Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Letter from Mr. Hammergren Significantly Reducing his Pension Benefit
On February 27, 2014, Jane E. Shaw, Ph.D., Chairman of the Compensation
Committee of the Board of Directors of McKesson Corporation ("McKesson" or the
"Company"), received a letter from John H. Hammergren, the Company's Chairman,
President and Chief Executive Officer, pursuant to which Mr. Hammergren acted to
voluntarily reduce his benefit under the Company's legacy executive pension
program, the Executive Benefit Retirement Plan (the "EBRP"). The change
addresses feedback received from some of the Company's stockholders about the
volatility of pension benefit calculations.
Effective immediately, Mr. Hammergren's EBRP benefit was reduced by
approximately $45 million from the amount disclosed in the Company's definitive
proxy statement for its 2013 Annual Meeting of Stockholders as being payable to
Mr. Hammergren had he voluntarily resigned effective March 31, 2013. The letter
resulted from conversations between Mr. Hammergren and the Board of Directors
following their consideration of stockholder feedback. The letter constitutes a
modification to Mr. Hammergren's employment agreement, as amended and restated
November 1, 2008, and as further modified March 27, 2012 (the "Employment
Agreement"). His right to the pension benefit will continue to be subject to all
other terms of the EBRP and his Employment Agreement. Except as expressly
modified by the letter, the Employment Agreement continues in full force and
A copy of the letter delivered to Dr. Shaw by Mr. Hammergren is attached hereto
as Exhibit 10.1 and incorporated herein by reference.
Incentive Program Changes
Further, on January 28, 2014, the Compensation Committee of the Company's Board
of Directors (the "Committee") modified the design of the Company's primary
long-term equity program. Beginning with fiscal year 2015, payouts to executive
officers under McKesson's restricted stock unit program will be determined
solely by comparing McKesson's total stockholder return ("TSR") over a
three-year period against TSR for the S&P 500 Health Care Index for the same
period. The Committee also changed the performance period from one to three
years; the first payout under this new program will occur in May 2017. The
Compensation Committee also made adjustments to the financial metrics being used
in the Company's annual and long-term cash incentive programs.
These changes address feedback received from some of the Company's stockholders
and are part of the Committee's continuing process of evaluating and refining
the Company's incentive programs.
New Compensation Peer Group
In addition, on January 28, 2014, following a comprehensive review of the
Company's current compensation peer group by the Committee's new independent
compensation consultant and review by the Committee, the Committee adopted a new
peer group which it will use beginning in fiscal year 2015 as a reference point
when making decisions about overall compensation, the elements of compensation,
the amount of each element of compensation and the relative competitive
landscape of the Company's executive compensation program. Approximately
one-half of the companies in the previous compensation peer group were
eliminated, and approximately six new companies were added to the new peer
group. The new compensation peer group focuses on companies that may compete
with McKesson for executive talent, including: (i) healthcare companies that may
compete or interact with the Company
within its supply chain, (ii) other traditional healthcare companies and
(iii) non-healthcare companies that are operationally similar to McKesson or
other companies within its supply chain. Details on the composition of the new
compensation peer group will be included in the Company's definitive proxy
statement for its 2014 Annual Meeting of Stockholders.
Item 7.01 Regulation FD Disclosure.
On February 27, 2014, the Company issued a press release announcing (i) the
acceptance by Dr. Shaw and the Company of Mr. Hammergren's letter significantly
reducing his EBRP benefit, (ii) changes to the Company's executive compensation
program and (iii) changes to the compensation peer group. A copy of the
Company's press release is attached hereto as Exhibit 99.1.
The information contained in this item, including Exhibit 99.1, is furnished to
the Securities and Exchange Commission (the "Commission"), but shall not be
deemed "filed" with the Commission for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by
reference in any filing under the Securities Act of 1933, as amended, or the
Exchange Act, except as shall be expressly set forth by specific reference in
such a filing.
Item 9.01 Financial Statements and Exhibits.
10.1 Letter dated February 27, 2014 relinquishing certain rights provided
in the Employment Agreement.
99.1 Press release issued by the Company dated February 28, 2014.