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ISS urges vote against four McKesson directors over CEO pay

NEW YORK (Reuters) - Proxy advisory firm Institutional Shareholder Services is urging shareholders of McKesson Corp to vote against the re-election of four directors, citing the firm's persistent problems in addressing shareholders' concerns about executive compensation.

Chief among the concerns was "the sizable and growing" lump-sum pension payment due to Chairman and CEO John Hammergren had he retired, which was worth some $159 million, ISS said.

The ISS recommendation follows criticism of the San Francisco-based healthcare technologies and drug distribution firm by CtW Investment Group. CtW Investment is part of the Change to Win labor federation, whose members include pensions funds that are McKesson shareholders.

CtW said McKesson's board is "entrenched and insular," and noted a "string of multi-billion dollar compliance and internal control failures under the watch of the audit committee," in a July 1 letter to McKesson shareholders.

In that letter, CtW Investment Group urged McKesson shareholders to vote against the re-election of directors Jane Shaw, a 21-year veteran of the board; Alton Irby, a 14-year veteran of the compensation committee as well as Hammergren.

In its recommendation, ISS said shareholders should vote against Irby and three other members of the compensation committee - Edward Mueller, Christine Jacobs and David Lawrence - for failing to address the compensation issues.

"The fact is the CEO's lump sum pension balance represents substantial lifetime costs to shareholders and does not incentivize the CEO's retention," ISS said.

ISS did not recommend the removal of Shaw. Furthermore, it did not recommend voting against Hammergren because the company has agreed to name a lead independent director.

Representatives from ISS and McKesson did not return requests for comment Sunday evening.

The ISS recommendations were first reported by The Wall Street Journal.

McKesson's shareholders are scheduled to vote at the company's July 31 annual shareholder meeting.

(Reporting by Jessica Toonkel; Editing by Edwina Gibbs)