Ex­ecs’ pay plan re­jected at McKes­son

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - AN­DERS MELIN

McKes­son Corp. in­vestors op­posed the com­pany’s ex­ec­u­tive com­pen­sa­tion plan af­ter a pub­lic voteno cam­paign by the In­ter­na­tional Brother­hood of Team­sters, which ac­cused the drug dis­trib­u­tor of ag­gra­vat­ing the opi­oid epi­demic.

In­vestors hold­ing a ma­jor­ity of voted shares re­jected the pro­gram at the com­pany’s an­nual meet­ing Wed­nes­day out­side Dal­las, the firm said Wed­nes­day in a state­ment. It’s the sec­ond time the board failed to win ma­jor­ity sup­port since ad­vi­sory votes on pay were first held in 2011.

“McKes­son has be­come em­broiled in what is per­haps Amer­ica’s most tragic fail­ure of cor­po­rate in­tegrity: the pre­scrip­tion-opi­oid cri­sis, which claims the lives of 62 Amer­i­cans ev­ery day,” Ken Hall, gen­eral sec­re­tary­trea­surer for the Team­sters,

said in pre­pared re­marks for the meet­ing, where union mem­bers pick­eted. “In­de­pen­dent board lead­er­ship is crit­i­cal go­ing for­ward in light of the cur­rent cri­sis fac­ing the com­pany.”

While share­hold­ers re­jected a Team­sters pro­posal re­quir­ing that the board ap­point an in­de­pen­dent di­rec­tor as chair­man, aim­ing to strip Chief Ex­ec­u­tive Of­fi­cer John Ham­mer­gren of his dual role, the board adopted a pol­icy that will split the two jobs af­ter he steps down.

“We en­gage with our share­hold­ers year-round to gather in­put on McKes­son’s busi­ness and to­day’s proxy vote pro­vided us with an­other op­por­tu­nity to hear from our share­hold­ers,” Ham­mer­gren said in the state­ment. “We take the feed­back se­ri­ously and will care­fully con­sider

the in­put re­ceived — mak­ing changes where nec­es­sary — so that we can con­tinue to best serve our cus­tomers and de­liver long-term value for our share­hold­ers.”

The Team­sters, in a Novem­ber let­ter to the board, de­manded an overhaul of in­cen­tive awards for se­nior ex­ec­u­tives, claw­backs of Ham­mer­gren’s past com­pen­sa­tion and that McKes­son end its prac­tice of ty­ing in­cen­tive pay to the sale of con­trolled sub­stances. Lead in­de­pen­dent di­rec­tor Ed­ward Mueller de­fended the board in a sep­a­rate let­ter to in­vestors, not­ing sev­eral com­pen­sa­tion changes made in prior years and com­pany ef­forts to help au­thor­i­ties com­bat the opi­oid epi­demic.

In­sti­tu­tional Share­holder Ser­vices Inc. and Glass Lewis & Co., the largest U.S. proxy ad­vis­ers, echoed some of the Team­sters’ con­cerns and both rec­om­mended that in­vestors vote against the pay pro­gram and sup­port the pro­posal

to ap­point an in­de­pen­dent chair­man.

While share­holder votes on com­pen­sa­tion aren’t bind­ing, it’s rare for in­vestors to op­pose man­age­ment’s rec­om­men­da­tions. Only about 1 per­cent of S&P 500 com­pa­nies failed to win ma­jor­ity sup­port for their ex­ec­u­tive pay pro­grams at their most re­cent an­nual meet­ings, ac­cord­ing to data com­piled by Bloomberg. Less than 70 per­cent sup­port is gen­er­ally con­sid­ered a strong sig­nal to di­rec­tors that they should take ac­tion to ad­dress in­vestors’ ob­jec­tions.

McKes­son’s board has cut Ham­mer­gren’s to­tal direct com­pen­sa­tion by 27 per­cent over the past five years, giv­ing him $20.1 mil­lion in re­ported pay for the fis­cal year ended March 31, a reg­u­la­tory fil­ing shows. He’s taken home $781 mil­lion since be­com­ing sole CEO in 2001, ac­cord­ing to a Bloomberg Pay In­dex tally of his salary, bonuses, perks, vested stock and ex­er­cised op­tions.

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