Business Context and Reporting Period
This Form 8-K filing by McKesson Corporation, dated May 23, 2006, reports on actions taken by the Compensation Committee of the Board of Directors. The filing details the approval of executive compensation awards for the fiscal year ending March 31, 2006 (FY 2006), the establishment of target awards for FY 2007, and the setting of long-term incentive targets for the 2007-2009 period.
Key Financial Metrics and Compensation Awards
The filing does not provide consolidated revenue, profit, cash flow, or debt metrics. It focuses exclusively on executive compensation figures.
FY 2006 Management Incentive Plan (Cash Awards)
- John Hammergren (CEO): $4,000,000
- Paul Julian (EVP, Group President): $1,560,000
- Jeffrey Campbell (EVP, CFO): $1,000,000
- Pamela Pure (EVP, President McKesson Provider Technologies): $1,025,000
- Ivan Meyerson (Former EVP, General Counsel): $690,000
Stock Option Awards (FY 2006)
- John Hammergren: 285,000 options
- Paul Julian: 142,000 options
- Jeffrey Campbell: 63,000 options
- Pamela Pure: 55,000 options
Note: Options vest ratably over four years with a seven-year life.
Performance Restricted Stock Units (PRSUs) - FY 2006
- John Hammergren: 266,000 units
- Paul Julian: 144,000 units
- Jeffrey Campbell: 61,000 units
- Pamela Pure: 64,000 units
Note: PRSUs vest 50% in one year and 100% in three years.
Material Changes and Policy Amendments
The Committee adopted revised Statements of Terms and Conditions (ST&Cs) regarding change-in-control provisions. Previously, awards vested immediately upon a change in control. Under the new terms effective May 23, 2006, awards will only immediately vest if the executive is terminated without "cause" or resigns for "good reason." The amendments also provide for economic protection in such events.
Additionally, in connection with Ivan Meyerson's retirement, the Committee accelerated the vesting of 18,200 Restricted Stock Units (RSUs) granted on May 25, 2004, to June 1, 2006.
Future Performance Targets (FY 2007 and 2007-2009)
The filing establishes target awards based on Earnings Per Share (EPS) performance:
| Executive | FY 2007 MIP Target (Cash) | FY 2007 PRSU Target (Units) | 2007-2009 LTIP Target (Cash) |
|---|---|---|---|
| John Hammergren | $1,860,644 | 110,000 | $2,700,000 |
| Paul Julian | $840,829 | 55,000 | $1,375,000 |
| Jeffrey Campbell | $593,283 | 25,000 | $600,000 |
| Pamela Pure | $539,559 | 22,000 | $550,000 |
Outlook, Risks, and Contingencies
The filing notes that actual awards for FY 2007 and the 2007-2009 period may be smaller or larger than the targets depending on the Company's actual performance against the EPS metrics. No specific financial risks or contingencies regarding the company's operations are disclosed in this document.
Key Facts for Investor Verification
- Compensation Structure: Verify the alignment of executive pay with the specific EPS performance metrics defined for FY 2007 and the 2007-2009 period.
- Change-in-Control Terms: Review the attached Exhibits 10.1 and 10.2 to understand the specific definitions of "cause" and "good reason" which now trigger immediate vesting.
- Retirement Impact: Confirm the accounting treatment for the accelerated vesting of 18,200 RSUs for Ivan Meyerson.
- Performance Metrics: The filing does not disclose the actual FY 2006 EPS results, only that the awards were based on performance; investors should verify the actual EPS achieved in the FY 2006 10-K.