The Director Compensation Project- McKesson

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010’s Fortune 500 and using information found in their 2010 proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence.  While substantially the same, there are some minor differences between NYSE and NASDAQ rules that are worth noting. 

Under NYSE Rule 303A.01, all listed companies must have a majority of independent directors sitting on their boards.  Directors are not independent if they received over $120,000 in direct compensation, other than director’s fees, in any one year period over the last three years pursuant to Rule 303A.02(b)(ii).  This is a looser restriction than the equivalent NASDAQ Rule, 5605(a)(2), which includes all compensation.  Rule 303A.06 requires that, in addition to the general independence standards, audit committee members must comport with the requirements of Exchange Act Rule 10A-3 (C.F.R. §240.10A-3), also know as SOX 301.

One can see some of the effects of these rules when looking at the director compensation table from McKesson’s (NYSE:MCK) 2010 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

Name	Total ($)
Andy D. Bryant	263,035
Wayne A. Budd	265,290
Alton F. Irby III	278,719
M. Christine Jacobs	270,999
Marie L. Knowles	285,010
David M. Lawrence	260,460
Edward A. Mueller	258,875
James V. Napier	50,597
Jane E. Shaw	277,108

Director Compensation.  During the fiscal year that ended in March 31, 2010, the board met seven times.  Each Director attended at least 75% of the aggregate number of meetings of the Board and of all the committees on which he or she served. 

Director Tenure.  Dr. Shaw is the longest tenured member of the Board, having served as a Director since April 1992. She is the Chair of the Committee on Directors and Corporate Governance and a member of the Audit Committee. With the exception of Mr. Bud and Ms. Knowles, all of the members of the Board serve as Directors elsewhere.  Mr. Hammergren is a director of Nadro, S.A. de C.V. (Mexico), an entity in which McKesson holds an interest.

CEO Compensation.  Mr. John Hammergren currently serves as the Chairman of the Board, President, and CEO of McKesson. The Compensation Committee, at its May 2010 meeting, reviewed all executive base salaries. The CEO received a base salary increase of 6.3% for fiscal year 2010.  His total compensation for 2010 reached a total of $54,584,021. This total included stock awards, stock options, non-equity incentive compensation, change in pension value and deferred earnings, and other additional compensation. This total is an increase from the $37,157,668  Mr. Hammergren earned in 2009.