Release of official tallies for votes on shareholder initiatives at McKesson Corp.'s (MCK) Wednesday, July 26 annual meeting have been delayed until Friday morning.

The results of votes on a director election, a non-binding recommendation to separate the CEO and chairman's role and initially were expected to be  disclosed in a securities filing Thursday.

The delay follows McKesson's annual shareholder meeting, which featured votes on initiatives pushed by  the Teamsters labor union. On Wednesday, July 26, the International Brotherhood of Teamsters attended the shareholder meeting while simultaneously conducting a peaceful protest outside the meeting's doors.

The union argued that the supporting its proposals would be way for investors to express displeasure over the prescription drug distributor's failure to protect itself from financial risk created by the drug industry's role in the opioid addiction crisis.

During McKesson's annual shareholder meeting, at the Teamsters' suggestion, investors rejected management's proposed executive compensation package. However, the other initiative that the labor union led, which called for separating the company's chairman and chief executive roles, did not pass.

The margin of defeat is critical, however, because a narrow loss would signify substantial support for the idea among investors. Indeed, it looks like the company fended off the executive duty breakup by a less-than-respectable margin.

Initially, McKesson recommended that investors vote against both proposals from the Teamsters, but now it appears that the company is at least acknowledging shareholder desire for splitting the executive roles. After the vote McKesson said it intends to split the CEO-Chairman duties sometime in the future,  basically when current Chairman and CEO John H. Hammergren steps down, which the company expects to be years into the future.

"We're pleased McKesson committed to splitting the roles of CEO and chair, as the Teamsters requested but the devil is in the details," said Michael Pryce-Jones, Senior Governance Analyst at Teamsters. "The company should ensure that the future chairman is an independent director, not a former executive."

However, McKesson noted that Hammergren does not intend to leave the company anytime soon. The distinction that McKesson made in regards to the dual role has an air of ambiguity to it, allowing the CEO to assume the position as chairman if the CEO were to step down.

"It is a good first step to commit to splitting the roles, as the Teamsters requested, but the company can and should do more - they should specifically ensure that the future chairman is an independent director," said Pryce-Jones.

"McKesson and its shareholders have been well served during John Hammergren's service as both CEO and chairman of the Board," said McKesson. "John's in-depth knowledge of the healthcare industry and of the complex businesses and operations of the company allows him to lead the Board's work and focus, ultimately helping deliver long-term value to our investors."

Thursday McKesson did report second quarter earnings, which missed estimates.

According to David Larsen, an analyst at Leerink, the bulk of quarter's miss is derived from the Distribution Division's operating margin.

"Management highlighted that results are in-line with their expectations but the reported operating margin in distribution declined by ~27bps y/y which is a significant negative surprise given commentary around a stabilizing sell-side environment, and improving sentiment around brand pricing," Larsen wrote in the report.

McKesson is down 22% year-over-year.

"Having now lost two say-on-pay votes in the past four years, McKesson's board has its work cut out as it tries to rebuild trust with investors, a task that is made all the more urgent by the company's role in the opioid crisis," said the Teamster's General Secretary Treasurer Ken Hall,

Shares of McKesson fell 2.30%, or $3.,82, on Thursday, July 27, trading at $162.53 at market close. During after-hours, the stock continued its decline and is currently trading at $161.72.

 

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