Almost a quarter of shareholder votes have backed a proposal seeking a separate CEO and board chair at McKesson Corporation’s AGM, amid a flurry of similar proposals this year.
The resolution, filed by activist shareholder John Chevedden, asked that McKesson’s board ‘adopt an enduring policy and amend the governing documents as necessary in order that two separate people hold the office of the [chair] and the office of the CEO. Whenever possible, the [chair] of the board shall be an independent director. This includes that a former CEO is determined to not be independent.’
Chevedden writes in his filing: ‘The roles of [chair] and CEO are fundamentally different and should be held by two directors, a CEO and a [chair] who is completely independent of the CEO and our company. The job of the CEO is to manage the company. The job of the [chair] is to oversee the CEO…
‘The ascending complexities of a company with $60 bn in market capitalization, like McKesson, increasingly demands that two [people] fill the two most important jobs on an enduring basis – [chair] and CEO. This should be an easy proposal for McKesson to adopt because [the company] already has an independent board [chair].’
The proposal garnered the backing of 24.3 percent of votes cast at the meeting. That level of support, while not a majority, is regarded as significant by governance professionals.
According to a Manhattan Institute database, 27 independent board chair proposals were voted on at US companies between January and the end of July, 10 of them filed by Chevedden. Support for those resolutions ranged from 16 percent to 43 percent, according to the database.
Vote ‘against’
McKesson’s board had urged shareholders to vote down the proposal, writing in the company’s proxy statement that:
- ‘The board recognizes the value of strong independent board leadership; currently, Don Knauss serves as independent board chair
- ‘McKesson and its shareholders are best served when leadership choices are made by the board on a case-by-case basis
- ‘The board regularly evaluates and reviews the board’s leadership structure, a process [that] incorporates feedback from the company’s shareholders.’
It added: ‘While the board’s current practice is to elect an independent board chair, its directors have a fiduciary duty to regularly evaluate and determine the most appropriate board leadership structure for McKesson and its shareholders in light of the company’s evolving needs, circumstances and opportunities. Our current directors have deep knowledge of the strategic goals of the company, the opportunities and challenges it faces and the various capabilities of our directors and management. Therefore, the board is best positioned to determine the most effective board leadership structure…
‘In situations where the board chair is not independent, McKesson’s corporate governance guidelines require the appointment of a lead independent director with clearly defined responsibilities to ensure strong independent governance functions and effective oversight of management.’
The board argued that a ‘prescriptive policy’ would curb its ability to structure McKesson’s board leadership as needed among changing circumstances and that the proposal did not take into account individual qualifications or whether a separate CEO/chair structure would be the best option, given specific circumstances.
It continued that the board ‘maintains effective independent oversight on behalf of our shareholders by ensuring that the audit, compensation & talent and governance & sustainability committees are led by and composed entirely of independent directors.’
A request for comment from McKesson was not returned immediately.
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
