Proxy season is pretty much over for the big companies that follow a calendar year, but “pretty much” leaves room for some interesting exceptions. Last week, it was McKesson (MCK), the medical distribution and IT giant, and CA Inc. (CA), the information technology company formerly known as Computer Associates. Both of them sent the SEC proxy filings after 5 p.m. on Friday (a preliminary proxy in McKesson’s case).
The two companies have a few things in common, including highly paid directors: McKesson paid its eight board members $2.3 million, an average of $289,251 apiece, according to its preliminary proxy, though a couple directors made more than $300,000. CA’s board is even better paid, judging from its proxy: Its eight non-employee board members made $2.4 million, or an average of $303,185 apiece — and one, Chairman A.F. Weinback, made $390,278 (albeit virtually all in equity).
Among the directors’ perks: as much as $25,000 apiece in matching charitable contributions at McKesson, and at CA as much as $19,530 apiece on “dividend equivalents” from stock the directors don’t yet own. (Those fake dividends, incidentally, earn fixed 8% interest until the CA directors do own the shares — try finding that kind of rate at your local bank branch.)
Both companies also give their top managers some sweet perks as well. At McKesson, CEO John H. Hammergren got $16,935 in financial-counseling fees, $100,560 in free personal trips on the company aircraft, $122,177 for “installation of home security devices and/or for security monitoring services” (nice of them to be specific) and $9,006 for a car and driver.
CA’s William E. McCracken got $123,609 in free plane rides, $27,000 in matching contributions to his favorite charities and $8,092 toward a company car. The company also shelled out $50,040 for “legal expenses incurred by [McCracken] in connection with the preparation and negotiation of his employment agreement.” (Translation: The board had shareholders pay a lawyer to negotiate against them.)
So far, so lavishly similar, with a few differences here and there. But what about the whole pay-for-performance thing?
At McKesson, Hammergren racked up a whopping $46.2 million in total compensation — a huge sum, no doubt, but substantially below the $54.6 million he made last year. While his stock awards rose (to $12.2 million from $11 million), his cash incentive fell (to $9.9 million from $12.8 million). His pension kept growing, by a whopping $14 million, but the growth was slower than in the prior year (when it rose by $20.7 million). For the record: Hammergren’s pension now stands at a jaw-dropping $83.4 million, which is even more amazing when you consider that he has been credited with just 15 years of service at the company.
CA is roughly half the market-cap of McKesson ($10.9 billion vs. $21 billion), so it’s not too surprising that McCracken doesn’t make nearly the big bucks that Hammergren does. But McCracken’s total haul in the last fiscal year was $8 million, more than double the $3.7 million reported last year. The biggest drivers were more than $4 million in stock awards and $1.5 million in options, up from roughly $500,000 each last year. (It’s worth noting that McCracken became CEO in January last year, so some of the increase presumably came from his bigger responsibilities.) His bonus paid out at 84% of target. Other execs carrying over from the prior year made slightly more as well.
But here’s another similarity: Both of the companies trailed their sectors last year in total return — McKesson by 5.3 percentage points, and CA by 1.35 percentage points. (Both also trailed the S&P 500.) Both are trailing their industries over the last 12 months as well.
So take your pick: McKesson shovels cash, stock and pension benefits with a forklift, but has the decency to trim the largesse a little after a less than stellar year. CA keeps piling it on despite lackluster performance, but is more restrained in absolute terms.
Not that it’s much of a choice.