McKesson (MCK) DEFA14A Additional proxy soliciting materials

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.    )

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¨	Soliciting Material Pursuant to §240.14a-12

McKESSON CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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2015 Annual Meeting of Stockholders

Meeting Date: July 29, 2015

2

2

Executive Summary

We ask for your support at our 2015 Annual Meeting

Strong

Performance

Delivered strong financial and operational performance in FY 2015

Increased Adjusted EPS by 29% year-over-year and achieved a three-year compound

annual growth rate of almost 21%

Generated $3.1 billion in operating cash flow

Delivered total shareholder return of 29%, adding $11.7 billion in market value

Expanded our scale and global reach with the acquisition of Celesio AG

Robust

Governance

Practices

We value shareholder feedback in the refinement of our governance practices

Recently elected our Lead Independent Director to an additional two-year term

Delivering on our commitment, we are pleased to submit proxy access by-law

amendments to shareholders at the 2015 Annual Meeting

Improvements to

the Compensation

Program

Engaged with over 62% of our shareholder base since the 2014 Annual Meeting

Continued to enhance our compensation program in response to feedback:

o

Introduced new performance metrics

o

Performance or vesting periods for new long-term awards of at least three years

Independent and

Experienced Board

10 of 11 director nominees are independent

Our directors bring a balance of industry-specific and functional expertise

We

are

refreshing

our

Board

–

we

added

three

new

independent

directors

in

FY

2015

and expect three of our current directors to retire over the next two years

3

3

A History of Strong, Sustained Performance

Key Operational,

Financial and

Strategic

Achievements

Delivered significant, profitable growth on a top-line, bottom-line, and cash flow basis

Deepened relationships with customers and manufacturing partners while expanding

scale and global reach

Focused

growth

on

emerging

technology

solutions

and

enhanced

customer

relationships

in distribution solutions

Continued execution of disciplined strategic transactions, most recently the $8 billion

acquisition of Celesio AG that expanded McKesson’s global platform

Balanced capital allocation policy with significant capital return to shareholders through

both stock repurchases and dividends

Our executive team and experienced Board

have driven tremendous long-term value for our shareholders

*   Total shareholder return (“TSR”) is calculated as stock price appreciation (or reduction) over the measurement period, including reinvestment of

dividends when paid, divided by the stock price at the beginning of the period.

Responsive to Shareholder Feedback

4

Ongoing

Board

Refreshment

Substantive

Compensation

Program

Changes

In FY 2014, implemented changes to address concerns regarding the scale of our CEO’s pension and

the quantum of his pay:

o

Reduced pension benefit to a fixed value almost 30% less than the amount he would have

received had he resigned at the end of FY 2013

o

Eliminated volatility in pension due to changes in actuarial assumptions

In FY 2015, continued to enhance our executive compensation program:

o

Introduced a new relative performance metric and strengthened pay for performance alignment

o

Relative total shareholder return metric is part of a long-term incentive program that also uses

absolute financial performance metrics

o

All executive officers receive long-term incentive awards with performance or vesting periods of

at least three years

In FY 2014, implemented a number of changes to our Board’s leadership structure:

o

Alton F. Irby III, former Chair of the Compensation Committee, stepped off that Committee

o

Jane E. Shaw, Ph.D., joined the Compensation Committee and then assumed the role of Chair

o

Wayne A. Budd was appointed Chair of the Governance Committee

In FY 2015, refreshed Board committees and Board composition:

o

Appointed a new Chair of the Compensation Committee, Andy D. Bryant, upon retirement of the

former Chair

o

Three

new

members

joined

our

Board

of

Directors

-

N.

Anthony

Coles,

M.D.,

Donald

R.

Knauss

and Susan

R. Salka

o

In

addition

to

a

fresh

perspective,

Dr.

Coles

and

Ms.

Salka

both

bring

years

of

leadership

in

the

healthcare

industry

and

Mr.

Knauss

brings

unique

branding

and

retailer

knowledge

We

expect

three

of

our

current

directors

to

retire

over

the

next

two

years:

Alton

F.

Irby

III,

David

M.

Lawrence,

M.D.

and

Wayne

A.

Budd

We regularly engage with our shareholders to understand their views

and make meaningful changes in response to shareholder feedback

Total Shareholder Return of 258%,

CEO Direct Pay Down 21%

5

Total Shareholder Return

(1)

vs. CEO Total Direct Compensation

(2)

(1)

Total shareholder return assumes $100 invested at the close of trading on March 31, 2010 and the reinvestment of dividends when paid.

Total direct compensation (“TDC”) refers to total compensation disclosed in the Summary Compensation Table minus the amount displayed

under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column. We exclude this amount because it does

not reflect Compensation Committee decisions based on Company or individual performance.

(2)

Executive Compensation

Financial Targets Tied to Operating and Strategic Plans

6

Key Considerations in Development of Annual and Long-Term Goals

Business Environment

Competitive Factors

McKesson Objectives

International Trends

Public

Policy

Analyst

Expectations

Market

Outlook

Tax

Policy

Industry Trends

Competitor Performance

Competitor Plans

Competitive Landscape

Market Growth

Historical Trends

Historical Performance

Long Range Planning

Capital Deployment Opportunities

Recent Capital Deployment Decisions

Long Range Corporate Strategy

Financial targets for annual and long-term incentive plans tied to annual operating plan and rolling three-year

strategic plan

This approach has been effective:

o

From FY

2013 to FY

2015, McKesson’s forward earnings guidance grew at its midpoint by more than 47%,

representing a compound annual growth rate of more than 21%

o

For FY

2015, forward earnings guidance published on May 12, 2014 represented 25% to 30% growth year-

over-year on a constant currency basis

o

The growth marked by our FY 2015 forward guidance was incorporated into each of the financial

performance targets approved by the Compensation Committee in May 2014 for use in McKesson’s

executive compensation program

Rigorous operational and strategic planning supports

the development of relevant and challenging incentive targets

What’s New: Executive Compensation

Incentive Plan Changes for FY 2015

7

Shareholder Feedback

Impact on FY 2015 Incentive

Plans

Redundant

use of

earnings metrics

Replaced Adjusted EBITDA with Adjusted OCF as secondary financial

metric in the Management Incentive Plan (annual cash incentive)

Replaced Cumulative Adjusted OCF with Adjusted ROIC as secondary

metric in the Long-Term Incentive Plan (long-term cash incentive)

Lack of shareholder

return or relative measure

Replaced Performance Restricted Stock Unit program  (“PeRSU,”

former long-term equity incentive) with a new Total Shareholder Return

Unit program (“TSRU,” new long-term equity incentive) for executive

officers

Adopted TSR relative to S&P 500 Health Care Index as sole

performance

metric

in

new

TSRU

program:

o

Target

payout

at

55

th

percentile

relative

to

index

(above

median

performance)

o

Payout capped at target if McKesson TSR is negative

Short performance period

(one-

year) in PeRSU

program

All long-term incentive plans for executive officers, including the new

TSRU program, now have performance or vesting periods of at least

three years

Vital Balance of Industry and Functional Expertise

8

Experienced Leaders

Global Leadership

All 11

nominees are experienced

business leaders, which equips them

to provide constructive insight to our

management team.

8

of the nominees have substantial

international experience, which

brings critical perspective to our

Board with our expansion in the

global marketplace.

Healthcare

Financial Expertise

5

of

the

nominees

are

experienced

leaders

in

the

healthcare

industry,

including

leaders

of

pharmaceutical

and

medical

device

companies

and

organizations

providing

healthcare

services.

10

of the nominees have valuable

financial experience having spent a

significant portion of their careers

focused on finance or as chief

executives, with 3

of them previously

having served as Chief Financial

Officers.

Supply Chain

Technology

8

of the nominees bring supply chain

or manufacturing experience to our

boardroom, which enhances the

Board’s oversight of our Distribution

Solutions businesses.

5 of the nominees are experienced

leaders in the technology industry,

which allows them to effectively

oversee the management of our

Technology Solutions businesses.

The Governance Committee has worked to build a vibrant Board

that blends the right expertise and perspectives to oversee McKesson

9

Independent, Experienced and Diverse Board

McKesson’s Board, with its diverse perspectives, provides valuable

guidance, consultation and oversight for management

Actively Refreshing the Board with New Talent

During

FY

2015,

three

new

members

joined

our

Board

of

Directors:

N.

Anthony

Coles,

M.D.,

Donald

R.

Knauss

and Susan

R. Salka

In

addition

to

the

fresh

perspectives

they

provide

the

Board,

Dr.

Coles

and

Ms.

Salka

both

bring

years

of

leadership

in

the

healthcare

industry,

and

Mr.

Knauss

brings

unique

branding

and

retailer

knowledge

Jane

E. Shaw, Ph.D., our longest-tenured director, retired from the Board at the 2014 Annual Meeting of

Stockholders,

and

we

expect

three

additional

directors

to

retire

over

the

next

two

years:

Alton

F.

Irby

III,

David

M.

Lawrence,

M.D.

and

Wayne

A.

Budd

The Governance Committee maintains a robust self-assessment and nomination process and will continue to

draw from a pool of highly qualified, diverse and independent director candidates for nomination to the Board

What’s New: Governance

10

In 2014, we announced plans to submit a proposal at the 2015 Annual Meeting to adopt proxy

access by-law amendments

Over the last 12 months, we continued to actively engage with shareholders to understand their

views on proxy access

On June 1

st

, we announced that our Board adopted proxy access by-law amendments, subject to

shareholder approval at the 2015 Annual Meeting, with the following terms:

o

3% ownership with a three-year holding period

o

Shareholders may nominate directors for up to 20% of the available seats

The by-law amendments will become effective immediately if approved by shareholders

Our Board remains committed to strong, shareholder-focused,

contemporary corporate governance practices consistent with our goal

of creating long-term, sustainable value for McKesson’s shareholders

Delivering on Proxy Access

Reelection of Lead Independent Director

In 2013, the Board created the role of Lead Independent Director and elected Edward A. Mueller

as McKesson’s first Lead Independent Director to serve a two-year term

In  April 2015, the independent directors of the Board elected Mr. Mueller to serve an additional

two-year term as Lead Independent Director, subject to his continuing reelection and status as

an independent director

Board Perspectives on Shareholder Proposals

Disclosure of Political Contributions

11

Given the limited nature of McKesson’s corporate political contributions, together with

recently enhanced transparency and Board oversight of our political engagement, the

Board believes this proposal is unnecessary and recommends a vote “AGAINST”

Decisions

made

by

policymakers

have

a

profound

impact

on

our

industry,

business

and

customers

We primarily engage in the political process through the McKesson Corporation Employees Political

Fund (“PAC”)

Contributions are funded entirely by eligible McKesson employees on a voluntary basis; such

contributions are not made with corporate assets

Transparency and accountability with respect to political expenditures are important

All

corporate

political

contributions

are

subject

to

both

internal

procedures

and

strict

laws

regarding

transparency

www.mckessoncorporatecitizenship.com provides a detailed description of our approach and total

corporate

political

contributions

(under

“Our

Company

—

Engagement

and

Collaboration”),

and

our

PAC files monthly reports with the Federal Election Commission

McKesson

does

not

make

“independent

expenditures”

or

“super

PAC”

contributions

McKesson makes a limited number of corporate political contributions at the state level

This includes corporate contributions to state candidates and political action committees in areas

where the Company has a significant employee or facility presence

Political

contributions

are

subject

to

Board

oversight,

and

all

contributions

must

be

approved

by

the

Senior Vice President of Public Affairs, with contributions greater than $1,000 subject to approval by

the Chairman of the Board and Chief Executive Officer

Participating

in the

Political Process

Contributions

Funded by

Employees

Transparency

and Disclosure

Limited

Corporate

Contributions

Board Perspectives on Shareholder Proposals

Accelerated Vesting of Equity Awards

12

The Board believes that the current executive compensation structure, including accelerated

vesting of equity incentive awards, is appropriate and effective at aligning the interests of

executives and shareholders –

a vote “AGAINST” is recommended

The

Board

opposes

this

proposal

because

providing

for

accelerated

vesting

of

equity

awards

in

the

event

of a named executive officer’s termination following a change in control is in the best interests of

shareholders:

o

This “double trigger” for accelerated vesting is consistent with feedback from our shareholders

o

Executives have employee benefits, including severance and change in control benefits, that the

Compensation Committee believes are competitively necessary

o

Adopting this proposal would limit our ability to provide competitive compensation programs and

could disadvantage our ability to attract and retain highly qualified employees

The Board believes that the current structure of the Company’s executive compensation program,

including the provisions related to accelerated vesting of equity incentive awards, is appropriate and

effective, and aligns the interests of our executives with those of the Company’s shareholders

o

These compensation programs are consistent with market practice and provide us with the ability to

compete for, attract and retain talented executives

Accelerated

vesting

can

help

to

mitigate

some

of

the

uncertainty

that

will

likely

arise

for

executives

from

a

change in control transaction, and reduce the risk of executive turnover during a pending transaction

where the risk of job loss is relatively high for senior executives

Accelerated

Vesting Subject

to a Double

Trigger Benefits

Shareholders

Aligning

Incentives

Retaining Key

Talent

13

2015 Annual Meeting of Stockholders

This information is being provided to shareholders in addition to the proxy statement filed by

McKesson Corporation (the “Company”) with the Securities and Exchange Commission (the

“SEC”) on June 15, 2015. Please read the complete proxy statement and accompanying

materials carefully before you make a voting decision. Even if voting instructions for your

proxy have already been given, you can change your vote at any time before the Annual

Meeting by giving new voting instructions as described in more detail in the proxy statement.

The proxy statement, and any other documents filed by the Company with the SEC, may be

obtained free of charge at www.sec.gov and from the Company’s website at

www.mckesson.com.