8-KLeadership Changes

CARDINAL HEALTH INC 8-K Report, Executive Changes (Aug 11, 2008)

Filed August 11, 2008For Securities:CAH

Summary

This 8-K filing from Cardinal Health, Inc. (CAH) on August 11, 2008, primarily reports on the fiscal year 2008 annual incentive compensation payouts to named executives. The Human Resources and Compensation Committee approved these payouts under the Amended and Restated Management Incentive Plan (MIP). Despite the company not meeting the pre-established performance targets for Net Operating Profit After Tax (NOPAT) and Return on Tangible Capital (ROTC) for fiscal year 2008, the Committee exercised its discretion to award compensation. This decision was based on the company's overall consolidated performance and, for specific executives, the performance of their associated business segments, particularly in relation to achieving a specified level of return on equity. Investors should note the discretionary nature of these payouts given the missed primary performance metrics.

Key Highlights

  • 1Cardinal Health's Human Resources and Compensation Committee approved fiscal 2008 annual incentive compensation payouts to named executives.
  • 2The payouts were made under the Amended and Restated Management Incentive Plan (MIP).
  • 3The company did not achieve its minimum performance goals for Net Operating Profit After Tax (NOPAT) and Return on Tangible Capital (ROTC) for fiscal 2008.
  • 4Despite missing NOPAT and ROTC targets, the Committee exercised discretion in determining award amounts.
  • 5Discretionary awards were based on overall consolidated company performance, specifically meeting a specified level of return on equity.
  • 6Executive payouts ranged from $208,689 for the CFO to $691,804 for the CEO.
  • 7The filing details the compensation for R. Kerry Clark (CEO), Jeffrey W. Henderson (CFO), Robert D. Walter (Former Executive Director), and David L. Schlotterbeck (Vice Chairman).

Frequently Asked Questions

While the company did not achieve its specific NOPAT and ROTC performance goals for fiscal year 2008, the Human Resources and Compensation Committee exercised its discretionary authority. The decision to award incentive compensation was based on the company's overall consolidated performance, which included meeting a specified level of return on equity, and the performance of the business segments associated with individual executives.

The performance goals for the fiscal 2008 annual incentive compensation were based on achieving a specified level of growth in Net Operating Profit After Tax (NOPAT) and Return on Tangible Capital (ROTC). A minimum threshold of 60% of the target award was contingent on meeting minimum levels of both NOPAT and ROTC.

The named executives received the following fiscal 2008 annual incentive compensation: R. Kerry Clark (Chairman and CEO) received $691,804; David L. Schlotterbeck (Vice Chairman) received $556,127; Robert D. Walter (Former Executive Director) received $416,883; and Jeffrey W. Henderson (Chief Financial Officer) received $208,689.

The exercise of discretion by the Committee suggests that while the primary, quantitative performance targets were not met, the Committee found other aspects of the company's performance (such as return on equity) or individual executive contributions to be significant enough to warrant compensation. This introduces a subjective element into the incentive compensation process for this period.