SAN FRANCISCO Shareholders re-elected all of McKesson Corp's (MCK.N) board members on Wednesday, defying the recommendations of influential proxy advisers and investors who object to the inflated compensation and dual roles of Chairman and CEO John Hammergren.
The company said all directors received a majority vote at the annual shareholders meeting in favor of their remaining on the board. No specific numbers were disclosed, which raised the suspicions of one critic who spoke at the meeting.
"It's about damage control," said Michael Pryce-Jones of the CTW Investment Group, part of the Change to Win labor federation that includes pension funds invested in McKesson. "They know they have a problem."
Investor advisory firms wanted some directors to go. ISS, the most influential, recommended ejection of the board's entire compensation committee. CTW wanted the committee chairman, Alton Irby, out along with Jane Shaw, head of the corporate governance committee. On Tuesday, CTW issued a statement calling McKesson "the new poster-child of out-of-control CEO pay."
The critics call attention to a $159 million lump-sum pension payment that Hammergren would have received had he retired. The Wall Street Journal called it one of the largest pensions in history, inflated over time by special concessions made by the board, such as credit for years in service. The pension even received coverage in the UK's Daily Mail newspaper.
In two advisory votes, shareholders did vote for a proposal to make it easier for the company to claw back pay from executives, which its backers said was believed to be the first time such a proposal had majority support. They also voted against its compensation policy in general.
"The issue's moved beyond simply tinkering around on pay," Pryce-Jones said. "I think it's the competency of the directors."
Concerns over governance at the San Francisco-based health technology and distribution company have rumbled for some time. A shareholder majority voted last year in favor of a non-binding resolution calling for splitting the chairman and CEO roles.
McKesson argues its governance and compensation have helped drive strong performance, which in turn has elevated executive compensation. The stock has climbed 27 percent in 2013, and over the CEO's 14-year tenure, it has more than quadrupled.
The shares drifted only slightly lower to $123.14 following the news of the vote on Wednesday.
Shareholder Fred Martin praised Hammergren and his team for putting the company and themselves in a "position where they should yield some dividends."
But Louis Malizia, assistant director for capital strategies at the International Brotherhood of Teamsters union, doubted whether they deserved quite so much in return.
Whereas coaches in sports often took too much of the blame for a team's performance, he said: "Here it's the opposite - the coaches get all the credit."
(Reporting by Braden Reddall; Editing by Carol Bishopric and Dan Grebler)