McKesson Executive Pay Plan Rejected After Teamsters CampaignBy
Company to split CEO, chairman roles after Hammergren leaves
Investors vote no on compensation for second time since 2011
McKesson Corp. investors opposed the company’s executive compensation plan after a public vote-no 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 secretary-treasurer 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.