UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.     )

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McKESSON CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

A LETTER FROM OUR LEAD INDEPENDENT DIRECTOR

Dear Fellow Shareholders,

We believe that McKesson has been successful over the long term because we listen carefully to our customers, partners and shareholders, which informs our corporate governance practices and enables us to anticipate market developments and customer needs.

Our directors work together to continually assess how we can operate responsibly and effectively protect and increase the value of your investment. As we approach the 2018 Annual Meeting, I would like to highlight some of the ways the Board of Directors has been working on your behalf.

Overseeing Strategy to Drive Long-Term Growth and Value Creation

The Board has several stewardship functions, which include: providing critical oversight, advising on McKesson’s strategic plans and setting the “tone at the top.” The Board actively oversees McKesson’s long-term strategy as we seek to build long-term shareholder value and assure the vitality of the Company for its customers, employees and shareholders. We:

Refreshing the Board and Committees with New Perspectives

We invigorate Board discussion through the appointment of new directors and the rotation of directors through different Board roles. Thoughtful and ongoing attention to Board composition is an important part of our role as we seek to ensure an appropriate mix of tenure and expertise that provides a balance of fresh perspectives and significant institutional knowledge. The Governance Committee has invested a substantial amount of time considering Board composition as part of the annual self-evaluation process, and revisits the topic during the year if the Board sees changes in the Company’s governance needs.

This year we appointed Bradley E. Lerman to the Board. Mr. Lerman’s deep understanding of the healthcare industry and experience linking compliance and legal considerations with corporate strategy will bring valuable insights to our Board. We also approved a number of changes to the composition and leadership of our Compensation Committee; changes that will be effective July 23, 2018. As part of this refreshment, N. Anthony Coles, M.D. will assume the role of Compensation Committee Chair, Susan R. Salka and Mr. Lerman will join the committee as new members, and M. Christine Jacobs will leave the committee. Our current Compensation Committee Chair Andy D. Bryant will not stand for reelection at the 2018 Annual Meeting. In addition, our newest Board member, Mr. Lerman, will assume the role of Governance Committee Chair and Donald R. Knauss will assume the role of Finance Committee Chair.

Refining Our Compensation Program to Align with Our Strategy

Ensuring that the Company has an executive compensation program that appropriately attracts, retains and incentivizes our management team is one of the Board’s most critical responsibilities. Following low support for our executive pay program at the 2017 Annual Meeting, our Compensation Committee undertook a robust process to review the Company’s executive compensation structure, taking into account feedback from our shareholders gathered during an extensive outreach effort.

We listened to our shareholders, and the following actions we have taken reflect your input:

We believe these changes effectively link our executive compensation program to financial objectives consistent with our long-term goals and are aligned with our shareholders’ interests. We are committed to maintaining a compensation structure that aligns pay with performance, drives long-term value creation and reflects the views of our shareholders.

Committing to Fight the Opioid Epidemic

McKesson is deeply concerned by the impact the opioid epidemic is having on families and communities across the U.S., and this issue is top of mind for the Board of Directors. In response to a shareholder request, the Board formed an independent Special Review Committee (the “SRC”) to investigate senior management’s and the Board’s oversight of compliance with the Company’s legal and regulatory obligations relating to the distribution of opioids. While the investigation revealed a strong culture that encouraged ethical and compliant conduct, as led by management and reinforced by the Board, the SRC offered recommendations in the interest of further strengthening our compliance framework. On the basis of these recommendations, the Board enhanced oversight procedures related to opioid distribution, the Controlled Substance Monitoring Program, and the pending lawsuits and investigations. In March 2018, the Company also announced a series of new initiatives to help fight the opioid epidemic, including the formation of a foundation dedicated to combating the crisis. The Company contributed $100 million to the new foundation as part of McKesson’s ongoing mission of delivering better care for patients. The Company’s new initiatives will provide additional tools to fight abuse, such as leveraging data and analytics to flag at-risk patients and fast-tracking distribution of new, non-opioid pain medications. We believe this investment and the Company’s continued actions can have a positive impact, particularly when done in collaboration with others in the healthcare industry, government policymakers, administrators and regulators.

We Ask for Your Support

We take seriously the trust you place in us through your investment in McKesson. Your vote is very important to us. We strongly encourage you to read both our proxy statement and annual report in their entirety, and ask that you vote with our recommendations.

Edward A. Mueller

Lead Independent Director

Wednesday, July 25, 2018

8:30 a.m. Central Daylight Time

The 2018 Annual Meeting of Stockholders of McKesson Corporation will be held at the Dallas/Fort Worth Airport Marriott, 8440 Freeport Parkway, Irving, Texas 75063.

ITEMS OF BUSINESS:

Shareholders of record at the close of business on May 31, 2018 are entitled to notice of and to vote at the meeting or any adjournment or postponement of the meeting.

June 15, 2018

By Order of the Board of Directors

Michele Lau

Senior Vice President,

Corporate Secretary and

Associate General Counsel

		YOUR VOTE IS IMPORTANT                         We encourage you to read the proxy statement and vote your shares as soon as possible. Specific instructions on how to vote via Internet, by phone, by mail or in person are included on the proxy card.

TABLE OF CONTENTS

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 Stockholders to be held on July 25, 2018 (“Annual Meeting”).

Meeting Information

Voting Items

Our board of directors (“Board” or “Board of Directors”) is asking you to take the following actions at the Annual Meeting:

How to Vote (see pages 86-90 for additional voting information)

Your vote is important. On June 15, 2018, McKesson Corporation (“Company,” “McKesson,” “we” or “us”) began delivering proxy materials to all shareholders of record at the close of business on May 31, 2018 (“Record Date”). As a shareholder, you are entitled to one vote for each share of common stock you held on the Record Date. You can vote in any of the following ways:

Vote via Internet		Call Toll-Free		Vote by Mail		Vote in Person
www.proxyvote.com		Call the phone number located at the top of your proxy card		Follow the instructions on your proxy card		Attend our Annual Meeting and vote by ballot

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PROXY SUMMARY

Company Highlights

McKesson is a global leader in delivering pharmaceutical and medical products and business services to retail pharmacies, hospitals, health systems, physician offices and others throughout North America and Europe. While distribution represents our core competency and generates the majority of our business by revenue (99% in FY 2018), we also provide technology solutions to support healthcare organizations in areas such as clinical, financial and supply chain management.

In FY 2018, our Company delivered solid performance across many of our businesses. Despite some industry-wide headwinds, we produced strong returns and invested to enhance our ability to deliver value to our manufacturing partners, our customers and patients. The Company generated revenues of $208.4 billion compared to $198.5 billion in FY 2017 and produced adjusted earnings of $12.62 per diluted share compared to $12.54 in FY 2017.

To build sustainable long-term value, we try to think years out as opposed to quarters out. In April 2018, we announced a multi-year growth initiative, which is intended to position us to take advantage of significant new growth opportunities in patient care delivery. Over the next few years, we anticipate achieving meaningful cost savings through an operating model review and redesign that we anticipate will primarily be used to fund the following growth priorities:

Governance Highlights

The Board actively seeks input from our shareholders and is committed to continuous monitoring of sound and effective governance practices. Below are highlights of some of our key governance attributes. Details on our corporate governance can be found on pages 19-25.

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PROXY SUMMARY

Director Nominees

There are eight nominees for election to the Board of Directors. Additional information on each nominee may be found under Item 1 - Election of Directors, beginning on page 8. Our Board approved a number of changes to the composition and leadership of its committees, which will be effective on July 23, 2018. The new committee memberships are outlined below. Information on the current committee memberships can be found on page 13.

AC: Audit Committee   CC: Compensation Committee   FC: Finance Committee   GC: Governance Committee   C: Committee Chair

* Committee memberships effective July 23, 2018

The eight director nominees standing for reelection to the Board have diverse backgrounds, skills and experiences. We believe their varied backgrounds contribute to an effective and well-balanced Board that is able to provide valuable insight to, and effective oversight of, our senior management team.

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PROXY SUMMARY

Comprehensive Approach to Shareholder Feedback

As we do every year, our Board undertook a significant engagement effort to receive feedback from shareholders regarding our executive compensation program and other matters of importance to the Company and our shareholders. We were disappointed to receive low support for our advisory say-on-pay proposal at the 2017 Annual Meeting of Stockholders, and actively sought to understand what actions we could take to address shareholder concerns.

Scope of Outreach

Since our last Annual Meeting of Stockholders, we reached out to shareholders representing over 80% of our outstanding common stock. We met with shareholders representing over 40% of our outstanding common stock and we specifically requested feedback regarding our executive compensation program given our low say-on-pay support in 2017.

Engagement and Response Efforts

Compensation Committee Chair Andy D. Bryant led engagements with shareholders representing 24% of our outstanding common stock. Management continued to meet with shareholders individually, at annual conferences and through other forums. Feedback from shareholders was shared regularly with the Board, including the Governance Committee and the Compensation Committee, for review and further discussion.

Key Issues of Discussion

In our meetings with shareholders over the last year, in addition to executive compensation, we discussed the Company’s robust disclosure and governance record, Board leadership, composition and refreshment, political engagement and response to the opioid crisis. We heard strong support for our CEO and senior management team, and recognition of executive retention as an issue for the Company. We also heard concerns relating to our executive compensation program, including overall pay magnitude for our CEO, pay-for-performance alignment and plan design. We summarize below what we have heard on both executive compensation and governance matters, and how we responded to shareholder feedback.

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PROXY SUMMARY

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PROPOSALS TO BE VOTED ON

There are eight nominees for election to the Board of Directors of the Company. The directors elected at the Annual Meeting will hold office until the 2019 Annual Meeting of Stockholders and until their successors have been elected and qualified, or until their earlier resignation, removal or death.

All nominees are current directors. N. Anthony Coles, M.D., John H. Hammergren, M. Christine Jacobs, Donald R. Knauss, Marie L. Knowles, Edward A. Mueller and Susan R. Salka were elected to the Board at the 2017 Annual Meeting of Stockholders. Bradley E. Lerman was elected to the Board effective April 24, 2018.

For purposes of the upcoming Annual Meeting, the Governance Committee has recommended the reelection of each nominee as a director. 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 is 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 director’s biographical information includes a description of the director’s experience, qualifications, attributes or skills that qualify the director to serve on the Company’s Board at this time.

Nominees

Your Board recommends a vote “FOR” each Nominee.

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ITEM 1. ELECTION OF DIRECTORS

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ITEM 1. ELECTION OF DIRECTORS

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ITEM 1. ELECTION OF DIRECTORS

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ITEM 1. ELECTION OF DIRECTORS

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 goal is 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 (“CEO”). The Board consisted of eight members at the end of fiscal year ended March 31, 2018 (“FY 2018”), all of whom were independent with the exception of John H. Hammergren, the Chairman of the Board (“Chairman”). Mr. Bryant will not stand for reelection at the 2018 Annual Meeting. With the election of Mr. Lerman effective April 2018, the Board currently consists of nine members, all of whom are independent with the exception of the Chairman.

The Board has four standing committees: the Audit Committee, the Compensation Committee, the Finance Committee, and the Governance Committee. Each of these committees is governed by a written charter approved by the Board in compliance with the applicable requirements of the SEC and the New York Stock Exchange (“NYSE”) listing requirements (collectively, the “Applicable Rules”). The charter of each committee requires an annual review by that committee. 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.

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ITEM 1. ELECTION OF DIRECTORS

Board and Meeting Attendance

The Board met seven times during FY 2018. Each director attended at least 75% of the aggregate number of meetings of the Board and of all the standing and other committees on which he or she served. 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 Annual Meeting. All then directors attended the 2017 Annual Meeting of Stockholders. The membership of each standing committee in FY 2018 and the number of meetings held during FY 2018 are identified in the table below.

In addition, the Board has, on occasion, established committees to deal with particular matters the Board believes appropriate to be addressed in that manner. For example, the Board formed a Special Review Committee (the “SRC”), comprised of three independent directors and assisted by independent counsel. The scope of the SRC’s investigation focused on senior management’s and the Board’s oversight of compliance with the Company’s legal and regulatory obligations relating to the distribution of opioids that occurred between 2008 and 2015. For more information on the SRC’s findings, please see pages 6-7 of this proxy statement.

Committee Responsibilities and Other Information

Committee Responsibilities

The Audit Committee is responsible for, among other things, reviewing with management the annual audited financial statements filed in the Annual Report on Form 10-K, including any major issues regarding accounting principles and practices, as well as the adequacy and effectiveness of internal control over financial reporting that could significantly affect the Company’s financial statements. Along with other responsibilities, the Audit Committee reviews with management and the independent registered public accounting firm (the “independent accountants”) the interim financial statements prior to the filing of the Company’s quarterly reports on Form 10-Q. In addition to appointing the independent accountants, monitoring their independence, evaluating their performance and approving their fees, the Audit Committee has responsibility for reviewing and accepting the annual audit plan, including the scope of the audit activities of the independent accountants. The Audit Committee at least annually reassesses the adequacy of its charter and recommends to the Board any proposed changes, and periodically reviews major changes to the Company’s accounting principles and practices. The committee also reviews the appointment, performance and replacement of the senior internal audit department executive and assists the Board with respect to its oversight of the Company’s policies and procedures regarding compliance with applicable laws and regulations.

Certain matters are reviewed and discussed with the full Board. For example, the Board actively monitors the pending litigation and investigations related to opioid distribution as well as the Company’s Controlled Substance Monitoring Program. In addition, the full Board discusses the implementation and effectiveness of the Company’s compliance and ethics program.

Additionally, the committee performs such other activities and considers such other matters as the Audit Committee or the Board deems necessary or appropriate. For example, the committee, and at times the Board as a whole, reviews the Company’s cybersecurity risk mitigation initiatives and related policies and procedures.

The composition of the Audit Committee, the attributes of its members, including the requirement that each be “financially literate” and have other requisite experience, and the responsibilities of the committee, as reflected in its charter, are in accordance with the Applicable Rules for corporate audit committees.

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ITEM 1. ELECTION OF DIRECTORS

Audit Committee Financial Expert

The Board has designated Ms. Knowles as the Audit Committee’s financial expert and has determined that she meets the qualifications of an “audit committee financial expert” in accordance with SEC rules, and that she is “independent” as defined for audit committee members in the listing standards of the NYSE and applicable SEC requirements, and in accordance with the Company’s director independence standards.

The Compensation Committee has responsibility for, among other things, reviewing all matters relating to executive officer compensation. Along with its other responsibilities, the Compensation Committee, with respect to executive officers, annually reviews and determines the salary paid, the grants of cash-based incentives and equity compensation, the entering into or amendment or extension of any employment contract or similar arrangement, the severance or change in control arrangements, the material perquisites provided, and any other executive officer compensation matter that may arise from time to time as directed by the Board.

The Compensation Committee periodically reviews and makes recommendations to the Board with respect to adoption of, or amendments to, all equity-based incentive compensation plans for employees, and cash-based incentive plans for executive officers, including an evaluation of whether the relationship between the incentives associated with these plans and the level of risk-taking by executive officers in response to such incentives is reasonably likely to have a material adverse effect on the Company. Subject to certain limitations, the Compensation Committee approves the grant of stock, stock options, stock purchase rights or other equity grants to employees eligible for such grants. Annually, the Compensation Committee reviews its charter and recommends to the Board any changes it determines are appropriate. It participates with management in the preparation of the Compensation Discussion and Analysis for the Company’s proxy statement. The committee also performs such other activities required by applicable law, rules or regulations and, consistent with its charter, as the Compensation Committee or the Board deems necessary or appropriate.

The Compensation Committee determines the structure and amount of all executive officer compensation, including awards of equity, after considering the initial recommendation of management and in consultation with the Compensation Committee’s independent compensation consultant. The Compensation Committee may delegate to the CEO the authority to grant awards to employees other than directors or executive officers, provided that such grants are within the limits established by the Delaware General Corporation Law and by resolution of the Board.

In accordance with its charter, the Compensation Committee annually evaluates the qualifications, performance and independence of its advisors. The Compensation Committee has the sole authority and right, when it deems necessary or appropriate, to retain, obtain the advice of and terminate compensation consultants, independent legal counsel or other advisors of its choosing. The committee has the sole authority to approve the fee arrangement and other retention terms of such advisors, and the Company must provide for appropriate funding. In this regard, the Compensation Committee is directly responsible for the appointment, fee arrangement and oversight of the work of any compensation consultant, independent legal counsel or other advisor retained.

During FY 2018, the Compensation Committee engaged an independent compensation consultant, Semler Brossy Consulting Group, LLC (“Semler Brossy”), and independent legal counsel, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP (“Gunderson Dettmer”). In addition to advising the Compensation Committee on executive compensation matters, Semler Brossy also provided independent consulting services to the Governance Committee in the area of director compensation. Additional information on the Compensation Committee’s process and procedures for consideration of executive compensation is addressed in the Compensation Discussion and Analysis.

The Finance Committee has responsibility for, among other things, reviewing the Company’s dividend policy at least annually, reviewing the adequacy of the Company’s insurance programs at least annually and reviewing with management the long-range financial policies of the Company. Annually, the Finance Committee reviews its charter and recommends to the Board any changes it determines are appropriate. Along with other responsibilities, the Finance Committee provides advice and counsel to management on the financial aspects of significant acquisitions and divestitures, major capital commitments, proposed financings and other significant transactions of a financial nature. The committee also makes recommendations concerning significant changes in the capital structure of the Company, reviews tax policy utilized by management, reviews the funding status and investment policies of the Company’s tax-qualified retirement plans, and reviews and (when authorized by the Board) approves the principal terms and conditions of securities that may be issued by the Company.

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ITEM 1. ELECTION OF DIRECTORS

The Governance Committee has responsibility for, among other things, annually reviewing the size and composition of the Board and recommending measures to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity, recommending the slate of nominees to be proposed for election at the annual meeting of stockholders, recommending qualified candidates to fill Board vacancies, and reviewing, in consultation with the Lead Independent Director, the composition of the standing committees of the Board and recommending any changes to the Board. The Governance Committee annually reviews its charter and recommends to the Board any changes it determines are appropriate. Along with other responsibilities, the Governance Committee evaluates the Board’s overall performance, develops and administers the Company’s related party transactions policy, monitors emerging corporate governance trends, and oversees and evaluates the Company’s corporate governance policies and programs. The committee annually reviews non-employee director compensation, including equity awards to directors, and advises the Board on these matters.

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 one of the following sources: current or former Board members, a professional search firm, Company executives or shareholders.

Shareholders who wish to make a recommendation or propose a director candidate for consideration by the Governance Committee may do so by submitting the candidate’s name, resume and biographical information and qualifications to the attention of the Corporate Secretary’s Office at One Post Street, 33rd Floor, San Francisco, California 94104. All recommendations or nominations received by the Corporate Secretary will be presented to the Governance Committee for its consideration. The Governance Committee and the Company’s CEO will consider those 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 stockholders, in accordance with the Advance Notice By-Law provisions, the nomination must be received by the Corporate Secretary not less than 90 days nor more than 120 days prior to the anniversary date of the Company’s most recent annual meeting of stockholders. Shareholders may also request that director nominees be included in the Company’s proxy materials in accordance with the proxy access provision in the By-Laws. Such requests must be received no earlier than 150 days and no later than 120 days prior to the anniversary of the immediately preceding annual meeting of stockholders. Each shareholder making a nomination would be required to provide certain information, representations and undertakings as outlined in the 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 experiences, 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 demonstrates the ability to make the kind of important and sensitive judgments that the Board is called upon to make, and whether the nominees’ skills are complementary to the existing Board members’ skills. Board members must take into account and balance the legitimate interests and concerns of all of the Company’s stockholders and other stakeholders. 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.

Mr. Lerman has been nominated to stand for election by the shareholders for the first time. He was initially identified as a potential director candidate by a professional search firm. The search firm gathered biographical information on Mr. Lerman and vetted his qualifications, experience and skills, as well as those of other potential director candidates, after which Mr. Lerman was brought to the attention of Governance Committee members and Mr. Hammergren as Chairman. At its meeting in January 2018, the Governance Committee considered biographical and background information on Mr. Lerman and evaluated his experience, qualifications and skills, as well as those of other potential director candidates. Several members of the Board interviewed Mr. Lerman. Other potential director candidates were also interviewed. At its April 2018 meeting, the Governance Committee, after further considering and evaluating Mr. Lerman’s candidacy and after assessing his independence, nominated Mr. Lerman for election as a director. In April 2018, the Board elected Mr. Lerman as a director effective as of April 24, 2018. In May 2018, the Governance Committee recommended for nomination, and the Board nominated, Mr. Lerman along with the other seven nominees to stand for election by the shareholders.

The Governance Committee has responsibility under its charter to review annually with the Board the size and composition of the Board with the objective of achieving the appropriate balance of knowledge, experience, skills, expertise and diversity required for the Board as a whole. Although the Board does not maintain a formal policy regarding diversity, the Governance Committee considers diversity to include diversity of backgrounds, cultures, education, experience, skills, thought, perspectives,

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ITEM 1. ELECTION OF DIRECTORS

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. A high level of diversity on our Board has been achieved in these areas, as evidenced by the information concerning our directors that is provided under “Nominees” above. 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.

Director Compensation

We use a combination of cash and equity-based compensation to attract and retain qualified candidates to serve on our Board. The Governance Committee annually reviews the level and form of the Company’s director compensation and, if it deems appropriate, recommends to the Board changes in director compensation. In reviewing our non-employee director compensation program, the committee is guided by these principles:

The compensation for each non-employee director of the Company includes an annual cash retainer, an annual restricted stock unit (“RSU”) award and meeting fees. The Lead Independent Director and chairs of the standing committees receive an additional annual cash retainer, and the Lead Independent Director receives an additional annual grant of RSUs. Detail on the value of the annual retainer and RSU awards is provided below. With regard to the Board and standing committees, non-employee directors receive a $1,500 per-meeting fee, except that the fee is $2,000 for Audit Committee meetings. With regard to meetings other than standing committee meetings, the Governance Committee determines 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.

Cash Compensation

Each non-employee director receives an annual retainer, and the Lead Independent Director and chairs of the standing committees receive an additional annual retainer. These amounts, and information on meeting fees, are set forth in the table below. Directors may elect in advance of a calendar year to defer up to 100% of their annual retainer (including any standing committee chair or Lead Independent Director retainer) and meeting fees into the Company’s Deferred Compensation Administration Plan III (“DCAP III”). The minimum deferral period for any amounts deferred is five years; however, notwithstanding the director’s 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. The Compensation Committee approves the rate at which interest or earnings are credited each year to amounts deferred into DCAP III. 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, other than the McKesson stock fund, available under the Company’s tax-qualified 401(k) plan. To the extent no such hypothetical investment selection is made by the director, interest is credited at an interest rate determined by the committee, which for calendar year 2018 is 120% of the long-term applicable federal rate published for December 2017 by the Internal Revenue Service (“IRS”).

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ITEM 1. ELECTION OF DIRECTORS

The following table summarizes the cash compensation provided to non-employee directors:

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. In addition to the $25,000 annual cash retainer for the Lead Independent Director (as shown in the above table), the Lead Independent Director receives an annual grant of RSUs with an approximate grant date value of $25,000.

The RSUs granted to non-employee directors are vested upon grant. If a director meets the director stock ownership guidelines (currently $480,000, 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 $0.34 per share each quarter. For our directors, dividend equivalents on RSUs are credited quarterly to an interest-bearing cash account and are not distributed until the shares underlying the RSUs are issued to the director. Interest accrues on directors’ credited dividend equivalents at the rate set by the Compensation Committee under the terms of our 2013 Stock Plan, which is currently 120% of the long-term applicable federal rate published for December 2017 by the IRS.

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.

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ITEM 1. ELECTION OF DIRECTORS

2018 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, 2018 (“FY 2018”). Mr. Hammergren, our Chairman, President and CEO, is not included in this table as he is an employee of the Company and receives no compensation for his service as a director. The compensation paid to or earned by Mr. Hammergren as an officer of the Company is shown in the 2018 Summary Compensation Table. Mr. Lerman is not included in this table because he was not elected to the Board until after March 31, 2018.

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ITEM 1. ELECTION OF DIRECTORS

Corporate Governance

McKesson is committed to, and for many years has adhered to, sound and effective corporate governance practices. Our Board diligently exercises its oversight responsibilities with respect to the Company’s business and affairs consistent with the highest principles of business ethics and corporate governance requirements of federal law, state law and the NYSE. We highlight these practices below.

You can access our Certificate of Incorporation, By-Laws, Corporate Governance Guidelines, Committee Charters, Director Independence Standards and Code of Conduct on our website at www.mckesson.com under the caption “Investors — Corporate Governance.”

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ITEM 1. ELECTION OF DIRECTORS

Corporate Social Responsibility

Our approach to corporate social responsibility is rooted in our commitment to better health – for our employees, our communities and beyond. We create better health for patients, and we mirror that commitment by advancing the health of our employees, our communities and the planet we all share.

McKesson’s Focus on Human Capital

We are committed to developing and investing in our most important asset – our people. We know that the well-being of our employees is an essential component of a healthy company, and we continually strive to promote a culture in which all employees feel supported and valued. Our culture is grounded in our shared ICARE (integrity, customer-first, accountability, respect and excellence) and ILEAD (inspire, leverage, execute, advance and develop) principles. These values guide all that we do, and help advance our company across every dimension, creating maximum value for our customers and making McKesson a great place to work.   We seek opportunities to create excitement among our employees about their careers. We invest heavily in employee growth and development through rewarding job assignments, one-on-one development with managers and opportunities for continued learning.

FY 2018 Education & Development Highlights

McKesson’s Commitment to Diversity and Equal Pay

Because we believe that our people drive our Company’s success, McKesson takes very seriously its commitment to the principles of equal opportunity, pay equity, diversity and inclusion. As we focus on delivering better health in a transformative healthcare landscape, we know it will take the best and brightest to keep us ahead of the curve. Our diversity and inclusion strategy is about building a strong pipeline of future leaders, whose diverse backgrounds and view-points infuse innovation, agility and creativity into our mission of delivering better health for the future. Our Board of Directors and management team have a long track record of advancing these important principles throughout the organization, which includes the creation of a diversity and inclusion organization (“D&I Organization”) more than ten years ago, followed shortly thereafter by the appointment of our first Chief Diversity Officer.

Our Board of Directors routinely receives reports from management on McKesson’s diversity and inclusion efforts. Our U.S. practices and policies are disclosed on our website and help McKesson ensure our workforce is reflective of our communities, values and cultural differences, and leverages the views and experiences of each other to create the best possible solutions.

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ITEM 1. ELECTION OF DIRECTORS

Diversity & Inclusion Highlights

McKesson’s Work on Environmental Sustainability

Healthier communities thrive in a healthier environment. That is why we are steadfast in our commitment to integrating environmental sustainability into our businesses. We are going beyond compliance to establish new environmental practices across the entirety of our organization, and continually seeking business efficiencies that lead to reduced environmental impact.

A key area of focus in FY 2018 was in setting targets for reduced CO₂ emissions through:

For more information about our Corporate Social Responsibility efforts and accomplishments, visit our website at http://www.mckesson.com/about-mckesson/corporate-citizenship/ where you will also find a link to our Corporate Social Responsibility Report. Additionally, we are pleased to share that McKesson Europe recently published its first dedicated Corporate Responsibility Report addressing the strategies and accomplishments unique to McKesson Europe.

McKesson’s Action on the Opioid Epidemic

At McKesson, we are deeply concerned by the impact the opioid epidemic is having on families and communities across our nation. We deliver life-saving medicines to millions of Americans each day and take our role in helping protect the safety and integrity of the pharmaceutical supply chain very seriously. For more information about how we are taking action to address the crisis, see pages 6-7 of this proxy statement.

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 nonexecutive directors satisfy the criteria for independence, including the absence of a direct or indirect material relationship with the Company. Provided that 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, the Board will deem such person to be independent. Applying these standards, and all applicable laws, rules or regulations, the Board has determined that, with the exception of John H. Hammergren, all of the Company’s directors, namely Andy D. Bryant, N. Anthony Coles, M.D., M. Christine Jacobs, Donald R. Knauss, Marie L. Knowles, Bradley E. Lerman, Edward A. Mueller and Susan R. Salka, are independent.

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ITEM 1. ELECTION OF DIRECTORS

Board Leadership Structure

Determination of Board Leadership Structure

The Board annually evaluates its leadership structure to determine the structure that would best serve the Company and its shareholders. The Company’s Corporate Governance Guidelines provide the Board with the ability to select its Chairman as it deems best for the Company at that time. However, in 2017, the Board announced its decision to split the role of Chairman of the Board and CEO in the future, commencing with the Company’s next CEO.

When the Chairman is not independent, a Lead Independent Director is elected by a majority of independent directors, with the purpose of also providing independent leadership to the Board. The Lead Independent Director is expected to serve a two-year term, unless he or she resigns, ceases to be an independent director, or a majority of independent directors appoints a new Lead Independent Director.

Current Leadership Structure

Mr. Hammergren currently serves as both Chairman and CEO, and Mr. Mueller is the Lead Independent Director. Although the Company has in the past separated the roles of Chairman and CEO, as was the case during the tenure of our prior CEO, the Board believes that this is the most effective Board leadership structure for the Company at this time.

A number of factors support the current leadership structure. Mr. Hammergren has more than 30 years of experience in healthcare and has served as the Chairman and CEO of the Company for more than 16 years. Since becoming CEO, he has delivered nearly 500% total shareholder return, transformed the Company during a period of unprecedented change in our industry, successfully tackled a number of challenges, and shaped an organization which delivered ongoing, long-term growth. His leadership includes the recent launch of a multi-year growth initiative which will enable the Company to provide new and innovative services and solutions to partners and customers. This strategic growth effort will help McKesson improve patient care delivery and drive shareholder value. The Board believes that Mr. Hammergren’s in-depth knowledge of the healthcare industry and of the complex businesses and operations of the Company makes him uniquely qualified to lead the Board, especially as the directors evaluate key business and strategic matters. Mr. Hammergren’s unique expertise and experience contributes significantly to how the Board guides the Company’s strategic moves, including navigating the opportunities and challenges in a rapidly changing industry. In addition, Mr. Hammergren’s leadership promotes better alignment of McKesson’s long-term strategic development with its operational execution.

In the end, the Board believes that the current combined Chairman and CEO structure promotes decisive leadership, ensures clear accountability, supports risk oversight, and enhances the flow of business information and communications between the Board and management. The Company is able to communicate with a single and consistent voice to shareholders, customers, employees and other stakeholders. At the same time, Mr. Hammergren reports to and is accountable to the independent directors, who have direct oversight of his performance as CEO.

Lead Independent Director Role

McKesson places great value on having strong independent Board leadership and has had a robust Lead Independent Director role in place since 2013. In selecting a Lead Independent Director, the independent directors consider the characteristics and skills required to carry out the duties and responsibilities of the position, including promotion of strong governance and engagement among all directors, character and integrity, a thorough knowledge of the Company’s strategy, business and operations, and ability to meet the required time commitment.

Mr. Mueller was elected to serve an additional two-year term as the Company’s Lead Independent Director effective July 26, 2017, subject to his continuing reelection and status as an independent director. Mr. Mueller has been an independent director of the Company since April 2008, and was first elected to the newly created role of Lead Independent Director in July 2013.

The independent directors believe Mr. Mueller has been an effective Lead Independent Director and remains best qualified for continued service. He has valuable long-term perspective and deep experience in corporate governance. Previously, Mr. Mueller was Chairman of the Board of Qwest Communications International Inc., where he demonstrated leadership skills critical to his position as Lead Independent Director. Mr. Mueller also has public company board experience with audit committee service, and has served as a member of McKesson’s Compensation Committee and Governance Committee since 2009.

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ITEM 1. ELECTION OF DIRECTORS

The Lead Independent Director role has clear responsibilities, which are reviewed annually by the Governance Committee and the full Board, including:

Board Meetings and Executive Sessions

Communication between Chair and Independent Directors

CEO Performance and Succession Plans

Board Performance and Evaluation

Communication with Shareholders

Duties to the Board

Other Board Leadership Structure Practices

The current Board leadership structure is further enhanced by additional practices the Board takes on to ensure effective independent Board leadership and oversight of management.

The Chairman and Lead Independent Director regularly solicit input from 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.

Board of Directors’ Role in Risk Oversight

The Company’s management 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.

Under our By-Laws and Corporate Governance Guidelines, the 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 reviews the Company’s enterprise risk management processes for identifying, ranking and assessing risks across the organization, as well as the output of that process. The Board as a whole also receives periodic reports from the Company’s management on various risks,

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ITEM 1. ELECTION OF DIRECTORS

including risks facing the Company’s businesses. The Board actively monitors the pending litigation and investigations related to opioid distribution as well as the Company’s Controlled Substance Monitoring Program. In addition, the full Board discusses the implementation and effectiveness of the Company’s compliance and ethics program. As discussed on pages 6-7 of this proxy statement, we are deeply concerned by the impact the opioid epidemic is having on families and communities across our nation, and our Board is committed to strengthening its oversight processes as we help the country combat this crisis.

Although the Board has ultimate responsibility for overseeing risk management, it has delegated to its committees certain oversight responsibilities. For example, in accordance with its charter, the Audit Committee engages in ongoing discussions regarding major financial risk exposures and the process and system employed to monitor and control such exposures. Periodically, the Board, and at times the Audit Committee, will engage in a discussion with management concerning the process by which risk assessment and management are undertaken, including review of cybersecurity and information security procedures and policies. In carrying out these responsibilities, the Audit Committee, among other things, regularly reviews with the head of Internal Audit and other senior members of Internal Audit, the audits or assessments of significant risks conducted by Internal Audit personnel based on their audit plan; and the committee regularly meets in executive sessions with the head of Internal Audit. The Audit Committee also regularly reviews with the Controller the Company’s internal control over financial reporting, including any significant deficiencies. As part of the reviews involving Internal Audit and the Controller, the Audit Committee reviews steps taken by management to monitor, control and mitigate risks. The Audit Committee also regularly reviews with the General Counsel and Chief Compliance Officer significant legal, regulatory, and compliance matters that could have a material impact on the Company’s financial statements or business. Finally, from time to time, executives who are responsible for managing a particular risk report to the Audit Committee on how the risk is being controlled and mitigated.

The Board has also delegated to other committees the responsibility to oversee risk within their areas of responsibility and expertise. For example, the Finance Committee exercises oversight with regard to the risk assessment and management processes related to, among other things, credit, capital structure, liquidity and insurance programs. As noted in the section below titled “Risk Assessment of Compensation Policies and Practices,” the Compensation Committee oversees risk assessment and management with respect to the Company’s compensation policies and practices.

In those cases in which committees have risk oversight responsibilities, the chairs of the committees regularly 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.

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 2018 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 2018 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:

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ITEM 1. ELECTION OF DIRECTORS

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

The Company has a written Related Party Transactions Policy requiring approval or ratification of certain transactions involving executive officers, directors and nominees for director, beneficial owners of more than 5% of the Company’s common stock, and immediate family members of any such persons where the amount involved exceeds $100,000. Under the policy, the Company’s General Counsel initially determines if a transaction or relationship constitutes a transaction that requires compliance with the policy or disclosure. If so, the matter will be referred to the CEO for consideration with the General Counsel as to approval or ratification in the case of other executive officers and/or their immediate family members, or to the Governance Committee in the case of transactions involving directors, nominees for director, the General Counsel, the CEO or holders of more than 5% of the Company’s common stock and/or their immediate family members. Annually, our directors, nominees and executive officers are asked to identify any transactions that might fall under the policy as well as to identify immediate family members. Additionally, they are required to notify the General Counsel promptly of any proposed related party transaction. The policy is administered by the Governance Committee. The transaction may be ratified or approved if it is fair and reasonable to the Company and consistent with its best interests. Factors that may be taken into account in making that determination include: (i) the business purpose of the transaction; (ii) whether it is entered into on an arms-length basis; (iii) whether it would impair the independence of a director; and (iv) whether it would violate the provisions of the Company’s Code of Conduct.

The Company and its subsidiaries may, in the ordinary course of business, have transactions involving more than $100,000 with unaffiliated companies of which certain of the Company’s directors are directors and/or executive officers. The Governance Committee reviews these transactions in accordance with the policy. However, the Company does not consider the amounts involved in such transactions to be material in relation to its businesses, the businesses of such other companies or the interests of the directors involved. In addition, the Company believes that such transactions are on the same terms generally offered by such other companies to other entities in comparable transactions.

Communications with Directors

Shareholders and other interested parties may communicate with any of the directors, including the Lead Independent Director, 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, One Post Street, San Francisco, CA 94104, or via e-mail to “leaddirector@mckesson.com” or “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.

Indemnity Agreements

The Company has entered into separate indemnity agreements with its directors and executive officers that provide for defense and indemnification against any judgment or costs assessed against them in the course of their service. Such agreements do not, however, permit indemnification for acts or omissions for which indemnification is not permitted under Delaware law.

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Your Board recommends a vote “FOR” this ratification proposal.

The Audit Committee of the Company’s Board of Directors 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, 2019. 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, 2018 and 2017, 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, the audit of the Company’s internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002, 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, foreign statutory audits required by non-U.S. jurisdictions, registration statements and comfort letters. The decrease in the fiscal year ended March 31, 2018 was primarily related to the 2017 Change Healthcare transaction.

Audit-Related Fees. This category consists of fees for assurance and related services such as employee benefit plan audits, accounting consultations, due diligence in connection with mergers, divestitures and acquisitions, attest services related to financial reporting that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.

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, 2018 and 2017, no amounts were incurred by the Company for tax advice, planning or consulting services.

All Other Fees. This category consists of fees for products and services other than the services reported above. The Company paid no fees in this category for the fiscal years ended March 31, 2018 and 2017.

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ITEM 2. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2019

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

Pursuant to the 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, including audit-related and tax 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 of the Company’s Board of Directors 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 — Corporate 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. The independent registered public accounting firm of 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, 2018; (ii) discussed with D&T the matters required to be discussed by the Public Company Accounting Oversight Board (“PCAOB”) standards; (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.

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, 2018 be included in the Company’s Annual Report on Form 10-K for filing with the SEC.

Audit Committee of the Board of Directors

Marie L. Knowles, Chair

Donald R. Knauss

Susan R. Salka

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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:

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PRINCIPAL SHAREHOLDERS

Security Ownership of Directors and Executive Officers

The following table sets forth, as of May 31, 2018, 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 2018 Summary Compensation Table below (collectively, 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 of May 31, 2018:

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EXECUTIVE COMPENSATION

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EXECUTIVE COMPENSATION

A Letter From Our Compensation Committee

Dear Fellow Shareholders,

As members of McKesson’s Compensation Committee, we endeavor to create an executive compensation program that strikes the right balance of pay for performance; attracts and retains an exceptionally talented executive team; and steers McKesson’s leadership to meet ambitious goals without taking undue risk. We recognize that our 2017 say-on-pay vote was a signal that many of you wanted us to take a new approach to certain aspects of our executive compensation program. We were determined to understand your perspectives and committed to making constructive changes in response to your feedback.

We gathered your views during an extensive outreach effort that included members of the Board and management. This effort involved meeting with shareholders representing over 40% of the Company’s outstanding common stock. We had robust discussions in which we listened to your views and shared our perspectives. We also heard your enthusiasm for retaining our management team, an enthusiasm we share, and targeted changes to the program that would be meaningful to you. The range of views we encountered and the thoughtful dialogue reminded us of the debates that we have within our boardroom, where a diversity of voices helps to identify the right path forward.

Based on those discussions, we brought a fresh eye to the compensation program and implemented a number of significant changes. In FY 2018, reported CEO pay declined by nearly 10%, and we eliminated the individual modifier from the annual cash incentive plan for our executive officers, reducing the potential payout under that plan. In addition, for FY 2019 we reduced our CEO’s target long-term incentive (“LTI”) compensation by $4.7 million, and increased the weighting of relative TSR in his target LTI compensation to 75% of his PSU (formerly TSR Unit) award, which is 50% of his total target LTI compensation. In response to the Special Review Committee’s recommendation to this committee, we also reinforced and codified our longstanding practice of considering regulatory, compliance and legal issues when making executive compensation decisions, by revising our annual governance checklist to incorporate these considerations as a formal agenda item at appropriate committee meetings. We followed this process when making compensation decisions in May 2018.

We believe these changes, which are described on pages 32-33 of this proxy statement, are consistent with your input and our strategic goals. Your views are diverse — not every suggestion aligned with our corporate strategy — and many recommendations were in conflict with one another. We worked diligently to implement changes that we believe are in the best interests of our shareholders as a group and allow us to retain our executive team. We think of this as an ongoing conversation that will continue as long as McKesson has investors.

We also recently approved a number of changes to the composition and leadership of our committee. As part of this refreshment, effective as of July 23, 2018, N. Anthony Coles, M.D. will assume the role of Committee Chair, Susan R. Salka and Bradley E. Lerman will join this committee as new members, and M. Christine Jacobs will leave this committee. Our current Committee Chair Andy D. Bryant will not stand for reelection at the 2018 Annual Meeting.

Our Committee is and will remain committed to the ongoing evaluation and improvement of our executive compensation program, informed by an ongoing discussion with you. We look forward to continuing the dialogue and encourage you to reach out with any questions or concerns related to our program before making your voting decision. Thank you for your investment in McKesson.

The Compensation Committee,

Andy D. Bryant, Compensation Committee Chair, N. Anthony Coles, M.D., M. Christine Jacobs, Edward A. Mueller

Compensation Discussion and Analysis

The Compensation Discussion and Analysis describes McKesson’s executive compensation program and reviews compensation decisions for our CEO and CFO, our three other most highly compensated executive officers serving as of March 31, 2018, our former CFO, James A. Beer, and our former Executive Vice President and Group President, Paul C. Julian, both of whose employment terminated during FY 2018 (collectively, our Named Executive Officers or “NEOs”). The NEOs who were serving at fiscal year-end, which excludes Mr. Beer and Mr. Julian, are referred to collectively as our “Current NEOs.” For FY 2018, our NEOs and their respective titles were as follows:

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EXECUTIVE COMPENSATION

Addressing the 2017 Say-on-Pay Vote

Our annual say-on-pay vote is one of our opportunities to receive feedback from shareholders regarding our executive compensation program. We were disappointed to receive low support for our advisory say-on-pay proposal at the 2017 Annual Meeting of Stockholders. We actively sought feedback from shareholders to better understand what motivated their votes and what actions we could take to address their concerns about our executive compensation program. Our Compensation Committee considered the vote result and the feedback we received as it evaluated the compensation opportunities provided to our executive officers.

Since our last Annual Meeting of Stockholders, we reached out to shareholders representing over 80% of our outstanding common stock. We met with shareholders representing more than 40% of our outstanding common stock, and we specifically requested feedback regarding our executive compensation program given our low say-on-pay support in 2017.

In our meetings with shareholders, we heard strong support for our CEO and senior management team and recognition of executive retention as an issue for the Company. Generally, shareholders reacted positively to the increase in the overall weighting of our Performance Stock Unit (“PSU”) awards to 50% of target long-term incentive (“LTI”) value for FY 2018, reducing our reliance on stock options from 40% to 30% of target LTI value, which further ties our NEOs’ pay to performance.

We also heard concerns relating to our executive compensation program. We summarize below what we heard and how we responded to those concerns.

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EXECUTIVE COMPENSATION

Continued Reduction in CEO Pay

Consistent with our pay-for-performance philosophy and in addition to the significant reduction in our CEO’s target long-term incentive compensation for FY 2019, we highlight that for FY 2018:

Lowered CEO FY 2019 Target LTI by $4.7 million

As highlighted in the table below, the Compensation Committee reduced our CEO’s target LTI opportunity by $4.7 million for FY 2019. This represents a 32% decrease in target LTI compared to FY 2018, and is in addition to the 30% decrease in reported CEO pay over the last five fiscal years. We believe this change directly addresses shareholder feedback relating to the overall magnitude of CEO pay.

Payouts Reflect Alignment Between Pay and Performance

Our plans reflect performance: Although we performed well against our FY 2018 operational goals and MIP paid out above target, we did not deliver results on multi-year metrics, particularly those tied to our stock price. This is reflected in FY 2018 compensation outcomes, noted below:

Our FY 2018 incentive plan outcomes demonstrate our commitment to a pay-for-performance philosophy. Three-year TSR was -36.4% and cumulative payout values for FY 2018 incentive awards were only 42% of target values, as illustrated below:

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EXECUTIVE COMPENSATION

Overview

FY 2018 Performance Highlights

In FY 2018, we delivered solid performance across our business units. Despite some industry-wide headwinds, we produced strong operational returns and invested to enhance our ability to deliver value to our manufacturing partners, our customers, and patients. Most importantly, we positioned ourselves to lead in areas of patient care delivery that present powerful new growth opportunities. Our recently announced multi-year strategic growth initiative articulates a bold path for McKesson and we are poised for the next significant wave of healthcare innovation. See page 2 of this proxy statement for more information about McKesson.

In our discussion of executive compensation throughout this proxy statement, we refer to Adjusted EPS as a performance metric specifically used in our incentive programs. In Appendix A to this proxy statement, we provide a reconciliation of earnings from continuing operations, net of tax, per diluted share attributable to the Company, as calculated in accordance with generally accepted accounting principles (GAAP), to Adjusted EPS (non-GAAP).

Best Practices in Compensation Governance