Proxy Blog

McKesson

July 9, 2018

The annual proxy for this distributor of pharmaceuticals and provider of health information technology and medical supplies had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Shareholder proposals on:
    -Greater lobbying disclosure
    -Prevent accelerated vesting of awards
    -Limit variable compensation of executives to GAAP financial metrics
    -Lowering threshold for special meetings 

Magni voted as follows: 

  1. Magni voted for all proforma proposals.
    -Directors. The board has a majority of independent directors and some have CEO/CFO experience with other companies. The compensation of directors is disclosed with a meaningful portion in equity where the equity has restrictions to align director incentives with long-term value creation. The compensation levels are set using a benchmarking process.
    -Auditors. There appear to be no controversies with the financial statements of the company.
    -“Say-on-pay” Advisory Vote. The proxy materials demonstrated that the board has more than considered shareholder feedback on executive compensation. In addition, the proxy materials disclosed the benchmarking done on executive compensation, including listing the peer group used in the benchmarking.

  2. Magni voted for and against shareholder proposals.
    -Against greater lobbying disclosure. McKesson already has award-winning disclosure of lobbying activities. Magni is supportive of lobbying disclosure when the company is opaque.
    Against prevention of accelerated vesting of awards. The primary reason for accelerated vesting is when a change of control occurs, such as when the company is sold. The shareholders should want the executives to be motivated to sell the company at a high price.
    For limiting variable compensation of executives to GAPP financial metrics. The experience of General Electric with its complicated and nonstandard financial information demonstrated the problems of non-GAAP metrics. McKesson claims the use of GAAP financial metrics limits the board’s ability to create targeted compensation packages. The risk reduction from forced usage of GAAP is more valuable than the incremental benefit from targeting.
    For lower threshold required for special meetings. The current McKesson threshold is currently 25% of shares. That is high.