Teamsters Win 'Golden Coffin' Pay Reform at McKesson

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International Brotherhood of Teamsters

Jan 27, 2010, 03:19 ET

Healthcare Company Executives' Future Death Benefits Will Be Put To Shareholder Vote

WASHINGTON, Jan. 27 /PRNewswire/ --This week McKesson Corporation (NYSE: MCK) announced that it will require shareholder approval for future agreements that provide special death benefits to company executives. The pay reform was proposed by the Teamsters last year in a resolution that received majority support at the company's July 22, 2009, annual meeting of shareholders.

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"The era of the board's unrestrained ability to promise multi-million dollar payouts for dying on the job is over at McKesson," said Teamsters General Secretary-Treasurer C. Thomas Keegel. "At a time when the country is reeling from the high cost of health care and investors are enraged at excessive executive compensation, shareholders will now have a stronger voice at McKesson."

Chairman and CEO John H. Hammergren realized $29.0 million in fiscal year 2009 compensation alone, and has accumulated $79.7 million under the Executive Benefit Retirement Plan.

"If shareholders think McKesson executives need another final windfall to provide for their estate, they will now have an opportunity to vote on executive 'golden coffins,'" Keegel said.

Announced in a Form 8-K filing on January 25, McKesson's new Executive Death Benefits Policy states that the company will not enter into a new plan or agreement with any executive officer, or a material amendment of an existing agreement with any executive officer, that provides for a death benefit that is not generally provided to all employees, including salary continuation upon the death of an executive officer, unless such agreement or amendment is approved by the company's shareholders pursuant to an advisory vote. McKesson also froze participation in its Executive Survivor Benefits Plan to the current roster of beneficiaries.

According to McKesson's 2009 proxy statement, the heirs of CEO John H. Hammergren stand to receive a $3.43 million cash death benefit under the Executive Survivor Benefits Plan. In addition, Mr. Hammergren's employment agreement provides for salary continuation for a period of six months, currently valued at $790,000, should he die during the term of the agreement.

The new policy does not affect all posthumous benefits, such as the accelerated vesting of stock options and restricted stock unit awards. According to McKesson's 2009 proxy statement, Mr. Hammergren's heirs would receive more than $21 million from the accelerated vesting of these awards, along with a pro rata portion of up to $13.8 million in Management Incentive Plan and Long-Term Incentive Plan awards.

"McKesson's new Executive Death Benefits Policy will not cure the company of excessive pay, and we continue to have serious concerns about the rigor of the company's pay plans," Keegel said. "Nonetheless, we are encouraged that McKesson is listening to its shareholders and taking a step in the right direction."

Founded in 1903, the International Brotherhood of Teamsters represents 1.4 million hardworking men and women in the United States, Canada and Puerto Rico.

SOURCE International Brotherhood of Teamsters