2018 Guide to Effective Proxies

2.17.3 Business strategy | 305 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES EXECUTIVE COMPENSATION Target Direct Compensation Mix Our executive compensation program is predominantly performance-based. As an executive’s ability to impact operational performance increases, so does the proportion of his or her at-risk compensation. Target long-term incentive compensation grows proportionately as job responsibilities increase, which encourages our officers to focus on McKesson’s long-term success and aligns with the long-term interests of our shareholders. The graphics below illustrate the mix of fixed, annual and long-term target incentive compensation we provided to our CEO and other Current NEOs for FY 2018. These graphics also illustrate the amount of target direct compensation tied to achievement of performance goals. FY 2018 CEO Compensation Mix FY 2018 Other Current NEOs Compensation Mix 22% 21% 11% 9 1 % P e r f o r m a n c e L i n k e d Base Salary MIP (Annual Cash) Cash LTIP (Long-Term) 9% 13% 16% PSUs (Equity) 39% Stock Options (Equity) 7 8 % P e r f o r m a n c e L i n k e d Base Salary MIP (Annual Cash) Cash LTIP (Long-Term) PSUs (1) (Equity) 28% Stock Options (Equity) 18% 23% (1) Mr. Vitalone did not receive PSUs in FY 2018 because he was not an executive officer when awards were granted in May 2017; rather, he received PeRSUs. Beginning with FY 2019, he is no longer eligible for the PeRSU program and instead participates in the PSU program along with our other Current NEOs. FY 2018 Pay Strategy Aligns with Shareholder Value Creation The metrics below incentivize our executives to focus on operational objectives which are expected to drive shareholder returns. Our FY 2018 incentive metrics were determined by the Compensation Committee in May 2017. All incentives are performance-based, and all LTI awards have performance or vesting periods of at least three years. Pay Element Performance Metric Rationale Target Pay Base Salary — Attracts and retains high-performing executives by providing market-competitive fixed pay — Management Incentive Plan (annual cash incentive) Adjusted EPS (75%) Sets growth expectations for shareholders and serves as a key indicator of operational performance and profitability 100% - 150% of Target Base Salary Adjusted OCF (25%) Measures the ability to translate earnings to cash which fuels our capital deployment with a goal of maximizing shareholder returns Performance Stock Units (long-term equity incentive) 3-Year Cumulative Adjusted EPS (75%) Measures earnings power, drives returns for the Company and directly correlates to share price performance 50% of Target LTI Value MCK TSR vs. S&P 500 Health Care Index (25%) Rewards relative performance against peers over time Stock Options Stock Price Directly aligns with value delivered to shareholders 30% of Target LTI Value Cash Long-Term Incentive Plan 3-Year Cumulative Adjusted OCF (75%) Measures effective management of working capital and cash generation over a multi-year period to return value to shareholders 20% of Target LTI Value 3-Year Average ROIC (25%) Encourages leaders to make sound investments that will generate strong future returns for shareholders 36 - 2018 Proxy Statement MCKESSON CORPORATION