delivered to shareholders
Target Pay
-
100% - 185% of Base Salary
60% of Target LTI Value
40% of Target LTI Value
2024 Proxy Statement 13
-------------------------------------------------------------------------------
Proxy Summary
Item Your Board's Recommendation
4 APPROVE AMENDMENT TO CERTIFICATE OF INCORPORATION
TO PROVIDE FOR OFFICER EXCULPATION FOR
Officer exculpatory provisions are permissible under Delaware law and they allow (See Page
companies to recruit and retain highly qualified individuals to serve as officers. 87
)
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
)
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
)
14 2024 Proxy Statement
-------------------------------------------------------------------------------
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.
2024 Proxy Statement 15
-------------------------------------------------------------------------------
Item 1. Election of Directors
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.
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
16 2024 Proxy Statement
-------------------------------------------------------------------------------
Item 1. Election of Directors
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.
Richard H. Carmona, M.D.
Chief of Health Innovations, Canyon Ranch, Inc. and 17th Surgeon General of the United States
Age: Committees: Director Qualification Highlights:
74 Compensation and Talent Compliance Public Health and Healthcare Industry
Director since:
2021
PROFESSIONAL EXPERIENCE AND BACKGROUND .
. He served in the United States Army and the Army's
Dr. Carmona has served as chief of health innovations of Special Forces and is a combat-decorated veteran.
Canyon Ranch Inc., a life-enhancement company, since 2017. SKILLS AND QUALIFICATIONS
. Dr. Carmona brings to the Board valuable public company
He has also served in several other executive roles since experience having served on public company boards and committees
joining Canyon Ranch in 2006, including vice chairman, for the past 15 years. In addition, he brings hands-on
chief executive officer of the Canyon Ranch health division experience in public health, clinical sciences and healthcare
and president of the nonprofit Canyon Ranch Institute. management. He is well-versed in the international and
. domestic legislative and policy aspects of the healthcare
Prior to Canyon Ranch, Dr. Carmona served as industry through his experience as the 17th U.S. Surgeon
the 17th Surgeon General of the United States General and as the CEO of a hospital and health care system.
from 2002 through 2006, achieving the rank OTHER PUBLIC COMPANY BOARDS
of Vice Admiral. Prior to serving as the Current:
Surgeon General, he was chairman of the State Herbalife Nutrition Ltd.
of Arizona Southern Regional Emergency Past Five Years:
Medical System and chief executive officer of Axon Enterprises, Inc. (2007 - 2022); Better
the County Hospital and Healthcare System. Therapeutics, Inc. (2017 - 2024); The
. Clorox Company (2007 - 2022)
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.
Business Distribution Senior Marketing Ethnic or
Transformation / Supply Executive / Public Racial
/ M&A Chain Leadership Relations / Diversity
Experience Communications
Cybersecurity Financial / Healthcare Sustainability Military
/ Technology Accounting Industry and Human Service
Experience Capital or Veteran
Management
Other Public Risk Management Global / Female
Company and Compliance International
Board Service Experience
2024 Proxy Statement 17
-------------------------------------------------------------------------------
Item 1. Election of Directors
Dominic J. Caruso
Retired Executive Vice President and Chief Financial Officer, Johnson & Johnson
Age: Committees: Director Qualification Highlights:
66 Audit (Chair) Financial Expertise
Director since: Compliance Risk Management and Controls
2018
PROFESSIONAL EXPERIENCE AND BACKGROUND .
. He currently serves on the Board of
Mr. Caruso retired as executive vice president and chief Trustees of the Cystic Fibrosis Foundation.
financial officer of Johnson & Johnson, a manufacturer SKILLS AND QUALIFICATIONS
of medical devices and pharmaceutical products, in Mr. Caruso brings to the Board financial expertise
August 2018, having served in the role since 2007. and leadership, as well as a deep familiarity
. with investors' perspectives, having previously
He led the company's financial and investor relations served as an executive officer of a publicly traded
activities, as well as the procurement organization. healthcare company. With a focus on healthcare
. compliance throughout his career at Johnson & Johnson,
Mr. Caruso joined Johnson & Johnson in Centocor, Inc. and KPMG, Mr. Caruso also brings
October 1999 as chief financial officer for experience in financial and compliance risk oversight.
Centocor, Inc., upon the completion of the OTHER PUBLIC COMPANY BOARDS
merger of Centocor and Johnson & Johnson. Current:
. Kyndryl Holdings, Inc.
Prior to joining Centocor, he had Past Five Years:
varied industry experiences with KPMG. None
.
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.
W. Roy Dunbar
Retired Chief Executive Officer and Chairman, Network Solutions, LLC
Age: Committees: Director Qualification Highlights:
63 Audit Technology
Director since: Governance and Sustainability Sustainability and Human Capital Management
2022
PROFESSIONAL EXPERIENCE AND BACKGROUND SKILLS AND QUALIFICATIONS
. Mr. Dunbar brings to the Board experience in
Mr. Dunbar most recently served as chief technology, operations and healthcare, as well as
executive officer and chairman at data governance and cybersecurity. He also brings
Network Solutions, LLC, an IT service additional experience in sustainability matters
management company, from 2008 to 2010. to help guide the Company's increasing focus
. on global impact initiatives. Mr. Dunbar has
From 2004 to 2008, he served as president served in various executive capacities where he
of global technology and operations for was accountable for international operations.
MasterCard where he was responsible for its OTHER PUBLIC COMPANY BOARDS
global payments platform and operations. Current:
. Duke Energy Corp., Johnson Controls International
Prior to that, he spent over a decade at Eli Lilly plc, SiteOne Landscape Supply, Inc.
and Company where he served as president for the Past Five Years:
intercontinental region, vice president of information Humana Inc. (2005 - 2020)
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.
Business Distribution Senior Marketing Ethnic or
Transformation / Supply Executive / Public Racial
/ M&A Chain Leadership Relations / Diversity
Experience Communications
Cybersecurity Financial / Healthcare Sustainability Military
/ Technology Accounting Industry and Human Service
Experience Capital or Veteran
Management
Other Public Risk Management Global / Female
Company and Compliance International
Board Service Experience
18 2024 Proxy Statement
-------------------------------------------------------------------------------
Item 1. Election of Directors
Deborah Dunsire, M.D.
Retired President and Chief Executive Officer, H. Lundbeck A/S
Age: Committees: Director Qualification Highlights:
62 Compensation and Talent Healthcare Industry
Director since: Finance Business Transformation
2024
PROFESSIONAL EXPERIENCE AND BACKGROUND SKILLS AND QUALIFICATIONS
. Dr. Dunsire brings to the Board deep healthcare and
Dr. Dunsire served as President and CEO of H. Lundbeck clinical experience, including leadership of large,
A/S, a biopharmaceutical company specializing complex biopharmaceutical companies, as well as
in developing and delivering transformative experience in healthcare operations and clinical
therapies for brain diseases, from 2018 to 2023. research. She also brings a unique perspective
. with her clinical background and expertise within
From 2017 to 2018, she served as President and CEO of XTuit the pharmaceutical and oncology arenas, which align
Pharmaceuticals, a biopharmaceutical with McKesson's strategic growth priorities.
company focused on cancer treatments. OTHER PUBLIC COMPANY BOARDS
. Current:
Prior to her employment with XTuit Pharmaceuticals, Syros Pharmaceuticals, Inc., Ultragenyx Pharmaceutical Inc.
Dr. Dunsire held various executive leadership roles Past Five Years:
at FORUM Pharmaceuticals, Millennium: The Takeda Alexion Pharmaceuticals Inc. (2018 - 2021)
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.
James H. Hinton
Operating Partner, Welsh, Carson, Anderson & Stowe
Age: Committees: Director Qualification Highlights:
65 Compensation and Talent Healthcare Industry
Director since: Finance Compliance
2022
PROFESSIONAL EXPERIENCE AND BACKGROUND SKILLS AND QUALIFICATIONS
. Mr. Hinton brings to the Board broad-based
Mr. Hinton currently serves as an operating partner for healthcare experience, including in all
the private equity firm Welsh, Carson, Anderson & Stowe. aspects of leading a complex healthcare
. services organization, as well as experience
From 2017 to 2021, he served as the CEO in healthcare operations and compliance. He
of Baylor Scott & White Health, the also brings experience in the development
largest not-for-profit health system in of integrated systems, adding value to the
Texas and one of the largest in the U.S. customer experience and affordability.
. OTHER PUBLIC COMPANY BOARDS
Mr. Hinton joined Presbyterian Healthcare Current:
Services, New Mexico's largest not-for-profit None
healthcare provider, in 1983 and he Past Five Years:
served as their CEO from 1995 to 2016. None
.
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.
Business Distribution Senior Marketing Ethnic or
Transformation / Supply Executive / Public Racial
/ M&A Chain Leadership Relations / Diversity
Experience Communications
Cybersecurity Financial / Healthcare Sustainability Military
/ Technology Accounting Industry and Human Service
Experience Capital or Veteran
Management
Other Public Risk Management Global / Female
Company and Compliance International
Board Service Experience
2024 Proxy Statement 19
-------------------------------------------------------------------------------
Item 1. Election of Directors
Donald R. Knauss
Retired Chairman and Chief Executive Officer, The Clorox Company
Age: Committees: Director Qualification Highlights:
73 Compensation and Talent (Chair) Human Capital Management
Director since: Finance Distribution / Supply Chain Experience
2014 Governance and Sustainability
PROFESSIONAL EXPERIENCE AND BACKGROUND SKILLS AND QUALIFICATIONS
. Mr. Knauss brings to the Board substantial board leadership
Mr. Knauss retired from The Clorox skills through his chairmanship role at The Clorox Company. He
Company, a multinational manufacturer also brings substantial executive experience through which
and marketer of consumer and professional he has developed valuable operational insights and strategic
products, in 2015, having served and long-term planning capabilities, as well as extensive
as executive chairman of the board international business management and retail experience, which
from November 2014 until July 2015 and includes experience in the retail pharmacy area. Mr. Knauss
chairman and chief executive officer also has significant public company board experience.
from October 2006 until November 2014. OTHER PUBLIC COMPANY BOARDS
. Current:
He was executive vice president of The Kellanova (formerly Kellogg Company), Target Corporation
Coca-Cola Company and president and chief Past Five Years:
operating officer for Coca-Cola North America None
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.
Bradley E. Lerman
Executive Vice President and Chief Legal Officer, Starbucks Corporation
Age: Committees: Director Qualification Highlights:
68 Audit Risk Management and Compliance
Director since: Compliance (Chair) Sustainability and Human Capital Management
2018
PROFESSIONAL EXPERIENCE AND BACKGROUND .
. He received a law degree from Harvard Law School and his
Mr. Lerman currently serves as the executive vice bachelor's degree in economics from Yale University.
president and chief legal officer of Starbucks SKILLS AND QUALIFICATIONS
Corporation, a company with a multinational Mr. Lerman brings to the Board significant legal
chain of coffeehouses and roastery reserves. and regulatory experience gained from years
. of large law firm practice and government
Previously, Mr. Lerman served as the senior positions with law enforcement responsibilities.
vice president, general counsel and corporate He also brings a multilayered understanding of
secretary of Medtronic plc, an American medical the healthcare industry and experience linking
device company, from 2014 to January 2022. compliance and legal consideration with corporate
. strategy and sustainability initiatives.
At Medtronic, he led the company's OTHER PUBLIC COMPANY BOARDS
global legal, government affairs Current:
and ethics and compliance functions. None
Prior to Medtronic, Mr. Lerman Past Five Years:
served as executive vice president, general counsel and corporate None
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.
Business Distribution Senior Marketing Ethnic or
Transformation / Supply Executive / Public Racial
/ M&A Chain Leadership Relations / Diversity
Experience Communications
Cybersecurity Financial / Healthcare Sustainability Military
/ Technology Accounting Industry and Human Service
Experience Capital or Veteran
Management
Other Public Risk Management Global / Female
Company and Compliance International
Board Service Experience
20 2024 Proxy Statement
-------------------------------------------------------------------------------
Item 1. Election of Directors
Maria N. Martinez
Retired Executive Vice President and Chief Operating Officer, Cisco Systems, Inc.
Age: Committees: Director Qualification Highlights:
66 Compliance Technology
Director since: Governance and Sustainability (Chair) International Experience
2019
PROFESSIONAL EXPERIENCE AND BACKGROUND .
. Ms. Martinez has received several distinctions for
Ms. Martinez served as executive vice her leadership, including the No. 2 ranking on
president and chief operating officer the ALPFA (Association for Latino Professionals for
from March 2021 to May 2024 and was America) list of the 50 Most Powerful Latinas.
executive vice president and chief .
customer experience officer from Ms. Martinez holds a bachelor's degree in
April 2018 until March 2021 at Cisco electrical engineering from the University of
Systems, Inc., a multinational digital Puerto Rico and a master's degree in computer
communications technology company. engineering from Ohio State University.
. SKILLS AND QUALIFICATIONS
Prior to joining Cisco, Ms. Martinez served in a variety Ms. Martinez brings to our Board leadership
of senior executive roles at Salesforce, Inc., including experience at leading technology
president, Global Customer Success and Latin America companies, which enhances the Board's
from March 2016 to April 2018; president, Sales and depth of experience in business
Customer Success from February 2013 to March 2016; executive and digital transformation. She also
vice president and chief growth officer from February brings a global leadership perspective,
2012 to February 2013; and executive vice president, as well as a focus on customer success and customer experience.
Customers for Life from February 2010 to February 2012. OTHER PUBLIC COMPANY BOARDS
. Current:
Prior to joining Salesforce, she managed Tyson Foods, Inc.
the global services business for Microsoft Past Five Years:
Corporation, including professional services Cue Health Inc. (2021 - 2024)
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.
Kevin M. Ozan
Retired Executive Vice President and Chief Financial Officer, McDonald's Corporation
Age: Committees: Director Qualification Highlights:
61 Audit Financial Expertise
Director since: Finance (Chair) International Experience
2024
PROFESSIONAL EXPERIENCE AND BACKGROUND .
. Mr. Ozan has a bachelor's degree in accounting
Mr. Ozan most recently served as senior executive vice president, from the University of Michigan and a master's
strategic initiatives from September degree in business from the Kellogg School
2022 to June 2023 and executive vice of Management at Northwestern University.
president and chief financial officer SKILLS AND QUALIFICATIONS
from March 2015 to August 2022 Mr. Ozan brings to the Board considerable experience in
of McDonald's Corporation, a leading global food service retailer. the areas of finance, mergers and acquisitions, risk
. management and international operations having served as
Mr. Ozan held various roles of a former senior financial executive at a global company.
increasing responsibility across the OTHER PUBLIC COMPANY BOARDS
financial and investor relations teams Current:
at McDonald's from 1997 to 2015. The Hershey Company
. Past Five Years:
Prior to joining McDonald's, he worked for over a decade in None
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.
Business Distribution Senior Marketing Ethnic or
Transformation / Supply Executive / Public Racial
/ M&A Chain Leadership Relations / Diversity
Experience Communications
Cybersecurity Financial / Healthcare Sustainability Military
/ Technology Accounting Industry and Human Service
Experience Capital or Veteran
Management
Other Public Risk Management Global / Female
Company and Compliance International
Board Service Experience
2024 Proxy Statement 21
-------------------------------------------------------------------------------
Item 1. Election of Directors
Brian S. Tyler
Chief Executive Officer, McKesson Corporation
Age: Committees: Director Qualification Highlights:
57 None Business Transformation
Director since: Health Care Experience
2019
PROFESSIONAL EXPERIENCE AND BACKGROUND .
. He is a member of the American Cancer Society's CEOs
Mr. Tyler has served as chief executive officer of Against Cancer group in the North Texas chapter.
McKesson Corporation since April 2019 and previously .
served as the Company's president and chief Mr. Tyler earned his Ph.D. from the University
operating officer from August 2018 to March 2019. of Chicago, Department of Economics specializing
. in industrial organization, labor economics
Mr. Tyler served as chairman of the Management and public finance / project evaluation.
Board of McKesson Europe AG from 2017 to 2018, SKILLS AND QUALIFICATIONS
president and chief operating officer of Mr. Tyler brings over 25 years of
McKesson Europe from 2016 to 2017, president of business and healthcare experience
McKesson's North American Pharmaceutical to the Board. As McKesson's CEO and a long-time leader of
Distribution and Services from 2015 to 2016, and McKesson's businesses, Mr. Tyler has extensive knowledge of the
McKesson's executive vice president, corporate Company's culture and workforce, and
strategy and business development from 2012 to 2015. its challenges and opportunities.
. OTHER PUBLIC COMPANY BOARDS
Mr. Tyler previously served in various other leadership Current:
roles at McKesson, including as president of Republic Services, Inc.
U.S. Pharmaceutical, president of McKesson Medical-Surgical, Past Five Years:
and president of McKesson Specialty Health. None
.
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.
Kathleen Wilson-Thompson
Retired EVP and Global Chief Human Resources Officer, Walgreens Boots Alliance, Inc.
Age: Committees: Director Qualification Highlights:
66 Compensation and Talent Healthcare Industry
Director since: Governance and Sustainability Sustainability and Human Capital Management
2022
PROFESSIONAL EXPERIENCE AND BACKGROUND SKILLS AND QUALIFICATIONS
. Ms. Wilson-Thompson brings to the Board
Ms. Wilson-Thompson most recently served as more than a decade of senior executive
executive vice president and global chief level experience leading human resources
human resources officer of Walgreens Boots and human capital management strategy
Alliance, Inc., a healthcare and retail at global healthcare companies. She also
pharmacy company, from December 2014 to brings experience through her extensive
January 2021, after serving as senior vice public company board service in the
president and chief human resources officer manufacturing and retail industries.
from January 2010 to December 2014. OTHER PUBLIC COMPANY BOARDS
. Current:
Previously, she served as senior vice Tesla, Inc., Wolverine Worldwide, Inc.
president, global human resources and Past Five Years:
chief labor and employment counsel at None
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.
Business Distribution Senior Marketing Ethnic or
Transformation / Supply Executive / Public Racial
/ M&A Chain Leadership Relations / Diversity
Experience Communications
Cybersecurity Financial / Healthcare Sustainability Military
/ Technology Accounting Industry and Human Service
Experience Capital or Veteran
Management
Other Public Risk Management Global / Female
Company and Compliance International
Board Service Experience
22 2024 Proxy Statement
-------------------------------------------------------------------------------
Item 1. Election of Directors
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.
2024 Proxy Statement 23
-------------------------------------------------------------------------------
Item 1. Election of Directors
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
Under our Corporate Governance Guidelines, non-employee directors with more than OUR TENURE AND
12 years of service on the McKesson Board must offer to resign from the Board. RETIREMENT POLICIES
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.
12-Year 75
Term Retirement
Limit Age
24 2024 Proxy Statement
-------------------------------------------------------------------------------
Item 1. Election of Directors
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:
Establish Annual Conduct Annual Director
Workplan Review Self-Assessments
Report to Board Independent Chair Conversations Enhancements
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
2024 Proxy Statement 25
-------------------------------------------------------------------------------
Item 1. Election of Directors
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.
Key Governance Attributes
Independent Chair Other Gover
We have maintained an independent .
chair structure since 2019. Donald Regular exe
R. Knauss has served as the Independent Chair since April 2022. .
Proxy acces
.
No supermaj
.
Majority vo
.
Annual dire
.
No poison p
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
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-employe
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 i
review of risks related to financial reporting, compensation practices, cybersecurity, technology, sustainability and distribution o
Board has maintained a standing Compliance Committee since 2019. The purpose of the Compliance Committee is to assist the Audit Comm
identification and evaluation of our primary legal and regulatory compliance risks, compliance program to address such risks and cer
Code of Conduct
McKesson's Code of Conduct describes fundamental principles, policies and procedures that shape our work and help our employees, off
Code of Conduct is available in multiple languages. Please visit
www.mckesson.com/Investors/Corporate-Governance/Code-of-Conduct/
for more information.
nance Best Practices
cutive sessions of the independent directors
s right
ority voting requirements
ting standard for uncontested director elections
ctor elections
ill
management succession planning.
e directors with a tenure of more than 12 years
ncludes oversight of our Company's strategy and
f controlled substances, among other risks. The
ittee and the Board in oversight of management's
tain cybersecurity and technology-related risks.
icers and directors make ethical decisions. Our
26 2024 Proxy Statement
-------------------------------------------------------------------------------
Item 1. Election of Directors
Anti-Hedging and Pledging
Our policies and practices restrict the Company's directors, officers and
employees from engaging in speculative transactions and transactions that
hedge or offset any decrease in the market value of our common stock.
Directors and officers are prohibited from engaging in certain transactions
involving the Company's securities such as: (i) standing orders and limit
orders; (ii) short sales; (iii) transactions in derivative securities related
to the Company, including publicly-traded put or call options with respect to
the Company's common stock; (iv) hedging or monetization transactions; and (v)
pledges of the Company's securities as collateral for any loans.
Insider Trading
We have adopted insider trading policies and procedures, which apply to
McKesson and its directors, officers and employees, and govern the purchase,
sale and other disposition of the securities of the Company and other
organizations, such as our business partners. Together with the Code of
Conduct, these policies and procedures provide broad prohibitions against the
illegal and unauthorized use and disclosure of material non-public
information. Our insider trading policies and procedures also subject our
directors, officers and certain other employees to additional trading
restrictions. We believe the insider trading policies and procedures are
reasonably designed to promote compliance with insider trading laws, rules and
regulations, and the listing standards applicable to us. For more information,
please see the description of our insider trading policies and procedures in
our most recent Annual Report on Form 10-K.
Stock Ownership 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. Our executive officers also are subject to stock
ownership requirements, the details of which are described on page
66
of this proxy statement.
2024 Proxy Statement 27
-------------------------------------------------------------------------------
Item 1. Election of Directors
The Board, Committees and Meetings
The Board is the Company's governing body with responsibility for oversight,
counseling and direction of the Company's management to serve the long-term
interests of the Company and its shareholders. The Board's goals are to build
long-term value for the Company's shareholders and to ensure the vitality of
the Company for its customers, employees and other individuals and
organizations that depend on the Company. To achieve its goals, the Board
monitors both the performance of the Company and the performance of the
Company's CEO. With the exception of Brian S. Tyler, the Company's CEO, all
director nominees for the Annual Meeting are independent.
The Board has the following five standing committees: Audit Committee,
Compensation and Talent Committee, Compliance Committee, Finance Committee,
and Governance and Sustainability Committee. Each of these committees is
governed by a written charter approved by the Board in compliance with the
requirements of the Securities and Exchange Commission (SEC) and the New York
Stock Exchange (NYSE), where applicable. The charter of each committee is
reviewed annually by that committee and the Board. All current members of our
Audit Committee, Compensation and Talent Committee, and Governance and
Sustainability Committee are independent, as determined by the Board, under
the NYSE listing standards and the Company's director independence standards,
which are available on the Company's website at
www.mckesson.com/Investors/Corporate-Governance/Director-Independence-Standards/
. In addition, each current member of the Audit Committee and Compensation and
Talent Committee meets the additional, heightened independence criteria
applicable to such committee members under the relevant rules.
Board and Meeting Attendance
The Board met five times during FY 2024. Each director then serving attended
at least 75% of the aggregate number of meetings of the Board and of its
committees on which he or she served. The non-management directors also met in
executive session at every Board meeting during FY 2024. Directors meet their
responsibilities not only by attending Board and committee meetings, but also
through communication with senior management, independent accountants,
advisors and consultants and others on matters affecting the Company.
Directors also are expected to attend the Annual Meeting. All directors then
serving attended the 2023 Annual Meeting of Shareholders. The number of Board
and committee meetings held during FY 2024 as well as the attendance of
directors who served at such time are outlined below.
100% 100% 5 >75% 28
Annual Meeting Attendance Board Meeting Attendance Total Board Meetings Committee Meeting Total Committee Meetings
Attendance
28 2024 Proxy Statement
-------------------------------------------------------------------------------
Item 1. Election of Directors
Committee Membership, Responsibilities and Other Information
The charter governing each of the Board's five standing committees can be
found at
www.mckesson.com/investors/corporate-governance
. The members below reflect the membership of the committees immediately after
the Annual Meeting if all director nominees are elected. Current committee
members include the below plus Linda P. Mantia on the Finance Committee and
Susan R. Salka on the Audit and Finance Committees. Mses. Mantia and Salka
will serve until their terms conclude at the Annual Meeting.
Audit Committee
Dominic J. Caruso* Meetings in FY 2024:
(Chair) 10 (includes one joint meeting with the Compliance Committee)
W. Roy Dunbar All members are independent and financially literate
Bradley E. Lerman * Designated as "audit committee financial expert"
Kevin M. Ozan* Responsibilities include:
.
Reviewing with management the interim and annual audited financial
statements filed in the Quarterly Reports on Form 10-Q and Annual
Report on Form 10-K, respectively, including any major issues regarding
accounting principles and practices and critical audit matters
.
Reviewing the adequacy and effectiveness
of internal controls over financial
reporting that could significantly affect
the Company's financial statements
.
Reviewing with management and the independent registered public
accounting firm the interim and annual financial statements
.
Appointing the independent accountants, monitoring their
independence, evaluating their
performance and approving their fees
.
Reviewing and overseeing the annual audit plan,
including the scope of the audit activities
of the independent accountants and performance
of the Company's internal audit function
.
Assisting the Board, in coordination with the
Compliance Committee, in providing risk oversight of
the Company's policies and procedures regarding
compliance with applicable laws and regulations
2024 Proxy Statement 29
-------------------------------------------------------------------------------
Item 1. Election of Directors
Compensation and Talent Committee
Donald R. Knauss Meetings in FY 2024:
(Chair) 5
Richard H. Carmona, M.D. Responsibilities include
Deborah Dunsire, M.D. :
James H. Hinton .
Kathleen Wilson-Thompson Reviewing and overseeing the Company's overall
compensation philosophy and the development
and implementation of compensation programs
aligned with the Company's business strategy
.
Reviewing various sustainability matters relevant to the Committee's
oversight responsibilities, including the Company's best talent
strategy and talent development, employee engagement and culture,
in coordination with the Board and other committees, as appropriate
.
Determining the structure and amount of all elements of executive
officer compensation and benefits, including material perquisites,
after consideration of management's recommendation and in
consultation with the committee's independent compensation consultant
.
Reviewing and making determinations regarding
the adoption, administration and amendments to
all equity incentive plans for employees, and
cash incentive plans for executive officers
.
Evaluating the relationship between the
incentives associated with Company plans
and the level of risk-taking by executive
officers in response to such incentives
.
Participating with management in the
preparation of the Compensation
Discussion and Analysis for the Company's proxy statement
.
Evaluating the qualifications, performance
and independence of its advisors
.
Overseeing the administration of, and
as appropriate, the enforcement of the
Company's Compensation Recoupment Policies
and any recoupment related activity
30 2024 Proxy Statement
-------------------------------------------------------------------------------
Item 1. Election of Directors
Compliance Committee
Bradley E. Lerman Meetings in FY 2024:
(Chair) 4 (includes one joint meeting with the Audit Committee)
Richard H. Carmona, M.D. Responsibilities include:
Dominic J. Caruso .
Maria N. Martinez Overseeing the Company's principal legal and regulatory
compliance risks and related compliance program,
as well as certain cybersecurity and technology-related
risks, in coordination with the Audit Committee
.
Reviewing the Company's approach to, and results
of, risk identification, assessment and
mitigation plans for the principal legal and
regulatory compliance risks facing the Company
.
Reviewing the Company's compliance
with laws and policies governing the
distribution of controlled substances
and reporting of suspicious orders
.
Overseeing any significant complaints and other matters raised through
the Company's compliance reporting mechanisms, including those matters
that involve allegations relating to violations of non-compliance with
the Controlled Substances Monitoring Program or distribution of opioids
.
Reviewing any significant government inquiries or
investigations and other significant legal actions
.
Receiving information about current and emerging
legal and regulatory compliance risks and
enforcement trends that may affect the Company's
business operations, performance or strategy
.
Commissioning studies, surveys and
reviews as appropriate to evaluate the
Company's compliance and quality of
personnel / committees providing compliance
.
Reviewing appointment, performance, compensation
and replacement of the Company's Chief
Compliance Officer and the Senior Vice President
of the Controlled Substances Monitoring Program
Finance Committee
Kevin M. Ozan Meetings in FY 2024:
(Chair) 5
Deborah Dunsire, M.D. Responsibilities include:
James H. Hinton .
Donald R. Knauss Reviewing with management the long-range
financial policies of the Company
.
Providing advice and counsel to management on the financial
aspects of significant acquisitions and divestitures,
major capital commitments, proposed financings and
other significant transactions of a financial nature
.
Making recommendations concerning significant
changes in the capital structure of the Company
.
Reviewing tax policy utilized by
management and the funding status and
investment policies of the Company's
tax-qualified retirement plans
2024 Proxy Statement 31
-------------------------------------------------------------------------------
Item 1. Election of Directors
Governance and Sustainability Committee
Maria N. Martinez Meetings in FY 2024:
(Chair) 5
Donald R. Knauss Responsibilities include:
W. Roy Dunbar .
Kathleen Wilson-Thompson Reviewing the size and composition of the Board and recommending measures to be taken so that the
Board reflects an appropriate balance of knowledge, experience, skills, expertise and diversity
.
Recommending the slate of nominees to be proposed for election at the annual
meeting of shareholders and qualified candidates to fill Board vacancies
.
Evaluating the Board's overall performance, reviewing the level and form of non-employees
director compensation and administering the Company's related party transactions policy
.
Reviewing the size and composition of each standing committee, identifying
individuals to serve as members and monitoring the functions of the committees
.
Monitoring emerging corporate governance trends, shareholder feedback, and
overseeing and evaluating the Company's corporate governance policies and programs
.
Overseeing the Company's corporate governance and sustainability matters,
as well as the Company's reporting to stakeholders on these matters
32 2024 Proxy Statement
-------------------------------------------------------------------------------
Item 1. Election of Directors
Board Leadership Structure
The Board has an independent chair leadership structure with Mr. Knauss
serving as Independent Chair of the Board and Brian Tyler serving as CEO. We
believe that having an Independent Chair is currently in the best interests of
the Company given Mr. Knauss' previous experience on our Board, knowledge of
the Company and ability to provide independent oversight of management.
Chair of the Board Duties
.
The Chair presides at all meetings of the Board and annual meetings of
shareholders.
.
The Chair regularly solicits input from the CEO and independent directors as
to the additional matters to place on the Board agenda and the information
that would be useful for their review and consideration.
.
The non-management directors regularly meet in executive sessions presided
over by Mr. Knauss as Independent Chair.
.
The Chair calls executive sessions of the non-management directors, provides
feedback to the CEO following such executive sessions, considers the overall
annual meeting calendar and agendas to ensure that issues of importance are
included and given sufficient time for discussion, recommends to the
Governance and Sustainability Committee the assignment of Board members to
serve on or chair Board committees, leads the Board's annual evaluation of the
CEO, and may retain or recommend to the Board or its committees the retention
of such advisors to assist the Board or its committees with their functions.
.
The Chair (and other directors) participate in shareholder engagements as
appropriate.
Key Areas of Board Oversight
Board of Directors' Role in Risk Oversight
Our Board is responsible for overseeing the business and affairs of the
Company. This general oversight responsibility includes oversight of strategy
and risk management, which the Board carries out as a whole or through its
committees. Among other things, the Board periodically discusses the Company's
enterprise risk management process, including its identification, management
and assessment of operations, strategic, financial and compliance risks.
Although the Board has ultimate responsibility for overseeing risk management,
it has delegated certain oversight responsibilities to committees with
specific areas of responsibility and experience. Each of the standing
committees regularly meets in executive session. The chairs of the committees
report to the Board significant risks, as identified by management, and the
measures undertaken by management for controlling and mitigating those risks.
The Board believes its risk management processes are well-supported by the
current Board leadership structure.
2024 Proxy Statement 33
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Item 1. Election of Directors
Board
Certain risk areas under the Board's role in risk oversight, which are not comprehensive of all of the risks they review, inc
Cybersecurity and Technology Risk Oversight Controlled Substance Distribution Risk Oversight
. .
Receives cybersecurity trends and regulatory updates Receives reports on the Company's Controlled
. Substances Monitoring Program (CSMP)
Receives information protection program strategy .
. Discusses the Company's compliance
Discusses implications for the Company's business strategy with federal and state-controlled
. substances regulatory requirements and
In FY 2024, to further increase Board fluency in cybersecurity and the effectiveness of the Company's CSMP
artificial intelligence (AI) matters, the Board participated in a
cybersecurity tabletop exercise as well as an educational session Receives updates on pending litigation and investiga
on AI developments with management and leading external experts
lude:
.
tions
pq
Board Committees
The chair of each standing committee reports to the Board on the significant risks, as identified by management, and the
measures undertaken by management for controlling and mitigating those risks.
Audit Committee Compensation and Talent Committee Governance and Sustainability Committee
. . .
Assists the Board in monitoring Oversees risk assessment Oversees matters related to corporate
integrity of financial and management related to governance and sustainability matters
statements; the independent the Company's compensation .
auditor's qualifications, policies and practices Oversees evaluation of the Board's
independence and performance; . performance, Board composition
critical audit matters and Oversees matters related to and refreshment, and committee
performance of the Company's our best talent strategy and composition and leadership
internal audit function talent development, employee .
. engagement and culture Evaluates the Company's governance practices
Coordinates with the Compliance and monitors shareholder feedback
Committee in overseeing
compliance with legal and
regulatory requirements
Compliance Committee Finance Committee
. .
Assists the Board in coordination Oversees risk assessment and management
with the Audit Committee in oversight processes related to, among other
of management's identification and evaluation of the Company's things, credit, capital structure,
principal legal and regulatory liquidity and insurance programs
compliance risks, related compliance .
program, and certain cybersecurity and technology-related risks Assists the Board in oversight of the
. financial aspects of significant acquisitions
Coordinates with the Audit Committee in monitoring and divestitures and other significant
compliance with legal and regulatory requirements transactions of a financial nature
.
Coordinates with the Compensation and
Talent Committee in incorporating
compliance and regulatory excellence
into executive compensation decisions
pq
Management
.
Responsible for the day-to-day management of the risks facing the Company,
including macroeconomic, financial, strategic, operational, public reporting,
legal, regulatory, political, cybersecurity, compliance and reputational risks
.
Carries out the risk management responsibility through a coordinated effort
among the various risk management functions within the Company
34 2024 Proxy Statement
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Item 1. Election of Directors
FY 2024 Report of the Compliance Committee
Formed in 2019, the Compliance Committee assists the Board in coordination
with the Audit Committee in overseeing management's identification and
evaluation of the Company's principal legal and regulatory compliance risks,
related compliance programs, and certain cybersecurity and technology-related
risks. The Compliance Committee includes directors with significant regulatory
expertise and a deep understanding of the healthcare industry.
In FY 2024, the Compliance Committee met four times, including one joint
meeting with the Audit Committee. Management communicated compliance program
and related updates during meetings and at other times as needed throughout
the year.
The Compliance Committee's key FY 2024 accomplishments include, but are not
limited to, the following:
.
Reviewed and discussed management's approach to its annual Compliance Program
risk assessment, identification of principal risk areas and evaluation of
emerging enforcement trends;
.
Met regularly with the Chief Legal Officer and Chief Compliance Officer,
including in separate closed sessions. The Compliance Committee also met with
other members of senior management throughout the year;
.
Provided oversight of regulatory programs, such as the Controlled Substances
Monitoring Program (CSMP) and the Enterprise Quality Program;
.
Participated in focused risk reviews illustrating how the Company's principal
risks apply to its businesses, including in the areas of pharmaceutical
distribution, clinical research and private label sourcing, including
discussions regarding the Federal Food, Drug & Cosmetic Act, Drug Supply Chain
Security Act and Uyghur Forced Labor Prevention Act;
.
Conferred with outside counsel on matters related to the CSMP and the results
of the Company's annual risk assessment process;
.
Reviewed the structure, staffing and resources of the Compliance and Ethics
Department and CSMP functions;
.
Discussed significant government inquiries, investigations and significant
matters raised through the Integrity Line and associated metrics and trends;
.
Participated in annual training on applicable U.S. Drug Enforcement Regulation
and U.S. Food and Drug Administration laws, regulations and guidance for drug
distributors, led by qualified external experts; and
.
Conducted a joint meeting with the Audit Committee to discuss, among other
things, the Compliance Program annual priorities, data strategy and
governance, cybersecurity and technology, and quality program initiatives.
2024 Proxy Statement 35
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Item 1. Election of Directors
Risk Assessment of Compensation Policies and Practices
We annually conduct a review of all incentive compensation plans utilized
throughout the Company, using a framework for risk assessment provided to us
by a nationally recognized outside compensation advisor. In conducting our
review, a detailed assessment of each incentive compensation plan, without
regard to materiality, is first prepared by representatives from the Company's
business units and then reviewed by senior executives of our Human Resources
Department. The review framework requires representatives of our business
units to examine and report on the presence of certain design elements under
both cash and equity incentive compensation plans that could encourage our
employees to incur excessive risk, such as the selection and documentation of
incentive metrics, the ratio of incentive to fixed compensation, the
year-over-year variability in payouts, the amount of management discretion and
the percentage of compensation expense as compared to the business units'
revenues. Consistent with our findings in past years, management concluded
that for FY 2024 our policies and practices do not create risks that are
reasonably likely to have a material adverse effect on the Company. A summary
of management's findings was reviewed with the Compensation and Talent
Committee at its April 2024 meeting.
The Compensation and Talent Committee discussed management's findings and
considered that the Company utilizes many design features that mitigate the
likelihood of encouraging excessive risk-taking behavior. Among these design
features are:
.
Multiple metrics across the entire enterprise that balance top-line,
bottom-line and cash management objectives
.
Linear payout curves, performance thresholds and caps
.
Reasonable goals and objectives, which are well-defined and communicated
.
Strong compensation recoupment policies
.
Training on our Code of Conduct and other policies that educate our employees
on appropriate behaviors and the consequences of taking inappropriate actions
.
Balance of short- and long-term variable compensation tied to a mix of
financial and operational objectives and the long-term value of our stock
.
The Compensation and Talent Committee's ability to exercise downward
discretion in determining payouts, including after consideration of
regulatory, compliance and legal issues
.
Rigorous stock ownership and retention guidelines
Based on the foregoing, the Compensation and Talent Committee concurred with
management that our compensation policies and practices do not create
inappropriate or unintended significant risk to the Company as a whole. We
believe that our incentive compensation plans do not provide incentives that
encourage risk-taking beyond the organization's ability to effectively
identify and manage significant risks, are compatible with effective internal
controls and the risk management practices of the Company, and are supported
by the oversight and administration of the Compensation and Talent Committee
with regard to our executive compensation program.
36 2024 Proxy Statement
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Item 1. Election of Directors
Shareholder Engagement
Who We Met With In FY 2024
We We A
reached out met with director
to shareholders representing over shareholders representing approximately participated in
51% 33% meetings with shareholders
of shares outstanding of shares outstanding representing approximately
19%
of shares outstanding
Our Primary Engagement Team What We Discussed
. .
Chair of the Board Board Composition
. .
Investor Relations Officer Board Skills and Diversity
. .
Corporate Secretary Board Evaluations
.
Management Succession Planning
.
Sustainability Metrics in Executive Compensation
.
Human Capital Management
.
Emissions Reduction Targets
Key Themes Discussed Recent McKesson Actions
Board Composition .
Board elected Deborah Dunsire, M.D. in June 2024 and Kevin M. Ozan
in January 2024, who collectively bring valuable senior executive
leadership experience and supplements the Board's skills in healthcare,
finance, accounting, M&A and risk management, among other items
Board Skills and Diversity .
We enhanced the Board skills
matrix linking experience
and skills to McKesson's
strategic priorities
.
We recruited 8 directors,
including 4 women and / or 4
racially or ethnically diverse
directors, in the past 5 years
Board Evaluations .
In FY 2023, an independent third-party
facilitator conducted the Board evaluations and
provided feedback on Board effectiveness and
considerations for strengthening Board oversight
Management Succession Planning .
As a result of our succession planning focus, we appointed new EVP, Chief
Legal Officer, Michele Lau, and EVP, Chief Information Officer and
Chief Technology Officer, Francisco Fraga - both of whom bring significant
leadership and depth of experience to their respective positions
Sustainability Metrics in .
Executive Compensation Beginning in FY 2023, we introduced
sustainability priorities as a
discretionary, downward modifier
in the Management Incentive Plan
Human Capital Management .
We continued to focus on delivering our Employee
Value Proposition - providing meaningful
work, demonstrating care for our employees
and ensuring a culture of belonging
Emissions Reduction Targets .
We received SBTi approval of our climate change
targets in FY 2023 and continue to provide updates
on progress to meeting our goals in shareholder
engagements efforts and FY 2024 Impact Report
2024 Proxy Statement 37
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Item 1. Election of Directors
Onboarding and Continuing Education
The Company provides new directors with a director orientation program to
familiarize them with, among other things, the duties and responsibilities of
directors, the Company's business, strategic plans, significant financial,
accounting and risk management matters, compliance programs, conflicts of
interest policies, Code of Conduct, Corporate Governance Guidelines, principal
officers, senior internal auditor and independent auditors. Management also
provides various director education opportunities throughout the year to all
directors. In FY 2024, among other topics, the directors participated in a
cybersecurity tabletop exercise as well as an educational session on AI
developments led by external experts to further increase the directors'
fluency in cybersecurity and AI matters.
Related Party Transactions Policy and Transactions with Related Persons
The Company has a Related Party Transactions Policy requiring approval or
ratification of certain transactions involving executive officers, directors
and nominees for director, beneficial owners of more than 5% of the Company's
common stock, and immediate family members of any such persons, where the
related person had, has or will have a direct material interest. There were no
reportable related party transactions for FY 2024.
Communications with Directors
Shareholders and other interested parties may communicate with any of the
directors, including the Independent Chair and any other, or all of the
directors as a group, by addressing their correspondence to the Board member
or members, c/o the Corporate Secretary's Office via e-mail to
boardchair@mckesson.com
or to
nonmanagementdirectors@mckesson.com
. The Corporate Secretary's office maintains a log of such correspondence
received by the Company that is addressed to members of the Board, other than
advertisements, solicitations or correspondence deemed by the Corporate
Secretary to be irrelevant to Board responsibilities. Directors may review the
log at any time and request copies of any correspondence received.
38 2024 Proxy Statement
-------------------------------------------------------------------------------
Director Compensation
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 n $115,000
Annual RSU Annual Cash 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
Details on the value of the annual cash retainers and RSU awards paid to each
non-employee director for FY 2024 are provided below. Non-employee directors
are paid their reasonable expenses for attending Board and committee meetings.
Directors who are employees of the Company or its subsidiaries do not receive
any compensation for service on the Board.
Cash Compensation
Each non-employee director receives an annual cash retainer of $115,000, and
the Independent Chair and chairs of the standing committees each receive an
additional annual cash retainer. Information on retainers paid in FY 2024 is
set forth in the Director Compensation table below. Directors may elect in
advance of a calendar year to defer up to 100% of their annual retainer
(including any standing committee chair or Board Chair retainer) under the
Company's Deferred Compensation Administration Plan III (DCAP III). The
minimum deferral period for any amounts deferred is five years; however,
notwithstanding the deferral election, if a director ceases to be a director
of the Company for any reason other than disability, retirement or death, the
account balance will be paid in a lump sum in the first January or July which
is at least six months following and in the year after the director's
separation from service. In the event of disability, retirement or death, the
account balance will be paid in accordance with the director's deferral
election. To be eligible for retirement, a director must have served on the
Board for at least six consecutive years prior to the director's separation. A
director may elect to have all or part of his or her DCAP III account credited
with earnings (or losses) based on the director's choice of a hypothetical
investment in certain funds available under the Company's 401(k) Retirement
Savings Plan (401(k) Plan). To the extent no such hypothetical investment
selection is made by the director, interest is credited at a default interest
rate equal to 120% of the long-term applicable federal rate published by the
Internal Revenue Service (IRS) for December of the immediately preceding
calendar year.
2024 Proxy Statement 39
-------------------------------------------------------------------------------
Director Compensation
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 $0.62 per share each quarter. Dividend equivalents
are not distributed until the shares underlying the RSUs are issued to the
director. Dividend equivalents on RSUs granted prior to April 28, 2020 are
credited to an account that accrues interest at the default interest rate set
forth in DCAP III, which is 120% of the long-term applicable federal rate
published by the IRS for December of the immediately preceding calendar year.
Interest accrual on dividend equivalents was eliminated for RSU awards granted
after April 28, 2020.
Director Stock Ownership Requirement
Under our Corporate Governance Guidelines, our non-employee directors are
expected to own shares or share equivalents of McKesson common stock equal to
six times the annual Board retainer, within six years of joining the Board.
40 2024 Proxy Statement
-------------------------------------------------------------------------------
Director Compensation
2024 Director Compensation Table
The following table sets forth information on the compensation paid to or
earned by each non-employee director for the fiscal year ended March 31, 2024.
Mr. Tyler is not included in this table as he is an employee of the Company
and, consequently, he does not receive any compensation for his service as a
director. The compensation paid to or earned by Mr. Tyler as an officer of the
Company is shown in the 2024 Summary Compensation Table. Dr. Dunsire is not
included in this table as she joined the Board on June 3, 2024.
Name Fees Earned Stock Total
or Paid in Cash Awards ($)
($) ($)
(1) (2)
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
(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.
2024 Proxy Statement 41
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ITEM 2
Ratification of Appointment of Deloitte & Touche LLP as the Company's Independent Registered Public Accounting Firm
We are asking our shareholders to ratify the selection of Deloitte & Touche LLP (D&T) as the Company's independent
registered public accounting firm for the fiscal year ending March 31, 2025 (FY 2025). Although ratification is not
required by our By-Laws or otherwise, the Board is submitting the selection of D&T to our shareholders for
ratification as a matter of good corporate practice. If shareholders fail to ratify the selection, the Audit
Committee will reconsider whether or not to retain D&T. Even if the selection is ratified, the Audit Committee in
its discretion may select a different registered public accounting firm at any time during the year if it determines
that such a change would be in the best interests of the Company and our shareholders. Representatives of D&T are
expected to be present at the Annual Meeting to respond to questions and to make a statement if they desire to do
so. For the fiscal years ended March 31, 2024 and 2023, professional services were performed by D&T, the member
firms of Deloitte Touche Tohmatsu, and their respective affiliates. Fees for those years were as follows:
FY 2024 FY 2023
Audit Fees $15,741,000 $15,965,000
Audit-Related Fees 2,537,000 1,675,000
TOTAL AUDIT AND AUDIT-RELATED FEES 18,278,000 17,640,000
Tax Fees 80,000 60,000
All Other Fees - -
TOTAL $18,358,000 $17,700,000
Audit Fees.
This category consists of fees for professional services rendered for the audit of the Company's consolidated annual
financial statements, review of the interim consolidated financial statements included in quarterly reports and
services that are normally provided by D&T in connection with statutory and regulatory filings or engagements. This
category also includes advice on accounting matters that arose during, or as a result of, the audit or the review of
interim financial statements, and foreign statutory audits required by non-U.S. jurisdictions.
Audit-Related Fees.
This category consists of fees for assurance and related services such as registration statements and comfort
letters, service organization control reports, accounting and financial reporting audit-related fees, due diligence
in connection with mergers, divestitures and acquisitions, and attest services related to financial reporting that
are not required by statute or regulation.
Tax Fees.
This category consists of fees for professional services rendered for U.S. and international tax compliance,
including services related to the preparation of tax returns and professional services.
Your Board recommends a vote
FOR
this ratification proposal.
42 2024 Proxy Statement
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Item 2. Ratification of Appointment of Deloitte & Touche LLP as the Company's Independent Registered Public Accounting Firm
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Registered Public Accounting Firm
Pursuant to applicable rules and its charter, the Audit Committee has sole
responsibility for appointing, setting compensation for and overseeing the
work of the independent registered public accounting firm. The Audit Committee
has a Pre-approval Policy for Audit and Non-audit Services under which the
Audit Committee pre-approves all audit and permissible non-audit services,
including audit-related and tax services, to be provided by D&T. The policy
delegates to the chair of the Audit Committee limited authority to pre-approve
services, which approvals are reviewed by the Audit Committee at its next
meeting. All of the services described in the D&T fee table were approved in
conformity with the Audit Committee's pre-approval process.
Audit Committee Report
The Audit Committee assists the Board of Directors in fulfilling its
responsibility for oversight of the quality and integrity of the Company's
financial reporting processes. The functions of the Audit Committee are
described in greater detail in the Audit Committee's written charter adopted
by the Company's Board of Directors, which may be found on the Company's
website at
www.mckesson.com
under the caption "Investors - Governance." The Audit Committee is composed
exclusively of directors who are independent under the applicable Securities
and Exchange Commission (SEC) and New York Stock Exchange (NYSE) rules and the
Company's independence standards. The Audit Committee's members are not
professionally engaged in the practice of accounting or auditing, and they
necessarily rely on the work and assurances of the Company's management and
the independent registered public accounting firm. Management has the primary
responsibility for the financial statements and the reporting process,
including the system of internal control over financial reporting. Deloitte &
Touche LLP (D&T) is responsible for performing an independent audit of the
Company's consolidated financial statements in accordance with generally
accepted auditing standards and expressing opinions on the conformity of those
audited financial statements with United States generally accepted accounting
principles and the effectiveness of the Company's internal control over
financial reporting. The Audit Committee has (i) reviewed and discussed with
management the Company's audited financial statements for the fiscal year
ended March 31, 2024; (ii) discussed with D&T the matters required to be
discussed by the applicable requirements of the Public Company Accounting
Oversight Board (PCAOB) and the SEC; (iii) received the written disclosures
and the letter from D&T required by applicable requirements of the PCAOB
regarding D&T's communications with the Audit Committee concerning
independence; and (iv) discussed with D&T its independence from the Company.
The Audit Committee further considered whether the provision of non-audit
related services by D&T to the Company is compatible with maintaining the
independence of that firm from the Company. The Audit Committee also has
discussed with management of the Company and D&T such other matters and
received such assurances from them as it deemed/appropriate.
The Audit Committee discussed with the Company's internal auditors and D&T the
overall scope and plans for their respective audits. The Audit Committee meets
regularly with the internal auditors and D&T, with and without management
present, to discuss the results of their audits, the evaluation of the
Company's internal control over financial reporting and the overall quality of
the Company's accounting and financial reporting.
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements
for the fiscal year ended March 31, 2024 be included in the Company's Annual
Report on Form 10-K for filing with the SEC.
Audit Committee of the Board of Directors
Dominic J. Caruso,
Chair
W. Roy Dunbar
Bradley E. Lerman
Kevin M. Ozan
Susan R. Salka
2024 Proxy Statement 43
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ITEM 3
Advisory Vote on Executive Compensation
As required by Section 14A of the Securities Exchange Act of 1934, as amended (Exchange Act), shareholders are
entitled to vote to approve, on a non-binding advisory basis, the compensation of named executive officers (NEOs) as
disclosed in this proxy statement. This item, commonly known as a "say-on-pay" proposal, gives shareholders the
opportunity to express their views on compensation for NEOs. The vote is not intended to address any specific item of
compensation, but rather the overall compensation of NEOs and the objectives, policies and practices described in
this proxy statement.
The Board endorses the compensation of our NEOs and believes our executive compensation program is designed to
attract, retain and incentivize management while aligning pay with performance, driving long-term value creation and
reflecting the views of shareholders. We believe that our executive compensation program aligns with McKesson's
financial results and positions us for continued growth. Accordingly, the Board recommends that you vote "FOR" the
following resolution at the Annual Meeting:
"RESOLVED, that the Company's shareholders approve, on an advisory basis, the compensation of the named executive
officers, as disclosed in the Company's proxy statement for the 2024 Annual Meeting of Shareholders pursuant to the
compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and
Analysis, the 2024 Summary Compensation Table and the other related tables and disclosure."
We were pleased that our executive compensation program was approved by shareholders at the 2023 Annual Meeting of
Shareholders with approximately 89% of votes cast in favor of the proposal. We received positive feedback from
shareholders regarding our pay practices, including our commitment to pay for performance and our use of at-risk,
performance-based compensation tied to key financial metrics. We remain committed to using the input and feedback we
receive from shareholders to inform our program design. Notably, after receiving feedback on the importance of
incorporating measurable sustainability metrics into our program, the Compensation and Talent Committee established
sustainability priority areas for all executive officers for FY 2024 as part of their annual cash incentive.
While the say-on-pay vote is advisory and therefore not binding, our Board and our Compensation and Talent Committee
value the diverse perspectives of our shareholders, which we receive through a number of channels, including the
say-on-pay vote. Since 2011, we have provided for an annual advisory vote on compensation of our NEOs. We believe
that the FY 2024 pay outcomes demonstrate our pay-for-performance philosophy, are consistent with shareholder
feedback, and ensure that our leadership team is aligned with our strategic goals. Detailed information on our
compensation program, including a full review of FY 2024 executive compensation, can be found in the Compensation
Discussion and Analysis beginning on page
46
of this proxy statement.
Your Board recommends a vote
FOR
the approval of the compensation of our NEOs, as disclosed in this proxy
statement pursuant to the compensation disclosure rules of the SEC.
44 2024 Proxy Statement
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Executive Compensation
A Letter From Our Compensation and Talent Committee
Dear Fellow Shareholders,
As members of the Compensation and Talent Committee, we thank you for your
continued investment in McKesson. We recognize the importance of our
responsibility for the design and oversight of our executive compensation
program, which aims to attract, retain and incentivize our executives. We
support a compensation philosophy that aligns our leadership team with the
interests of our shareholders and motivates our executives to maximize
long-term shareholder value while driving our business goals and key strategic
priorities. We are pleased to share with you the following "Compensation
Discussion and Analysis." Key highlights include:
Engaging with Our Shareholders.
We value our shareholders' input on our compensation program. Throughout our
proactive year-round engagement program, our Board solicits feedback from our
shareholders to ensure we are meeting expectations regarding our compensation
program, along with other key governance topics. Since our 2023 Annual
Meeting, we reached out to shareholders representing approximately 51% of our
outstanding common stock and engaged with shareholders representing
approximately 33% of our outstanding common stock. During these conversations,
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
(R)
.
In addition to this feedback gathered through our engagements with
shareholders, we also carefully review the results of our annual advisory vote
on executive compensation. We were pleased that shareholders at the 2023
Annual Meeting approved our executive compensation with approximately 89% of
votes cast in favor of our 2023 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.
Continued Alignment of Executive Compensation with Our Key Priorities.
Supporting the development of our Company's strategy and overseeing its
execution is our Board's most critical function. We remain focused on our four
key priorities related to our enterprise strategy: focus on people and
culture, expand oncology and biopharma platforms, drive sustainable core
growth, and evolve and grow the portfolio. As members of the Compensation and
Talent Committee, we play a critical role in ensuring that we have appropriate
incentives in place to drive performance in both the short term and the long
term, while navigating a rapidly changing market. We continue to assess our
compensation within the context of performance, the progress we are making on
our enterprise strategy, and our commitment to long-term shareholder value. We
were pleased with McKesson's performance against these goals in FY 2024.
Looking Ahead.
We appreciate the trust each of our shareholders has placed in McKesson. As we
look ahead, the Compensation and Talent Committee will continue to evaluate
our compensation program and ensure its structure and design continues to meet
the expectations of our shareholders. We thank all shareholders who we had the
opportunity to speak with over the course of the last year for their
perspectives. We will continue to solicit your feedback on these matters.
We look forward to continuing this dialogue and ask for your continued support.
The Compensation and Talent Committee
Donald R. Knauss,
Chair
Richard H. Carmona, M.D.
Deborah Dunsire, M.D.*
James H. Hinton
Kathleen Wilson-Thompson
*Dr. Dunsire joined the Board on June 3, 2024.
2024 Proxy Statement 45
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Executive Compensation
Compensation Discussion and Analysis
The Compensation Discussion and Analysis describes McKesson's executive
compensation program and reviews compensation decisions for our CEO and CFO,
our three other most highly compensated executive officers serving as of March
31, 2024, our former Executive Vice President, Chief Legal Officer and General
Counsel, Lori A. Schechter, who stepped down as an executive officer of the
Company in FY 2024, and our former Executive Vice President, Chief Information
Officer and Chief Technology Officer, Nancy Avila, whose employment terminated
during FY 2024 (collectively, our Named Executive Officers or "NEOs"). The
NEOs who were serving at fiscal year-end, which exclude Ms. Schechter and Ms.
Avila, are referred to collectively as our "current NEOs." For FY 2024, our
NEOs were as follows:
Name Title
Brian S. Tyler Chief Executive Officer
Britt J. Vitalone Executive Vice President and Chief Financial Officer
Michele Lau Executive Vice President and Chief Legal Officer
LeAnn B. Smith Executive Vice President and Chief Human Resources Officer
Thomas L. Rodgers Executive Vice President and Chief Strategy and Business Development Officer
Lori A. Schechter Former Executive Vice President, Chief Legal Officer and General Counsel
Nancy Avila Former Executive Vice President, Chief Information Officer and Chief Technology Officer
Overview
Business Strategy and Key Initiatives
At McKesson, we are focused on executing against clear priorities to drive
value. Part of that growth will come through our ability to work together, to
execute and to use the capabilities and assets across McKesson to innovate in
new and different ways. We will continue to be disciplined in our capital
deployment as we execute this strategy.
Focus on People Sustainable Core Growth Expand Oncology and Evolve and Grow the Portfolio
and Culture Biopharma Platforms
Commitment to Investing in Talent Scaled and Durable Differentiated Assets Digital Enablement and
Best Place to Work Distribution of Assets and Capabilities Artificial Intelligence
Leading Pharmaceutical Leadership in Access, Technology Modernization
and Medical Affordability, and Process Simplification
Supply Distribution Network and Adherence Solutions
In FY 2024, we remained focused on our enterprise strategy previously
communicated to all stakeholders and our transformation to a diversified
healthcare services company centered around a set of four Company priorities:
our focus on people and culture, driving sustainable growth in our core,
continuing to expand in the areas of oncology and biopharma services where we
have key differentiation, and evolving and growing the portfolio. We believe
the execution against these four key pillars is critical to our ability to
generate long-term sustainable growth.
46 2024 Proxy Statement
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Executive Compensation
FY 2024 Performance Highlights
In FY 2024, we delivered growth in revenue and adjusted earnings per share. We
are pleased with the momentum across all business segments. We made
significant progress against our company priorities, which included focusing
on our people and culture to attract and retain talent, delivering sustainable
core growth in our pharmaceutical and medical supply distribution networks,
expanding the oncology and biopharma platforms through strategic investments,
and evolving and growing the portfolio. The commitment to these priorities is
critical to our financial performance and sustainable long-term growth. During
FY 2024, we completed the acquisition of healthcare software solutions company
Compile, which is anticipated to provide a centralized commercial data
platform for McKesson and accelerate its capabilities in commercializing data
and providing insights to biopharma customers. McKesson remains strategically
positioned, with a broad set of differentiated assets and capabilities, to
support healthcare innovation and improve care in every setting. FY 2024
financial highlights are shown below.
(1)
Reflects continuing operations attributable to McKesson, net of tax.
(2)
Results are non-GAAP financial measures; refer to the accompanying definitions
and reconciliation schedules within Appendix A.
(3)
Reflects income from continuing operations before interest expense and income
taxes.
In our discussion of executive compensation throughout this proxy statement,
we refer to Adjusted Earnings per Diluted Share (Adjusted EPS), Adjusted
Operating Profit (AOP), Free Cash Flow (FCF), Return on Invested Capital
(ROIC) and Relative Total Shareholder Return (rTSR) as performance metrics
specifically used in our incentive programs. In Appendix A to this proxy
statement, we provide reconciliations from diluted earnings per share from
continuing operations, operating profit and operating cash flow calculated in
accordance with U.S. generally accepted accounting principles (GAAP) to the
non-GAAP metrics used in calculating performance under our incentive plans. A
description of ROIC, a non-GAAP metric, can be found on page
57
of this proxy statement.
2023 Say-on-Pay Vote and Continued Shareholder Engagement
We were pleased that our executive compensation program was approved by
shareholders at the 2023 Annual Meeting of Shareholders with approximately 89%
of votes cast in favor of our say-on-pay proposal. We received positive
feedback from shareholders regarding our pay practices, including our
commitment to a pay-for-performance philosophy and our use of at-risk,
performance-based compensation tied to key financial and sustainability
metrics that align with our business strategy. We appreciate our shareholders'
ongoing support for our executive compensation program.
We are committed to seeking feedback and soliciting input to ensure we meet
ongoing shareholder expectations regarding our compensation, sustainability,
governance and corporate responsibility practices. As we do every year, our
Board undertook a significant engagement effort to receive feedback from
shareholders regarding our executive compensation program and other matters of
importance to the Company and our shareholders. Since our 2023 Annual Meeting,
we proactively reached out to shareholders representing approximately 51% of
our outstanding common stock and engaged with shareholders representing
approximately 33% of our outstanding common stock. Shareholders voiced broad
support for our compensation design, in particular, the recent addition of the
downward-only modifier tied to our key sustainability priority areas.
Additional information on this modifier can be found on page
55
.
Our shareholders' views on executive compensation and corporate governance are
important to us, and we value and utilize their feedback and insights each
year. The Board and its committees regularly discuss and consider the feedback
we receive from shareholders through this engagement process, as well as the
outcome of the annual advisory vote on executive compensation. As we continue
to execute against our strategy, we look forward to ongoing shareholder
engagement, including dialogue focused on our executive compensation program
and corporate governance and sustainability practices. Additional information
on our shareholder engagement can be found on page
8
of this proxy statement.
2024 Proxy Statement 47
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Executive Compensation
Focus on Corporate Culture
At McKesson, the way we do business is just as important as the business
itself, so each executive is evaluated on his or her commitment to the
Company's "I
2
CARE" and "ILEAD" principles. I
2
CARE is the cultural foundation of the Company. Our I
2
CARE principles unify the Company and guide individual's behavior toward each
other, customers, vendors and other stakeholders. ILEAD is our common
definition and shared commitment to leadership. These leadership principles
serve as a guide to all our employees enterprise-wide. By embracing this
commitment, we bring out the best in ourselves and our teams to, ultimately,
enable McKesson to drive better outcomes for our company, our customers, and
the patients we impact for years to come.
Through our best talent strategy, we build successful teams by fostering a
culture of inclusion and belonging and believe it is an important element that
drives long-term shareholder value. McKesson was recognized for the tenth
consecutive year as an "Equality 100 Award Winner" by the Human Rights
Campaign Foundation; for the eleventh year in a row as a "Military Friendly
Employer" by GI Jobs; and as a "Best Place to Work" for Disability Inclusion
on the Disability Equality Index for the eighth consecutive year. Francisco
Fraga, our Executive Vice President, Chief Information Officer and Chief
Technology Officer, made the "100 Most Influential Hispanic Leaders for
Technology" list, by the Hispanic Technology Executive Council (HITEC). In
2023, McKesson was designated by the Age Friendly Institute as a "Certified
Age-Friendly Employer." McKesson was also named to several Seramount lists
including: "Best Company for Multicultural Women," "Top Company for Executive
Women," and a "Leading Inclusion Index Company." Additionally, in 2024,
McKesson was named by Newsweek as one of "America's Greatest Workplaces for
Diversity." McKesson also participated in the Hispanic Association on
Corporate Responsibility (HACR) Inclusion Index and the McKinsey Women in the
Workplace and Race in the Workplace studies.
Our vision for a healthier world begins with our employees, who bring our
purpose to life every day. As a company, we provide opportunities for growth
and development, programs for an inclusive workplace so our employees can be
their best, and initiatives that focus on employee health and wellness. We
strive to make inclusion and belonging integral to everything we do, because
we believe building a more inclusive future is everyone's responsibility. The
Company engaged internal and external experts to help leaders build skills in
these and other areas. To keep pace with rapidly evolving business and
industry needs, in 2023 we launched digital mindset upskilling to provide
opportunities for advancement in key areas of digital acumen. Additionally, in
2024, McKesson was recognized by Fortune as one of "America's Most Innovative
Companies" which reflects our commitment to being at the forefront of product
innovation, process innovation, and culture.
Corporate culture is a top priority for Brian Tyler, our CEO, who focuses on
talent and performance mindset, emphasizing the importance of an inclusive
work setting and winning as one team. Our Compensation and Talent Committee
considers executive officers' efforts on talent and culture matters when
determining compensation for our executive officers, including our NEOs.
48 2024 Proxy Statement
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Executive Compensation
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.
2024 Proxy Statement 49
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Executive Compensation
Best Practices in Compensation Governance
What We Do
Pay for performance Engage with shareholders on matters including executive
compensation and governance throughout the year
Emphasize long-term performance Align plan design with
business strategy
Design with mix of operational Balance mix of annual
and market-based metrics and long-term metrics
Develop sound financial goals Engage independent advisors
Maintain robust compensation recoupment Review Compliance Committee's assessment
policies with trigger for reputational harm of senior management performance
Manage use of equity incentive Drive progress on culture and
plan conservatively sustainability-related initiatives
Use double-trigger change in Review current compensation and estimated
control vesting provisions separation and change in control benefits
Maintain rigorous stock Mitigate undue risk-taking
ownership guidelines through sound plan design
What We Don't Do
Allow directors and executive officers Provide excise tax gross-ups
to hedge or pledge Company securities on change-in-control payments
Re-price or exchange stock options Accrue or pay dividend equivalents
without shareholder approval during performance periods
Provide tax gross-ups on executive perquisites other than for Pay above-market interest
tax equalization and business-related relocation expenses on deferred compensation
50 2024 Proxy Statement
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Executive Compensation
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.
Pay Element Performance Metric Rationale
Base Salary - Attracts and retains
high-performing executives
by providing
market-competitive fixed pay
Management Incentive Plan Adjusted EPS Rewards operational performance
(annual cash incentive) and profitability; important
driver of share price valuation
and shareholder expectations
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 Ensures sustainability Discretionary Downward-Only Modifier
Priority Areas priorities are aligned with
business strategic objectives
and Company purpose
Performance Stock Units 3-Year Cumulative Adjusted EPS Measures long-term earnings
(long-term equity incentive) power, drives returns for the
Company and directly correlates
to share price performance
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 - Directly aligns with value
(long-term equity incentive) delivered to shareholders
Target Pay
-
100% - 185% of Base Salary
60% of Target LTI Value
40% of Target LTI Value
2024 Proxy Statement 51
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Executive Compensation
Target Direct Compensation Mix
Our executive compensation program is predominantly variable and performance-bas
ed. As an executive's ability to impact operational performance increases, so
does the proportion of at-risk, variable compensation. Target LTI grows
proportionately as job responsibilities increase, which encourages our
executive officers to focus on McKesson's long-term success and aligns with
the long-term interests of our shareholders. The graphics below illustrate the
mix of fixed and variable compensation, and the annual MIP and LTI
compensation opportunities we provided to our CEO and other current NEOs for
FY 2024. These graphics also illustrate the proportion of target direct
compensation that is based on Company and share price performance.
FY 2024 CEO Compensation Mix FY 2024 Other Current NEOs Compensation Mix
FY 2024 Target Direct Compensation.
The Compensation and Talent Committee established FY 2024 target direct
compensation for our current NEOs as shown below. The committee takes a number
of factors into consideration when setting total target direct compensation
and each of its individual elements, including job responsibilities, time in
role, and competitive market data derived from our Compensation Peer Group.
Further information on the elements of compensation can be found in the
following pages, where each pay element is described in more detail.
Name Base Salary MIP Target MIP Target Target Long-Term Incentives Total Target
($) (Annual (Annual Direct
(1) Incentive) Incentive) Compensation
(% of Salary) ($) ($)
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 700,000 100 % 700,000 1,711,187 1,140,070 4,251,257
(2)
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
(1)
FY 2024 base salary figures shown above are as of the end of FY 2024.
(2)
Ms. Lau was appointed to the position of Executive Vice President and Chief
Legal Officer, effective January 1, 2024. The FY 2024 base salary and MIP
targets shown above represent her target compensation at the end of FY 2024.
Performance-Based Program with Rigorous Targets
Performance Targets Designed to Reward Stretch Performance
Each year, the Board reviews the annual and long-term plans developed by
management that are intended to drive operational performance results and
shareholder returns. After thorough review and discussion over multiple
meetings, the Compensation and Talent Committee establishes performance goals
for each of our corporate incentive plans to motivate our leaders to deliver a
high degree of business performance, while encouraging prudent risk-taking. We
structure performance-based compensation to reward an appropriate balance of
short-term and long-term financial and
52 2024 Proxy Statement
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Executive Compensation
strategic business results, with an emphasis on managing the business for
long-term results and shareholder value creation. Target-setting involves a
rigorous planning process that considers McKesson's strategic objectives,
market factors, the competitive environment, alignment to shareholders'
interests and other external factors. The committee also considers growth
expectations for our competitors, as well as the market outlook for our
industry.
Key Considerations in Development of Annual and Long-Term Goals
External Factors Competitive Environment McKesson's Objectives
. . .
Analyst & Shareholder Expectations Competitor Performance and Plans Historical Performance and Trends
. . .
Market Outlook Competitive Landscape Long Range Planning
. . .
Tax Policy Market Growth Capital Deployment Opportunities
. . .
Public Policy Industry Trends Long Range Corporate Strategy
Target Setting for Annual Plans
We set rigorous annual goals based on Company and industry outlooks for the
year, historical and projected growth rates for McKesson and its peers, and
performance expectations from investors and equity and credit analysts. The
annual incentive plan aligns with the Board-approved annual operating plan and
is designed so that target payout requires achievement of a high degree of
business performance, while encouraging prudent risk-taking. Financial goals
for our annual plans consider capital deployment decisions and are aligned
with progress toward our long-term plan. The Company's annual operating plan
serves as the basis of the annual earnings guidance we communicate to
investors. The annual operating plan contemplates the prior year's results and
the anticipated business environment. Our projected earnings growth reflects
market conditions, which also affect our peer group and analyst forecasts.
Cash flow goals are set by focusing on working capital efficiency, operating
plans by business unit, and other cash sources and uses, including interest
and income taxes. We established performance targets for FY 2024 that reflect
the following:
.
Adjusted EPS and Adjusted Operating Profit targets were set to achieve growth
of 14% and 7%, respectively, over FY 2023 results when excluding the impact of
COVID-19 related items and the European business operations and completed
divestitures; and
.
Free Cash Flow target was set in line with the FY 2024 external guidance
range, reported at the end of FY 2023, and is consistent with the Company's
five-year historical average.
Our executive officers' FY 2024 annual incentive plan also included the
Compensation and Talent Committee's discretionary consideration of progress on
key sustainability priority areas (for downward-only adjustment of payouts) in
order to ensure our sustainability priorities are aligned with business
strategic objectives and our Company purpose, which the committee believes
will create long-term shareholder value.
Consistent with prior years, our FY 2024 annual incentive plan targets assumed
capital deployment in the form of share repurchases and considered analyst
expectations for growth and peer companies' publicly disclosed performance as
well as public policy.
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.
2024 Proxy Statement 53
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Executive Compensation
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.
Base Salary
Base salary is the only fixed component of our executive officers' total cash
compensation and is intended to provide market-competitive pay to attract and
retain executives. When considering whether to increase a NEO's base salary,
the Compensation and Talent Committee takes into account competitive market
data derived from our Compensation Peer Group as well as the individual's
performance and experience. Following a comprehensive review, the committee
approved base salary increases for our NEOs, effective June 1, 2023.
The table below summarizes FY 2023 and FY 2024 base salaries for our current
NEOs.
Name FY 2023 Annual FY 2024 Annual
Base Salary Base Salary
(1) (1)
($) ($)
Brian S. Tyler 1,440,000 1,500,000
Britt J. Vitalone 875,000 1,000,000
(2)
Michele Lau - 700,000
(3)
LeAnn B. Smith 625,000 637,500
Thomas L. Rodgers 592,000 615,700
(1)
FY 2023 and FY 2024 base salary figures shown above are as of fiscal year end.
(2)
In November 2023, Mr. Vitalone received a base salary increase in connection
with the expansion of his role to include leadership of McKesson Technology
and mergers and acquisitions.
(3)
Ms. Lau became an executive officer on January 1, 2024, and did not have base
salary at the end of FY 2023.
54 2024 Proxy Statement
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Executive Compensation
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
(R)
, 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
2024 Proxy Statement 55
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Executive Compensation
.
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.
56 2024 Proxy Statement
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Executive Compensation
The table below summarizes MIP payouts to our current NEOs for FY 2024:
MIP Payout Earned =
114%
Name Eligible X MIP = MIP X Adjusted + AOP + FCF = FY 2024
Earnings Target Target EPS Result Result MIP
($) (%) Award Result (%) (%) Payout
(1) ($) (%) 25% 25% ($)
50% Weight Weight
Weight
Brian S. 1,490,000 185 % 2,756,500 122 % 111 % 100 % 3,142,410
Tyler
Britt J. 937,500 125 % 1,171,875 122 % 111 % 100 % 1,335,938
Vitalone
Michele Lau 175,000 100 % 175,000 122 % 111 % 100 % 199,500
(2)
LeAnn B. 635,418 100 % 635,418 122 % 111 % 100 % 724,377
Smith
Thomas L. 611,750 100 % 611,750 122 % 111 % 100 % 697,395
Rodgers
(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
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
2024 Proxy Statement 57
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Executive Compensation
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:
PSU Payout Earned: 200%
Name FY 2022 - X Cumulative + Average + Relative = FY 2022 -
(1) FY 2024 Adjusted EPS ROIC TSR FY 2024
Target PSUs Result Result Result Earned PSUs
(#) (%) (%) (%) (#)
50% Weight 25% Weight 25% Weight
Brian S. Tyler 36,013 200 % 200 % 200 % 72,026
Britt J. Vitalone 10,290 200 % 200 % 200 % 20,580
LeAnn B. Smith 995 200% ( 200% ( N/A 1,990
(2) 67% Weight 33% Weight
) )
Thomas L. Rodgers 3,823 200 % 200 % 200 % 7,646
(1)
Ms. Lau joined McKesson during FY 2024 and was not granted a FY 2022 - FY 2024
PSU target award.
58 2024 Proxy Statement
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Executive Compensation
(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.
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)
(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
(55
th
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 35
th
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.
2024 Proxy Statement 59
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Executive Compensation
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:
Name FY 2024 - FY 2026 FY 2024 - FY 2026
PSUs PSU Grant Value
(#) ($)
(1)
Brian S. Tyler 19,084 8,100,237
Britt J. Vitalone 6,150 2,610,358
Michele Lau 3,051 1,711,187
(2)
LeAnn B. Smith 2,828 1,200,339
Thomas L. Rodgers 2,475 1,050,534
(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
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:
Name FY 2024 FY 2024
RSUs RSU Grant Value
(#) ($)
(1)
Brian S. Tyler 13,736 5,400,171
Britt J. Vitalone 4,426 1,740,038
Michele Lau 2,274 1,140,070
(2)
LeAnn B. Smith 2,035 800,040
Thomas L. Rodgers 1,781 700,182
(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.
60 2024 Proxy Statement
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Executive Compensation
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.
2024 Proxy Statement 61
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Executive Compensation
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.
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.
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?
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.
62 2024 Proxy Statement
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Executive Compensation
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
(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.
2024 Proxy Statement 63
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Executive Compensation
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.
Setting Targets for the Fiscal Year Mid-Year Review Assessing Year-End Results
. . .
Compensation and Talent Committee's Compensation and Talent Compensation and Talent Committee
independent consultant uses Committee examines the design reviews current compensation
data on the Compensation Peer and purpose of all executive and estimated separation and
Group derived from independent compensation pay elements. change in control benefits.
surveys and disclosures by . .
public companies to inform the Compensation and Talent Committee reviews CEO presents an assessment of his
committee of competitive pay and considers feedback from shareholders individual performance results
levels for executive officers. and proxy advisory firms regarding executive to the Board and discusses his
. compensation program and policies. goals for the new fiscal year.
Our CEO, in consultation with . .
the Compensation and Talent Compensation and Talent Committee reviews Compensation and Talent
Committee's independent compliance with Stock Ownership Policy. Committee considers, among
compensation consultant and our . other things, progress on
EVP & CHRO, develops compensation Management updates the Compensation sustainability priority
recommendations for the and Talent Committee on areas, including regulatory,
other executive officers, for performance against incentive compliance and legal issues,
approval by the committee. plan pre-established targets. in making executive
. . compensation determinations.
Compensation and Talent Compensation and Talent Committee .
Committee sets target pay reflects on market trends and emerging Board conducts our CEO's performance
for all executive officers, practices in executive compensation and review, discusses his performance
including our CEO. their potential application at McKesson. 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.
64 2024 Proxy Statement
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Executive Compensation
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
.
2024 Proxy Statement 65
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Executive Compensation
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.
Name Stock Ownership Policy
Target Ownership Actual Ownership
Multiple of Multiple Expressed Multiple of Value of Shares Held
Base Salary in Dollars Base Salary by Executives
(1) 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
(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.
66 2024 Proxy Statement
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Executive Compensation
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 repricing 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.
2024 Proxy Statement 67
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Executive Compensation
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
Donald R. Knauss,
Chair
Richard H. Carmona, M.D.
Deborah Dunsire, M.D.*
James H. Hinton
Kathleen Wilson-Thompson
*Dr. Dunsire joined the Board on June 3, 2024.
Compensation and Talent Committee Interlocks and Insider Participation
The Compensation and Talent Committee is currently composed of the five
independent directors listed above. No member of the Compensation and Talent
Committee is, or was during FY 2024, a current or former officer or employee
of the Company or any of its subsidiaries. Additionally, during FY 2024, none
of our executive officers served on the board of directors or compensation and
talent committee of any entity that had one or more of its executive officers
serving on the Board or the Compensation and Talent Committee of the Company.
68 2024 Proxy Statement
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Executive Compensation
2024 Summary Compensation Table
The table below provides information regarding compensation and benefits
earned by our NEOs.
Name and Fiscal Salary Bonus Stock Non-Equity All Other Total
Principal Year ($) ($) Awards Incentive Plan Compensation ($)
Position (2) ($) Compensation ($)
(3) ($) (4)
Brian S. Tyler 2024 1,490,000 -0- 13,500,408 3,142,410 864,725 18,997,543
Chief Executive
Officer
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. 2024 937,500 -0- 4,350,396 1,335,938 158,827 6,782,661
Vitalone
Executive Vice
President
and Chief
Financial
Officer
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 2024 175,000 1,500,000 6,851,529 199,500 80,225 8,806,254
Executive Vice
President
and Chief
Legal Officer
LeAnn B. Smith 2024 635,418 100,000 2,000,379 724,377 80,941 3,541,115
Executive Vice
President
and Chief Human
Resources
Officer
2023 515,083 100,000 2,050,834 676,177 33,435 3,375,529
Thomas L. 2024 611,750 -0- 1,750,716 697,395 119,115 3,178,976
Rodgers
Executive Vice
President and Chief
Strategy and Business
Development Officer
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. 2024 843,833 -0- 2,900,395 961,970 134,765 4,840,963
Schechter
(1)
Former Executive
Vice President,
Chief
Legal
Officer and
General Counsel
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 2024 505,250 -0- 2,050,646 575,985 942,043 4,073,924
(1)
Former Executive
Vice President,
Chief
Information
Officer and
Chief Technology
Officer
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
(1)
Ms. Schechter stepped down from her position as Executive Vice President,
Chief Legal Officer and General Counsel effective December 31, 2023 and
retired from the Company on June 3, 2024. Ms. Avila ceased to be Chief
Information Officer and Chief Technology Officer effective October 2, 2023 and
involuntarily terminated from the Company without cause on January 1, 2024.
For more details, please refer to "Executive Transitions during FY 2024" on
page
49
.
(2)
Bonus amounts shown represent the following with respect to FY 2024:
To address cash compensation forfeited at her prior employer, Ms. Lau received
a cash sign-on award of $1,500,000, which was paid upon hire. Ms. Lau will be
required to repay a pro-rated portion of her cash sign-on award should she
voluntarily separate from the Company within two years of her hire date.
Ms. Smith received a cash sign-on award with a cumulative value of $300,000
when she was hired in April 2021. $100,000 was paid upon hire in April 2021,
$100,000 was paid in April 2022, and the remaining $100,000 was paid in April
2023.
(3)
Stock Award amounts shown represent the aggregate grant date fair value of
stock-based awards calculated in accordance with ASC Topic 718. These values
exclude estimated forfeitures and may not reflect compensation actually
received by our executive officers. The assumptions used to calculate the
value of these awards can be found in 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. For
awards that are not subject to performance conditions, such as RSUs, the
maximum award levels would not result in awards greater than disclosed in the
table above. For awards that are subject to performance conditions, such as
PSUs, we report the value at grant date based upon the probable outcome of
such conditions consistent with our estimate of aggregate compensation cost to
be recognized over the service period determined under ASC Topic 718,
excluding the effect of estimated forfeitures.
2024 Proxy Statement 69
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Executive Compensation
The following represents the aggregate value based on the maximum number of
shares that may be earned for PSU awards computed in accordance with ASC Topic
718 for each of the fiscal years presented above: Mr. Tyler, $16,200,475,
$15,600,590 and $14,700,661; Mr. Vitalone, $5,220,716, $4,800,876 and
$4,200,466; Ms. Lau, $3,422,373; Ms. Smith, $2,400,677 and $2,100,736; Mr.
Rodgers, $2,101,068, $1,741,000 and $1,560,597; Ms. Schechter, $3,480,477,
$3,126,712 and $3,126,437; and Ms. Avila, $2,461,111, $2,401,210 and
$1,740,177.
To address equity compensation forfeited at her prior employer, Ms. Lau also
received a new hire RSU award of $4,000,000, which will vest 50% on each of
the first and second anniversaries of the grant date.
(4)
All Other Compensation components shown in the table below represent the
following amounts with respect to FY 2024:
Name 401(k) Plan Nonqualified Financial Executive International Other Total All Other
Match Deferred Counseling Officer Assignment Perquisites Compensation
($) Compensation ($) Security and Housing and Severance ($)
(a) Plan Match (c) Policy Relocation Benefits
($) ($) ($) ($)
(b) (d) (e) (f)
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
(a)
Matching Contributions to 401(k) Plan:
These are amounts contributed by the Company to each NEO's account under our
401(k) plan.
(b)
Matching Contributions to Nonqualified Deferred Compensation Plans:
As described below in the narrative following the 2024 Nonqualified Deferred
Compensation Table, the SRSP and the DCAP III each provide for matching
contributions. The amount contributed by the Company to each NEO's SRSP
account was as follows: Mr. Tyler, $412,638; Mr. Vitalone, $104,417; Ms. Lau,
$0; Ms. Smith, $39,264; Mr. Rodgers, $58,403; Ms. Schechter, $27,173; and Ms.
Avila, $0. The Company made no contributions to the DCAP III accounts of the
NEOs, except for Ms. Schechter who received a contribution of $59,580.
(c)
Financial Counseling Services:
These amounts represent the value of financial counseling services provided to
each NEO.
(d)
Executive Officer Security Policy:
Company Aircraft:
Mr. Tyler is required under our security policy to use Company aircraft for
security, productivity and privacy reasons. The aggregate incremental cost of
personal use of Company-provided aircraft for Mr. Tyler in FY 2024 was
$313,161. In accordance with our security policy, Mr. Tyler approved Mr.
Vitalone's personal use of the Company's aircraft. The aggregate incremental
cost of personal use of Company-provided aircraft for Mr. Vitalone in FY 2024
was $18,722. To calculate this cost, the Company determines the total variable
annual operating cost for each aircraft, such as fuel, trip-related
maintenance, landing and parking fees, crew expenses, supplies and catering.
The total variable operating cost is then averaged for all flight hours flown
and multiplied by the total number of personal flight hours for each NEO.
Fixed annual costs that do not change based on usage, such as pilots'
salaries, home hangar expenses, general taxes, routine maintenance and
insurance, are excluded from the incremental cost calculation. If an aircraft
flies empty before picking up or after dropping off a passenger flying for
personal reasons, and the empty flight is not related to any other
business-related travel, this "deadhead" segment is included in the
incremental cost calculation for determining personal use. Subject to
availability and space, occasionally personal guests may accompany our named
executive officers on business or personal travel, but in these instances
there was no incremental cost to the Company.
Home Security:
The Company paid $14,803 for the installation of home security devices for Mr.
Tyler, based on an evaluation performed by an independent security consultant.
For a complete description of Mr. Tyler's security benefit, please refer to
the section entitled "Other Compensation and Benefits" on page
61
.
The Company does not reimburse our NEOs for taxes due on imputed income for
items or services provided under the Executive Officer Security Policy.
70 2024 Proxy Statement
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Executive Compensation
(e)
International Assignment and Housing Relocation:
International Assignment:
Mr. Tyler served on international assignment as Chairman of the Management
Board of McKesson Europe for approximately two years, ending with his
appointment to the position of President and Chief Operating Officer, at which
time Mr. Tyler and his family repatriated to the United States. Our policies
on temporary international assignments and tax equalization are designed to
mitigate the inconvenience of such an assignment by covering expenses in
excess of what the employee would have incurred had the employee remained in
their home country. Accordingly, certain benefits are provided on an income
tax-free basis to the employee, and the Company provides tax equalization
payments to the employee to ensure that the employee bears a tax burden
comparable to their U.S. tax burden on income that is unrelated to the
international assignment. These benefits are provided to all Company employees
covered by the policies. For Mr. Tyler, All Other Compensation includes
$12,000 for income tax gross-ups paid during FY 2024 pursuant to the Company's
relocation policy.
Housing Relocation:
For Ms. Lau, includes $36,970 for the value of relocation expenses paid by the
Company to her or on her behalf, and $22,887 for income tax gross-ups pursuant
to the Company's relocation policy. These relocation benefits are consistent
with the benefits provided to all employees who relocate in connection with
their employment with the Company.
(f)
Other Perquisites and Severance Benefits:
Annual Physical Examinations:
For Mr. Tyler, Mr. Vitalone, Ms. Smith, Mr. Rodgers, Ms. Schechter, and Ms.
Avila, includes $3,577, $4,242, $10,128, $13,473, $9,066, and $7,997,
respectively, in Company-paid expenses related to annual physical examinations.
McKesson Foundation Company Matching Contributions:
For Mr. Tyler, Ms. Smith, Mr. Rodgers, Ms. Schechter, and Ms. Avila, includes
$5,000, $103, $1,793, $5,000, and $5,000, respectively, in matching
contributions made by the McKesson Foundation to charitable organizations. For
Mr. Tyler, Ms. Lau and Ms. Schechter includes $2,500, $2,500, and $2,500,
respectively, donated by the McKesson Foundation to a charitable organization
in respect of their service as a director of the organization.
Severance Benefit:
For Ms. Avila, includes severance benefits of 16 months' salary continuation
having an aggregate value of $897,600.
Other:
For Mr. Tyler and Mr. Rodgers, includes a one-time payment of $68,248 and
$14,000, respectively, to make them whole with respect to a penalty tax
assessed by the IRS due to an inadvertent Company administrative error.
2024 Proxy Statement 71
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Executive Compensation
2024 Grants of Plan-Based Awards Table
The table below provides information on plan-based awards granted to our NEOs
during the fiscal year ended March 31, 2024:
Name Type of Grant Estimated Estimated All Other Grant
Award Date Future Payouts Future Payouts Stock Date Fair
Under Non-Equity Under Equity Awards: Value of
Incentive Incentive Number Stock and
Plan Awards Plan Awards of Shares Option
(1) (2) of Stock Awards
or Units ($)
(#) (5)
Threshold Target Maximum Threshold Target Maximum
($) ($) ($) (#) (#) (#)
(3) (4)
Brian S. RSU 5/23/2023 13,736 5,400,171
Tyler
PSU 5/23/2023 9,542 19,084 38,168 8,100,237
MIP 1,378,250 2,756,500 5,513,000
Britt J. RSU 5/23/2023 4,426 1,740,038
Vitalone
PSU 5/23/2023 3,075 6,150 12,300 2,610,358
MIP 585,938 1,171,875 2,343,750
Michele RSU 2/9/2024 2,274 1,140,070
Lau
RSU 2/9/2024 7,979 4,000,272
(6)
PSU 2/9/2024 1,526 3,051 6,102 1,711,187
MIP 87,500 175,000 350,000
LeAnn B. Smith RSU 5/23/2023 2,035 800,040
PSU 5/23/2023 1,414 2,828 5,656 1,200,339
MIP 317,709 635,418 1,270,836
Thomas L. RSU 5/23/2023 1,781 700,182
Rodgers
PSU 5/23/2023 1,238 2,475 4,950 1,050,534
MIP 305,875 611,750 1,223,500
Lori A. RSU 5/23/2023 2,951 1,160,156
Schechter
PSU 5/23/2023 2,050 4,100 8,200 1,740,239
MIP 421,917 843,833 1,687,666
Nancy RSU 5/23/2023 2,086 820,090
Avila
PSU 5/23/2023 1,450 2,899 5,798 1,230,556
MIP 252,625 505,250 1,010,500
(1)
Amounts shown represent the range of possible cash payouts under the MIP for
the FY 2024 performance period. Amounts actually earned under the FY 2024 MIP
are included in the 2024 Summary Compensation Table under the column titled
"Non-Equity Incentive Plan Compensation." Information regarding the operation
of the MIP is provided above in the section titled "Each Compensation Element
Serves a Unique Purpose."
(2)
Amounts shown for PSUs represent the range of possible payouts for the FY 2024
- FY 2026 performance period that the Compensation and Talent Committee
established at its May 2023 meeting with respect to annual PSU awards. Payout
decisions for these PSU awards will be made in May 2026.
(3)
Amounts shown for MIP represent 50% of the target payout for FY 2024, which is
the threshold award payout.
(4)
Amounts shown for the annual PSUs represent 50% of the target payout for the
FY 2024 - FY 2026 performance period, which is the threshold award payout.
(5)
Amounts shown reflect the aggregate grant date fair values of RSU and PSU
awards computed in accordance with ASC Topic 718, and do not reflect actual
realized values. 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.
(6)
For more details on Ms. Lau's sign-on RSU award, please see the "Executive
Transitions during FY 2024" section on page
49
.
72 2024 Proxy Statement
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Executive Compensation
2024 Outstanding Equity Awards Table
The table below provides information on option awards and stock awards held by
our NEOs as of March 31, 2024:
Name Stock Awards
Number of Shares or Market Value of Shares Equity Incentive Plan Equity Incentive
Units of Stock That or Units of Stock That Awards: Number of Plan Awards: Market
Have Not Vested Have Not Vested Unearned Shares, Units or Payout Value
(#) ($) or Other Rights That of Unearned Shares,
(1) (2) Have Not Vested Units or Other Rights
(#) That Have Not Vested
(3) ($)
(2)
Brian S. Tyler 32,613 17,508,289 154,570 82,980,905
Britt J. Vitalone 10,052 5,396,416 46,536 24,982,852
Michele Lau 10,253 5,504,323 6,102 3,275,859
LeAnn B. Smith 4,165 2,235,980 13,046 7,003,745
Thomas L. Rodgers 3,842 2,062,578 17,548 9,420,644
Lori A. Schechter 6,837 3,670,443 32,412 17,400,382
Nancy Avila -0- -0- 8,526 4,577,183
(1)
Stock awards vest as follows:
For Mr. Tyler, 4,578 shares on May 23, 2024; 5,272 shares on May 24, 2024;
8,333 shares on May 25, 2024; 4,579 shares on May 23, 2025; 5,272 shares on
May 24, 2025; and 4,579 shares on May 23, 2026.
For Mr. Vitalone, 1,475 shares on May 23, 2024; 1,622 shares on May 24, 2024;
2,381 shares on May 25, 2024; 1,475 shares on May 23, 2025; 1,623 shares on
May 24, 2025; and 1,476 shares on May 23, 2026.
For Ms. Lau, 4,747 shares on February 9, 2025; 4,748 shares on February 9,
2026; 758 shares on February 9, 2027.
For Ms. Smith, 678 shares on May 23, 2024; 446 shares on May 24, 2024; 222
shares on May 25, 2024; 507 shares on February 10, 2025; 678 shares on May 23,
2025; 447 shares on May 24, 2025; 508 shares on February 10, 2026; and 679
shares on May 23, 2026.
For Mr. Rodgers, 593 shares on May 23, 2024; 588 shares on May 24, 2024; 885
shares on May 25, 2024; 594 shares on May 23, 2025; 588 shares on May 24,
2025; and 594 shares on May 23, 2026.
For Ms. Schechter, 983 shares on May 23, 2024; 1,057 shares on May 24, 2024;
1,772 shares on May 25, 2024; 984 shares on May 23, 2025; 1,057 shares on May
24, 2025; and 984 shares on May 23, 2026.
(2)
Based on the $536.85 closing price of the Company's common stock as reported
by the NYSE on March 28, 2024, the last trading day of our fiscal year.
(3)
SEC rules require us to disclose the threshold payout amounts for PSU awards
outstanding as of the end of the fiscal year, except that if performance
during the last completed fiscal year has exceeded threshold performance, the
disclosure is based on the next higher performance measure. The value included
in this column includes actual payout value with respect to FY 2022 - FY 2024
PSU awards, which exceeded target performance levels.
Outstanding PSUs actually earned, if any, will pay out in May 2024, May 2025
and May 2026. The following amounts reflect maximum payouts for FY 2023 - FY
2025 PSUs and FY 2024 - FY 2026 PSUs granted to our NEOs:
Completion of the three-year PSU performance period ending March 31, 2024
- Mr. Tyler, 72,026 shares; Mr. Vitalone, 20,580 shares; Ms. Lau, 0 shares;
Ms. Smith, 1,990 shares; Mr. Rodgers, 7,646 shares; Ms. Schechter, 15,318
shares; and Ms. Avila, 8,526 shares;
Completion of the three-year PSU performance period ending March 31, 2025
- Mr. Tyler, 44,376 shares; Mr. Vitalone, 13,656 shares; Ms. Lau, 0 shares;
Ms. Smith, 5,400 shares; Mr. Rodgers, 4,952 shares; Ms. Schechter, 8,894
shares; and Ms. Avila, 0 shares.
Completion of the three-year PSU performance period ending March 31, 2026
- Mr. Tyler, 38,168 shares; Mr. Vitalone, 12,300 shares; Ms. Lau, 6,102
shares; Ms. Smith, 5,656 shares; Mr. Rodgers, 4,950 shares; Ms. Schechter,
8,200 shares; and Ms. Avila, 0 shares.
2024 Proxy Statement 73
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Executive Compensation
2024 Option Exercises and Stock Vested Table
The table below provides information on stock options exercised and stock
awards vested with respect to our NEOs during the fiscal year ended March 31,
2024:
Name Option Awards Stock Awards
Number of Shares Value Realized Number of Shares Value Realized
Acquired on Exercise on Exercise Acquired on Vesting on Vesting
(#) ($) (#) ($)
(1) (2)
Brian S. Tyler 82,092 22,736,547 99,429 39,072,268
Britt J. Vitalone -0- -0- 28,260 11,105,753
Michele Lau -0- -0- -0- -0-
LeAnn B. Smith -0- -0- 2,705 1,123,716
Thomas L. Rodgers -0- -0- 11,087 4,364,995
Lori A. Schechter -0- -0- 22,271 8,750,995
Nancy Avila -0- -0- 14,367 5,820,976
(1)
Amount shown represents values realized, calculated as the difference between
the market price of the Company's common stock on the date of exercise and the
exercise price.
(2)
Amount shown represents the aggregate fair market values of the Company's
common stock realized upon the vesting of RSUs. In addition to the amount
realized upon vesting of RSUs, participants received a cash payment of
dividend equivalents which for Mr. Tyler was $101,138, for Mr. Vitalone was
$28,962, for Ms. Lau was $0, for Ms. Smith was $8,976, for Mr. Rodgers was
$14,072, for Ms. Schechter was $22,172, and for Ms. Avila was $22,309.
74 2024 Proxy Statement
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Executive Compensation
2024 Nonqualified Deferred Compensation Table
The table below provides information on the contributions, earnings and
account balances for our NEOs participating in a Company-sponsored
nonqualified deferred compensation program. The nonqualified deferred
compensation plans referenced in the table below are described in the
narrative immediately following the table.
Name Executive Registrant Aggregate Aggregate Aggregate
Contributions in Contributions in Earnings in Withdrawals/ Balance at Last
Last Fiscal Year Last Fiscal Year Last Fiscal Year Distributions Fiscal Year-End
($) ($) ($) ($) ($)
(1) (2) (3) (4)
Brian S. Tyler
SRSP Plans 515,797 412,638 372,548 -0- 3,683,540
DCAP Plans -0- -0- 232,556 -0- 4,615,229
Dividend Equivalents -0- 81,142 -0- 101,138 112,753
Britt J. Vitalone
SRSP Plans 130,521 104,417 75,494 -0- 667,869
DCAP Plans -0- -0- 11,265 -0- 122,019
Dividend Equivalents -0- 24,661 -0- 28,962 34,008
Michele Lau
SRSP Plans -0- -0- -0- -0- -0-
DCAP Plans -0- -0- -0- -0- -0-
Dividend Equivalents -0- -0- -0- -0- -0-
LeAnn B. Smith
SRSP Plans 49,080 39,264 10,852 -0- 113,429
DCAP Plans -0- -0- -0- -0- -0-
Dividend Equivalents -0- 10,927 -0- 8,976 10,698
Thomas L. Rodgers
SRSP Plans 73,004 58,403 81,579 -0- 599,917
DCAP Plans -0- -0- -0- -0- -0-
Dividend Equivalents -0- 9,326 -0- 14,072 12,766
Lori A. Schechter
SRSP Plans 33,967 27,173 87,831 -0- 782,767
DCAP Plans 1,489,500 59,580 470,415 -0- 7,606,152
Dividend Equivalents -0- 17,053 -0- 22,172 27,422
Nancy Avila
SRSP Plans -0- -0- -0- -0- -0-
DCAP Plans -0- -0- -0- -0- -0-
Dividend Equivalents -0- 11,390 -0- 22,309 -0-
(1)
Amounts shown reflect deferrals into SRSP and/or DCAP III accounts. These
amounts are reported as compensation in the 2024 Summary Compensation Table
above.
(2)
Amounts shown represent Company contributions to SRSP and/or DCAP III
accounts, as well as dividend equivalents on unvested RSUs. All recipients of
RSUs, including our NEOs, receive dividend equivalents at the same dividend
rate received by the Company's common stock investors, which is currently
$0.62 per share per quarter.
(3)
Amounts shown include earnings (or losses) on compensation deferred into the
current SRSP and DCAP III plans and their respective predecessor plans.
(4)
Amount shown represents dividend equivalents that were distributed in cash
upon vesting of the related RSUs.
2024 Proxy Statement 75
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Executive Compensation
Supplemental Retirement Savings Plan
The SRSP was originally adopted by the Board on January 1, 2005 and is the
successor plan to the Supplemental Profit-Sharing Investment Plan (SPSIP),
which was frozen effective December 31, 2004. The SRSP includes deferral and
distribution provisions intended to comply with IRC Section 409A. The SRSP was
most recently amended effective July 30, 2019.
U.S. employees, including NEOs, may elect to participate in the SRSP.
Participants may elect to defer, in whole percentages, from 1.0% to 5.0% of
covered compensation in excess of the IRC Section 401(a)(17) limit (currently,
$345,000 per year). "Covered compensation" under this plan includes base
salary and MIP payouts. An election to participate in the SRSP remains in
effect until the participant informs the plan administrator that he or she
wishes to cease participation. In that case, the election to cease
participation becomes effective at the beginning of the next calendar year. At
an employee participation level of 5.0%, the Company contributes an additional
4.0% of the participant's pay as a matching contribution, consistent with the
terms of our 401(k) Plan (Company Match). Participants are 100% vested in both
the Company Match and their own contributions in the SRSP.
Participants in the SRSP and SPSIP make a distribution election at the time
they elect to enroll in the plan. Upon separation from service, distributions
may be made in either a lump sum or in installments. If the separation from
service is not due to retirement, disability or death, the entire account
balance is distributed as a lump sum at a time such payment would comply with
IRC Section 409A. Distributions under the SRSP and the SPSIP are subject to
ordinary income taxes.
Accounts in the SRSP are credited with earnings (or losses) based on the
employee's choice of hypothetical investments in certain of the funds offered
under our 401(k) Plan. In the event no such hypothetical investment choice is
made, interest is credited to the participant's account at a default interest
rate, which is 120% of the long-term applicable federal rate published by the
IRS for December of the immediately preceding calendar year.
Unlike tax-qualified retirement accounts, assets for the payment of benefits
under the SRSP and SPSIP are not held in trust. Distributions under these
plans are paid from the Company's general corporate funds. Participants and
their beneficiaries are unsecured general creditors of the Company with no
special or prior right to any Company assets for payment of any obligation
under the plans.
76 2024 Proxy Statement
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Executive Compensation
Deferred Compensation Administration Plan III
The DCAP III was adopted by the Board on January 1, 2005 and is the successor
plan to the Deferred Compensation Administration Plan II, which was frozen
effective December 31, 2004. The DCAP III includes deferral and distribution
provisions intended to comply with IRC Section 409A. The DCAP III was most
recently amended effective July 30, 2019.
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. Participants may elect to defer into the DCAP III up to 75% of
their annual base salary and up to 90% of their annual MIP payout. Unlike the
SRSP, an employee's election to participate in the DCAP III is in effect for
only one calendar year. Amounts deferred under the DCAP III are credited to a
book account, and credited with earnings (or losses) based on the employee's
choice of hypothetical investments in certain of the funds offered under the
401(k) Plan. In the event no such hypothetical investment choice is made,
interest is credited to the participant's account at a default interest rate,
which is 120% of the long-term applicable federal rate published by the IRS
for December of the immediately preceding calendar year (DCAP Rate).
Participants in the DCAP III make a distribution election at the time they
elect to defer compensation. Distributions may be made at one or more
specified dates in the future or upon separation from service in either a lump
sum or in installments. If the separation from service is not due to
retirement, disability or death, the entire account balance is distributed as
a lump sum at a time such payment would comply with IRC Section 409A.
Distributions under the DCAP plans are subject to ordinary income taxes.
Earnings that are deferred into the DCAP III are not considered "covered
compensation" for 401(k) Plan or SRSP purposes, as defined by those plans. No
401(k) Plan or SRSP employee deductions are taken from compensation deferred
into the DCAP III. To keep the DCAP III participants whole with respect to
their Company Match, an amount is credited to a participant's DCAP III account
equal to 4% of the amount deferred.
As with the SRSP and the SPSIP, assets for the payment of benefits under the
DCAP plans are not held in trust. Distributions are paid from the Company's
general corporate funds. Participants and their beneficiaries are unsecured
general creditors of the Company with no special or prior right to any Company
assets for payment of any obligation under the plans.
Severance and Change in Control Policies
Executive Severance Policy
The Severance Policy for Executive Employees, as amended and restated April
26, 2022 (Executive Severance Policy), applies in the event an executive
officer is terminated by the Company for reasons other than for "Cause" and
the termination is not covered by the Company's CIC Policy, which is described
below. Cause has the definition set forth in the Executive Severance Policy,
which was included as an exhibit to the Company's Annual Report on Form 10-K,
as filed with the SEC on May 9, 2022.
The benefit payable to participants under the Executive Severance Policy is a
minimum of 12 months' base salary, plus one month's base salary per year of
service, up to a maximum of 24 months. Benefits under this plan are paid as
salary continuation and are reduced or eliminated by any income the executive
receives under the Company's short-term disability plan. Participants must
execute a general release of the Company and its affiliates in order to
receive severance benefits. In addition, benefits are subject to forfeiture
and clawback if (i) the participant violates any continuing restrictive
covenant obligation under any Company agreement, plan or policy, or if the
participant does not comply with obligations under the release, (ii) following
termination the Company determines that the participant engaged in any certain
act or omission during employment that would have entitled the Company to
terminate the participant's employment for Cause or (iii) as determined by the
Compensation and Talent Committee in its sole discretion, the participant has
engaged in any other conduct not in good faith that is injurious to the
Company.
In addition to the benefits under the Executive Severance Policy, award
agreements under our 2022 Stock Plan and 2013 Stock Plan provide for
accelerated vesting of RSUs that would have vested within six months following
termination and continued participation in PSU awards that would have paid out
within six months of termination in the event an executive
2024 Proxy Statement 77
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Executive Compensation
officer is terminated by the Company for reasons other than for "cause."
Alternatively, if the officer has attained normal retirement (age 60 with at
least 10 years of service) or would be eligible for normal retirement within
six months of termination, the officer is entitled to continued vesting of RSU
awards and continued participation in PSU awards, provided that the award was
granted at least one year before termination.
Change in Control Policy
The Change in Control Policy for Selected Executive Employees, amended and
restated effective January 28, 2020 (CIC Policy), provides for severance
payments to eligible executive employees of the Company (including executive
officers). Payments under the CIC Policy are paid only upon a qualifying
separation from service that occurs within six months prior to, or 24 months
following, a "Change in Control." For purposes of the CIC Policy, a qualifying
separation from service is one that is by the Company other than for "Cause"
and either proximate to or instigated by the party involved in, or otherwise
in connection with, the Change in Control, or one that is initiated by the
participant for "Good Reason." Cause and Good Reason have the definitions set
forth in the CIC Policy, which was included as an exhibit to the Company's
Annual Report on Form 10-K, as filed with the SEC on May 22, 2020. A Change in
Control is defined as the occurrence of any change in ownership of the
Company, a change in the effective control of the Company or a change in the
ownership of a substantial portion of the assets of the Company, all as
defined in IRC Section 409A.
The CIC Policy expands eligibility for benefits to a larger employee group
than is eligible under the Executive Severance Policy. Tier one participants
(which would include any NEO participating in the CIC Policy) are eligible for
a cash benefit equal to 2.99 times the participant's "Earnings," defined by
the policy as the sum of (i) annual base salary plus (ii) the greater of (A)
the participant's target bonus under the MIP or (B) the average of the
participant's MIP award for the latest three years for which the participant
was eligible to receive an award (or such lesser period of time during which
the participant was eligible to receive an award). Tier one participants are
eligible for Company-paid life insurance for three years, and a taxable cash
payment which is sufficient to provide a net amount equal to the participant's
premium for COBRA continuation coverage for three years. CIC Policy severance
payments may be delayed following a participant's separation from service to
comply with IRC Section 409A. Any payments delayed as a result of such
compliance will accrue interest at the DCAP Rate until paid.
Effective January 28, 2020, the Compensation and Talent Committee approved
amendments to the CIC Policy that eliminated excise tax gross-ups. In the
event that payments and benefits received in connection with a change in
control would constitute parachute payments subject to excise tax under IRC
Section 4999, payments and benefits will be reduced to the extent necessary to
avoid payment of the excise tax, but only if the reduction results in a
greater after-tax benefit to the participant.
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 (as
defined in the CIC Policy).
Potential Payments upon Termination or Change in Control
The following narrative describes potential payments and benefits that may be
received by our NEOs or their respective beneficiaries pursuant to existing
plans or arrangements under various separation scenarios, including
termination of employment or a change in control of McKesson.
Benefits and Payments upon Death or Disability
In the event of (i) death or (ii) termination of employment due to permanent
and total disability, which occurs on the first anniversary of the date the
executive is unable to perform services, executives are entitled to
accelerated vesting of their outstanding options and RSUs, prorated PSU awards
and prorated MIP awards. Prorated PSU and MIP payments are made at the end of
the performance period when payments are made to actively employed plan
participants. Vested stock options remain exercisable for three years, subject
to earlier expiration of the option term.
78 2024 Proxy Statement
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Executive Compensation
Termination for Cause
Generally, under the Company's incentive plans and programs, "cause" means the
executive's willful misconduct and in some cases the executive's negligent
misconduct, which, in any case, is injurious to the Company. The specific
consequences of such behavior are reflected in plan documents. In the event of
termination for Cause, all obligations or commitments under our incentive
plans are canceled or voided, including outstanding equity grants, vested
stock options, and MIP awards. However, payments such as accrued but unpaid
salary and paid time off are made as required by federal and state laws.
Benefits and Payments upon Voluntary Termination
In the event of voluntary termination, all unvested incentive awards are
canceled unless the employee is eligible for certain benefits based on age and
service with the Company. Employees whose age plus service equals 65 (65
points) are eligible for prorated MIP awards upon voluntary termination on or
after January 1 of the fiscal year. Under the 2013 Stock Plan and 2022 Stock
Plan (referred to below as the Stock Plans), all employee participants with at
least 65 points have three years to exercise vested stock options following a
voluntary termination, subject to expiration of the option term. Employee
participants who have attained normal retirement (age 60 with at least 10
years of service) are eligible for continued vesting of equity awards
following a voluntary termination, and the full term to exercise stock
options, provided that the award was granted at least one year before the date
of termination.
Benefits and Payments upon Involuntary Termination
The Executive Severance Policy covers our executive officers, including our
NEOs. The Executive Severance Policy is described above under "Severance and
Change in Control Policies."
Benefits and Payments upon Involuntary Termination in Connection with a Change
in Control
The CIC Policy provides severance benefits to certain selected employees,
including our NEOs. The CIC Policy is described above under "Severance and
Change in Control Policies."
Upon a qualifying termination in connection with a Change in Control, award
agreements under the Stock Plans provide for accelerated vesting of
outstanding unvested equity awards. Award agreements under the Stock Plans
provide that upon a Change in Control, PSUs convert into time-based vesting
awards based on the greater of target or actual performance under the terms of
the awards through the date of the Change in Control. The MIP provides for
payment, after the end of the fiscal year in which a Change in Control occurs,
equal to the greatest of (i) the target award; (ii) the award payable based on
actual performance; or (iii) the average actual award payable to the
participant for the prior three years. This MIP award is also payable if the
participant's employment is involuntarily terminated within 12 months after a
Change in Control.
2024 Proxy Statement 79
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Executive Compensation
The table below sets forth the value of benefits to which NEOs or their
beneficiaries may be entitled under the five termination scenarios described
above. Unless otherwise noted, the amounts shown assume separation on March
31, 2024 and, where applicable, are calculated using the $536.85 closing price
of the Company's common stock on March 28, 2024, the trading last day of our
fiscal year.
In the table below, a "-0-" indicates no monetary value is associated with the
benefit, while a "-" indicates the NEO is not entitled to the benefit.
Name Benefit Benefits and Termination Benefits and Benefits and Benefits and
Payments for Cause Payments Payments Payments
upon Death ($) upon upon upon
or Disability (b) Voluntary Involuntary Involuntary
($) Termination Termination Termination
(a) ($) ($) in Connection
(c) (d) with a
Change in
Control
($)
(e)
Brian S. Tyler Salary Continuation - - - 3,013,500 14,990,559
/ Severance
(1)
MIP 3,142,410 - 3,142,410 3,142,410 3,370,139
(2)
Value of Stock Vesting 67,531,434 - - 48,428,701 78,332,319
(3)
Medical - - - - 96,110
(4)
Total 70,673,844 - 3,142,410 54,584,611 96,789,127
Britt J. Vitalone Salary Continuation - - - 2,009,000 7,813,180
/ Severance
(1)
MIP 1,335,938 - 1,335,938 1,335,938 1,538,349
(2)
Value of Stock Vesting 19,989,075 - - 13,989,238 23,412,031
(3)
Medical - - - - 51,075
(4)
Total 21,325,013 - 1,335,938 17,334,176 32,814,635
Michele Lau Salary Continuation - - - 1,406,300 2,693,299
/ Severance
(1)
MIP 199,500 - - 199,500 199,500
(2)
Value of Stock Vesting 6,050,299 - - - 7,142,252
(3)
Medical - - - - 96,110
(4)
Total 6,249,799 - - 1,605,800 10,131,161
LeAnn B. Smith Salary Continuation - - - 749,488 3,918,112
/ Severance
(1)
MIP 724,377 - - 724,377 724,377
(2)
Value of Stock Vesting 4,776,892 - - 1,256,766 6,272,019
(3)
Medical - - - - 74,067
(4)
Total 5,501,269 - - 2,730,631 10,988,575
Thomas L. Rodgers Salary Continuation - - - 1,236,941 4,596,716
/ Severance
(1)
MIP 697,395 - 697,395 697,395 877,683
(2)
Value of Stock Vesting 7,496,573 - - 5,213,887 8,825,278
(3)
Medical - - - - 74,067
(4)
Total 8,193,968 - 697,395 7,148,223 14,373,744
(1)
Amounts shown in column (d) represent salary continuation calculated under the
Executive Severance Policy plus six months' interest accrued at the DCAP Rate,
as though payments would be delayed six months to comply with IRC Section
409A. Amounts shown in column (e) represent the lump sum severance benefit
calculated under the CIC Policy plus six months' interest accrued at the DCAP
Rate, as though payment would be delayed six months to comply with IRC Section
409A.
(2)
Amounts shown in columns (a), (c) and (d) represent actual MIP payouts for FY
2024 as reported in the 2024 Summary Compensation Table on page
69
. Amounts shown in column (e) are equal to the greatest of (i) the target
award; (ii) the award payable based on actual performance; or (iii) the
average actual award payable to the participant for the prior three years.
80 2024 Proxy Statement
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Executive Compensation
(3)
Amounts shown represent the value, as of March 31, 2024, of RSUs and PSUs
which would become vested in whole or in part upon certain termination events.
The amounts shown for the Value of Stock Vesting in the event of "Involuntary
Termination in Connection with a Change in Control" (column (e)) include PSU
awards converted to RSUs based on the greater of target and actual performance
achieved. PSU awards in this column are shown at (i) actual performance
achieved with respect to FY 2022 - FY 2024 PSU awards; and (ii) target
performance with respect to PSU awards with in-flight performance periods as
of March 31, 2024. For more information on unvested equity awards held by our
NEOs, refer to the 2024 Outstanding Equity Awards Table.
(4)
Amounts shown represent three years of premiums for COBRA continuation coverage.
CEO Pay Ratio
As permitted by SEC rules, we used the same median employee this year that we
used for our pay ratio disclosure in our 2023 proxy statement, because there
has been no change in our global employee population or employee compensation
arrangements that we believe would result in a significant impact to the pay
ratio. We identified our median employee using our global employee population
identified as of January 1, 2023. We used annual base pay as our consistently
applied compensation measure. For purposes of our CEO pay ratio, our CEO's
compensation is $18,997,543 and our median employee compensation is $64,861.
Accordingly, our CEO to median employee pay ratio is 293:1.
Our CEO pay ratio disclosure is a reasonable estimate and may not be
comparable to the CEO pay ratio reported by other companies because the SEC
rules for identifying the median employee and calculating the pay ratio allow
companies to use different methodologies, exemptions, estimates and
assumptions.
2024 Proxy Statement 81
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Executive Compensation
Pay Versus Performance
The following tables and narratives set forth information regarding: (i) the
total compensation of our Principal Executive Officer (PEO), Mr. Brian S.
Tyler, and our non-PEO Named Executive Officers (collectively, the Non-PEO
NEOs) as presented in the Summary Compensation Table (SCT) for each of the
past four fiscal years; (ii) "compensation actually paid" (CAP) to our PEO and
our Non-PEO NEOs, as calculated pursuant to Item 402(v) of Regulation S-K
(Item 402(v)); (iii) certain financial performance measures, including Total
Shareholder Return (TSR), after-tax net income (loss) attributable to McKesson
Corporation, prepared in accordance with GAAP (Net Income), and our
Company-Selected Measure, Adjusted EPS for incentive programs; and (iv) the
relationship of CAP to those certain financial performance measures.
Fiscal Year Summary Compensation Average Average Value of Net Income Adjusted
Compensation Actually Paid Summary Compensation Initial Fixed ($ in millions) EPS
Table Total to to PEO Compensation Actually Paid $100 Investment ($)
PEO ($) Table Total for for Non-PEO Based On:
($) Non-PEO NEOs NEOs
($) ($)
Company Peer Group
TSR 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 ( 17.04
4,539
)
Notes:
(1)
To calculate CAP, the following amounts were deducted from and added to
Summary Compensation Table (SCT) total compensation:
PEO SCT Total to CAP Reconciliation
Fiscal Year SCT Total Deductions from SCT Additions to SCT Total Compensation Actually
($) Total ($) 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 Additions to SCT Total Compensation Actually
($) Total ($) 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
i.
Represents the grant date fair value of equity-based awards granted in each
fiscal year presented, as shown in the "Stock Awards" column of the SCT.
ii.
Represents the value of equity calculated in accordance with Item 402(v) for
each fiscal year presented. The assumptions used in calculating the fair value
of the equity awards in FY 2024 did not differ in any material respect from
the assumptions used to calculate the grant date fair value of the awards as
reported in the Summary Compensation Table, except that the fair value
calculations of (i) the TSR PSUs granted in FY 2023 and FY 2024 used an
estimated volatility between 19% and 22%, as compared to an estimated
volatility between 24% to 34% used to calculate the grant date fair value of
such awards, and (ii) the non-TSR PSUs granted in FY 2023 and FY 2024 assumed
payouts between 96% and 129%, as compared to the grant date fair value
calculations which assumed a payout at target.
82 2024 Proxy Statement
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Executive Compensation
(2)
The Principal Executive Officer (PEO) represented in columns (b) and (c) is
Brian S. Tyler
.
The non-PEO Named Executive Officers (Non-PEO NEOs) represented in columns (d)
and (e) are the following individuals for each of the fiscal years presented:
.
FY 2024 - Britt J. Vitalone, Michele Lau, LeAnn B. Smith, Thomas L. Rodgers,
Lori A. Schechter, and Nancy Avila;
.
FY 2023 - Britt J. Vitalone, Lori A. Schechter, Nancy Avila and LeAnn B. Smith;
.
FY 2022 - Britt J. Vitalone, Lori A. Schechter, Tracy L. Faber and Nancy
Avila; and
.
FY 2021 - Britt J. Vitalone, Lori A. Schechter, Thomas L. Rodgers and Tracy L.
Faber.
(3)
TSR is cumulative for the measurement periods beginning on March 31, 2020 and
ending on March 31 of each of 2021, 2022, 2023, and 2024, respectively. The
peer group referenced for purposes of the TSR comparison in column (g) is the
group of companies included in the Standard & Poor's (S&P) 500 Health Care
Index, which is the industry peer group the Company used for purposes of Item
201(e) of Regulation S-K.
(4)
Net Income in column (h) reflects GAAP income (loss) attributable to McKesson
Corporation.
(5)
Adjusted EPS
for incentive programs, our Company-Selected Measure in column (i), is the
non-GAAP financial performance measure from the tabular list of FY 2024 Most
Important Measures below which, in the Company's assessment, is the most
important performance measure for FY 2024 linking PEO and non-PEO NEO CAP to
the Company's performance. See
Appendix A
to this proxy statement for a reconciliation of diluted earnings per share
from continuing operations as reported under GAAP to Adjusted EPS for
incentive programs.
PEO Equity Award Detail
Fiscal Year Year End Fair Change in Fair Value as of Change in Fair Fair Value Value of Total E
Value of Equity Fair Value Vesting Date of Value as of the at the Dividends or
Awards of Outstanding Equity Awards Vesting Date of End of the Prior other Earnings Adjust
Granted in the and Granted and Equity Awards Year of Equity Paid on Stock
Year Unvested Vested in the Granted in Prior Awards that or Option
($) Equity Awards Year Fiscal Years Failed to Meet Awards not
Granted in ($) that Vested in Vesting Otherwise
Prior Years the Fiscal Year Conditions in Reflected in
the Year Fair Value or
($) Total
Compensation
($)
(i) (ii) (iii) (iv) (v) (vi)
2024 19,249,885 23,023,341 - - 3,840,553 - - 101,138 46,214,917
0 0
2023 14,913,714 13,443,829 - - 3,032,450 - - 195,742 31,585,735
0 0
2022 25,000,413 33,600,371 - - 572,038 - - 208,242 59,381,064
0 0
2021 16,364,447 13,034,008 - - 290,267 - - 16,621 29,705,343
0 0
quity
Award
ments
($)
Non-PEO NEO Equity Award Detail
Fiscal Year Year End Fair Change in Fair Value as of Change in Fair Fair Value Value of Total E
Value of Equity Fair Value Vesting Date of Value as of the at the Dividends or
Awards of Outstanding Equity Awards Vesting Date of End of the Prior other Earnings Adjust
Granted in the and Granted and Equity Awards Year of Equity Paid on Stock
Year Unvested Vested in the Granted in Prior Awards that or Option
($) Equity Awards Year Fiscal Years Failed to Meet Awards not
Granted in ($) that Vested in Vesting Otherwise
Prior Years the Fiscal Year Conditions in Reflected in
the Year Fair Value or
($) Total
Compensation
($)
(i) (ii) (iii) (iv) (v) (vi)
2024 3,848,402 2,812,080 53,629 533,378 ( 16,082 6,977,220
286,351
)
2023 2,995,518 2,170,991 - - 638,913 - - 31,893 5,837,315
0 0
2022 4,748,056 6,817,164 - - 340,430 - - 68,993 11,974,643
0 0
2021 3,155,205 4,326,468 - - 171,389 - - 21,359 7,674,421
0 0
quity
Award
ments
($)
i.
Add the fair value as of the end of the covered fiscal year of all awards
granted during the covered fiscal year that are outstanding and unvested as of
the end of the covered fiscal year;
2024 Proxy Statement 83
-------------------------------------------------------------------------------
Executive Compensation
ii.
Add the amount equal to the change as of the end of the covered fiscal year
(from the end of the prior fiscal year) in fair value (whether positive or
negative) of any awards granted in any prior fiscal year that are outstanding
and unvested as of the end of the covered fiscal year;
iii.
Add, for awards that are granted and vest in the same year, the fair value as
of the vesting date;
iv.
Add the amount equal to the change as of the vesting date (from the end of the
prior fiscal year) in fair value (whether positive or negative) of any awards
granted in any prior fiscal year for which all applicable vesting conditions
were satisfied at the end of or during the covered fiscal year;
v.
Subtract, for any awards granted in any prior fiscal year that fail to meet
the applicable vesting conditions during the covered fiscal year, the amount
equal to the fair value at the end of the prior fiscal year; and
vi.
Add the dollar value of any dividends or other earnings paid on stock or
option awards in the covered fiscal year prior to the vesting date that are
not otherwise included in the total compensation for the covered fiscal year.
Required Tabular Disclosure of Most Important Measures to Determine FY 2024 CAP
The four metrics listed below represent the most important measures the
Compensation and Talent Committee used to link CAP to Company performance for
FY 2024, as further described in the Compensation Discussion and Analysis in
the sections entitled "Annual Compensation" and "Long-Term Incentive
Compensation."
FY 2024 Most Important Performance Measures
Adjusted EPS
Adjusted Operating Profit
Free Cash Flow
Average ROIC
84 2024 Proxy Statement
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Executive Compensation
Relationships Between "Compensation Actually Paid" and Performance Measures
The graphs and narratives below show and describe (i) the relationship between
the Company's TSR and that of the S&P 500 Health Care Index, and (ii) the
relationship of "compensation actually paid" (CAP) to our PEO and Non-PEO NEOs
to (a) the Company's TSR; (b) the Company's Adjusted EPS (Company-Selected
Measure), and (c) the Company's Net Income.
Total Shareholder Return (TSR): Company versus Peer Group:
The Company's four-year cumulative TSR has significantly exceeded that of the
S&P 500 Health Care Index. We selected the S&P 500 Health Care Index as the
comparator because it is generally available to shareholders and broadly used
by other companies in the same industry.
Compensation Actually Paid (CAP) versus TSR:
As shown in the first table of this Pay versus Performance section, the PEO's
and Non-PEO NEOs' CAP values are higher than the corresponding grant date fair
values in the SCT, which is consistent with the Company's positive TSR each
year, as shown in the graphs immediately above and below. This is due
primarily to the Company's use of equity incentives, the value of which is
tied directly to stock price in addition to the Company's financial
performance. Our executive compensation program emphasizes equity-based pay,
with the majority of target direct compensation for both the PEO and Non-PEO
NEOs delivered via equity-based awards.
2024 Proxy Statement 85
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Executive Compensation
CAP versus Adjusted EPS:
The chart below compares the PEO's and Non-PEO NEOs' CAP values to our
Company-Selected Measure (CSM), Adjusted EPS. As noted above, for each fiscal
year presented, CAP values are higher than the corresponding grant date fair
value of stock awards shown in the SCT, which is consistent with our growing
Adjusted EPS.
The Company focuses on Adjusted EPS in our incentive plans because earnings
per share is one of the principal measures used by shareholders to assess
financial performance results and establish a price for the Company's equity,
and it is a central component of our guidance to shareholders. The use of
Adjusted EPS in our incentive plans 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, Adjusted EPS is
included as a key metric in both our annual and long-term incentives.
Given this emphasis on Adjusted EPS, its impact on the value of the Company's
shares and therefore CAP values - both positive and negative - is significant.
Adjusted EPS drives a significant portion of the Company's annual cash
incentive and determines a significant portion of PSU award payouts to be
earned during any three-year PSU performance period.
CAP versus Net Income:
The Compensation and Talent Committee does not use Net Income to determine
compensation opportunity or outcomes.
The Committee believes that Adjusted EPS is a superior indicator of core
operating performance and profitability. In addition, it is common for our
shareholders to use Adjusted EPS and other metrics to inform their views of
historical and future expectations for underlying operational performance. Net
Income, on the other hand, can show variability year over year due to timing
of specific events or because of unusual or non-recurring events. For example,
in the table above, there is a large net loss in FY 2021 Net Income, which was
primarily attributable to the opioid litigation settlement charge included in
our FY 2021 GAAP results of operations. The actual cash impact of that
settlement will take place over multiple years, and the FY 2021 Net Income
loss figure does not reflect the actual underlying performance of the
business, which is better reflected by the other metrics included in our
incentive programs, as well as the Company's 46% TSR for that fiscal year.
Therefore, we would not necessarily expect to see alignment between Net Income
(loss) and CAP. The Compensation and Talent Committee is focused on alignment
of our compensation programs to metrics that most appropriately measure our
profitability and sustainable long-term growth.
86 2024 Proxy Statement
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ITEM 4
Approve Amendment to Certificate of Incorporation to Provide for Officer Exculpation
On January 31, 2024, the Board approved, and determined to recommend to our
shareholders that they approve, certain amendments to the Company's Amended and
Restated Certificate of Incorporation (the Charter) to permit the exculpation of
officers consistent with recent changes to the Delaware General Corporation Law (the
DGCL).
Section 9 of Article VI of the Charter currently includes certain exculpatory
provisions that eliminate the liability of directors for monetary damages to the
fullest extent possible under applicable law. As a Delaware corporation, the DGCL
permits the Company to eliminate directors' personal liability for monetary damages
resulting from a breach of the fiduciary duty of care, subject to exceptions
prescribed by the DGCL. Such director exculpatory provisions are common among large
public companies, and we believe that they allow the Company to recruit and retain
highly qualified persons to serve as directors. Under prior Delaware law, the
statutory exculpatory provisions could only be extended to directors of corporations.
However, effective August 1, 2022, the Delaware legislature amended the DGCL to
permit Delaware corporations to extend similar exculpatory protections to officers,
subject to the conditions and limitations under Section 102(b)(7) of the DGCL.
The Board believes that it is in the best interests of the Company and its
shareholders to provide such exculpatory provisions to the officers of the Company to
the extent permitted by the DGCL, as recently amended. In making this determination,
the Board considered that the DGCL provision limits exculpation of officers only to
claims that do not involve breaches of the duty of loyalty, acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law, or
any transaction in which the officer derived an improper personal benefit. Further,
the statutory exculpation does not extend to derivative claims brought by or in the
right of the Company.
In weighing the potential benefits and drawbacks to shareholders, the Board further
considered that officers, like directors, are exposed to a substantial risk of
lawsuits that could seek to impose personal monetary liability. The Board believes
that these new exculpatory protections recognized by the Delaware legislature, if
approved by our shareholders, would allow the Company to continue to attract and
retain highly qualified officers and enable them to exercise good business judgment
and act in the best interests of the shareholders, while minimizing their potential
personal liability and reducing distractions arising from frivolous litigation,
including diversion of management attention and potential waste of corporate
resources.
If this proposal is approved by shareholders, a Certificate of Amendment to our
Charter to implement this proposal will be filed with the Secretary of State of the
State of Delaware, and Section 9 of Article VI of the Charter will be amended to read
in its entirety as set forth below (with additions shown as underlined):
9. Liability of Directors
and Officers
. To the fullest extent permitted by Delaware statutory or decisional law, as amended
or interpreted, no director
or officer
of this Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director
or officer, as applicable
. This Section 9 does not affect the availability of equitable remedies for breach of
fiduciary duties.
Solely for purposes of this Section 9, "officer" shall have the meaning determined in
accordance with Section 102(b)(7) of Title 8 of the Delaware Code, as amended from
time to time
.
Your Board recommends a vote
FOR
this proposal.
2024 Proxy Statement 87
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ITEM 5
Shareholder Proposal on Independent Board Chairman
Shareholders will vote on the following proposal if it is properly presented
at the Annual Meeting and not previously withdrawn or otherwise excluded. The
Company is not responsible for the accuracy or content of the shareholder
proposal presented below, which appears in the form we received it. It may
contain typographical or other errors, as well as assertions about the Company
that we believe are incorrect. We have not attempted to make any corrections
or refute any inaccuracies.
The following shareholder proposal has been submitted to the Company for
action at the Annual Meeting by John Chevedden. Mr. Chevedden's address and
shareholdings will be provided promptly upon receipt of a written or oral
request.
Proposal 5 - Independent Board Chairman
Shareholders request that the Board of Directors adopt an enduring policy, and
amend the governing documents as necessary in order that 2 separate people
hold the office of the Chairman and the office of the CEO.
Whenever possible, the Chairman of the Board shall be an Independent Director.
This includes that a former CEO is determined to not be independent.
The Board has the discretion to select a Temporary Chairman of the Board who
is not an Independent Director to serve while the Board is seeking an
Independent Chairman of the Board on an accelerated basis.
Although it is best practice to adopt this proposal soon this policy could be
phased in when there is a contract renewal for our current CEO or for the next
CEO transition.
The roles of Chairman and CEO are fundamentally different and should be held
by 2 directors, a CEO and a Chairman who is completely independent of the CEO
and our company. The job of the CEO is to manage the company. The job of the
Chairman is to oversee the CEO.
This proposal topic won 52% support at Boeing and 54% support at Baxter
International in 2020. Boeing then adopted this proposal topic.
The ascending complexities of a company with $60 Billion in market
capitalization, like McKesson, increasingly demands that 2 persons fill the 2
most important jobs on an enduring basis - Chairman and CEO.
This should be an easy proposal for McKesson to adopt because McKesson already
has an independent Board Chairman. However the McKesson Board could, on short
notice, appoint one person to the 2 most important jobs at McKesson for an
extended period of time. And if that happens there are no established roles
for a McKesson Lead Director.
Please vote yes:
Independent Board Chairman
-
Proposal 5
88 2024 Proxy Statement
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Item 5. Shareholder Proposal on Independent Board Chairman
COMPANY STATEMENT IN OPPOSITION
Your Board recommends a vote "AGAINST" this proposal for the following reasons:
.
The Board recognizes the value of strong independent Board leadership; currently, Don
Knauss serves as independent Board Chair.
.
McKesson and its shareholders are best served when leadership choices are made by the
Board on a case-by-case basis.
.
The Board regularly evaluates and reviews the Board's leadership structure, a process
which incorporates feedback from the Company's shareholders.
The Board recognizes the value of strong independent Board leadership; currently Don
Knauss serves as independent Board Chair.
An independent Board Chair has led our Board since 2019, when Brian Tyler became our
CEO. Our Board elected Mr. Knauss as independent Board Chair in April 2022,
succeeding the prior independent Board Chair, Edward Mueller, in a planned transition.
McKesson and its shareholders are best served when leadership choices are made by the
Board on a case-by-case basis.
The Board believes continued flexibility to appoint the necessary Board leadership on
a case-by-case basis is in the best interest of the Company and its shareholders.
While the Board's current practice is to elect an independent Board Chair, its
directors have a fiduciary duty to regularly evaluate and determine the most
appropriate Board leadership structure for McKesson and its shareholders in light of
the Company's evolving needs, circumstances and opportunities. Our current directors
have deep knowledge of the strategic goals of the Company, the opportunities and
challenges it faces, and the various capabilities of our directors and management.
Therefore, the Board is best positioned to determine the most effective Board
leadership structure, on a case-by-case basis, to protect and enhance long-term
shareholder value.
In situations where the Board Chair is not independent, McKesson's Corporate
Governance Guidelines require the appointment of a Lead Independent Director with
clearly defined responsibilities to ensure strong independent governance functions
and effective oversight of management.
The Board opposes a prescriptive policy that would unnecessarily restrict its ability
in structuring McKesson's Board leadership as appropriate when faced with new or
different circumstances. This proposal, if implemented, does not consider individual
qualifications or if such a structure is the most suitable for the specific
circumstances that the Board would need to consider. The rigid standard imposed by
this proposal would deprive the Board of the flexibility to use its business judgment
to select the most effective Board leadership structure to meet the needs of the
Company and prioritize the interests of its shareholders based on the circumstances
confronting the Board and the Company at any given time.
The Board regularly evaluates and reviews the Board's leadership structure, a process
which incorporates feedback from the Company's shareholders.
The Board and the Governance and Sustainability Committee evaluate the Board's
leadership structure at least annually, and more frequently as appropriate. This
process includes evaluating the performance of the current Board Chair and Board
leadership structure generally to ensure strong independent governance and effective
oversight of management. In addition, we regularly discuss our Board leadership
structure with our shareholders as part of our year-round shareholder engagement
program. Through these conversations, shareholders have not expressed concerns about
our Board's current ability to determine the appropriate Board leadership structure
for the Company at any given time.
The Board maintains effective independent oversight on behalf of our shareholders by
ensuring that the Audit, Compensation and Talent, and Governance and Sustainability
Committees are led by and composed entirely of independent directors. McKesson
follows strong corporate governance practices as described in more detail beginning
on page
11
of this proxy statement.
Your Board recommends a vote
"AGAINST"
this proposal.
2024 Proxy Statement 89
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ITEM 6
Shareholder Proposal on Report on Risks of State Policies Restricting Reproductive Health Care
Shareholders will vote on the following proposal if it is properly presented at the Annual
Meeting and not previously withdrawn or otherwise excluded. The Company is not responsible
for the accuracy or content of the shareholder proposal presented below, which appears in
the form we received it. It may contain typographical or other errors, as well as assertions
about the Company that we believe are incorrect. We have not attempted to make any
corrections or refute any inaccuracies.
The following shareholder proposal has been submitted to the Company for action at the
Annual Meeting by Rhia Ventures. Rhia Ventures' address and shareholdings will be provided
promptly upon receipt of a written or oral request.
Report on Risks of State Policies Restricting Reproductive Health Care
WHEREAS: Companies must navigate a patchwork of state laws regarding the provision of
reproductive health care. Since 2011, states have passed more than 600 laws restricting
abortion access, and twelve states now ban most abortions. Other states have enacted
legislation that protects these rights.
McKesson has significant operations in states where reproductive rights are severely
limited. McKesson's female employees - over 62 percent of the company's 35,000 employees in
the United States - may face challenges accessing reproductive healthcare, including
abortion services, for themselves or family members. McKesson may find it more difficult to
recruit employees in states that have outlawed abortion (bit.ly/3Ctj3ZI).
Employers, as well as employees, bear the cost of restricted access to reproductive health
care. Women who cannot access abortion are three times more likely to leave the workforce
than women who are able to access abortion when needed, and four times as likely to slip
into poverty (bit.ly/37qrmMw). The Institute for Women's Policy Research estimates state
abortion restrictions may annually keep nearly 597,000 women aged 15 to 44 out of the
workforce (bit.ly/3SQRp4n). This may harm McKesson's ability to meet diversity goals, with
negative consequences to performance, brand and reputation.
According to a 2022 survey commissioned by Lean In, more than three-quarters of both women
under 40 and men, regardless of political affiliation, would prefer to work for companies
supporting abortion access (bit.ly/3IcR5qJ). A 2022 Harris Poll found that in the wake of
the Dobbs decision, 69 percent of employees aged 18 to 34 want more clarity and transparency
about their organization's policies and benefits for reproductive healthcare (bit.ly/3OqENNL).
RESOLVED: Shareholders request the Board issue a public report within one year of the annual
meeting, omitting confidential information and at reasonable expense, detailing any known
and potential risks or costs to the company caused by enacted or proposed state policies
severely restricting reproductive rights or access to reproductive health medications, and
detailing any strategies beyond litigation and legal compliance that the company may deploy
to minimize or mitigate these risks.
SUPPORTING STATEMENT: Shareholders recommend the report evaluate risks and costs to the
company associated with new laws severely restricting reproductive rights and medication,
and similar restrictive laws proposed or enacted in other states. In its discretion, the
Board's analysis may include effects on employee hiring, retention, and productivity, and
decisions regarding closure or expansion of operations in states proposing or enacting
restrictive laws and strategies such as public policy advocacy by the company, related
political contributions policies, and human resources or educational strategies.
90 2024 Proxy Statement
-------------------------------------------------------------------------------
Item 6. Shareholder Proposal on Report on Risks of State Policies Restricting Reproductive Health Care
COMPANY STATEMENT IN OPPOSITION
Your Board recommends a vote "AGAINST" this proposal for the following reasons:
.
McKesson aspires to be the best place to work in healthcare by attracting, developing
and retaining the best talent to advance our purpose of
Advancing Health Outcomes for All
(R)
.
.
McKesson provides a comprehensive Total Rewards package, including medical benefits.
.
The proposal would impose unnecessary burdens on McKesson without any meaningful
benefit to our employees or shareholders.
McKesson aspires to be the best place to work in healthcare.
We know that the success of our business depends on our ability to attract, hire,
develop and retain a highly skilled and inclusive workforce. That's why the first
pillar of our enterprise strategy is focusing on our people and culture as we aspire
to be the best place to work in healthcare. A component of our annual enterprise risk
assessment focuses on talent, and our Board engages in regular oversight of talent,
including employee inclusion, engagement and advancement. To reinforce our commitment
to current and potential employees and define what makes McKesson a great company to
work for, we strive every day to live our employee value proposition by providing
meaningful work, caring for our employees and creating a culture where all employees
feel they belong. Caring for our employees includes providing programs that focus on
their holistic well-being, fostering a culture of purpose and ensuring our employees
have a voice.
McKesson provides a comprehensive Total Rewards package, including medical benefits.
As part of our efforts to attract, retain and advance our employees, we offer
comprehensive and competitive health and wellness benefits. This includes benefits
essential to the health of our people. McKesson takes pride in the comprehensive
Total Rewards package offered to our employees and regularly reviews our benefits
programs to confirm they remain competitive; support our employees' physical,
emotional and financial well-being; and comply with applicable laws. We provide
travel and lodging benefits that include travel for any covered health service if
such covered service is not available from a local provider within 100 miles of an
employee's home. While McKesson offers an expansive set of benefits, the Company does
not decide for any employee which treatments and procedures are medically necessary;
rather, these decisions are made by our employees, employees' healthcare providers
and the insurance companies administering the plan. We take our employees' privacy
seriously, especially when it comes to their health information. We want our
employees to feel comfortable accessing their medical benefits.
We value our people and are deeply committed to their health and well-being. We
actively review and act on issues that our employees raise (anonymously or directly)
concerning our benefits programs. To date, management is not aware of material
concerns raised by employees concerning reproductive care coverage included in our
health and wellness benefits.
The proposal would impose unnecessary burdens on McKesson without any meaningful
benefit to our employees or shareholders.
The scope of the requested report is overly broad and burdensome. The report would
need to include a thorough review of all existing state laws, and all proposed bills,
regulations and policies that may never become applicable to our employees. As the
legal landscape on this topic frequently changes, the requested report would also
quickly become out-of-date.
We plan to continue to obey all enacted and applicable laws and regulations. In line
with our commitment to care for our employees, we will closely monitor the impacts on
our employees of any enacted legislation, responding as needed to best support our
workforce. This will allow us to more efficiently and effectively use our resources
to meet the needs of our employees, rather than expending our resources on this
requested report. It will also ensure we remain in compliance with all applicable
laws and regulations.
We know that the success of our business depends on our ability to attract, hire,
develop and retain a highly skilled and inclusive workforce. Our success also relies
on our ability to nurture a culture that supports our growth and aligns employees
around the Company's purpose of
Advancing Health Outcomes for All
(R)
. Given our commitment to hiring and retaining the most talented people and our
comprehensive healthcare benefits and polices, we do not believe that the requested
report would provide meaningful value or that the cost of creating and publishing the
requested report would be an effective use of Company resources.
Your Board recommends a vote
"AGAINST"
this proposal.
2024 Proxy Statement 91
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Principal Shareholders
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of May 28, 2024, information regarding
ownership of the Company's outstanding common stock by any entity or person,
to the extent known by us or ascertainable from public filings, that is the
beneficial owner of more than 5% of the outstanding shares of common stock:
Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership Percent of Class*
The Vanguard Group 12,145,675 (1) 9.3 %
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
BlackRock, Inc. 11,665,986 (2) 9.0 %
50 Hudson Yards
New York, New York 10001
* Based on 129,936,487 shares of common stock outstanding, as of May 28,
2024.
(1)
This information is based upon a Schedule 13G/A filed with the SEC on February
13, 2024 by The Vanguard Group, which reports shared voting power with respect
to 178,157 shares, sole dispositive power with respect to 11,570,003 shares,
and shared dispositive power with respect to 575,672 shares.
(2)
This information is based upon a Schedule 13G/A filed with the SEC on January
25, 2024 by BlackRock, Inc., which reports sole voting power with respect to
10,509,429 shares and sole dispositive power with respect to 11,665,986 shares
as a result of being a parent company or control person of certain
subsidiaries.
Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended (Exchange
Act) requires the Company's directors and executive officers, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file with the SEC initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the Company. Such
officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, all reports required by Section 16(a) of the
Exchange Act in FY 2024 from our officers, directors and greater than 10%
beneficial owners were timely filed.
92 2024 Proxy Statement
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Principal Shareholders
Security Ownership of Directors and Executive Officers
The following table sets forth, as of May 28, 2024, except as otherwise noted,
information regarding ownership of the Company's outstanding common stock by:
(i) all directors and director nominees; (ii) each executive officer named in
the 2024 Summary Compensation Table below (collectively, our named executive
officers or the NEOs); and (iii) all directors, NEOs and executive officers as
a group. The table also includes shares of common stock that underlie
outstanding RSUs and options to purchase common stock of the Company that
either vest or become exercisable within 60 days after May 28, 2024.
Name of Individual Shares of Common Stock (1) Percent
Beneficially Owned of Class
Nancy Avila 5,172 *
Richard H. Carmona, M.D. - *
Dominic J. Caruso - *
W. Roy Dunbar - *
Deborah Dunsire, M.D. 24 (2) *
James H. Hinton - *
Donald R. Knauss 2,069 (3) *
Michele Lau 138 (4) *
Bradley E. Lerman - *
Linda P. Mantia 483 *
Maria N. Martinez 483 *
Kevin M. Ozan 15 *
Thomas L. Rodgers 7,909 *
Susan R. Salka - *
Lori A. Schechter 16,355 (3) *
LeAnn B. Smith 2,824 *
Brian S. Tyler 97,412 (4) *
Britt J. Vitalone 17,004 (4) *
Kathleen Wilson-Thompson - *
All directors, NEOs and executive officers as a group (19 persons) 149,888 (3)(4) *
* Less than 1.0%. The number of shares beneficially owned and the
percentage of shares beneficially owned are based on 129,936,487 shares of the
Company's common stock outstanding as of May 28, 2024, adjusted as required by
the rules promulgated by the SEC. Shares of common stock that may be acquired
by exercise of stock options or vesting of RSUs within 60 days after May 28,
2024, and vested RSUs that are not yet settled are deemed outstanding and
beneficially owned by the person holding such stock options or RSUs for
purposes of computing the number of shares and percentage beneficially owned,
but are not deemed outstanding for purposes of computing the percentage
beneficially owned by any other person.
(1)
Except as otherwise indicated in the footnotes to this table, the persons
named have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them, subject to community
property laws where applicable.
(2)
The 24 shares are held by the Jireh Foundation, a charitable foundation, of
which Dr. Dunsire is a co-trustee along with her spouse, but for which Dr.
Dunsire disclaims beneficial ownership.
(3)
Includes shares held by immediate family members who share a household with
the named person, by family trusts as to which the named person and his or her
spouse have shared voting and investment power, or by an independent trust for
which the named person disclaims beneficial ownership as follows: Mr. Knauss,
1,296 shares; Ms. Schechter, 4,178 shares; and all directors, NEOs and
executive officers as a group, 5,474 shares.
(4)
Includes shares held under the Company's 401(k) Plan as of May 28, 2024, as
follows: Ms. Lau, 138 shares; Mr. Tyler, 214 shares; Mr. Vitalone, 549 shares;
and all NEOs and executive officers as a group, 901 shares.
2024 Proxy Statement 93
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Annual Meeting Information
Record Date and Who Can Vote
On or about June 21, 2024, the Company began delivering proxy materials to all
shareholders of record at the close of business on June 5, 2024 (Record Date).
On the Record Date, there were 129,710,815 shares of the Company's common
stock outstanding and entitled to vote. As a shareholder, you are entitled to
one vote for each share of common stock you held on the Record Date, including
shares: (A) held for you in an account with a broker, bank or other nominee;
(B) held directly in your name as the shareholder of record; or (C) allocated
to your account in the Company's 401(k) Plan.
The names of shareholders of record entitled to vote at the Annual Meeting
will be available for 10 days prior to the meeting for any purpose germane to
the Annual Meeting. You may request this information prior to the Annual
Meeting by contacting the Corporate Secretary of the Company by email at
corpsecretary@mckesson.com
.
How to Vote
Your vote is important. Shareholders can vote by using the Internet, telephone
or mail, or at the Annual Meeting. As a shareholder, you are entitled to one
vote for each share of common stock you held on the Record Date. You can vote
in any of the following ways:
Shareholders of Record or a Participant in the Company's 401(k) Plan
If you are a shareholder of record or a participant in the Company's 401(k)
Plan, you can vote your shares by using the Internet, by calling a toll-free
number, or by mailing your signed proxy card(s). Specific instructions for
voting by means of the Internet or telephone are included on the accompanying
proxy card. The Internet and telephone voting procedures are designed to
authenticate your identity, allow you to vote your shares and confirm that
your voting instructions have been properly recorded. If you do not wish to
vote via the Internet or by telephone, please complete, sign and return the
proxy card in the self-addressed, postage-paid envelope provided.
Street Name Shareholders
If you have shares held by a broker, bank or other nominee, you can vote your
shares by following the instructions provided by your broker, bank or other
nominee.
Your vote as a shareholder is important. Please vote as soon as possible to
ensure that your vote is recorded.
Proxy Authority
All shares represented by valid proxies will be voted as specified and in the
discretion of the designated proxy holders as to any other matters that may
properly come before the Annual Meeting. If you sign and return a proxy card
without specific voting instructions, your shares will be voted as recommended
by our Board of Directors on all proposals described in this proxy statement,
and in the discretion of the designated proxy holders as to any other matters
that may properly come before the Annual Meeting. We are currently not aware
of any matter to be presented at the Annual Meeting other than the items
described in this proxy statement.
Revocation
You can revoke your proxy at any time before the Annual Meeting by sending to
the Company's Corporate Secretary a written revocation to
corpsecretary@mckesson.com
or by submitting a proxy bearing a later date by the voting methods described
above. You may also revoke your proxy by attending the Annual Meeting and
casting a ballot. If you have shares held by a broker, bank or other nominee,
you can revoke your proxy by following the instructions provided by your
broker, bank or other nominee.
94 2024 Proxy Statement
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Annual Meeting Information
Attendance
The Annual Meeting will be held on July 31, 2024 and conducted exclusively
online without an option for physical attendance. Shareholders of record as of
the Record Date will be able to attend and participate in the online Annual
Meeting by visiting
www.virtualshareholdermeeting.com/MCK2024
and entering the 16-digit control number on your Notice, voting instructions
form or on your proxy card for purposes of asking questions and casting your
votes for the Annual Meeting ballot items. Only shareholders and proxy holders
who enter their valid control number will be able to participate in the online
Annual Meeting in order to submit questions and vote.
The live webcast of the Annual Meeting will begin promptly at 8:30 a.m.,
Central Time. We encourage you to access the webcast early, starting at
approximately 8:15 a.m., Central Time, in order to allow yourself time to log
in and test your computer. If you encounter technical difficulties accessing
the online Annual Meeting, please call the technical support telephone number
posted on
www.virtualshareholdermeeting.com/MCK2024
.
Even if you plan to attend the Annual Meeting online, we recommend that you
vote in advance of the Annual Meeting as described in this proxy statement, so
that your vote will be counted if you later decide to not attend the Annual
Meeting or you encounter technical difficulties. If you properly submit your
votes before the online Annual Meeting, then you do not have to vote at the
Annual Meeting unless you wish to change your vote.
Dividend Reinvestment Plan
For those shareholders who participate in the Company's Automatic Dividend
Reinvestment Plan (DRP), the enclosed proxy card includes all full shares of
common stock held in your DRP account on the Record Date for the Annual
Meeting, as well as your shares held of record.
401(k) Plan
Participants in the Company's tax-qualified 401(k) Plan have the right to
instruct the trustee, on a confidential basis, how the shares allocated to
their accounts are to be voted, and will receive a voting instruction card for
that purpose. In general, the 401(k) Plan provides that all shares for which
no voting instructions are received from participants will be voted by the
trustee in the same proportion as shares for which voting instructions are
received. However, shares that have been allocated to 401(k) Plan
participants' PAYSOP accounts for which no voting instructions are received
will not be voted.
Quorum, Vote Required and Method of Counting Votes
The presence in person or by proxy of holders of a majority of the voting
power of the outstanding shares of common stock entitled to vote at the
meeting will constitute a quorum for the transaction of business at the Annual
Meeting. Abstentions or broker non-votes will be considered present for quorum
purposes.
Item 1 - Election of Directors
. You may vote "for" or "against" each of the director nominees, or "abstain"
from voting on the election of any nominee. A nominee will be elected as a
director if he or she receives a majority of votes cast (that is, the number
of votes cast "for" a director nominee must exceed the number of votes cast
"against" that nominee). Abstentions and broker non-votes (as described below)
will not count as votes cast and will have no effect on the outcome of the
matter. Each nominee previously submitted an irrevocable resignation in the
event that the nominee fails to receive a majority of the votes cast and the
Board decides to accept that resignation. As described in our Corporate
Governance Guidelines, if a nominee fails to receive a majority of the votes
cast, the Governance and Sustainability Committee will make a recommendation
to the Board with respect to the irrevocable resignation, and the Board will
take action no later than 90 days following the Annual Meeting and publicly
disclose its determination. Directors are elected by a plurality of the votes
cast in any contested election.
2024 Proxy Statement 95
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Annual Meeting Information
Item 2 - Ratification of the Appointment of the Independent Registered Public
Accounting Firm
. You may vote "for" or "against," or "abstain" from voting on this proposal.
Approval requires the affirmative vote of a majority of the voting power of
the shares present in person or represented by proxy at the meeting and
entitled to vote on the proposal. Shares represented by abstentions will have
the effect of a vote against this proposal. As described in more detail below,
this proposal is considered a routine matter, and brokers can cast
discretionary votes on this proposal.
Item 3 - Non-Binding Advisory Vote on Executive Compensation
. You may vote "for" or "against," or "abstain" from voting on this
non-binding advisory proposal. Approval requires the affirmative vote of a
majority of the voting power of the shares present in person or represented by
proxy at the meeting and entitled to vote on the proposal. Shares represented
by abstentions will have the effect of a vote against this proposal. Broker
non-votes with respect to this proposal will have no effect on the outcome of
the matter.
Item 4 - Approval of Amendment to Certificate of Incorporation to Provide for
Officer Exculpation.
You may vote "for" or "against," or "abstain" from voting on this proposal.
Approval requires the affirmative vote of a majority of the voting power of
the outstanding shares of our common stock entitled to vote on the matter.
Shares represented by abstentions and broker non-votes will have the effect of
a vote against this proposal.
Items 5 and 6 - Shareholder Proposals
. You may vote "for" or "against," or "abstain" from voting on this proposal.
Approval requires the affirmative vote of a majority of the voting power of
the shares present in person or represented by proxy at the meeting and
entitled to vote on the proposal. Shares represented by abstentions will have
the effect of a vote against this proposal. Broker non-votes with respect to
this proposal will have no effect on the outcome of the matter.
All votes cast at the Annual Meeting will be tabulated by the independent
inspector of election.
Broker Non-Votes
Broker non-votes occur when beneficial owners do not provide voting
instructions and the broker, bank or other nominee does not have discretion to
vote. Rules of the NYSE prohibit discretionary voting by brokers on certain
"non-routine" matters. At the Annual Meeting, if brokers, banks and other
nominees have not received instructions from the beneficial owners, they will
not be permitted to vote on any proposal other than the ratification of the
appointment of the independent registered public accounting firm (Item 2).
Therefore, we encourage all beneficial owners to provide voting instructions
to your nominees to ensure that your shares are voted at the Annual Meeting.
Voting Results
We intend to publish voting results in a Current Report on Form 8-K to be
filed with the SEC within four business days after the Annual Meeting.
Online Access to Annual Reports and Proxy Statements
The notice of annual meeting, proxy statement and annual report are available at
www.proxyvote.com
. Instead of receiving future copies of the proxy statement and annual report
by mail, you may, by following the applicable procedures described below,
elect to receive these documents electronically, in which case you will
receive an e-mail with a link to these documents.
Shareholders of Record:
You may elect to receive proxy materials online next year in place of printed
materials by logging on to
www.proxyvote.com
and entering your request within either the Internet voting section or order
hard copy options. By doing so you will save the Company printing and mailing
expenses, reduce the impact on the environment and obtain immediate access to
the annual report, proxy statement and voting form when they become available.
96 2024 Proxy Statement
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Annual Meeting Information
Beneficial Shareholders:
If you hold your shares through a broker, bank or other holder of record, you
may also have the opportunity to receive copies of the proxy statement and
annual report electronically. Please check the information provided in the
proxy materials mailed to you by your broker, bank or other holder of record
regarding the availability of this service or contact the broker, bank or
other holder of record through which you hold your shares and inquire about
the availability of such an option for you.
If you elect to receive your materials via the Internet, you can still request
paper copies by leaving a message with Investor Relations by sending an e-mail
to
investors@mckesson.com
.
Important Notice Regarding the Availability of Proxy Materials for the 2024
Annual Meeting of Shareholders to be held on July 31, 2024. Our 2024 proxy
statement and annual report are available free of charge at
proxyvote.com
.
Householding of Proxy Materials
In a further effort to reduce printing costs, postage fees and the impact on
the environment, we have adopted a practice approved by the SEC called
"householding." Under this practice, shareholders who have the same address
and last name and do not participate in electronic delivery of proxy materials
will receive only one copy of our proxy materials, unless any of these
shareholders notifies us that he or she wishes to continue receiving
individual copies. Shareholders who participate in householding will continue
to receive separate proxy cards.
If you share an address with another shareholder and received only one set of
proxy materials, but would like to request a separate copy of these materials,
we will have a separate copy promptly delivered to you upon your written or
oral request. To request such a separate copy, please contact Broadridge
Investor Communication Solutions by calling 1-866-540-7095 or by writing to
Broadridge Investor Communication Solutions, Attn: Householding Department, 51
Mercedes Way, Edgewood, New York 11717. Similarly, you may also contact
Broadridge Investor Communication Solutions if you received multiple copies of
the proxy materials and would prefer to receive a single copy in the future.
Solicitation of Proxies
We are providing these proxy materials in connection with the solicitation
made by the Company's Board of Directors of proxies to be voted at the Annual
Meeting. The Company is paying the cost of preparing, printing and mailing
these proxy materials. We will reimburse brokerage firms, banks and others for
their reasonable expenses in forwarding proxy materials to beneficial owners
and obtaining their instructions. The Company has retained Alliance Advisors
LLC (Alliance) to assist in distributing these proxy materials. We have also
engaged Alliance to assist in the solicitation of proxies. We expect
Alliance's solicitation fee to be approximately $50,000 plus out-of-pocket
expenses. The directors, officers and employees of the Company may also
participate in the solicitation without remuneration in addition to
compensation received as directors, officers or employees.
Shareholder Proposals for the 2025 Annual Meeting
To be eligible for inclusion in the Company's 2025 proxy statement pursuant to
Rule 14a-8 under the Exchange Act, shareholder proposals must be sent to the
Corporate Secretary of the Company at
corpsecretary@mckesson.com
or at the principal executive offices of the Company located at 6555 State
Highway 161, Irving, Texas 75039, and must be received no later than February
21, 2025.
The Company's advance notice By-Law provisions require that, for our 2025
Annual Meeting, shareholder nominations made outside of the Company's proxy
access By-Law provisions and proposals made outside of Rule 14a-8 under the
Exchange Act must be submitted in accordance with the requirements of the
By-Laws, no later than May 2, 2025 and no earlier than April 2, 2025. Any
notice of director nominations other than through the Company's proxy access
provision must include the additional information required by Rule 14a-19(b)
under the Exchange Act.
Shareholders may also request that director nominees be included in the
Company's proxy materials pursuant to the Company's proxy access provisions
under its By-Laws. Such nominations must be submitted no later than April 2,
2025 and no earlier than March 3, 2025. Each shareholder making such a
nomination would be required to provide certain information, representations
and undertakings as outlined in the By-Laws. A copy of the full text of the
Company's By-
Laws referred to above may be obtained by writing to the Corporate Secretary
of the Company.
2024 Proxy Statement 97
-------------------------------------------------------------------------------
Annual Meeting Information
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2024, on file with the SEC, excluding certain exhibits, may be
obtained without charge by writing to Investor Relations, McKesson
Corporation, 6555 State Highway 161, Irving, TX 75039.
Website addresses and hyperlinks are included for reference only. The reports
mentioned above, or any other information contained on or available through
websites referred to and/or linked to in this Proxy Statement (other than the
Company's website to the extent specifically referred to herein as required by
the SEC or NYSE rules) are not part of this proxy solicitation and are not
incorporated by reference into this Proxy Statement or any other proxy
materials.
Some of these reports and information contain cautionary statements regarding
forward-looking information that should be carefully considered. Our
statements and reports about our objectives may include statistics or metrics
that are estimates, make assumptions based on developing standards that may
change, and provide aspirational goals that are not intended to be promises or
guarantees. For more information, please refer to the section "Cautionary
Statements" in our Impact Report. The statements and reports may also change
at any time and we undertake no obligation to update them, except as required
by law.
98 2024 Proxy Statement
-------------------------------------------------------------------------------
Appendix A - Supplemental Information
The Company believes the presentation of Non-GAAP measures provides useful
supplemental information to investors with regard to its operating
performance, as well as assists with the comparison of its past financial
performance to the Company's future financial results. Moreover, the Company
believes that the presentation of Non-GAAP measures assists investors' ability
to compare its financial results to those of other companies in the same
industry. However, the Company's Non-GAAP measures may be defined and
calculated differently by other companies in the same industry.
Reconciliation of GAAP Earnings Per Diluted Share (EPS) to Adjusted Earnings
Per Share (EPS) for Incentive Compensation (Non-GAAP)
Year Ended March 31,
2024 2023 2022
Earnings per diluted common share from continuing $ 22.39 $ 25.05 $ 7.26
operations attributable to McKesson Corporation (GAAP)
(a)
After-tax adjustments:
Amortization of 1.42 1.29 1.69
acquisition-related intangibles
Transaction-related 0.15 (0.52) 10.40
expenses and adjustments
LIFO inventory-related (0.86) 0.01 (0.11)
adjustments
Gains from antitrust (1.35) (0.67) (0.22)
legal settlements
Restructuring, impairment, 0.66 1.13 1.46
and related charges, net
Claims and litigation 0.82 0.02 1.54
charges, net
Other adjustments, net 4.21 (0.37) 1.67 (b)
Adjusted Earnings per $ 27.44 $ 25.94 $ 23.69
Diluted Share (Non-GAAP)
(a)
After-tax adjustments:
Incentive compensation - 0.43 (0.43) (c)
adjustments, net
(a)
Adjusted EPS for Incentive $ 27.44 $ 26.37 $ 23.26
Compensation (Non-GAAP)
(a)
FY 2022 - FY 2024
Cumulative
3-Year cumulative earnings per diluted common share from $ 54.70 (d)
continuing operations attributable to McKesson Corporation (GAAP)
(a)
After-tax adjustments 22.37
3-Year Cumulative Adjusted Earnings $ 77.07 (d)
per Diluted Share (Non-GAAP)
(a)
Incentive compensation $ 2.10 (e)
adjustments, net
(a)
3-Year Cumulative Adjusted EPS for $ 79.17
Incentive Compensation (Non-GAAP)
(a)
(a)
Certain computations may reflect rounding adjustments.
(b)
Other adjustments, net includes a provision for bad debts of $4 per diluted
share for the year ended March 31, 2024 related to the bankruptcy of our
customer, Rite Aid Corporation.
(c)
For the year ended March 31, 2024, consists of $(0.01) per diluted share of
foreign currency gains or losses, primarily related to Canadian dollars and
Euros, compared to our fiscal 2024 plan FX rates offset by $0.01 per diluted
share related to business acquisition activities. For the year ended March 31,
2023, consists of $0.24 per diluted share of foreign currency gains or losses,
primarily related to Euros and Canadian dollars, compared to our fiscal 2023
plan FX rates and $0.20 per diluted share impact from our European divestiture
activities, partially offset by $(0.01) per diluted share related to business
acquisition activities. For the year ended March 31, 2022, consists of $(0.47)
per diluted share impact from our European divestiture activities, partially
offset by $0.03
2024 Proxy Statement A-1
-------------------------------------------------------------------------------
Appendix A - Supplemental Information
per diluted share of foreign currency gains or losses, primarily related to
Euros and Canadian dollars, compared to our fiscal 2022 plan FX rates.
(d)
GAAP earnings per diluted common share from continuing operations attributable
to McKesson Corporation, as reported in our Annual Report on Form 10-K, was
$22.39, $25.05, and $7.26 for the years ended March 31, 2024, 2023, and 2022,
respectively. Adjusted Earnings per Diluted Share (Non-GAAP) was $27.44,
$25.94, and $23.69 for the years ended March 31, 2024, 2023, and 2022,
respectively.
(e)
Incentive compensation adjustments, net includes $0.44 per diluted share
impact of foreign currency gains or losses, primarily related to Canadian
dollars and Euros, compared to our fiscal 2022 plan FX rates, $1.65 per
diluted share from our European divestiture activities, and $0.01 per diluted
share from business acquisition activities.
Reconciliation of GAAP Income from Continuing Operations before Interest
Expense and Income Taxes to Adjusted Operating Profit for Incentive
Compensation (Non-GAAP)
(In millions) Year Ended
March 31, 2024
Income from continuing operations before interest expense and income taxes (GAAP) $ 4,041
Pre-tax adjustments:
Amortization of acquisition-related intangibles 249
Transaction-related expenses and adjustments (12)
LIFO inventory-related adjustments (157)
Gains from antitrust legal settlements (244)
Restructuring, impairment, and related charges, net 115
Claims and litigation charges, net 147
Other adjustments, net 762
Adjusted Operating Profit (Non-GAAP) $ 4,901
Pre-tax adjustments:
Incentive compensation adjustments, net - (a)
Adjusted Operating Profit for Incentive Compensation (Non-GAAP) $ 4,901
(a)
Consists of $(1) million of foreign currency gains or losses, primarily
related to Canadian dollars and Euros, compared to our fiscal 2024 plan FX
rates, partially offset by $1 million related to business acquisition
activities.
A-2 2024 Proxy Statement
-------------------------------------------------------------------------------
Appendix A - Supplemental Information
Reconciliation of Operating Cash Flow (GAAP) to Free Cash Flow (Non-GAAP)
Year Ended March 31,
(In millions) 2024 2023 2022
Operating Cash Flow (GAAP) $ 4,314 $ 5,159 $ 4,434
Investing Cash Flow (GAAP) (1,072) (542) (89)
Financing Cash Flow (GAAP) (3,342) (4,368) (6,321)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 6 25 55
Cash, cash equivalents, and restricted cash classified as Assets held for sale - 470 (540)
Net increase (decrease) in cash, cash equivalents, and restricted cash $ (94) $ 744 $ (2,461)
Year Ended March 31,
(In millions) 2024 2023 2022
Operating Cash Flow (GAAP) $ 4,314 $ 5,159 $ 4,434
Payments for property, plant, and equipment (431) (390) (388)
Capitalized software expenditures (256) (168) (147)
Free Cash Flow (Non-GAAP) $ 3,627 $ 4,601 $ 3,899
Supplemental Non-GAAP Financial Information
In an effort to provide investors with additional information regarding the
Company's financial results as determined by generally accepted accounting
principles ("GAAP"), McKesson Corporation (the "Company" or "we") also
presents the following Non-GAAP measures.
.
Adjusted Earnings per Diluted Share (Non-GAAP) and 3-Year Cumulative Adjusted
Earnings per Diluted Share (Non-GAAP):
We define Adjusted Earnings per Diluted Share as GAAP earnings per diluted
common share from continuing operations attributable to McKesson, excluding
per share impacts of amortization of acquisition-related intangibles,
transaction-related expenses and adjustments, LIFO inventory-related
adjustments, gains from antitrust legal settlements, restructuring,
impairment, and related charges, claims and litigation charges, other
adjustments as well as the related income tax effects for each of these items,
as applicable, divided by diluted weighted-average shares outstanding. We
define 3-Year Cumulative Adjusted Earnings per Diluted Share as the sum of
Adjusted Earnings per Diluted Share (Non-GAAP) for the applicable last three
fiscal years.
.
Adjusted Operating Profit (Non-GAAP):
We define Adjusted Operating Profit as GAAP income from continuing operations
before interest expense and income taxes, excluding amortization of
acquisition-related intangibles, transaction-related expenses and adjustments,
LIFO inventory-related adjustments, gains from antitrust legal settlements,
restructuring, impairment, and related charges, claims and litigation charges,
and other adjustments.
The following provides further details regarding the adjustments made to our
GAAP financial results to arrive at our Non-GAAP measures as defined above:
Amortization of acquisition-related intangibles - Amortization expenses of
intangible assets directly related to business combinations and the formation
of joint ventures.
Transaction-related expenses and adjustments - Transaction, integration, and
other expenses that are directly related to business combinations, the
formation of joint ventures, divestitures, and other transaction-related costs
including initial public offering costs. Examples include transaction closing
costs, professional service fees, legal fees, severance charges, retention
payments and employee relocation expenses, facility or other exit-related
expenses, certain fair value adjustments including deferred revenues,
contingent consideration and inventory, recoveries of acquisition-related
expenses or post-closing expenses, net interest expense impact of hedging
foreign currency-denominated notes, bridge loan fees and gains or losses on
business combinations, and divestitures of businesses that do not qualify as
discontinued operations.
LIFO inventory-related adjustments - LIFO inventory-related non-cash charges
or credit adjustments.
2024 Proxy Statement A-3
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Appendix A - Supplemental Information
Gains from antitrust legal settlements - Net cash proceeds representing the
Company's share of antitrust lawsuit settlements.
Restructuring, impairment, and related charges - Restructuring charges that
are incurred for programs in which we change our operations, the scope of a
business undertaken by our business units, or the manner in which that
business is conducted as well as long-lived asset impairments. Such charges
may include employee severance, retention bonuses, facility closure or
consolidation costs, lease or contract termination costs, asset impairments,
accelerated depreciation and amortization, and other related expenses. The
restructuring programs may be implemented due to the sale or discontinuation
of a product line, reorganization or management structure changes, headcount
rationalization, realignment of operations or products, integration of
acquired businesses, and/or company-wide cost saving initiatives. The amount
and/or frequency of these restructuring charges are not part of our underlying
business, which include normal levels of reinvestment in the business. Any
credit adjustments due to subsequent changes in estimates are also excluded
from adjusted results.
Claims and litigation charges - Adjustments to certain of the Company's
reserves, including those related to estimated probable settlements for its
controlled substance monitoring and reporting, and opioid-related claims, as
well as any applicable income items or credit adjustments due to subsequent
changes in estimates. This does not include our legal fees to defend claims,
which are expensed as incurred. This also may include charges or credits for
general non-operational claims not directly related to our ongoing business.
Other adjustments - The Company evaluates the nature and significance of
transactions qualitatively and quantitatively on an individual basis and may
include them in the determination of our adjusted results from time to time.
While not all-inclusive, other adjustments may include: other asset
impairments; gains or losses from debt extinguishment; and other similar
substantive and/or infrequent items as deemed appropriate.
The Company evaluates the aforementioned Non-GAAP measures on a periodic basis
and updates the definitions from time to time. The evaluation considers both
the quantitative and qualitative aspects of the Company's presentation of
Non-GAAP adjusted results.
Income tax effects are calculated in accordance with Accounting Standards
Codification 740, "Income Taxes," which is the same accounting principle used
by the Company when presenting its GAAP financial results.
.
Free Cash Flow (Non-GAAP):
We define free cash flow as net cash provided by (used in) operating
activities less payments for property, plant, and equipment and capitalized
software expenditures, as disclosed in our consolidated statements of cash
flows in our Annual Report on Form 10-K.
In addition, Adjusted EPS for Incentive Compensation (Non-GAAP), 3-Year
Cumulative Adjusted EPS for Incentive Compensation (Non-GAAP), and Adjusted
Operating Profit for Incentive Compensation (Non-GAAP) are measures that
management utilizes to determine employee incentive compensation. These
measures are further adjusted from certain non-GAAP measures defined above for
incentive compensation adjustments, net, including certain foreign currency
gains or losses compared to plan, certain business acquisition activities and
the impact from our European divestiture activities. While not all-inclusive,
incentive compensation adjustments, net may include other substantive and/or
infrequent items as deemed appropriate by our Compensation and Talent
Committee.
The Company believes the presentation of Non-GAAP measures provides useful
supplemental information to investors with regard to its operating
performance, as well as assists with the comparison of its past financial
performance to the Company's future financial results. Moreover, the Company
believes that the presentation of Non-GAAP measures assists investors' ability
to compare its financial results to those of other companies in the same
industry. However, the Company's Non-GAAP measures may be defined and
calculated differently by other companies in the same industry.
The Company internally uses both GAAP and Non-GAAP financial measures in
connection with its own financial planning and reporting processes. Management
utilizes Non-GAAP financial measures when allocating resources, deploying
capital, as well as assessing business performance, and determining employee
incentive compensation. The Company conducts its businesses internationally in
local currencies, including Canadian dollars, Euro, and British pound
sterling. As a result, the comparability of our results reported in U.S.
dollars can be affected by changes in foreign currency exchange rates. We
believe free cash flow is important to management and useful to investors as a
supplemental measure as it indicates the cash flow available for working
capital needs, re-investment opportunities, strategic acquisitions, share
repurchases, dividend payments, or other strategic uses of cash. Nonetheless,
Non-GAAP adjusted results and related Non-GAAP measures disclosed by the
Company should not be considered a substitute for, nor superior to, financial
results and measures as determined or calculated in accordance with GAAP.
A-4 2024 Proxy Statement
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