8-KLeadership ChangesExhibits & Filings

MCKESSON CORP 8-K Report, Executive Changes (Apr 2, 2012)

Filed April 2, 2012For Securities:MCK

Summary

This 8-K filing from McKesson Corporation (MCK) on April 2, 2012, reports a significant voluntary action by its Chairman, President, and CEO, John H. Hammergren. Effective March 27, 2012, Mr. Hammergren relinquished certain rights related to his employment agreement, specifically those concerning change in control provisions. This includes waiving his right to an excise tax gross-up payment and altering the calculation of his potential cash severance in the event of a change in control. This move by the CEO is noteworthy as it demonstrates a potential alignment with shareholder interests by reducing the company's financial exposure in a change of control scenario. Investors may view this as a positive signal regarding executive commitment and financial prudence, especially given the potential magnitude of such payments under his previous agreement. The filing itself is primarily informational, attaching the letter detailing these renunciations.

Key Highlights

  • 1CEO John H. Hammergren voluntarily relinquished certain rights under his employment agreement.
  • 2The renunciations are effective as of March 27, 2012.
  • 3Mr. Hammergren gave up his right to a change in control-related excise tax gross-up payment.
  • 4He also relinquished his right to have change in control cash severance calculated at 2.99 times his 'base amount'.
  • 5This action potentially reduces the company's financial obligations in a change of control scenario.
  • 6The filing is an 8-K Current Report dated April 2, 2012, reporting an event from March 27, 2012.
  • 7The details of the relinquished rights are provided in a letter attached as an exhibit.

Frequently Asked Questions

Mr. Hammergren relinquished his right to a change in control-related excise tax gross-up payment and his right to have change in control-related cash severance calculated as 2.99 times his 'base amount' as defined under Section 280G of the Internal Revenue Code.

This action is significant because it demonstrates a potential alignment of executive interests with shareholder interests by reducing the company's potential financial liability in the event of a change in control. It can signal executive confidence and commitment to the company's long-term value without such protective provisions.

This filing does not suggest that a change in control is imminent. It simply reports that the CEO has voluntarily amended his employment agreement to remove certain 'gross-up' and enhanced severance provisions related to such a hypothetical future event.

An excise tax gross-up payment is an additional amount paid by a company to an executive to cover the cost of excise taxes imposed on certain 'excess parachute payments' received by the executive in the event of a change in control. Executives may have these rights in their employment agreements to ensure they receive their full intended severance amount without being penalized by excise taxes.