- Hammergren eligible for $187 million package if terminated
- Sum includes severance, medical benefits, financial counseling
Cutting a single executive can sometimes be as costly as cutting an army of workers.
McKesson Corp. said in March it would dismiss 1,600 workers in the U.S. and expects the departures will cost about $300 million, mostly in severance payments. Chief Executive Officer John Hammergren is staying put, which might be just as well for the drug distributor’s bottom line.
If Hammergren is terminated or leaves for good reason, he’ll be eligible for severance and benefits worth about $187 million. Put another way, his potential exit payment is roughly equal to the cost of cutting 1,000 of the company’s workers.
“The staggering ratio is yet further evidence that McKesson is being run first and foremost for Hammergren, with shareholders, employees and customers left far behind,” said Ken Hall, general secretary-treasurer of the International Brotherhood of Teamsters, which counts McKesson employees among its members. The union has filed a shareholder proposal asking the board to restrict the vesting of executives’ unearned equity compensation if the company is bought.
Employee severance and vesting of equity awards are “separate, unrelated matters,” Kristin Hunter, a spokeswoman for San Francisco-based McKesson, said in an email.
“Accelerated vesting is common in large, publicly traded companies and keeps McKesson competitive when competing for executive talent,” she wrote, adding that such policies can motivate executives to put shareholders’ interests first in a possible deal. The company holds its annual meeting on July 27 in Richmond, Virginia.
Hammergren’s potential exit package, valued as of March 31, is the second-largest among CEOs at companies in the S&P 500 Index, according to the Bloomberg Pay Index. It includes a pension that was reduced by 30 percent to $114 million in 2014 after a majority of shareholders voted against the executive pay program in the prior year. He’s also eligible for medical benefits, access to an office, a secretary and financial counseling for the remainder of his life.
Hammergren became McKesson’s CEO in 2001, when shares were trading for less than $30. The stock slumped 16 percent in the past 12 months through yesterday to close at $198.03.