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 23, 2021.

Meeting Information

Voting Items

McKesson At a Glance

Who We Are

McKesson is a global leader in healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare information solutions. 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 partners at the right time, safely and cost-effectively.

Our Vision and Business Strategy

Our employees work hard every day to improve patient care in every setting — one product, one partner, one patient at a time and deliver opportunities that make our customers and partners more successful — all for the better health of patients. Despite the uncertainty brought on by the COVID-19 pandemic, our focus has been on executing against what is within our control. In FY 2021, McKesson has focused on executing against four clear priorities to drive value.

		Investing in Growth Areas
		Driving Innovation
		Focused Capital Deployment
		Serving Communities

Fiscal Year 2021 Highlights                

Our results are a testament to McKesson’s ability to execute during challenging times, and speak to the dedication of our people, the resilience of our business and the important leadership role McKesson plays in the healthcare supply chain.

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

Fighting the COVID-19 Pandemic

Despite an evolving market landscape, we remain focused on playing an even larger role in the fight against the COVID-19 pandemic, leveraging our deep expertise as we partner with the U.S. government on COVID-19 vaccine efforts. We expanded our existing contractual relationship with the Centers for Disease Control and Prevention through an amendment to our existing Vaccines for Children Program contract to support the U.S. government as the centralized distributor of COVID-19 vaccines and ancillary supplies needed to administer vaccines. We have also partnered with the Department of Health and Human Services and Pfizer to manage the assembly and distribution of the ancillary supplies needed to administer COVID-19 vaccines. We are utilizing our expertise and capabilities to support the government’s efforts to vaccinate everyone in the U.S. who wants to receive a COVID-19 vaccine.

For more information on our role in distributing COVID-19 vaccines in support of the U.S. government, visit www.mckesson.com/About-McKesson/COVID-19/Vaccine-Support/.

Supporting and Protecting Team McKesson

We are deeply committed to supporting and protecting our team members, many of whom are on the frontline playing a critical role in helping to ensure that healthcare supplies and medicines are available for healthcare workers and 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 and reinforcing the practice of social distancing in our distribution centers to avoid unnecessary proximity where feasible. 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.

During FY 2021, we provided additional employee benefit offerings such as, paid emergency sick leave, waived deductibles for COVID-19 diagnostic testing and all forms of COVID-19 treatment. We also provided employees with access to free medical and mental telehealth counseling. We offered a special mid-year enrollment opportunity for employees to adjust their health coverage elections and made special payments to reward the hard work of our associates in frontline distribution center, call center and transportation roles. In addition, the McKesson Taking Care of Our Own Fund distributed 628 hardship grants to employees and the U.S. Oncology Network We Care Fund, which was created for the benefit of employees of that business, distributed 470 hardship grants. Both funds expanded their eligibility requirements to include impacts from the COVID-19 pandemic.

During these challenging times, we continue to 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.

Amplifying Our Global Impact

As a global healthcare company, delivering better health outcomes for our employees, our communities, and our environment is our mission. Every day, we strive to inspire and enable people to reach their full potential. Our company must champion the social, environmental and economic well-being of our team members and the communities we serve. We recognize that health outcomes are influenced by a number of factors, including the conditions in the communities in which people are born, live, learn and work — the social determinants of health. McKesson can play a key role in improving these outcomes, helping to achieve health equity and access by working closely with our customers, partners, government agencies and non-profit organizations. We are continually in pursuit of our purpose, Advancing Health Outcomes For All, which requires us to consider how we leverage natural resources and the environment across our business operations, our contributions to local communities where we operate, and the diversity of the communities we serve. We support a culture where team members operate with integrity and treat everyone with dignity and respect.

As Executive Vice President & Global Chief Impact Officer, Dr. Baggett has global responsibility for McKesson’s strategy and execution related to diversity, equity and inclusion (DEI), sustainability and ESG, social impact, community partnerships and philanthropy through the McKesson Foundation. Our Board receives regular updates on these matters.

Access to Care

We believe that access to affordable, inclusive care is imperative to an individual’s overall physical, social and mental health, and yet millions of people do not have access to quality healthcare. We also acknowledge that as a global healthcare company committed to improving care in every setting, and with recognized leadership in providing access to healthcare products, services, and partnerships, we bring unique capabilities to help address some of these barriers, which include economic, geographic, environmental and social factors.

We are committed to building on our strong foundation of capabilities and actions, as well as our impact-driven culture, to further address the barriers impacting access to care. We support expanding access to high-quality, affordable care for all patients, and we share a goal of addressing rising healthcare costs affecting millions of people across the globe. By leveraging our network of pharmacies and healthcare providers, our global distribution and logistical systems, our partnerships with hospitals, pharmacies and health systems, and our relationships with key stakeholders, public and private, we are amplifying our commitments and disclosure on social and environmental issues that are meaningful to our enterprise and our stakeholders.

Health Equity

We believe everyone deserves an equitable opportunity to live a healthy life, and we know that “health” is more than physical wellness — it is an outcome of social, economic and environmental circumstances. As a company committed to improving care in every setting – one product, one partner, one patient at a time – we are amplifying our actions to create a healthier, more inclusive environment for all our stakeholders.

We understand there are persistent social, economic and environmental conditions that prevent equitable access in every community. We believe the future of healthcare will be shaped by these increasingly complex issues. We acknowledge our role, as a global company and a leader in healthcare to take action toward ending those systemic disparities and health inequities impacting our workforce, our patients and their families, our communities, and our society.

Climate Action for Health

We recognize that climate change is one of the biggest challenges society faces in the 21^st century and that it has a direct and significant impact on human health. We also acknowledge that human action is related to the underlying environmental factors that contribute significantly to climate change and human health.

Therefore, we embrace our responsibility, as a global corporation, and as a leader in healthcare, to take action in support of protecting our planet, sustaining our business, and ultimately serving the health of patients and communities, some of whom are dealing with the impacts of climate-related issues and illnesses. Across our operations in the United States, Canada and Europe, we are sharpening our focus on environmental actions, including greater carbon accounting and disclosure, emissions reduction and energy efficiency programs, renewable electricity procurement and use, and transportation efficiency improvements.

McKesson recently committed to a long-term roadmap for our Sustainability & ESG strategy and actions. Please refer to page 7 for more information on our response to shareholder feedback regarding our commitment to establish science-based greenhouse gas (GHG) emissions reduction targets.

Diversity, Equity and Inclusion

We aim to continuously push one another’s thinking, challenge long-held beliefs and assumptions, and leverage our diversity to explore uncharted areas. As such, we continue to make DEI integral to everything we do because we believe building a healthier future is everyone’s responsibility. In support of this commitment, we have intensified our corporate culture initiatives and goals, which are not only core to our I²CARE and ILEAD values, but also vital to our business success:

Achieving the best possible care for everyone requires a singular focus to win as one team. At the start of every day, we know it’s not just a package, it’s a patient. It’s not just a job, it’s a purpose. And it’s not just a company, it’s all of us.

Our employees understand that together, unified by our global I²CARE values, we fulfill our mission and uphold our reputation as a trusted partner to our customers and their patients. Our I²CARE principles unify the Company and guide individuals’

behavior toward each other, customers, vendors and other stakeholders. ILEAD is our common definition, shared leadership framework and our commitment to how we drive better health for our company, our customers and the patients whose lives we touch. These principles serve as a guide to all our employees enterprise-wide.

Supporting our employees’ development and growth is a high priority. Brian Tyler, our CEO, continues to focus on corporate culture, emphasizing the importance of diverse and inclusive work settings and winning as one team. In FY 2021, Mr. Tyler led a series of ‘inclusion sprints’ comprised of five interactive webinars reinforced by weekly inclusion resources with our top 600 leaders. Mr. Tyler also held the annual Senior Leaders Meeting for our top 135 leaders where he rolled out an updated McKesson Playbook and highlighted several other leadership behaviors including the value of strengthening a talent and performance mindset. The Company engaged internal and external experts to help leaders build skills in these and other areas.

The chart below highlights the percentage of our employees who identify as women and people of color. The data for our metrics is derived from our voluntary, self-identification process as of March 31, 2021 and represents our best estimate as of that date.

The ‘McKesson Leadership’ metric represents our leadership at the vice president level and above. ‘Women’ represents worldwide employees. ‘People of Color’ represents U.S. employees only, as the data for Canada and Europe is not available and includes the following races and ethnicities: Hispanic or Latino, Black or African American, Asian, Native Hawaiian or Other Pacific Islander, American Indian or Alaska Native, or Two or More Races.

McKesson was recognized for the eighth consecutive year as one of the “Best Places to Work for LGBTQ Equality” by the Human Rights Campaign Foundation; for the fifth year in a row as a “Military Friendly Employer” by GI Jobs; and as a “Best Place to Work” for Disability Inclusion on the Disability Equality Index for the fifth consecutive year. The Governance Committee of our Board of Directors oversees diversity, equity and inclusion issues through regular updates and discussions with senior leadership. We also facilitate Employee Resource Groups and Inclusion and Diversity Networks across the company, where employees share their individual and collective perspectives on business practices and cultural and social issues.

Supporting Our Local Communities

McKesson supports communities where we live and work and believes access to high-quality healthcare helps to foster thriving communities. We partner with key stakeholders to better understand our local communities’ needs and leverage our talent and other resources to make a difference.

The McKesson Foundation, a 501(c)(3) corporate foundation, disbursed nearly $7,000,000 in the U.S. and abroad to support charitable initiatives, including:

The McKesson Foundation also offered volunteering programs in FY 2021. During Community Days, one of its largest annual events, employees supported more than 160 nonprofit organizations through virtual platforms during the COVID-19 pandemic.

You may also visit www.forefdn.org for information about the Foundation for Opioid Response Efforts (FORE), a Section 501(c)(3) nonprofit organization started with a $100,000,000 gift from McKesson, whose vision is to inspire and accelerate actions to end the opioid epidemic.

We believe that giving back will help build healthier communities, advancing health outcomes for all.

Listening to Our Shareholders Year Round

Our Board believes 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 meetings held throughout the year with shareholders during which we encourage ongoing, meaningful dialogue about the issues they find most important. We report shareholder feedback regularly to our Board, which in turn evaluates shareholder feedback year-round.

Our Board reviews our annual meeting results, ongoing shareholder feedback and corporate governance and compensation trends to help drive and develop our shareholder engagement priorities. At least twice per year, we invite shareholders to engage with us. Our Board reviews shareholder feedback throughout the year and identifies key themes. Our Board also evaluates opportunities to respond to shareholders while considering relevant corporate governance best practices and trends. We respond to shareholder feedback by enhancing our policies, practices and disclosures informed by ongoing dialogue with our shareholders and communicate important updates and enhancements made during the fiscal year in our proxy statement.

Scope of Outreach and Common Themes

Since our 2020 annual meeting, we have proactively reached out to shareholders representing approximately 61% of our outstanding common stock and engaged with shareholders representing nearly 38% of our outstanding common stock. Our Independent Chair also led engagements with certain shareholders to discuss a diverse range of topics, including:

Our Enhanced Political Engagement and Lobbying Policy

In response to the support received for the shareholder proposal on lobbying activities and expenditures, Item 5 on the ballot presented at our 2020 Annual Meeting, we have further enhanced our political engagement and lobbying policy. In addition to oversight by the Governance Committee, on an annual basis we have enhanced our disclosures to now include:

Our approach to political engagement, including access to a report on our 2020 lobbying activities, can be found on our website at www.mckesson.com/About-McKesson/Public-Affairs/Political-Engagement.

Greenhouse Gas Emissions Reduction Targets

McKesson recently committed to a long-term roadmap for our Sustainability & ESG strategy and actions. In response to shareholder feedback, we also committed to establishing science-based greenhouse gas (GHG) emissions reduction targets for scope 1, 2 and 3 emissions that are intended to meet the standards of the Science Based Targets initiative (SBTi). We will provide those targets to SBTi for validation by the end of 2021. We will publish a report within 90 days of received validation by SBTi or no later than June 2022 that describes the validated SBTi and discloses the objectives and strategies for how we plan to reduce our total contribution to climate change, including with respect to GHG reduction, renewable energy, and energy efficiency.

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 2021 Pay Elements and Performance Metrics

Our executive compensation program is predominantly performance-based, consisting of three direct pay elements — base salary, annual cash incentive and long-term incentives — each of which serves a unique purpose. The metrics below incentivize our executives to focus on operational objectives that are expected to drive shareholder value.

Temporary Board and Executive Pay Reductions

In light of the disruption and uncertainty created by the evolving COVID-19 pandemic, our Board voluntarily agreed to a temporary 10% reduction in their cash retainers for the last six months of calendar year 2020. In addition, our Compensation Committee implemented a temporary base salary reduction of 10% for all executive officers and business unit presidents, which remained in effect from June 1, 2020 through September 30, 2020 for executives other than our CEO, and from June 1, 2020 through December 31, 2020 for our CEO. These temporary reductions on compensation are reflected in the 2021 Director Compensation Table and the 2021 Summary Compensation Table on pages 27 and 61 of this proxy statement, respectively.

Compensation Committee Discretionary Action on FY 2021 Payouts

Over the past fiscal year, the Compensation Committee’s consideration of the implications of the opioid litigation settlement charge on FY 2021 compensation outcomes was among its most complex and critical processes. As described more fully beginning on page 35 of this proxy statement, in its deliberations, the Compensation Committee carefully considered both the settlement charge’s impact on the underlying metrics within the incentive plans, and the impact on the Company and its stakeholders all in the context of outstanding operating performance in FY 2021. While the settlement charge did not impact our operating performance in FY 2021, the committee concluded, and management agreed, that the magnitude of the potential settlement merited adjustments to pay decisions for FY 2021.

The Compensation Committee considered a range of options. The committee also considered that certain settlement-related expenses like the settlement charge are excluded from the metrics used in incentive programs for important reasons. This exclusion is a long-standing practice at McKesson and is common in our industry.

In evaluating the different options, the Compensation Committee considered multiple factors, including:

In light of the above analysis, the Compensation Committee determined that it was appropriate to maintain the practice of excluding the settlement charge from FY 2021 incentive compensation calculations. However, in light of the scale of the accrual and the potential future cost associated with the settlement charge, the committee concluded that it would be appropriate to reduce payouts under the FY 2021 MIP and FY 2019 — FY 2021 Cash LTIP for our NEOs as follows:

CEO: Payout reduced by $2.6 million or 75%, to $882,813

Other NEOs: Aggregate payout reduced by $2.7 million or 50%

CEO: Payout reduced by $312,000 or 30%, to $720,000

Other NEOs: Aggregate payout reduced by $503,490 or 30%

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 of this proxy statement.

Name

Age

Director Since

Independent

Committee Memberships

Other Public Company Boards

Dominic J. Caruso Retired EVP & CFO, Johnson & Johnson

63

2018

✓

• Audit (Chair) • Compliance

None

Donald R. Knauss Retired Chairman & CEO, The Clorox Company

70

2014

✓

• Audit • Finance (Chair)

• Kellogg Company • Target Corporation

Bradley E. Lerman SVP, General Counsel & Corporate Secretary, Medtronic plc

64

2018

✓

• Compensation • Compliance (Chair)

None

Linda P. Mantia Retired SVP & COO, Manulife Financial Corporation

52

2020

✓

• Audit • Governance

• Ceridian HCM Holding Inc. • MindBeacon Holdings Inc.

Maria Martinez EVP & COO, Cisco Systems, Inc.

63

2019

✓

• Compliance • Governance

None

Edward A. Mueller Retired Chairman & CEO, Qwest Communications International, Inc.

74

2008

✓

• Compensation • Governance

None

Susan R. Salka CEO & President, AMN Healthcare Services, Inc.

56

2014

✓

• Compensation • Governance (Chair)

• AMN Healthcare Services, Inc.

Brian S. Tyler CEO, McKesson Corporation

54

2019

• Republic Services, Inc.

Kenneth E. Washington CTO, Ford Motor Company

60

2019

✓

• Compliance • Finance

None

Diverse Skills, Experiences and Qualifications

The skills matrix below identifies our director nominees’ prominent experiences and qualifications by name. 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, the information contained in this summary is not intended to be exhaustive, but aims to convey the general 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.

Board Skills

6 Directors with Risk Management & Compliance Experience   8 Directors with Global / International Experience   4 Directors with Healthcare Industry Experience

Senior Executive Leadership

●

●

●

●

●

●

●

●

●

Other Public Company Board Service

●

●

●

●

●

●

Business Transformation / M&A

●

●

●

●

●

●

●

●

●

Financial / Accounting

●

●

●

●

●

●

Healthcare Industry Experience

●

●

●

●

Distribution / Supply Chain Experience

●

●

●

●

●

Risk Management and Compliance

●

●

●

●

●

●

Sustainability and ESG

●

●

Cybersecurity / Technology

●

●

●

●

●

●

Global / International Experience

●

●

●

●

●

●

●

●

Marketing / Public Relations / Communications

●

●

●

●

●

Additional Diversity Highlights

Governance Highlights

Board refreshment. One independent director, Linda Mantia, joined our Board in FY 2021. Tony Coles, Chris Jacobs and Marie Knowles will not stand for reelection at the 2021 Annual Meeting. We plan to implement a modified tenure policy in 2022, which will require continual board refreshment and succession planning.

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 21 for more information.

PROPOSALS TO BE VOTED ON

There are 9 nominees for election to the Board of Directors of the Company. The directors elected at the Annual Meeting will hold office until the 2022 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, Don Knauss, Brad Lerman, Maria Martinez, Ed Mueller, Susan Salka, Brian Tyler and Ken Washington were elected to the Board at the 2020 Annual Meeting of Shareholders. Linda Mantia was appointed to the Board effective October 19, 2020.

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 section provides 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 nominee’s biographical information includes a description of the nominee’s experience, qualifications, attributes or skills that qualify the nominee to serve on the Company’s Board at this time.

Nominees

Your Board recommends a vote “FOR” each Nominee.

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 twelve directors. After the 2021 Annual Meeting, if all nominees are elected, the Board will consist of nine directors. Ed Mueller serves as the Board’s Independent Chair. All of the directors during the time they served on the Board 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 seven times during FY 2021. 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 2021, 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 virtual Annual Meeting. All directors then serving attended the 2020 Annual Meeting of Shareholders. The membership of each standing committee in FY 2021 and the number of meetings held during FY 2021 are identified in the section immediately below.

Committee Membership, Responsibilities and Other Information

The following are the standing committees of the Board 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, shareholders or other parties.

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. Mantia 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 initially gathered information on Ms. Mantia and vetted her qualifications, experience and skills, as well as those of other potential director candidates, after which Ms. Mantia was brought to the attention of the Governance Committee Chair and the independent Board Chair. Several members of the Board interviewed Ms. Mantia. In October 2020, the Board elected Ms. Mantia 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 33% and 22%, respectively, of our slate of director nominees.

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:

Evaluating Board Composition, Performance and Effectiveness

Board evaluations play a critical role in assessing the effectiveness of our Board, which conducts an annual evaluation to consider where they believe our Board functions most effectively. The evaluation process may also identify areas in which our Board believes its members can make a better contribution to the Company. The following graphic illustrates core elements of our Board’s evaluation process:

Our Governance Committee leads the evaluation of the Board and the performance of the Independent Chair. Our Independent Chair also speaks to directors individually, and that feedback is later reported to the entire Board. Each committee is responsible for evaluating its own performance and determining their objectives for the following year. The Governance Committee establishes objectives for the Board, and reviews periodically the Board’s evaluation process and makes enhancements based on the Company’s evolving business strategies and risks.

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, Don Knauss, Brad Lerman, Linda Mantia, Maria Martinez, Ed Mueller, Susan Salka and Ken Washington, are independent. Tony Coles, Christine Jacobs and Marie Knowles were independent during the time they served.

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 24-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 management team. 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. In addition, the Board provided strategic oversight with respect to the Company’s activities as the centralized distributor of certain COVID-19 vaccines and ancillary supplies. Moreover, the Compliance Committee held multiple sessions to provide oversight of the legal and compliance risks and risk mitigation measures relating to COVID-19 vaccine and ancillary supply distribution. For more information on the Company’s efforts in response to the COVID-19 pandemic, please see page 3.

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 Controlled Substances Monitoring Program (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.

Information about the Company’s CSMP appears at www.mckesson.com/About-McKesson/Fighting-Opioid-Abuse/Controlled-Substance-Monitoring-Program.

Cybersecurity Risk Oversight

At least quarterly, the Board addresses cybersecurity trends, risk reduction strategy or related topics. Management’s quarterly 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.

Report of the Compliance Committee

Since its formation in 2019, our Compliance Committee (Committee) has assisted the Board in overseeing the Company’s compliance programs and management’s identification and evaluation of the Company’s 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 to our Board. The other members of the Compliance Committee include Dominic Caruso (Audit Committee Chair), Maria Martinez and Dr. Ken Washington. All members of our Compliance Committee joined the Board since January 2018. During FY 2021, the Compliance Committee formally met nine times and received updates from management during and outside of the formal meetings.

The Compliance Committee’s key FY 2021 accomplishments include, but are not limited to:

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 2021 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 2021 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:

In addition, incentives for senior management feature the following:

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 no related party transactions subject to disclosure in this proxy statement. The Company has a Related Party Transactions Policy requiring reasonable prior review and oversight of all related party transactions for potential conflicts of interest and the prohibition of related party transactions that are inconsistent with the interests of the Company and its shareholders. The policy applies to the Company’s directors, nominees for director, executive officers, beneficial owners of more than 5% of the Company’s common stock, and immediate family members of any such persons. The policy encompasses transactions, arrangements and relationships in which the Company or an affiliated entity is a participant and any such related person has an interest or is involved, or is reasonably likely to obtain an interest or to become involved, which

the Company initially reviews to determine as to whether any related person had or will have a direct or indirect material interest. If so, then the policy requires that related party transaction to be reviewed by the Governance Committee and provides for ongoing oversight of the related party transaction. In its review of related party transactions, the Governance Committee considers factors such as: the business purpose of the transaction; whether the transaction is made in the ordinary course of business and is entered into on an arm’s-length basis; whether the transaction would impair the independence of a director; whether it would violate the provisions of the Company’s Code of Conduct; and whether the transaction is otherwise consistent with the interests of the Company and its shareholders. The Company’s directors, nominees for director and executive officers are periodically asked to identify immediate family members and any transactions, arrangements and relationships that are subject to the policy.

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.

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 compensation paid to our non-employee directors and, if it deems appropriate, recommends changes to the Board. In reviewing our non-employee director compensation program, the committee is guided by these principles:

Each non-employee director of the Company is paid an annual cash retainer and an annual restricted stock unit (RSU) award. Our non-executive Board Chair is provided additional compensation that the Board believes is commensurate with that role. Our non-employee director 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 2021 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 Temporary 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 temporary 10% reduction in their cash retainers (including the annual cash retainer, Board Chair cash retainer and committee chair retainer) for the last six months of calendar year 2020.

2021 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, 2021. Mr. Tyler is not included in this table as he was an employee of the Company during FY 2021 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 2021 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 2021, 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) 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.

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 $0.42 per share each quarter. Dividend equivalents are not distributed until the shares underlying the RSUs are issued to the director. Dividend equivalents on RSUs granted prior to April 28, 2020 are credited to an account that accrues interest 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. Interest accrual on dividend equivalents was eliminated for RSU awards granted after April 28, 2020.

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.

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, 2022. 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, 2021 and 2020, 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.

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, 2021 and 2020, no amounts were incurred by the Company for tax advice, planning or consulting services.

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

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 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, 2021; (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, 2021 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

Linda P. Mantia

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:

Security Ownership of Directors and Executive Officers

The following table sets forth, as of May 28, 2021, 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 2021 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 May 28, 2021.

EXECUTIVE COMPENSATION

A Letter From Our Compensation Committee

Dear Fellow Shareholders,

The Compensation Committee has benefited from shareholder insights over the last several years, and feedback gathered in direct conversations with investors over the last 12 months has informed our approach to compensation at McKesson. We greatly appreciate our shareholders’ willingness to engage with us and share a range of perspectives during these discussions, which have informed our thinking. This year has presented a special set of challenges for all companies on many fronts, including compensation, and in this letter and proxy statement, we seek to provide insight regarding the work of the Compensation Committee.

Evaluating Performance in a Complex Year. At the beginning of our FY 2021, the COVID-19 pandemic had significantly disrupted global markets and created uncertainty for our employees, communities and customers. In that environment, the Committee set goals and target payouts based on the Company’s one-year operating plan and rolling three-year strategic plan, recognizing McKesson’s critical role in supporting our customers and partners through the pandemic and the risks facing supply chains.

In our review of the year, McKesson delivered strong performance in an unprecedented environment and played a critical role in the COVID-19 vaccine distribution and kitting programs with the U.S. government. Working with the U.S. government and evolving demand patterns from customers resulted in positive contributions in FY 2021, which offset the impacts of lower prescription volumes and limited patient mobility as a result of the COVID-19 pandemic. The Compensation Committee reviewed performance both including and excluding these pandemic-related items to ensure a clear understanding of performance against plan.

As detailed elsewhere in these materials, the business demonstrated strong execution and the executive team delivered outstanding performance in a dynamic macro environment. Our accomplishments in FY 2021 are the foundation for the future, and we remain confident in our ability to create long-term value for our shareholders.

In FY 2021, after several years of litigation, McKesson also concluded that a broad settlement of opioid claims by governmental entities was probable, and that a reasonable estimate of the associated loss could be recorded for GAAP accounting purposes. This charge of $8.1 billion was incurred in FY 2021, although no final settlement has been reached, and as currently contemplated, any payments would be spread out over an 18-year period. We generally adjust settlement charges out of the calculation of compensation metrics for several reasons, including: the desire to provide appropriate incentives for management to engage in settlements when appropriate for the Company; our view that settlement-related expenses such as this settlement charge do not accurately reflect our executive team’s ability to execute our strategy and create value for our shareholders and our customers; and the potential that a final settlement would not be achieved or would be achieved on different terms. Although that is our standard practice, this settlement charge was unusual in its size and we concluded that it was important to consider this settlement charge when making final compensation decisions.

Discretionary Reductions to Compensation. Each year the Compensation Committee considers the formulaic evaluations built into the core compensation program in the broader context of performance, and other events and issues (such as regulatory and legal issues) that have an impact on our company. For example, we reduced payouts under the FY 2020 MIP for our executive officers and implemented temporary base salary reductions for all of our executive officers and business unit presidents, in light of the challenges of the COVID-19 pandemic. While discretionary adjustments are not expected to be an annual occurrence, for FY 2021, we again concluded that a reduction in pay outcomes was appropriate in light of the scale of the settlement charge recognized in the third quarter. Although the Company continues to be involved in settlement discussions, the Compensation Committee concluded that it was appropriate to take action this year in a manner that acknowledged both the significant outperformance delivered by the executive team on behalf of shareholders during the performance periods covered by the program and the probable future costs associated with the settlement under discussion. In reaching this conclusion, we considered, among other factors:

Specific actions taken are detailed in the CD&A, beginning on page 35.

There is no better opportunity to evaluate the effectiveness and true measure of a strategy, or a pay program, than when it is under pressure. The challenges of the last year gave us further visibility into the robustness and flexibility of our compensation program, as it provided our executive team with incentives to exceed expectations on multiple metrics to the benefit of shareholders, while also leaving the Compensation Committee with appropriate discretion to ensure that pay outcomes were aligned with shareholder interests.

We welcome our ongoing dialogue with shareholders both in discussions and through your vote. We ask for your support and thank you for your investment in McKesson.

The Compensation Committee,

N. Anthony Coles, M.D., Chair

Bradley E. Lerman

Edward A. Mueller

Susan R. Salka

Compensation Discussion and Analysis

The Compensation Discussion and Analysis describes McKesson’s executive compensation program and reviews compensation decisions for our CEO and CFO, and our three other most highly compensated executive officers, all of whom were serving as of March 31, 2021 (collectively, our Named Executive Officers or “NEOs”). For FY 2021, our NEOs and their respective titles were as follows:

Overview

Business Strategy and Key Initiatives

At McKesson, we are focused on executing against clear priorities to drive value. Part of that growth will come through our ability to work together, to execute and to use the capabilities and assets across McKesson to innovate in new and different ways. We will continue to be disciplined in our capital deployment as we execute this strategy.

While the COVID-19 pandemic presented many unknowns in FY 2021, our businesses had strong execution, underpinned by stable fundamentals. Our top priority in FY 2021 has been our work with the U.S. Government to support the COVID-19 vaccination effort, and this effort underpins McKesson’s ability to meet the needs of our partners and customers during challenging times. Additionally, despite a rapidly evolving macro environment, we continued to invest in growth in the areas of oncology and biopharma services, where we have key differentiation. Within the U.S. Pharmaceutical segment, our provider solutions and U.S. Oncology businesses performed well in FY 2021 and are well-positioned as innovative specialty products come to market. We brought our Prescription Technology Solutions business together under one leadership team to help improve pharmacy’s efficiency and increase customer’s profits, and we are investing in innovation and automation for our biopharma partners. Medical-Surgical Solutions benefited from the broad reach and capabilities of the business across the non-acute market, as new opportunities emerged and as customer demand evolved. Within the International segment, we continued to recognize benefits from our actions to rationalize our retail footprint and also invested in digital capabilities to meet the evolving needs of patients. In FY 2021, we also completed the creation of a joint venture with Walgreens Boots Alliance, combining our German wholesale operations.

FY 2021 Performance Highlights

In FY 2021, we delivered adjusted operating results that exceeded the original expectations we set in May 2020, early in the COVID-19 pandemic. While our first quarter results were down materially compared to FY 2020, driven by shelter-in-place guidelines restricting patient mobility, we began to see volumes recover across the business late in the first quarter as patient mobility improved. The shape and pace of the recovery from the effects of the COVID-19 pandemic proved to be different from our original expectations, showing signs of non-linearity throughout FY 2021. Against a dynamic and challenging macroeconomic backdrop, we continued to respond to the evolving demand brought on by the pandemic, leveraging the breadth and scale of our distribution and services capabilities. While we benefited from transitory demand for certain products and our role supporting the U.S. Government as the centralized distributor of COVID-19 vaccines and ancillary kits, the underlying core business showed improved execution and stable fundamentals. We continued to invest internally in the areas of oncology and biopharma services and maintained our balanced approach to capital deployment, returning $1.0 billion to shareholders through share repurchases and dividends. McKesson is well-positioned with a broad array of differentiated assets and capabilities to be a leader in the next significant wave of healthcare innovation.

In Appendix A to this proxy statement, we provide reconciliations from earnings (loss) per diluted share, operating profit and operating cash flow calculated in accordance with generally accepted accounting principles (GAAP) to the non-GAAP metrics presented above, including Adjusted Operating Profit, Adjusted Earnings per Diluted Share, and Free Cash Flow, as well as to the measures used in calculating performance under our incentive plans. In our discussion of executive compensation throughout this proxy statement, we refer to Adjusted Earnings per Share for incentive compensation (Adjusted EPS), Adjusted Operating Profit for incentive compensation (AOP), Adjusted Operating Cash Flow for incentive compensation (Adjusted OCF), Free Cash Flow (FCF), Return on Invested Capital (ROIC) and Relative Total Shareholder Return (rTSR) as performance metrics specifically used in our incentive programs. A description of ROIC, a non-GAAP metric, can be found on page 50 of this proxy statement.

Considering Settlement Charge Implications for Compensation Outcomes

For several years, McKesson has been subject to multiple claims in litigation relating to the distribution of opioids. The Board and management are deeply concerned by the seriousness of the public health crisis associated with opioid abuse and addiction. The Company is committed to being part of the solution through protecting the integrity of the pharmaceutical supply chain to ensure availability of appropriate treatments to patients with serious illnesses and injuries.

In FY 2021, consistent with our efforts to come to a resolution, the Company concluded that discussions under a proposed settlement framework had reached a stage at which a broad settlement of opioid claims is probable, and the loss related thereto could be reasonably estimated as of December 31, 2020. During FY 2021, McKesson recorded a GAAP-only pre-tax charge of $8.1 billion, $6.8 billion post-tax, related to the estimated liability for opioid-related claims of governmental entities, which we refer to as the settlement charge. As of June 1, 2021, no settlement has been reached and no payments have been made.

In its deliberations, the Compensation Committee carefully considered both the settlement charge’s impact on the underlying metrics within the incentive plans, and the impact on the Company and its stakeholders. While the settlement charge did not impact our operating performance in FY 2021, the committee concluded, and management agreed, that the magnitude of the potential settlement merited adjustments to pay decisions for FY 2021.

Accrual Impacts Calculation of Compensation Performance Metrics. Although no actual payments have been made, the accrual affects the GAAP calculation of several performance metrics under the compensation program, including earnings per diluted common share, operating profit, and ROIC.

Background on Setting and Calculating Compensation Performance Targets and Results. The Compensation Committee designed the incentive programs at McKesson to align with the strategy and business objectives we have laid out for our stakeholders. Settlement-related expenses like the settlement charge are excluded from the metrics used in those programs, but the costs associated with ongoing litigation defense are not. This has been a long-standing practice at McKesson and is common in our industry. Our belief in this practice stems from the fact that the expenses associated with settlements vary significantly, are difficult to predict when planning forward-looking performance targets, and settlements are often entered into for different reasons such as to conclude proceedings in a manner that satisfies all of the parties involved, and to eliminate ongoing costs related to litigation without any admission or finding of wrongdoing by the company. As in the case of this settlement charge, the GAAP impact may occur before a settlement is final and prior to any actual expenditure of capital, and any eventual payments might occur over a multi-year period. Moreover, settlement-related expenses do not accurately reflect our executive team’s ability to execute our strategy and create value for our shareholders and our customers. The Compensation Committee has concluded that inclusion of these types of settlement-related expenses would diminish our shareholders’ visibility into the correlation between our operating performance outcomes and executive pay outcomes. The committee’s current approach:

Had the committee diverged from McKesson’s standard practice and included the impact of the settlement charge when calculating performance metrics used in compensation programs, FY 2021 incentive payouts would have been as follows, in relation to the respective target awards: 50% for FY 2021 MIP; 8% for FY 2019 — FY 2021 PSUs; 104% for FY 2019 — FY 2021 Cash LTIP; and 179% for the strategic growth initiative PSU (Strategic PSU) awards. See Appendix A to this proxy statement for additional detail on the impact of the settlement charge on performance metrics used in our incentive plans.

Range of Actions Considered By the Compensation Committee. Although it has been standard practice for McKesson and for many companies to adjust settlement-related expenses such as the settlement charge out of the calculation of performance metrics used in compensation programs, the Compensation Committee noted that because of its scale, this was not a standard settlement charge. The committee determined that all options should be considered in determining the calculation of performance metrics and ultimate incentive plan payouts. The committee evaluated a range of potential actions including:

Key Factors Considered. In evaluating the different options, the Compensation Committee considered the following factors, and how those factors informed its analysis: