Why did McKesson's CEO reduce his pension benefit?

CEO John H. Hammergren voluntarily reduced his legacy executive pension benefit by approximately $45 million to address feedback from stockholders regarding the volatility of pension benefit calculations and to demonstrate responsiveness to shareholder concerns.

What are the key changes to McKesson's long-term incentive program?

Starting with fiscal year 2015, McKesson's restricted stock unit program will be based solely on Total Shareholder Return (TSR) performance measured against the S&P 500 Health Care Index over a three-year period. The performance period has also been extended from one to three years.

How has McKesson's executive compensation peer group changed?

McKesson has adopted a new compensation peer group, eliminating about half of the previous companies and adding new ones. The new group focuses on companies that compete for executive talent, including healthcare companies within McKesson's supply chain, other traditional healthcare companies, and non-healthcare companies with similar operational structures.

When will these new incentive program changes take effect?

The modified long-term equity incentive program, based on TSR, will begin with fiscal year 2015, and the first payout under this new structure is expected in May 2017. Adjustments to cash incentive programs and the new peer group will also be utilized starting in fiscal year 2015.

MCK 8-K: Leadership Changes & Regulation FD

Summary

This 8-K filing from McKesson Corporation (MCK) on February 28, 2014, primarily details significant changes to executive compensation in response to stockholder feedback. Notably, CEO John H. Hammergren voluntarily reduced his legacy executive pension benefit by approximately $45 million. This action addresses concerns about the volatility of pension calculations and reflects a proactive approach to executive compensation practices. Furthermore, McKesson announced modifications to its long-term equity incentive program, shifting to a performance-based restricted stock unit program that will be determined solely by total shareholder return (TSR) relative to the S&P 500 Health Care Index over a three-year period, starting with fiscal year 2015. The company also adjusted financial metrics for its annual and long-term cash incentive programs and adopted a new compensation peer group, aiming for better alignment with companies competing for executive talent in the healthcare and operational sectors. These changes signal a commitment to enhancing governance and aligning executive pay with shareholder interests.

Key Highlights

1CEO John H. Hammergren voluntarily reduced his executive pension benefit by approximately $45 million in response to stockholder feedback.
2McKesson's long-term equity incentive program will shift to a Total Shareholder Return (TSR) performance-based model against the S&P 500 Health Care Index starting in fiscal year 2015.
3The performance period for the restricted stock unit program has been extended to three years, with the first payout under the new model expected in May 2017.
4Adjustments have been made to the financial metrics used in the company's annual and long-term cash incentive programs.
5A new, revised compensation peer group has been adopted to better benchmark executive compensation, with a focus on companies that may compete for executive talent.
6The changes are presented as a direct response to feedback received from the company's stockholders.
7The filing includes a press release dated February 28, 2014, summarizing these compensation and peer group adjustments.

MCKESSON CORP 8-K Report, Executive Changes (Feb 28, 2014)

Summary

Key Highlights

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