McKesson Corp. shareholders rejected the company’s executive pay plan Wednesday amid criticism by the International Brotherhood of Teamsters union over the drug distributor’s role in the opioid epidemic in West Virginia and other states.
McKesson’s board of directors announced the vote against the executive “say-on-pay” proposal at their annual shareholders meeting in Irving, Texas.
“The fact that shareholders voted against the pay package for top executives sends a pretty strong message: Shareholders know there’s a problem with the opioid epidemic, and the company hasn’t taken it seriously enough,” said Teamsters General Secretary-Treasurer Ken Hall after addressing the board at Wednesday’s meeting. “To put profits before people’s lives is totally unacceptable.”
It was only the fourth time this year that shareholders of a Fortune 500 company like McKesson have voted down a pay package for top executives, according to the Teamsters.
Minutes after the meeting, McKesson issued a statement, saying,
“The compensation committee will conduct a thorough review of the current executive compensation plan and consider implementing changes that further drive alignment between incentives and shareholder value.”
The Teamsters union and three Democratic state treasurers — including West Virginia Treasurer John Perdue — also had called on McKesson’s board to appoint an independent chairman. McKesson CEO John Hammergren, who was paid more than $20 million last year, doubles as board chairman.
McKesson shareholders voted against the proposal to split those roles, effectively keeping Hammergren in both jobs. However, the board announced it would have a separate CEO and chairman, starting with the chief executive who follows Hammergren. The company did not make clear whether Hammergren could become board chairman if he steps down as CEO.
“The board would continue its practice of evaluating at least annually whether its leadership structure continues to be in the best interest of the company and its shareholders,” McKesson said in the statement.
The San Francisco-based drug wholesaler did not announce vote totals for any proposals put before shareholders.
McKesson faces a lawsuit in West Virginia filed last year by Attorney General Patrick Morrisey. The suit alleges McKesson flooded the state with powerful prescription painkillers, helping to fuel West Virginia’s opioid epidemic.
West Virginia has the highest drug overdose death rate in the nation. More than 860 people fatally overdosed last year across the state — a record number.
McKesson shipped more than 100 million doses of hydrocodone and oxycodone — both powerful painkillers — to West Virginia between 2007 and 2012, according to federal drug data obtained by the Gazette-Mail.
A congressional committee is investigating McKesson’s drug shipments — and those of two other wholesalers.
Earlier this year, the U.S. Justice Department finalized a $150 million settlement with McKesson. Federal prosecutors alleged that the company failed to detect and report pharmacies’ suspicious orders of prescription pain pills. McKesson first disclosed the settlement amount in an April 2015 financial statement.
The settlement committed McKesson to a multi-year suspension of sales of controlled substances from distribution centers in Colorado, Ohio, Michigan and Florida. It also imposes new and enhanced compliance requirements on McKesson’s distribution system.
The suspensions are among the most severe sanctions ever agreed to by a Drug Enforcement Administration-registered distributor.
In 2008, McKesson agreed to a $13.25 million civil penalty for similar violations.
Since that year, Hammergren has received $692 million in compensation from the company.
In its statement Wednesday, McKesson said it has invested millions into a controlled substance monitoring program that’s designed to block shipments to pharmacies that order suspicious numbers of powerful drugs.
The Teamsters said the shareholders’ vote and board’s promise to separate the chairman and CEO roles marked a “victory for corporate citizenship and responsibility.”
“It’s the first time, to my knowledge, shareholders have voted for accountability for any companies in this industry, particularly companies that have allegedly fueled the opioid epidemic,” said Hall, who also is president of Teamsters Local 175 in South Charleston.
The Teamsters next plan to take similar demands to Cardinal Health, which distributes more prescription drugs than any other company in West Virginia. The union plans to rally at Cardinal Health’s shareholders meeting in Ohio this fall.
Earlier this year, the Teamsters protested at a shareholders meeting in Philadelphia held by AmerisourceBergen, another large pharmaceutical distributor.
“We’re not just going after McKesson,” Hall said. “We’re going to continue to fight until we ensure there’s some changes.”
Reach Eric Eyre at email@example.com, 304-348-4869 or follow @ericeyre on Twitter.