McKesson’s CEO Cashes In

They say you get what you negotiate, not what you deserve.

Well, here’s the proof from the cover story in last Thursday’s Wall Street Journal: How Some Firms Boost the Boss's Pension.

In case you missed it, this story focuses on an obscure formula that some companies use to jack up lump sum pension payouts for the top brass. The story prominently features John Hammergren, CEO of drug wholesaler McKesson.

If Mr. Hammergren had quit or retired last March, he would have been entitled to a lump-sum pension of $84.6 million, which the article claims is “among the highest for any U.S. executive.” And because McKesson used its own discount rate rather than the IRS-set rate, his pension would have included an extra $18.2 million.

Mr. Hammergren has reportedly also negotiated a few unusual pension boosters: “McKesson credits him with years he didn't serve, and also counts 150% of his annual bonus in the final pay calculation, instead of just the bonus he was actually paid.” See for yourself (on page 2).

Whatever. It’s a free market. Thanks to some sort of change in Federal disclosure rules, shareholders are now fully informed about the plan and can make their own judgments. Nonetheless, I’m still surprised that McKesson’s Board would go along with such “enhancements” to an already generous plan.