MCK McKesson Corporation

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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McKESSON CORPORATION

(Name of Registrant as Specified In Its Charter)

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

A LETTER FROM OUR INDEPENDENT CHAIR

The Board remains as high functioning and engaged as ever, continuously monitoring the Company’s strategy, leadership, operations, and risk management in the dynamic global healthcare environment in which we operate.

As we approach the 2020 Annual Meeting, I would like to share some of the ways that your Board is working to provide strong governance and independent oversight to represent your interests.

Our COVID-19 Response Efforts

As one of the world’s largest healthcare companies, we have a critical role to play in making medications and supplies available to customers and patients when they need them. McKesson plays an important role in healthcare delivery, and it is something we take seriously every day — even more so now as the world is facing this healthcare challenge. Over the past few months, we have taken a number of meaningful steps to advance public health goals, maintain essential access to medications and supplies for our customers, and safeguard our employees from the spread of COVID-19.

We awarded approximately $30 million in special one-time bonus payments to recognize frontline workers and certain other staff for their contributions. In addition, we invested approximately $15 million for COVID-19 related relief and response efforts, which includes a $10 million contribution to the McKesson Foundation. A portion of that contribution will be deployed to McKesson’s Taking Care of Our Own Fund to provide support for employees impacted by the COVID-19 pandemic.

Other measures we have taken to mitigate the impact of the COVID-19 health crisis include:

Cultivating a Strong Ethical Culture

At McKesson, doing business in the right way is fundamental to, and embedded in, our culture. Our long-term success depends on embracing and expecting the highest ethical standards in everything we do, everywhere we operate. For us, compliance is more than just following rules. It includes considering the actions we take, and adapting to new challenges and situations, always guided by our ICARE principles. Our Board, which has long believed that oversight of the Company’s culture and reputation are key Board responsibilities, collaborates with management to establish and communicate the right ethical tone, which guides our conduct and helps protect the Company’s reputation. Our Board has provided guidance to our CEO,

Brian Tyler, as he launched Team McKesson, a FY 2020 corporate culture initiative focused on winning as one team, and as we have worked to continually strengthen our culture of empowerment, recognition and belonging. Further, the entire Board and its committees, including the Compliance Committee, work to understand and review our corporate risks, overseeing matters ranging from legal and compliance risks, including with respect to opioids, financial reporting risk, reputational risks, compensation practices and cybersecurity.

We remain deeply concerned about the ongoing opioid crisis. We are proud of our Controlled Substance Monitoring Program and are dedicated to ongoing enhancements. We are also working with others to advance a series of initiatives focused on helping to address the opioid epidemic, advocate for public policy recommendations and support innovative programs and partnerships that we believe can have a meaningful impact on the opioid health crisis. Please see pages 6-7 for more information regarding the Board’s oversight of risk and the Company’s work to address the opioid crisis.

Focus on Corporate Responsibility

At McKesson, we want to do everything we can to continue delivering critical healthcare supplies and medicines. Our approach to addressing the pandemic thus far underscores how we view corporate responsibility. Corporate responsibility means better health for our planet and people everywhere. We strive to use our economic, environmental, social and governance resources thoughtfully and responsibly.

In 2018, the Company conducted a materiality assessment that involved in-depth interviews and surveys with 95 stakeholders from Canada, Europe and the U.S., including employees, customers, suppliers, industry associations, government agencies, non-governmental organizations and joint venture partners. Based on that assessment, and considering shareholder feedback, the Company published its 2019 Corporate Responsibility Report, which highlights work in three important areas: product quality and patient safety; eco-efficient transportation and operations; and better health for employees and communities. Our work in these areas is grounded in our shared ICARE (integrity, customer first, accountability, respect and excellence) principles, which guide us in making a positive impact for patients, the environment and our society every day.

Executing on Strategy

An essential role of the Board is to provide effective oversight related to McKesson’s corporate strategy and execution. The Board works closely with senior leadership in developing the Company’s strategy and positioning us to continue as a leading healthcare company. As we reflect on FY 2020, our results demonstrate continued momentum in our business as we executed on priorities we believe will drive growth, including: optimizing performance in our U.S. Pharmaceutical and Specialty Solutions segment, simplifying the business and operating with increased focus and speed, and accelerating our strategic growth initiatives. As we looked to become a simpler, more focused, and nimbler organization under the leadership of CEO Brian Tyler, our organization has rallied around these efforts, and it is showing in our culture and results.

In addition to transforming and energizing the culture of McKesson, building on the already strong foundation of our ICARE and ILEAD values, we saw great execution across the enterprise in FY 2020. As an example, we came together to identify significant cost savings, and are tracking towards our target of $400 million to $500 million in gross pretax savings by the end of FY 2021. In March, we also successfully completed the exit of our investment in Change Healthcare, in line with our stated objective of unlocking value for our shareholders in a manner designed to be tax-efficient. We are excited to move forward and continue executing against our strategic growth initiatives as a more focused organization, and believe McKesson is well positioned with a broad set of differentiated assets and capabilities.

Engaging with Shareholders

Engagement with our shareholders remains a key focus for our Company and an important part of our Board’s governance commitment. Our robust shareholder engagement program, which includes an integrated outreach team, meets with a broad base of shareholders throughout the year to discuss corporate governance, executive compensation, corporate responsibility practices, and other matters of importance. Our commitment to this program enables ongoing dialogue that results in adopting sound and effective corporate governance practices as well continuous improvements. It also provides us with valuable insight and feedback from shareholders throughout the year, allowing the Board to better understand our shareholders’ priorities and perspectives and to incorporate them into its deliberations and decision making.

During FY 2020, we proactively reached out to shareholders representing nearly 66% of our outstanding common stock and we engaged with shareholders representing approximately 50% of our outstanding common stock. Our Compensation Committee Chair led engagements with shareholders representing nearly 29% of our outstanding common stock to discuss executive compensation matters and changes to our FY 2020 compensation program, among other matters. Various members of management, including our CEO, also participated in discussions with portfolio managers, analysts and others. Please turn to page 10 to learn more about how we responded to feedback from our shareholders over the past year.

Aligning Pay and Performance

Ensuring that the Company has an executive compensation program that appropriately attracts, retains and incentivizes our management team is one of the Board’s most critical responsibilities. It is important to us that the interests of our executives are aligned with the interests of shareholders by setting rigorous performance targets that are tied to key financial results and strategic objectives designed to further the Company’s long-term strategy.

We believe our program effectively links our executive compensation program to financial objectives consistent with our long-term goals and are aligned with our shareholders’ interests. We are committed to maintaining a compensation structure that aligns pay with performance, drives long-term value creation and reflects the views of our shareholders. This proxy statement includes a letter from the Compensation Committee on page 35 describing their efforts over the last year and more recently, salary reductions and other actions affecting our Board, executive officers and business unit presidents in light of the uncertainty and adverse global business impacts of the COVID-19 pandemic.

We Ask for Your Support

We take seriously the trust you place in us through your investment in McKesson. We appreciate the opportunity to serve McKesson on your behalf, and will continue our work to ensure the sustainable and long-term growth of the Company. We look forward to hearing your views at this year’s Annual Meeting and in the year to come.

Your vote is very important to us. We strongly encourage you to read both our proxy statement and annual report in their entirety prior to the Annual Meeting on July 29, 2020, and kindly request that you support our voting recommendations.

Edward A. Mueller

Independent Chair

Due to the public health impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our employees and shareholders, we have decided not to have a physical annual meeting this year. The meeting will be solely by means of remote communication as a virtual meeting. You will be able to attend the Annual Meeting online, vote and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/MCK2020 and entering the 16-digit control number included in our Notice Regarding the Availability of Proxy Materials (Notice), voting instructions form or proxy card. Online access to the audio webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system.

ITEMS OF BUSINESS:

Shareholders of record at the close of business on June 1, 2020 are entitled to notice of and to vote at the meeting or any adjournment or postponement of the meeting.

June 18, 2020

By Order of the Board of Directors

Michele Lau

Senior Vice President,

Corporate Secretary and

Associate General Counsel

On June 18, 2020, we began delivering proxy materials to all shareholders of record at the close of business on June 1, 2020. The mailing address of our principal executive offices is McKesson Corporation, 6555 State Highway 161, Irving, Texas 75039.

Vote via Internet

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Call the phone number located at the top of your proxy card 1-800-690-6903

Follow the instructions on your proxy card

Join our Annual Meeting at www.virtualshareholdermeeting.com/MCK2020

TABLE OF CONTENTS

PROXY SUMMARY

This summary highlights certain information in this proxy statement and does not contain all the information you should consider in voting your shares. Please refer to the complete proxy statement and our annual report prior to voting at the Annual Meeting of Shareholders to be held on July 29, 2020.

Meeting Information

Voting Items

				- 2020 Proxy Statement		1

PROXY SUMMARY

McKesson At a Glance

Who We Are

McKesson is a leader in:

Our Vision and Business Strategy

To improve patient care in every setting — one product, one partner, one patient at a time, we partner with pharmaceutical manufacturers, providers, pharmacies, governments and other organizations in healthcare to help provide the right medicines, medical products and healthcare services to the right patients at the right time, safely and cost-effectively. Our employees work every day to innovate and deliver opportunities that make our customers and partners more successful — all for the better health of patients. McKesson remains focused on executing against clear priorities to drive value.

		Accelerate growth through business transformation initiatives and focused investments
		Expand our capabilities in specialty and manufacturer services with enhanced data & analytics
		Drive innovation while focusing on our differentiated assets and capabilities

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PROXY SUMMARY

Fiscal 2020 Highlights

See Appendix A to this proxy statement for a reconciliation of free cash flow and adjusted operating profit to the most directly comparable GAAP metrics.

Response to COVID-19

As the COVID-19 health crisis continues to unfold, we remain focused on our two most important priorities — supporting the needs of our employees and their families at work and home and continuing to play a critical role in the global healthcare community during this unprecedented time. As one of the world’s largest healthcare companies, we know we have a critical role to play in making medications and supplies available to customers and patients when they need them. In normal times, our daily work is essential to the provision of healthcare and it is even more so right now as the world faces this unique healthcare challenge.

We are deeply committed to supporting and protecting our colleagues who — through their determined efforts — are playing a vital role in helping to ensure that healthcare supplies and medicines are available for healthcare workers and their patients who need them during this critical time. We have undertaken multiple measures to promote safety in our facilities, including placement of hand sanitizer and sanitizing wipes throughout the workplace, reinforcing the practice of social distancing in our distribution centers to avoid unnecessary proximity where feasible, and disinfectant cleaning throughout the day. We are making face masks available to essential employees and requiring temperature testing before coming to work. We also instituted a global mandatory work from home policy to reduce density in our facilities. This helps to protect the health and safety of those employees who are able to perform their work responsibilities from home as well as those with essential roles that must be performed at our distribution centers and other facilities.

We have provided additional employee benefit offerings such as waived deductibles for COVID-19 diagnostic testing and consultations, free mental health counseling, special payments totaling approximately $30 million to reward the hard work of our associates in frontline distribution center, call center and transportation roles and paid emergency sick leave which may be used for several reasons, including physician ordered self-quarantine. We also invested approximately $15 million for COVID-19 related relief and response efforts, which includes a $10 million contribution to the McKesson Foundation, a portion of which will be deployed to McKesson’s Taking Care of Our Own Fund to provide support for employees impacted by the COVID-19 pandemic.

We are taking a proactive approach to manage inventory during this pandemic and helping our provider partners to obtain needed supplies and medications to treat those who are ill and to help stop the spread of the disease. This includes allocating key product categories to attempt equitable distribution and closely monitoring increased demand in order to try to mitigate future product supply issues. To further protect inventory, we have taken steps to limit sales of certain supply-challenged personal protective equipment to healthcare providers and first responders only and are prioritizing FEMA-identified “hot zones” and critical settings of care. Additionally, we are providing daily data feeds on inventories, orders and additional sourcing opportunities to FEMA to help get limited supplies to where they are most needed.

In challenging times, we rally around our customers, support our employees, and take to heart the role that we can play in helping our communities globally. It’s what we do because it’s who we are.

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PROXY SUMMARY

Our Commitment to Our Stakeholders and the Environment

Investing in Team McKesson

We build the best teams by recruiting, developing and retaining diverse talent. We are proud to be recognized by prominent organizations for our culture of inclusion which we recognize as an important element that drives long-term shareholder value. We continue to keep inclusion and diversity top of mind as we enter the final phases of our headquarters move to Irving, Texas.

Our Board of Directors is focused on human capital management (HCM), providing guidance to our CEO on culture initiatives, discussing inclusion, diversity and equality efforts, and participating in employee town halls and panel discussions hosted by the Company’s employee resource groups.

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PROXY SUMMARY

Embracing Sustainable Practices

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PROXY SUMMARY

A Culture of Compliance

At McKesson, we take seriously our role in helping to protect the safety and integrity of the pharmaceutical and medical supply chain. Each day, our distribution team delivers life-saving medicines and supplies to pharmacies, hospitals and clinics that serve millions of patients. We take to heart that each and every item delivered is not just a package, it’s a patient.

In 2019, our Board formed a standing Compliance Committee to assist the Board in overseeing the Company’s compliance programs and management’s identification and evaluation of its principal legal and regulatory compliance risks. Recognizing the critical role fresh perspectives and expertise play in risk oversight, our Board has committed to:

McKesson’s Controlled Substance Monitoring Program

Our Controlled Substance Monitoring Program (CSMP) uses sophisticated algorithms designed to monitor for suspicious orders, block the shipment of controlled substances to pharmacies when certain thresholds are reached and report those blocked orders to the U.S. Drug Enforcement Administration (DEA). We are proud of our CSMP and dedicated to ongoing enhancements. Some highlights of the program include:

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PROXY SUMMARY

Company Initiatives. We are also working with others to advance a series of initiatives focused on helping to address the opioid epidemic, offer public policy recommendations — including the Prescription Safety-Alert System (RxSAS) technology proposal — and to support innovative programs and partnerships that we believe can have a meaningful impact on this challenging issue. We are committed to engaging with all who share our dedication to acting with urgency to address this crisis. Please visit https://www.mckesson.com/About-McKesson/Fighting-Opioid-Abuse/ to learn more about these initiatives.

Foundation for Opioid Response Efforts. In March 2018 the Company contributed $100 million to establish the Foundation for Opioid Response Efforts (FORE), a Section 501(c)(3) nonprofit organization whose vision is to inspire and accelerate action to end the opioid epidemic. Earlier this year, FORE announced grant awards to 19 organizations, with a particular focus on urban, rural, minority, tribal and low-income communities. Visit https://forefdn.org/ for more information about FORE’s opioid response efforts.

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PROXY SUMMARY

Director Nominees and Our Approach to Governance

Our director nominees exhibit a mix of skills, experience, diversity and perspectives. Additional information about each director’s experience, qualifications and skills can be found beginning on page 13.

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PROXY SUMMARY

Breadth of Experience and Qualifications

The graphic below identifies a selection of our director nominees’ prominent experiences and qualifications. Each director nominee brings his or her own unique background and range of expertise, knowledge and experience which provides an appropriate and diverse mix of qualifications necessary for our Board to effectively fulfill its oversight responsibilities. By its nature, this summary is neither detailed nor exhaustive, but aims to convey the breadth of experience and qualifications that our director nominees bring to their work on the McKesson Board of Directors to oversee strategy, performance, culture and risk at the Company.

Governance Highlights

Board refreshment. Two independent directors joined our Board in FY 2020 — Maria Martinez and Ken Washington. Additionally, our Board has committed to electing an additional director to our Board by no later than the 2021 Annual Meeting, and our two longest serving directors will retire from the Board by that time.

Leading corporate governance practices. Below we highlight some of the key features of our corporate governance practices. Please see the section entitled “Corporate Governance” beginning on page 22 for more information.

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PROXY SUMMARY

Our Shareholder Engagement Efforts

Our Board recognizes the trust you place in them through your investment in McKesson, and we believe that solicitation and consideration of shareholder feedback is critical to driving long-term growth and creating shareholder value. Our shareholder engagement program is a robust, year-round process encompassing two formal shareholder engagement roadshows conducted in the summer and winter, and also meetings throughout the year with shareholders in various forums to encourage ongoing, meaningful dialogue about the issues they find most important. As described in the diagram below, we report shareholder feedback regularly to our Board, which in turn evaluates feedback year-round.

Our Year-Round Shareholder Engagement Process

Scope of Shareholder Outreach and Common Themes

During FY 2020, we proactively reached out to shareholders representing nearly 66% of our outstanding common stock and we engaged with shareholders representing approximately 50% of our outstanding common stock. We were disappointed to receive low support for our advisory say-on-pay proposal at our 2019 Annual Meeting and actively sought to understand what actions we could take to address our shareholders’ concerns. Our Compensation Committee Chair led engagements with shareholders representing nearly 29% of our outstanding common stock to discuss executive compensation matters and changes to our FY 2020 compensation program. Various members of management, including our CEO, also participated in discussions with portfolio managers, analysts and others this past year. We discussed a diverse range of topics with our shareholders, including:

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PROXY SUMMARY

Shareholder Feedback

The table below highlights how we responded to shareholder feedback in several areas. We report shareholder feedback to our Board on a regular basis throughout the year. We discussed our executive compensation program in detail with many shareholders and appreciate their perspectives. Please see the table below and pages 37-38 for a discussion regarding the changes made to our executive compensation program in response to shareholder feedback.

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PROXY SUMMARY

Executive Compensation Highlights

As discussed in detail under “Compensation Discussion and Analysis,” with the goal of building long-term value for our shareholders, we have developed an executive compensation program designed to strike the right balance of pay for performance; attracting and retaining an exceptionally talented executive team; and steering McKesson’s leadership to meet ambitious goals without taking undue risk.

FY 2020 Pay Elements and Performance Metrics

Our executive compensation program is predominantly performance-based, consisting of four primary compensation elements that each serve a unique purpose. The metrics below incentivize our executives to focus on operational objectives that are expected to drive shareholder value.

Best Practices in Compensation Governance

What We Do
✓		Pay for performance		✓		Engage with shareholders throughout the year
✓		Emphasize long-term performance		✓		Align with business strategy
✓		Design with mix of operational and market-based metrics		✓		Balance mix of annual and long-term metrics
✓		Develop sound financial goals		✓		Engage independent advisors
✓		Maintain robust compensation recoupment policy with trigger for reputational harm		✓		Review Compliance Committee’s assessment of senior management efforts on compliance matters
✓		Manage use of equity incentive plan conservatively		✓		Monitor progress on culture initiatives
✓		Use double-trigger change in control vesting provisions		✓		Review tally sheets
✓		Maintain rigorous stock ownership guidelines		✓		Mitigate undue risk-taking through sound plan design
What We Don’t Do
		Allow directors and executive officers to hedge or pledge Company securities				Provide excise tax gross-ups
		Re-price or exchange stock options without shareholder approval				Accrue or pay dividend equivalents during performance periods
		Provide tax gross-ups on perquisites for executives, except in the case of certain business-related relocation expenses				Pay above-market interest on deferred compensation

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PROPOSALS TO BE VOTED ON

There are 11 nominees for election to the Board of Directors of the Company. The directors elected at the Annual Meeting will hold office until the 2021 Annual Meeting of Shareholders and until their successors have been elected and qualified, or until their earlier resignation, removal or death.

All nominees are current directors. Dominic Caruso, Tony Coles, Chris Jacobs, Don Knauss, Marie Knowles, Brad Lerman, Ed Mueller, Susan Salka, Brian Tyler and Ken Washington were elected to the Board at the 2019 Annual Meeting of Shareholders. Maria Martinez was appointed to the Board effective October 18, 2019.

The Governance Committee has recommended the reelection of each nominee as a director at the Annual Meeting. Each nominee has informed the Board that he or she is willing to serve as a director. If any nominee should decline or become unable or unavailable to serve as a director for any reason, your proxy authorizes the persons named in the proxy to vote for a replacement nominee, or the Board may reduce its size.

The following is a brief description of the age, principal occupation, position and business experience, including other public company directorships, for at least the past five years and major affiliations of each of the nominees. Each director’s biographical information includes a description of the director’s experience, qualifications, attributes or skills that qualify the director to serve on the Company’s Board at this time.

Nominees

Your Board recommends a vote “FOR” each Nominee.

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ITEM 1. ELECTION OF DIRECTORS

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The Board, Committees and Meetings

The Board of Directors is the Company’s governing body with responsibility for oversight, counseling and direction of the Company’s management to serve the long-term interests of the Company and its shareholders. The Board’s goals are to build long-term value for the Company’s shareholders and to ensure the vitality of the Company for its customers, employees and other individuals and organizations that depend on the Company. To achieve its goal, the Board monitors both the performance of the Company and the performance of the Chief Executive Officer. The Board consists of 11 directors. Ed Mueller serves as the Board’s Independent Chair. All of the directors during FY 2020 were, and the director nominees are, independent with the exception of Brian Tyler, the Company’s CEO.

The Board has five standing committees: The Audit Committee, Compensation Committee, Compliance Committee, Finance Committee, and Governance Committee. Each of these committees is governed by a written charter approved by the Board in compliance with the requirements of the SEC and the New York Stock Exchange, where applicable. The charter of each committee is reviewed annually by that committee and the Board. Each member of our standing committees is independent, as determined by the Board, under the NYSE listing standards and the Company’s director independence standards. In addition, each member of the Audit Committee and Compensation Committee meets the additional, heightened independence criteria applicable to such committee members under the applicable rules. The members of each standing committee are appointed by the Board each year for a term of one year or until their successors are elected and qualified or their earlier resignation.

Board and Meeting Attendance

The Board met eight times during FY 2020. Each director attended at least 75% of the aggregate number of meetings of the Board and of its committees on which he or she served. The independent directors also met in executive session during FY 2020, as necessary. Directors meet their responsibilities not only by attending Board and committee meetings, but also through communication with senior management, independent accountants, advisors and consultants and others on matters affecting the Company. Directors are also expected to attend the upcoming Annual Meeting. All directors attended the 2019 Annual Meeting of Shareholders. The membership of each standing committee in FY 2020 and the number of meetings held during FY 2020 are identified below.

Committee Membership, Responsibilities and Other Information

The following are the standing committees of the Board of Directors:

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ITEM 1. ELECTION OF DIRECTORS

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ITEM 1. ELECTION OF DIRECTORS

The charter of each of the Board’s standing committees are available at www.mckesson.com/investors/corporate-governance/.

Director Qualifications, Nomination and Diversity

To fulfill its responsibility to recruit and recommend to the Board nominees for election as directors, the Governance Committee considers all qualified candidates who may be identified by any of the following sources: current or former Board members, a professional search firm, Company employees or other sources.

You may make a recommendation for a director candidate by submitting the candidate’s name, resume and biographical information and qualifications to the attention of the Corporate Secretary’s Office at 6555 State Highway 161, Irving, Texas 75039. All recommendations received by the Corporate Secretary will be presented to the Governance Committee for its consideration. The Governance Committee will consider director candidates who meet the criteria described below, and the Governance Committee will recommend to the Board nominees who best suit the Board’s needs. In order for a shareholder to make a nomination of a director candidate for election at an upcoming annual meeting of shareholders, such shareholder’s nomination must comply with the requirements set forth in the Company’s By-Laws.

In evaluating candidates for the Board, the Governance Committee reviews each candidate’s independence, skills, experience and expertise against the criteria adopted by the Board. Members of the Board should have the highest professional and personal ethics, integrity and values, and represent diverse backgrounds and experience consistent with the Company’s values. They should have broad experience at the policy-making level in business, technology, healthcare or public interest, or have achieved prominence in a relevant field. The Governance Committee will consider whether the candidate’s background and experience demonstrate the ability to make the kind of important and sensitive judgments that the Board is called upon to make, and whether the nominee’s skills are complementary to the existing Board members’ skills. In addition, Board members must be able to devote sufficient time and energy to the performance of his or her duties as a director and must be open to hearing different perspectives.

Ms. Martinez has been nominated to stand for election by the shareholders for the first time. She was initially identified as a potential director candidate by a professional search firm. The search firm gathered biographical information on Ms. Martinez and vetted her qualifications, experience and skills, as well as those of other potential director candidates, after which Ms. Martinez was brought to the attention of the Governance Committee Chair and the independent Board Chair. Several members of the Board interviewed Ms. Martinez. In October 2019, the Board elected Ms. Martinez to serve on the Board. The Board does not maintain a formal policy regarding diversity; however, the Governance Committee considers diversity to include diversity of backgrounds, cultures, education, experience, skills, thought, perspectives, personal qualities and attributes, and geographic profiles (i.e., where the individuals have lived and worked), as well as race, ethnicity, gender, national origin and other categories. Our Governance Committee and the Board believe that a diverse representation on the Board fosters a robust, comprehensive, and balanced deliberation and decision-making process that is essential to the continued effective functioning of the Board and continued success of the Company. Women and people of color comprise more than 50% of our director nominees.

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Corporate Governance

We are committed to continually assessing our governance policies and structures to incorporate best practices. We highlight some of our corporate governance practices below.

The following governance materials appear on our website at www.mckesson.com/investors/corporate-governance:

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ITEM 1. ELECTION OF DIRECTORS

Director Independence

Under the Company’s Corporate Governance Guidelines, the Board must have a substantial majority of directors who meet the applicable criteria for independence required by the NYSE. Each year, the Board must determine, based on all relevant facts and circumstances, whether in its business judgment the non-executive directors satisfy the criteria for independence, including the absence of a material relationship with the Company. The Board will deem a director independent if no relationship or transaction exists that would disqualify such a director under these standards, and no other relationship or transaction exists of a type not specifically mentioned in NYSE standards that, in the Board’s opinion, taking into account all relevant facts and circumstances, would impair a director’s ability to exercise his or her independent judgment. Applying these standards, and all applicable laws, rules or regulations, the Board has determined that, with the exception of Brian Tyler, all of the Company’s director nominees, namely Dominic Caruso, Tony Coles, Chris Jacobs, Don Knauss, Marie Knowles, Brad Lerman, Maria Martinez, Ed Mueller, Susan Salka and Ken Washington, are independent. The Board also determined that with the exception of Brian Tyler, the Company’s CEO, all of the Company’s directors during FY 2020 were independent.

Board Leadership Structure

The Board has an independent chair leadership structure with Ed Mueller serving as independent Board Chair and Brian Tyler serving as CEO.

The Board believes that this is the most effective Board leadership structure for the Company at this time. Mr. Mueller’s experience serving on McKesson’s Board, as well as other public company boards, positions him to effectively lead the Board. The Chair regularly solicits input from the CEO and independent directors as to the additional matters to place on the Board agenda and the information that would be useful for their review and consideration. All of the Board’s standing committees are composed solely of, and chaired by, independent directors.

Mr. Tyler is a 23-year McKesson veteran who brings expert perspective on the future of the industry, both in the U.S. and globally. Having spent his entire career in healthcare, he has a clear vision on how McKesson will continue to play an integral role in improving care while driving value for McKesson’s shareholders. He also brings with him a deep understanding of the Company, its culture and what’s important to its employees. We believe the combined leadership of Mr. Mueller as independent Board Chair and Mr. Tyler as CEO best serves the Company and its shareholders at this time.

The Governance Committee and Board annually evaluates the Board’s leadership structure to determine the structure that would best serve the Company and its shareholders.

Board of Directors’ Role in Risk Oversight

Our Board has responsibility for overseeing the business and affairs of the Company. This general oversight responsibility includes oversight of risk management, which the Board carries out as a whole or through its committees. Among other things, the Board as a whole periodically discusses the Company’s enterprise risk management process, including its identification, ranking and assessment of operations, strategic, financial and compliance risks. This discussion includes the output of that process, as well as the Company’s compliance programs and management of legal and regulatory risks. Below, as an example, we highlight three risk areas and the Board’s role in risk oversight:

COVID-19 Risk Oversight

Our Board has been actively overseeing the Company’s critical work in the ongoing COVID-19 pandemic, including regular updates from and discussions with the Company’s executives. The Board’s review and discussion around this ongoing crisis spans a broad range of matters, including protecting the health and safety of our employees, expanding benefits for and supporting our employees, evaluating the impact of the pandemic on strategy, operations, liquidity and financial matters, the Company’s role in delivering crucial supplies and minimizing supply chain disruption, partnering with governments, monitoring continued compliance with applicable laws, and supporting the communities in which we operate. For more information on the Company’s efforts in response to the COVID-19 pandemic, please see page 3.

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ITEM 1. ELECTION OF DIRECTORS

Controlled Substance Distribution Risk Oversight

Our Board actively oversees the Company’s work to address the opioid epidemic. It regularly receives reports on the Company’s CSMP and discusses the Company’s compliance with federal and state controlled substances regulatory requirements and the effectiveness of the Company’s CSMP. The Board additionally receives updates on pending litigation and investigations. Further, the Compliance Committee regularly receives updates on the CSMP. For more information on the Company’s work to address the opioid epidemic, please see “A Culture of Compliance” beginning on page 6.

Cybersecurity Risk Oversight

At least twice annually, the Board reviews with management the Company’s cybersecurity risk reduction strategy. Management’s reports to the Board focus on:

Role of Board Committees in Risk Oversight

Although the Board has ultimate responsibility for overseeing risk management, it has delegated certain oversight responsibilities to committees with specific areas of responsibility and expertise. Each of the standing committees regularly meets in executive session. The chairs of the committees report to the full Board the significant risks facing the Company, as identified by management, and the measures undertaken by management for controlling and mitigating those risks.

McKesson senior leadership is responsible for the day-to-day management of the risks facing the Company, including macroeconomic, financial, strategic, operational, public reporting, legal, regulatory, political, cybersecurity, compliance, and reputational risks. Management carries out this risk management responsibility through a coordinated effort among the various risk management functions within the Company. As part of its ongoing compliance program, the Company monitors potential uses of conflict minerals in its businesses, particularly in the context of acquisitions, and it reports when required these diligence efforts and determinations.

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ITEM 1. ELECTION OF DIRECTORS

Report of the Compliance Committee

In January 2019, our Board of Directors formed a new standing committee, the Compliance Committee, to assist the Board in overseeing the Company’s compliance programs and management’s identification and evaluation of its principal legal and regulatory compliance risks. The Compliance Committee has four members and is chaired by Brad Lerman, who brings significant legal and regulatory expertise and a deep understanding of the healthcare industry. The other members of the Compliance Committee are Dominic Caruso (Audit Committee Chair), Marie Knowles and Dr. Ken Washington. Seventy-five percent of our Compliance Committee, including Mr. Lerman, joined the Board since January 2018. During FY 2020, the Compliance Committee formally met six times and received updates from management during and outside of the formal meetings.

The Compliance Committee’s key FY 2020 accomplishments include:

Risk Assessment of Compensation Policies and Practices

We annually conduct a review of all incentive compensation plans utilized throughout the Company, using a framework for risk assessment provided to us by a nationally recognized outside compensation advisor. In conducting our review, a detailed assessment of each incentive compensation plan, without regard to materiality, is first prepared by representatives from the Company’s business units and then reviewed by senior executives of our Human Resources Department. The review framework requires representatives of our business units to examine and report on the presence of certain design elements under both cash and equity incentive compensation plans that could encourage our employees to incur excessive risk, such as the selection and documentation of incentive metrics, the ratio of incentive to fixed compensation, the year-over-year variability in payouts, the amount of management discretion, and the percentage of compensation expense as compared to the business units’ revenues. Consistent with our findings in past years, management concluded that for FY 2020 our policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. A summary of management’s findings was reviewed with the Compensation Committee at its April 2020 meeting.

The Compensation Committee discussed management’s findings and considered that the Company utilizes many design features that mitigate the likelihood of encouraging excessive risk-taking behavior. Among these design features are:

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ITEM 1. ELECTION OF DIRECTORS

Based on the foregoing, the Compensation Committee concurred with management that our compensation policies and practices do not create inappropriate or unintended significant risk to the Company as a whole. We believe that our incentive compensation plans do not provide incentives that encourage risk-taking beyond the organization’s ability to effectively identify and manage significant risks, are compatible with effective internal controls and the risk management practices of the Company, and are supported by the oversight and administration of the Compensation Committee with regard to our executive compensation program.

Related Party Transactions Policy and Transactions with Related Persons

The Company has a Related Party Transactions Policy requiring approval or ratification of certain transactions involving executive officers, directors and nominees for director, beneficial owners of more than 5% of the Company’s common stock, and immediate family members of any such persons, where the amount involved exceeds $120,000 in which the related person had, has or will have a direct material interest. Additionally, they are required to notify the General Counsel of any potential related party transaction. Under the policy, the Company’s General Counsel initially determines if a transaction or relationship constitutes a transaction that requires compliance with the policy. If so, the matter will be referred to the Governance Committee. Annually, our directors, nominees and executive officers are asked to identify any transactions that might fall under the policy as well as to identify immediate family members. The transaction may be approved or ratified if, in the Governance Committee’s business judgment and based on the review of all relevant facts and circumstances, it is determined that the transaction is fair and reasonable to the Company and consistent with its best interests. Factors that may be taken into account in making that determination include, without limitation: (i) the business purpose of the transaction; (ii) whether the transaction is made in the ordinary course of business and is entered into on an arm’s-length basis; (iii) whether it would impair the independence of a director; and (iv) whether it would violate the provisions of the Company’s Code of Conduct. There are no reportable related party transactions.

Communications with Directors

Shareholders and other interested parties may communicate with any of the directors, including the Board Chair and any other, or all of the directors as a group, by addressing their correspondence to the Board member or members, c/o the Corporate Secretary’s Office, McKesson Corporation, 6555 State Highway 161, Irving, Texas 75039, or via e-mail to boardchair@mckesson.com or to nonmanagementdirectors@mckesson.com. The Corporate Secretary’s office maintains a log of such correspondence received by the Company that is addressed to members of the Board, other than advertisements, solicitations or correspondence deemed by the Corporate Secretary to be irrelevant to Board responsibilities. Directors may review the log at any time, and request copies of any correspondence received.

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ITEM 1. ELECTION OF DIRECTORS

Director Compensation

Director compensation at McKesson includes a combination of cash and equity-based compensation. The Governance Committee annually reviews the level and form of the Company’s director compensation and, if it deems appropriate, recommends to the Board changes in director compensation. In reviewing our non-employee director compensation program, the committee is guided by these principles:

At the beginning of FY 2020, each non-employee director of the Company was paid an annual cash retainer, an annual restricted stock unit (RSU) award and meeting fees. Effective with the beginning of FY 2020, the new role of non-executive Board Chair is provided additional compensation that the Board believes is commensurate with that role. On July 30, 2019, the Governance Committee recommended, and the Board approved, elimination of meeting fees from our annual non-employee director compensation structure. The annual cash retainer paid to all non-employee directors was increased by $30,000 to compensate for the elimination of meeting fees. The value of all other compensation elements remained unchanged, and the total value of compensation remain unchanged from the prior year. The Board believes the elimination of meeting fees aligns our non-employee director compensation structure to prevailing practice. Effective August 1, 2019, the compensation structure is as follows:

Detail on the value of the annual cash retainers and RSU awards paid to each non-employee director for FY 2020 is provided below. The Governance Committee retains the right to determine on a case-by-case basis whether meeting fees are appropriate for non-employee directors. Non-employee directors are paid their reasonable expenses for attending Board and committee meetings. Directors who are employees of the Company or its subsidiaries do not receive any compensation for service on the Board.

FY 2021 Reduction in Cash Retainers

On June 3, 2020, in light of the disruption and uncertainty created by the evolving COVID-19 pandemic, the Board voluntarily agreed to a 10% reduction in their cash retainers (including the annual cash retainers, Board Chair cash retainer and committee chair retainers) for the last six months of calendar year 2020. These reductions are not reflected in the table below; however, they will be reflected in our 2021 proxy statement.

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ITEM 1. ELECTION OF DIRECTORS

2020 Director Compensation Table

The following table sets forth information concerning the compensation paid to or earned by each non-employee director for the fiscal year ended March 31, 2020. Mr. Tyler is not included in this table as he was an employee of the Company during FY 2020 and received no compensation for his service as a director. The compensation paid to or earned by Mr. Tyler as an officer of the Company is shown in the 2020 Summary Compensation Table.

Cash Compensation

Each non-employee director receives an annual retainer, and the independent Board Chair and chairs of the standing committees receive an additional annual retainer. Information on retainers and meeting fees, in each case as paid in FY 2020, are set forth in the table above. Directors may elect in advance of a calendar year to defer up to 100% of their annual retainer (including any standing committee chair or Board Chair retainer) and meeting fees under the Company’s Deferred Compensation Administration Plan III (DCAP III). The minimum deferral period for any amounts deferred is five years; however, notwithstanding the deferral election, if a director ceases to be a director of the Company for any reason other than disability, retirement or death, the account balance will be paid in a lump sum in the first January or July which is at least six months following and in the year after the director’s separation from service. In the event of disability, retirement or death, the account balance will be paid in accordance with the director’s deferral election. To be eligible for retirement, a director must have served on the Board for at least six consecutive years prior to the director’s separation. A director may elect to have all or part of his or her DCAP III account credited with earnings (or losses) based on the director’s choice of a hypothetical investment in certain funds available under the Company’s 401(k) plan. To the extent no such hypothetical investment selection is made by the director, interest is credited at a default interest rate equal to 120% of the long-term applicable federal rate published by the Internal Revenue Service (IRS) for December of the immediately preceding calendar year.

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ITEM 1. ELECTION OF DIRECTORS

Equity Compensation

Non-employee directors receive an automatic annual grant of RSUs with an approximate grant date value of $180,000. The actual number of RSUs granted is determined by dividing $180,000 by the closing price of the Company’s common stock on the grant date (with any fractional unit rounded up to the nearest whole unit); provided, however, that the number of units granted in any annual grant will in no event exceed 5,000, in accordance with our 2013 Stock Plan. As shown in the above table, the Board Chair receives an additional automatic annual grant of RSUs with an approximate grant date value of $120,000.

The RSUs granted to non-employee directors are vested upon grant. If a director meets the director stock ownership guidelines (currently $660,000, six times the annual cash retainer), then the director will, on the grant date, receive the shares underlying the RSUs, unless the director elects to defer receipt of the shares. The determination of whether a director meets the director stock ownership guidelines is made as of the last day of the deferral election period preceding the applicable RSU award. If a non-employee director has not met the stock ownership guidelines as of the last day of such deferral election period, then issuance of the shares underlying the RSUs will automatically be deferred until the director’s separation from service.

Recipients of RSUs are entitled to dividend equivalents at the same dividend rate applicable to the Company’s common shareholders, which is determined by our Board and currently is $0.41 per share each quarter. For our directors, dividend equivalents on RSUs are credited quarterly to an interest-bearing cash account and are not distributed until the shares underlying the RSUs are issued to the director. On April 28, 2020, interest accrual on dividend equivalents was eliminated for RSU awards granted after that date. For RSU awards granted prior to April 28, 2020, interest accrues on directors’ credited dividend equivalents at the default interest rate set forth in DCAP III, which is 120% of the long-term applicable federal rate published by the IRS for December of the immediately preceding calendar year.

All Other Compensation and Benefits

Non-employee directors are eligible to participate in the McKesson Foundation’s Executive Request Program and Matching Gifts Program. Under the Executive Request Program, our non-employee directors may request that the foundation make donations to qualifying public charitable organizations. Under the Matching Gifts Program, our non-employee directors’ own gifts to schools, educational associations or funds and other public charitable organizations are eligible for a match by the foundation of up to $5,000 per director for each fiscal year.

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Your Board recommends a vote “FOR” this ratification proposal.

The Audit Committee has approved Deloitte & Touche LLP (D&T) as the Company’s independent registered public accounting firm to audit the consolidated financial statements of the Company and its subsidiaries for the fiscal year ending March 31, 2021. The committee believes that D&T is knowledgeable about the Company’s operations and accounting practices, and is well qualified to act as the Company’s independent registered public accounting firm.

We are asking our shareholders to ratify the selection of D&T as the Company’s independent registered public accounting firm. Although ratification is not required by our By-Laws or otherwise, the Board is submitting the selection of D&T to our shareholders for ratification as a matter of good corporate practice. If shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain D&T. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders. Representatives of D&T are expected to be present at the Annual Meeting to respond to questions and to make a statement if they desire to do so. For the fiscal years ended March 31, 2020 and 2019, professional services were performed by D&T, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, “Deloitte & Touche”), which includes Deloitte Consulting. Fees for those years were as follows:

Audit Fees. This category consists of fees for professional services rendered for the audit of the Company’s consolidated annual financial statements, review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by D&T in connection with statutory and regulatory filings or engagements. This category also includes advice on accounting matters that arose during, or as a result of, the audit or the review of interim financial statements, and foreign statutory audits required by non-U.S. jurisdictions.

Audit-Related Fees. This category consists of fees for assurance and related services such as employee benefit plan audits, registration statements and comfort letters, accounting and financial reporting audit-related fees, due diligence in connection with mergers, divestitures and acquisitions, and attest services related to financial reporting that are not required by statute or regulation. The increase in fiscal year ended March 31, 2020 was related to our exit of Change Healthcare Joint Venture including the fees associated with carve out financial statement audits.

Tax Fees. This category consists of fees for professional services rendered for U.S. and international tax compliance, including services related to the preparation of tax returns and professional services. For the fiscal years ended March 31, 2020 and 2019, no amounts were incurred by the Company for tax advice, planning or consulting services. The decrease in fiscal year ended March 31, 2019 was primarily related to less tax provisions and compliance projects.

All Other Fees. This category consists of fees for permissible advisory work performed by Deloitte that does not meet the above category descriptions.

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ITEM 2. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2021

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

Pursuant to applicable rules, and as set forth in the terms of its charter, the Audit Committee has sole responsibility for appointing, setting compensation for, and overseeing the work of the independent registered public accounting firm. The Audit Committee has established a policy that requires it to pre-approve all audit and permissible non-audit services, including audit-related and tax services, to be provided by Deloitte & Touche. Between meetings, the Chair of the Audit Committee is authorized to pre-approve services, which are reported to the committee at its next meeting. All of the services described in the fee table above were approved in conformity with the Audit Committee’s pre-approval process.

Audit Committee Report

The Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the Company’s financial reporting processes. The functions of the Audit Committee are described in greater detail in the Audit Committee’s written charter adopted by the Company’s Board of Directors, which may be found on the Company’s website at www.mckesson.com under the caption “Investors — Governance.” The Audit Committee is composed exclusively of directors who are independent under the applicable SEC and NYSE rules and the Company’s independence standards. The Audit Committee’s members are not professionally engaged in the practice of accounting or auditing, and they necessarily rely on the work and assurances of the Company’s management and the independent registered public accounting firm. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal control over financial reporting. D&T is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards and expressing opinions on the conformity of those audited financial statements with United States generally accepted accounting principles and the effectiveness of the Company’s internal control over financial reporting. The Audit Committee has: (i) reviewed and discussed with management the Company’s audited financial statements for the fiscal year ended March 31, 2020; (ii) discussed with D&T the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC; (iii) received the written disclosures and the letter from D&T required by applicable requirements of the PCAOB regarding D&T’s communications with the Audit Committee concerning independence; and (iv) discussed with D&T its independence from the Company. The Audit Committee further considered whether the provision of non-audit related services by D&T to the Company is compatible with maintaining the independence of that firm from the Company. The Audit Committee has also discussed with management of the Company and D&T such other matters and received such assurances from them as it deemed appropriate.

The Audit Committee discussed with the Company’s internal auditors and D&T the overall scope and plans for their respective audits. The Audit Committee meets regularly with the internal auditors and D&T, with and without management present, to discuss the results of their audits, the evaluation of the Company’s internal control over financial reporting and the overall quality of the Company’s accounting and financial reporting.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited financial statements for the fiscal year ended March 31, 2020 be included in the Company’s Annual Report on Form 10-K for filing with the SEC.

Audit Committee of the Board of Directors

Dominic J. Caruso, Chair

M. Christine Jacobs

Donald R. Knauss

Marie L. Knowles

Maria Martinez

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PRINCIPAL SHAREHOLDERS

Security Ownership of Certain Beneficial Owners

The following table sets forth information regarding ownership of the Company’s outstanding common stock by any entity or person, to the extent known by us or ascertainable from public filings, that is the beneficial owner of more than 5% of the outstanding shares of common stock:

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PRINCIPAL SHAREHOLDERS

Security Ownership of Directors and Executive Officers

The following table sets forth, as of June 1, 2020, except as otherwise noted, information regarding ownership of the Company’s outstanding common stock by: (i) all directors and director nominees; (ii) each executive officer named in the 2020 Summary Compensation Table below (collectively, our named executive officers or the NEOs); and (iii) all directors, NEOs and executive officers as a group. The table also includes shares of common stock that underlie outstanding RSUs and options to purchase common stock of the Company that either vest or become exercisable within 60 days after June 1, 2020.

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EXECUTIVE COMPENSATION

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EXECUTIVE COMPENSATION

A Letter From Our Compensation Committee

Dear Fellow Shareholders,