UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AmerisourceBergen Corporation

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January 28, 2021

Dear Stockholder:

Throughout this unprecedented COVID-19 crisis, AmerisourceBergen’s role in supporting the pharmaceutical supply chain has never been more crucial, and its commitment to ensuring that customers and patients continue to receive the medicines they need never greater. The Board of Directors is proud of the dedication and resiliency that AmerisourceBergen’s global workforce of 22,000 associates demonstrated in meeting the challenges created by the global pandemic.

During 2020, the Board received regular updates from management on the Company’s COVID-19 response and was aligned in support of initiatives undertaken to balance the Company’s responsibilities to the supply chain with the welfare of its employees. While AmerisourceBergen’s business results underscore its operational success, the Company also enhanced its ongoing commitment to the health and well-being of associates by:

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providing associates in distribution centers and other essential locations with personal protective equipment;

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implementing strict safety and cleaning protocols;

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offering paid leave for associates unable to work due to COVID-19-related issues;

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providing back-up dependent care programs; and

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broadening the mental health and well-being resources available to all associates.

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Recognizing their extraordinary effort, the Company also provided a weekly incentive for frontline associates as well as a one-time special bonus at year-end for more than 15,000 associates globally.

The renaming of the Governance, Sustainability & Corporate Responsibility Committee highlights the long-standing commitment of our Board of Directors to Environmental, Social and Governance issues. Management also created an internal steering committee—the Global ESG Council—that will develop a long-term, measurable ESG strategy and provide regular progress reports to the Board. The fourth annual Corporate Citizenship Overview highlights the Company’s priorities: developing inspired associates, operating sustainably, building healthy communities, and responsibly managing the opioid supply chain.

The Board of Directors believes that a vital part of developing inspired associates is fostering a diverse and inclusive culture. Under the oversight of the Compensation and Succession Planning Committee, we look forward to the Company advancing our long-term diversity and inclusion strategy focused on people, culture and community. To accelerate that effort, the Company recently appointed Dr. Lonie Haynes as its Chief Diversity & Inclusion Officer. Building on the Company’s long-standing commitment to diversity, Dr. Haynes has the full support of the Board and management to help AmerisourceBergen create a stronger workforce, mobilize associates through diversity and inclusion best practices, and help them develop and achieve their full potential.

In January 2020, we welcomed a new independent director, Dennis Nally, who also joined our Audit Committee in August 2020. We view the active refreshment of the Board and the periodic refreshment of Board committees as integral to maintaining independent oversight of management. 2020 was also a successful first year for our Compliance and Risk Committee, which was established in furtherance of our responsibility for oversight of the Company’s businesses, including the Company’s long-standing commitment to ethics and compliance. AmerisourceBergen’s Chief Compliance Officer, who oversees the Office of Compliance, reports directly to the Compliance and Risk Committee.

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—and I invite you to join me virtually at the 2021 annual meeting.

Thank you for your continued investment in AmerisourceBergen.

Sincerely,

Jane E. Henney
Lead Independent Director

Table of Contents

 

2021 AmerisourceBergen Proxy | Proxy Statement Highlights

Proxy Statement Highlights

This summary provides highlights of selected information about AmerisourceBergen Corporation (the “Company,” “AmerisourceBergen,” “we” or “us”) from this proxy statement. Please review the entire document before voting.

All of our 2021 Annual Meeting materials are available at investor.amerisourcebergen.com.

 

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Corporate Governance Highlights | 2021 AmerisourceBergen Proxy

Corporate Governance Highlights

Response to COVID-19

Throughout the COVID-19 pandemic, AmerisourceBergen has been guided by its purpose of being united in its responsibility to create healthier futures. AmerisourceBergen implemented measures to both protect the welfare of our associates and enable our businesses to continue to play their crucial role in supporting the sustainability of the pharmaceutical supply chain and enabling patient access. Since March 2020, our Board has received regular updates from management on the Company’s COVID-19 response and has been aligned in support of initiatives undertaken to protect associates and to augment business operations. Board oversight included a special meeting of the Compliance and Risk Committee in May 2020 focused on the COVID-19 pandemic.

In order to protect the health of our associates we provided associates in our distribution centers and other operational locations with personal protective equipment and implemented strict safety and cleaning protocols. We invested in enhanced pay, including weekly incentives for our frontline associates, as well as a one-time special bonus at year-end for more than 15,000 associates globally. Further, we offered paid leave for associates unable to work due to COVID-19-related issues and provided back-up dependent care programs as well as mental health and well-being resources to all associates. We are proud of the over $1 million in COVID-19 relief funds committed by the AmerisourceBergen Foundation and of the fact that the AmerisourceBergen Associate Assistance Fund, a primarily associate-supported fund for associates in need, supported over 75 associates through fiscal year 2020, many of whom were struggling due to the impact of COVID-19.

While prioritizing the well-being of our associates, we also worked to maintain a safe and secure pharmaceutical supply chain. Given AmerisourceBergen’s vital role in the supply chain, throughout the pandemic, in addition to focusing on our normal supplier processes, our teams have worked to ensure that critical medications are allocated to our customers fairly to facilitate optimal patient access. We also employed real-time data and analytics to facilitate actionable channel solutions and awareness for commercial and government stakeholders.

Key Practices and Policies

Our Board consistently seeks to implement leading practices and policies in corporate governance, with emphasis on maintaining the Board’s independence to provide effective oversight of management and ensure accountability to our stockholders. Below, we highlight our key corporate governance practices and policies:

 

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2021 AmerisourceBergen Proxy | Corporate Governance Highlights

 

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Corporate Governance Highlights | 2021 AmerisourceBergen Proxy

For further details, please see the full discussion relating to our corporate governance policies and practices and our leadership structure in this proxy statement under the section titled “Corporate Governance and Related Matters—Corporate Governance.”

 

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2021 AmerisourceBergen Proxy | Our ESG Priorities and Selected Activities & Accomplishments

Our ESG Priorities and Selected Activities & Accomplishments

 

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Oversight of Controlled Substances | 2021 AmerisourceBergen Proxy

Oversight of Controlled Substances

AmerisourceBergen has a longstanding commitment to ensuring a safe and efficient pharmaceutical supply chain. Our wholesale pharmaceutical distribution business plays a key, but specific, role of providing safe access to thousands of important medications to enable healthcare providers to serve patients with a wide array of clinical needs across the healthcare spectrum. We have taken substantial steps to help prevent the diversion of controlled substances and are committed to joining other healthcare stakeholders, government entities, civic organizations, law enforcement agencies and individuals to help address the opioid epidemic.

Our Role in the Supply Chain

Our wholesale distribution business manages the secure transportation of Food and Drug Administration approved medications, a small part of which includes opioids and other controlled substances, from manufacturers to neighborhood pharmacies and pharmacy chains as well as hospitals, nursing homes, hospices, and other clinical settings. Distributors do not manufacture or create supply or demand for opioids. The distribution of opioid medicines represents less than two percent of our annual revenue, and we do not offer our sales employees incentives based on opioid sales.

In fulfilling our Company’s purpose to create healthier futures, AmerisourceBergen is dedicated to providing efficient and safe access to all FDA-approved medications through our wholesale distribution business. Wholesale distribution serves as a physical link between manufacturers and the healthcare providers that ultimately serve patients.

Preparation of a Report on our Safe and Secure Distribution of Controlled Substances

In September 2019, we released a report titled Safe and Secure Distribution of Controlled Substances which describes in greater detail our role in the pharmaceutical supply chain, our Board’s oversight of management’s efforts to develop meaningful solutions to the opioid epidemic, our management team’s thoughtful approach to enterprise risk management, our commitment to operational integrity and diversion control, and our community and associate outreach efforts. A copy of this report can be found on our website at investor.amerisourcebergen.com.

Board Oversight of Risks

Our Board oversees risk management and considers specific risk topics on an ongoing basis, including risks associated with the Company’s distribution of opioid medications. Our Compliance and Risk Committee provides further oversight on these matters and expertise at the Board level. The Board and/or the Compliance and Risk Committee receive at least quarterly updates on our anti-diversion program, the status of pending litigation related to the distribution of opioids, legislative and regulatory developments related to controlled substances, and stockholder feedback. For additional information on the Board’s oversight of risks, see “Corporate Governance and Related Matters—Corporate Governance—Risk Oversight and Management” beginning on page 20 of this proxy statement.

 

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2021 AmerisourceBergen Proxy | Corporate Governance and Related Matters

Corporate Governance and Related Matters

 

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Corporate Governance and Related Matters | 2021 AmerisourceBergen Proxy

In addition, our Governance, Sustainability and Corporate Responsibility Committee has identified the following expertise, experience, attributes and skills that are particularly relevant to AmerisourceBergen:

We seek individuals with diverse backgrounds, skills and expertise to serve on our Board. We believe that diversity is essential to encourage fresh perspectives, enrich the Board’s deliberations and avoid the dominance of a particular individual or group over the Board’s decisions. The Governance, Sustainability and Corporate Responsibility Committee includes, and has any search firm that it engages include, women and ethnically and racially diverse candidates in the pool from which the committee selects new director candidates. The Governance, Sustainability and Corporate Responsibility Committee may consider and evaluate director nominees identified by our stockholders as described below in the section titled “Stockholder Engagement—​Stockholder Recommendations for Director Nominees.”

Below are each nominee’s biography and an assessment of the above-mentioned expertise, experience, attributes and skills that the nominee possesses.

 

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2021 AmerisourceBergen Proxy | Corporate Governance and Related Matters

Biographical information about our nominees

 

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Corporate Governance and Related Matters | 2021 AmerisourceBergen Proxy

Non-Employee Director Compensation at 2020 Fiscal Year-End

Our director compensation program is designed to attract and retain qualified non-employee directors. Our program aligns director compensation with the compensation of our peers (our peer companies are identified on page 36). Our Governance, Sustainability and Corporate Responsibility Committee reviews non-employee director compensation regularly to confirm that it appropriately addresses time, effort, expertise, and accountability required of active board membership.

The following table summarizes the total compensation earned by directors who were not employees of AmerisourceBergen during fiscal year 2020. Ms. Barra waived her right to receive compensation as a non-employee director. Directors who are employees of AmerisourceBergen receive no compensation for their service as directors or as members of Board committees.

(1)

These amounts include amounts earned for service as Committee Chairs and amounts deferred into our deferred compensation plan. In fiscal year 2020, Mr. Long received 345 shares of Common Stock, in lieu of the retainer. Mr. Durcan received 1,039 shares of Common Stock, in lieu of the retainer. Mr. Nally received 416 shares of Common Stock, in lieu of 50% of his retainer.

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(2)

As of September 30, 2020, each of the non-employee directors held the following shares of outstanding restricted stock units: Ms. Barra—0; Mr. Durcan—5,453 ; Mr. Gochnauer—9,837; Mr. Greenberg—9,436; Dr. Henney—6,309; Ms. Hyle—5,453 Mr. Long—5,453; Mr. McGee—8,230; and Mr. Nally—2,012.

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The amounts reported represent the grant date fair value for equity awards shown in accordance with Accounting Standards Codification 718, disregarding the estimate of forfeitures related to service-based vesting conditions. There were no forfeitures by the directors in fiscal year 2020. See Note 11 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 for assumptions used to estimate the fair values of restricted stock units granted during fiscal 2020.

(3)

No stock options were granted to directors in fiscal year 2020. As of September 30, 2020, Ms. Hyle held 3,085 outstanding stock options. None of the other non-employee directors hold any outstanding stock options.

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(4)

These amounts represent the dividends accrued and paid on restricted stock units that vested in fiscal year 2020. Messrs. Gochnauer, Greenberg and McGee deferred payment of the dividend to a later date.

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(5)

Ms. Barra waived her right to receive compensation as a non-employee director. Consequently, our Board has waived the stock ownership requirements for Ms. Barra.

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(6)

Mr. Durcan’s compensation includes seven days per diem compensation related to his work for the Special Litigation Committee.

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(7)

Mr. Nally was elected as a director in January 2020. His compensation reflects seven days per diem compensation related to his work for the Special Litigation Committee.

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2021 AmerisourceBergen Proxy | Corporate Governance and Related Matters

Director Fees.   Our director compensation program provides for an annual cash retainer plus an annual equity award of restricted stock units. Consistent with our overall compensation philosophy, the compensation program for non-employee directors provides total direct compensation (cash retainer and equity award) in the 50th percentile of our peer group. (See page 36 for a description of our peer group.)

Annual Retainers.   A director may elect to have the annual retainer paid in cash, Common Stock or restricted stock units, or credited to a deferred compensation account. Payment of annual retainers in cash will be made in equal quarterly installments.

Annual Equity Awards.   On March 5, 2020, each of the non-employee directors (other than Ms. Barra, who waived compensation) received an annual grant of restricted stock units. The vesting period for these awards is three years from the date of grant, subject to continued service on the Board or following retirement by a director (i) aged 62 with five years of continuous service on the Board or (ii) who, after reaching age 55, has an age plus years of continuous employment with the Company that equals at least 70. These grants were made under the AmerisourceBergen Corporation Omnibus Incentive Plan (the “Omnibus Incentive Plan”). A director may defer settlement of shares payable with respect to restricted stock units as described below.

Deferral and Other Arrangements.   Directors have the option to defer all or any part of the annual retainer and to credit the deferred amount to an account under the AmerisourceBergen Corporation Deferred Compensation Plan. Payment of deferred amounts will be made or begin on the first day of the month after the non-employee director ceases to serve as a director. A director may elect to receive the deferred benefit (i) over annual periods ranging from three to fifteen years and payable in quarterly installments or (ii) in a single distribution. We pay all costs and expenses incurred in the administration of the Deferred Compensation Plan. Directors also have the option to forgo 50% or more of their annual cash retainers and receive either Common Stock or restricted stock units covering shares having a fair market value on the quarterly grant date equal to the amount of the foregone compensation. In addition, directors may defer settlement of any shares payable with respect to any restricted stock units (and any dividend equivalents) received either in lieu of the annual retainer or as the annual equity award to a later date. We also provide our directors with a prescription drug benefit and reimburse them for the cost of education programs, transportation, food and lodging in connection with their service as directors.

Stock Ownership Guidelines.   We require our non-employee directors to own shares of our Common Stock to align their interests with those of the stockholders and to provide an incentive to foster our long-term success. From and after the fifth year following their Board election, non-employee directors must own stock equal in value to at least five times the annual cash retainer. We may take unusual market conditions into consideration when assessing compliance. We confirm compliance with guidelines annually at the end of each fiscal year and as of September 30, 2020, all of our non-employee directors were in compliance with the stock ownership guidelines or had not yet completed their fifth year as a director.

 

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Corporate Governance and Related Matters | 2021 AmerisourceBergen Proxy

Corporate Governance

Board Structure

Our Board provides guidance and critical review of our governance, strategic initiatives, talent management and risk management processes. Our Board ensures that we have an effective management team in place to run our business and serves to protect and advance the long-term interests of our stockholders. The role of our senior executives is to develop and implement a strategic business plan for AmerisourceBergen and to grow our business.

Our employees conduct our business under the direction of our Chairman, President and Chief Executive Officer and with the independent oversight of our Board, including our Lead Independent Director, Dr. Jane E. Henney. To enhance its oversight function, our Board is composed of directors who are not employed by us, with the exception of Mr. Collis.

Role of the Chairman and Lead Independent Chair

We believe that our leadership structure is in the best interests of AmerisourceBergen and its stockholders and that it fosters innovative, responsive and strong leadership for the Company as a whole. Our Board has determined that the election of an executive Chairman must be accompanied by the election of a strong Lead Independent Director with a clearly defined and dynamic leadership role in the governance of the Board. In March 2020, the Board determined that re-appointing Steven H. Collis as Chairman of the Board and Dr. Jane E. Henney as Lead Independent Director would result in the governance structure best suited to enable our Board and management to carry out their responsibilities to our stockholders and promote the growth of AmerisourceBergen. We believe the structure promotes, through the clearly articulated roles and responsibilities of the Lead Independent Director and Board committees, the objective and effective oversight of management.

Serving as both Chairman and Chief Executive Officer enables Mr. Collis to effectively and efficiently execute our strategic initiatives, and to respond to challenges and changes in both U.S. and international markets. Mr. Collis is uniquely suited to serve in these two roles due to his knowledge of the Company and his experience in the industry. As Lead Independent Director, Dr. Henney provides assertive, independent leadership in the boardroom. In addition to her extensive knowledge of the healthcare industry and regulatory environment, Dr. Henney has a thorough understanding of the Board’s oversight role and leading corporate governance practices.

The Chairman’s primary responsibility is to set the agenda for the Board and to facilitate communications among our directors and between the Board and senior management. As Chairman, President and Chief Executive Officer, Mr. Collis ensures that the Board’s agenda and discussions address strategic planning as well as key business issues and risks that he encounters in daily operations.

Our governance structure establishes a dynamic leadership role for the Lead Independent Director, which, together with independent Committee leadership, provides a meaningful counterbalance to the executive Chairman and maintains independent and effective oversight of management.

Key aspects of this structure include: if the Chairman is not an independent member of the Board, a majority of the independent directors shall elect a Lead Independent Director annually, subject to his or her continuing reelection and status as an independent director; the Lead Independent Director has clearly articulated and extensive authority and responsibilities in the Board’s governance and functions; our Audit Committee, the Compensation and Succession Planning Committee, and the Governance, Sustainability and Corporate Responsibility Committee are each chaired by and comprised solely of independent directors; a majority of the directors serving on our Compliance and Risk Committee are independent directors; and our non-employee directors are encouraged to, and often do, have direct contact with our senior managers outside the presence of our executive officers.

The Lead Independent Director’s robust and comprehensive authority is as follows:

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presides at all meetings of the Board at which the Chairman is not present;

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calls, sets the agenda for and chairs executive sessions of the non-employee directors;

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has authority to call a Board meeting and/or a meeting of non-employee directors;

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approves Board meeting agendas and schedules to ensure that there is sufficient time for discussion of all agenda items;

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2021 AmerisourceBergen Proxy | Corporate Governance and Related Matters

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meets one-on-one with the Chairman after each regularly scheduled Board meeting;

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serves as a liaison between the Chairman and the non-employee directors;

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serves on the Executive Committee;

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advises the Chairs of the Board committees and assists them in the management of their workloads;

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with the Chair of the Compensation and Succession Planning Committee, takes a leading role in succession planning for the Chief Executive Officer;

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supports the Chair of the Governance, Sustainability and Corporate Responsibility Committee in overseeing the annual self-assessment process for the Board and each committee, interviewing and recommending candidates for the Board, and recommending Board committee assignments;

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is available for communication and consultation with major stockholders upon request on appropriate topics; and

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performs such other functions and responsibilities as set forth in our corporate governance principles or as requested by the Board or the non-executive directors from time to time.

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Our Board conducts annual evaluations, under the oversight of our Governance, Sustainability and Corporate Responsibility Committee. The Compensation and Succession Planning Committee, in accordance with its charter and under the oversight of the Lead Independent Director, will annually review the performance of, and succession plan for, the Chief Executive Officer. These processes provide our Board with opportunities to examine and reassess the effectiveness of our leadership structure, including the performance of our Chairman and Lead Independent Director.

Succession Plan for Chairman of the Board

Our Board has always retained the flexibility to determine the optimal leadership structure for the Company and its stockholders because our stockholders benefit most when our Board has the freedom to make decisions that are in the best interests of the Company rather than pursuant to a predetermined policy. Mr. Collis has served as President and Chief Executive Officer since July 2011 and as Chairman since March 2016.

In November 2018, the Board determined that it was in the best interests of the Company to split the role of Chairman of the Board and Chief Executive Officer in the future, commencing with the Company’s next Chief Executive Officer. At that time, the Chairman role will be assumed by an independent director.

Board Corporate Governance

Our Board has adopted our corporate governance principles. Together with the charters of the Board committees, they provide the framework for the governance of AmerisourceBergen. Our corporate governance principles clearly delineate the authority and roles of the Chairman of the Board and the Lead Independent Director in the leadership of the Board, mandate the independence of the committee Chairs and all the members of our Audit Committee, Compensation and Succession Planning Committee and Governance, Sustainability and Corporate Responsibility Committee, and affirm non-employee directors’ access to managers and associates outside the presence of our executives. The corporate governance principles address a variety of governance issues in addition to the leadership structure, including those discussed under the headings “Information on Board Committees,” “Code of Ethics” and “Stockholder Engagement.” The Board reviews and updates the corporate governance principles and the committee charters from time to time to reflect leading corporate governance practices.

There are six standing committees of the Board: the Audit Committee, the Compensation and Succession Planning Committee, the Compliance and Risk Committee, the Executive Committee, the Finance Committee and the Governance, Sustainability and Corporate Responsibility Committee. In addition, a Special Litigation Committee was created in September 2020 to review and evaluate a derivative complaint related to Medical Initiatives, Inc., a subsidiary that ceased operations in 2014. Our Executive Committee, which is composed of our Chairman of the Board, the Lead Independent Director and the Chairs of the other standing committees, has the authority to act between regularly scheduled meetings of the Board, subject to applicable law. The Chairman of the Board serves as the Chair of the Executive Committee. The Board believes that changing committee assignments from time to time strengthens our corporate governance practices and enhances each committee’s objective review of management.

 

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Corporate Governance and Related Matters | 2021 AmerisourceBergen Proxy

Our corporate governance principles and the charters of the Audit Committee, the Compensation and Succession Planning Committee, the Compliance and Risk Committee, the Finance Committee and the Governance, Sustainability and Corporate Responsibility Committee have been posted on our website at investor.amerisourcebergen.com.

Board Independence

The Board has determined that, except for Ms. Barra and Mr. Collis, all of the directors are independent. Our corporate governance principles require us to maintain a minimum of 70% independent directors on our Board. If the ten director nominees are elected at the 2021 Annual Meeting of Stockholders, eight out of ten directors then serving will be independent.

The Board has adopted guidelines in our corporate governance principles to assist it in making independence determinations, which meet or exceed the independence requirements set forth in the NYSE listing standards. These guidelines are contained in Section 5 of our corporate governance principles. For a director to be considered independent, the Board must determine that the director does not have any direct or indirect material relationship with AmerisourceBergen.

With the assistance of legal counsel, our Board reviewed the applicable legal standards for director and Board committee member independence. In undertaking its review, the Board considered that some of our directors serve on the board of directors or as executive officers of companies for which we perform (or may seek to perform) drug distribution and other services in the ordinary course of business. As a result of this review, the Board has determined that each of the following current directors is independent: D. Mark Durcan, Richard W. Gochnauer, Lon R. Greenberg, Jane E. Henney, M.D., Kathleen W. Hyle, Michael J. Long, Henry W. McGee and Dennis M. Nally.

Our Board has also determined that each of the members of our Audit Committee, Compensation and Succession Planning Committee and Governance, Sustainability and Corporate Responsibility Committee are independent, in accordance with the independence requirements set forth in their charters and, as applicable, SEC rules and NYSE listing standards. None of the members of these committees receives any consulting or advisory fee from us other than compensation as non-employee directors.

Risk Oversight and Management

 

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2021 AmerisourceBergen Proxy | Corporate Governance and Related Matters

The Board executes its oversight responsibility for risk management directly and through its committees, as follows:

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Our Board considers specific risk topics throughout the year, including risks associated with government regulation as well as with our strategic objectives, business plan, operations, distribution of controlled substances, information technology (including cybersecurity) and capital structure, among many others. Each fiscal quarter, our Chief Financial Officer reports to the Board on AmerisourceBergen’s financial performance and explains how actual performance compares to our business plan. Our corporate officers and the leaders of our principal business units report regularly to the Board about the risks and exposures related to their areas of responsibility. The Board is informed about and regularly discusses our risk profile, including legal, regulatory and operational risks to our business. The Board also oversees our compliance policies and practices, including our sophisticated diversion control program through which the Company provides daily reports directly to the Drug Enforcement Administration about the quantity, type, and receiving pharmacy of every order of controlled substances we distribute. Additionally, the Board periodically visits Company facilities, which provides the directors with an opportunity to observe the Company’s operations and to interact with employees outside of the boardroom.

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Each Board committee reports to the Board at every regular Board meeting on the topics discussed and actions taken at the most recent committee meeting. The Board discusses the risks and exposures, if any, involved in the matters or recommendations of the committees, as necessary.

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Our Compliance and Risk Committee assists the Board in its oversight of the Company’s (i) enterprise risk management program, (ii) compliance program, which includes the Office of Compliance led by the Company’s Chief Compliance Officer, (iii) legal and regulatory compliance, and (iv) Code of Ethics and Business Conduct.

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Our Audit Committee has primary responsibility for monitoring our internal audit and financial risk assessment and overseeing our system of internal controls and financial reporting. At each regularly scheduled meeting, the Audit Committee receives reports from our (i) external auditor on the status of audit activities and findings; and (ii) chief audit executive (who reports directly to the Audit Committee) on the status of the internal audit plan, audit results and any corrective action taken in response to audit findings. The Audit Committee is also responsible for periodically reviewing cybersecurity issues and the Company’s business continuity and disaster recovery plans.

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The Board’s other committees oversee risks associated with their respective areas of responsibility. For example, the Governance, Sustainability and Corporate Responsibility Committee oversees our corporate governance practices generally, including monitoring our corporate citizenship function and our corporate responsibility practices. Additionally, the Compensation and Succession Planning Committee assesses risks associated with our compensation policies and programs for executives as well as employees generally. Our Finance Committee discusses risks relating to our capital structure, financing activities, dividend and tax policy and stock repurchase activities. The recently established Special Litigation Committee will review and evaluate a derivative complaint related to Medical Initiatives, Inc., a subsidiary that ceased operations in 2014.

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We have a Chief Compliance Officer who oversees our corporate compliance program, including our Office of Compliance, compliance audits, compliance training, and compliance with our Code of Ethics and Business Conduct and the Company’s reporting, investigation and corrective action program. We also have an internal Compliance Committee composed of senior executives, including our Chief Compliance Officer and Chief Compliance Counsel, who supports the Chief Compliance Officer in fulfilling her responsibilities and driving corporate adherence to our compliance program, Code of Ethics and Business Conduct and related policies and procedures. Our Chief Compliance Officer and Chief Compliance Counsel report to the Compliance and Risk Committee and to the full Board throughout the year on corporate compliance matters, the status of our compliance programs (including our diversion control program described above), calls to our hotline and any other material developments.

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Oversight of Employee Compensation

We have conducted an internal risk assessment of our employee compensation policies and practices, including those relating to our executives. We have concluded that our compensation policies and practices do not promote behaviors that could put the organization at legal, financial or reputational risk. We have reviewed our risk analysis with the Compensation and Succession Planning Committee. The risk assessment process included, among other things, a review of all key incentive compensation plans to ensure that they

 

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Corporate Governance and Related Matters | 2021 AmerisourceBergen Proxy

are aligned with our pay-for-performance philosophy and include performance metrics that support corporate goals. The objective of the process was to identify any compensation plans and practices that may encourage employees to take unnecessary risks that could threaten the Company. No such plans or practices were identified. Moreover, various factors mitigate the risk profile of our compensation programs, including, among others:

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Performance targets under our cash incentive programs are tied to a number of different financial metrics so employees will not place undue emphasis on any particular metric at the expense of other aspects of our business;

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Maximum caps on payouts have been established for our annual cash incentive programs, including under our cash bonus plan used for senior management;

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Equity awards under our performance plan for senior executives have maximum caps and are forfeited entirely if the threshold performance metrics are not achieved;

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For fiscal year 2020, the performance plan ties 50% of an executive officer’s annual equity award to performance shares that are dependent on financial metrics achieved over a three-year period to ensure that our executive officers are accountable for long-term measures of success;

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The remaining 50% of an executive officer’s annual equity award is in stock options and restricted stock units and also vests over a multi-year period to encourage executive officers to focus on long-term growth and creating value for stockholders;

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Stock ownership requirements align the interests of our senior management with those of our stockholders;

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•

We have effective management processes for developing annual business plans and a strong system of internal financial controls; and

​

•

A broad-based group of functions, including human resources, finance and legal, oversees aspects of our cash and equity incentive programs.

​

Board Orientation and Education

We provide our directors with comprehensive orientation and continuing education, as needed, which is overseen by the Governance, Sustainability and Corporate Responsibility Committee. Director orientation familiarizes the directors with our business and strategic plans, significant financial, accounting and risk management issues, compliance programs and other controls, policies, principal officers and internal auditors, and our independent registered public accounting firm. The orientation also addresses Board procedures, our corporate governance principles and our Board committee charters. We offer continuing education programs and provide opportunities to attend commercial director education seminars to assist our directors in maintaining their expertise in areas related to the work of the Board and the directors’ committee assignments. Ongoing education includes two hours of annual compliance training for each director. We also provide our directors with full membership to the National Association of Corporate Directors to provide a forum for them to maintain their insight into leading governance practices and exchange ideas with peers. Dr. Henney in 2011 and 2012, Ms. Hyle in 2015 and Mr. McGee in 2018 were named to the “NACD Directorship 100,” an annual honor sponsored by the National Association of Corporate Directors to recognize influential directors and others who impact corporate governance.

Board Evaluations

We have a comprehensive annual evaluation policy and process in place for the Board and each of its committees, which is led by the Chair of our Governance, Sustainability and Corporate Responsibility Committee and our Lead Independent Director. As required by our corporate governance principles, the evaluation occurs annually. Either the Chair of our Governance, Sustainability and Corporate Responsibility Committee, the Lead Independent Director, or an independent, third-party governance expert interviews each director to obtain his or her assessment of the effectiveness of the Board and the committees on which he or she serves, as well as director performance and Board dynamics. In fiscal 2020, the evaluation process was led by a third-party expert. In advance of the interview, each member of a committee receives a questionnaire soliciting feedback regarding the committee’s performance. During the interview, each member is asked to provide an assessment of the Board’s and the relevant committee’s performance. We also solicit suggestions for improving the Board’s and the committee’s performance, dynamics, time-management, and functioning, as well as proposed topics of focus for the Board and the committee in the upcoming year. The results of the individual

 

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2021 AmerisourceBergen Proxy | Corporate Governance and Related Matters

interviews and assessments are aggregated in a report, which the Lead Independent Director presents to the full Board for review, discussion and determination of action items. The annual review by the Board of the corporate governance principles and by each committee of its charter is a further step in the evaluation process through which the directors consider leading corporate governance practices for the Board as a whole and identify new areas of focus for the different committees. The full Board reviews and discusses recommended revisions to the corporate governance principles and committee charters prior to voting on their approval.

Director Elections and Resignations

Our bylaws and corporate governance principles provide for a majority vote standard for the election of directors. Under the majority vote standard, each director must be elected by a majority of the votes cast by the shares present in person or represented by proxy and entitled to vote. A “majority of the votes cast” means that the number of votes cast “for” a candidate for director must exceed the number of votes cast “against” that director. A plurality voting standard will apply instead of a majority voting standard if:

•

A stockholder has provided us with notice of a nominee for director in accordance with our bylaws; and

​

•

That nomination has not been withdrawn on or prior to the day next preceding the date the Company first provides its notice of meeting for such meeting to stockholders.

​

Under Delaware law, if an incumbent nominee for director in an uncontested election does not receive the required votes for re-election, the director remains in office until a successor is elected and qualified. Our bylaws and corporate governance principles require each director nominee to tender an irrevocable resignation prior to the applicable meeting of stockholders and include post-election procedures in the event an incumbent director does not receive the required votes for re-election, as follows:

•

The Governance, Sustainability and Corporate Responsibility Committee shall make a recommendation to the Board as to whether to accept the previously tendered resignation of the director;

​

•

The Board will act on the Governance, Sustainability and Corporate Responsibility Committee’s recommendation; and

​

•

The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding that resignation.

​

Information on Board Committees

Audit Committee

•

Appoints, and has authority to terminate, our independent registered public accounting firm.

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•

Pre-approves all audits and permitted non-audit services provided by the Company’s independent registered public accounting firm, including the scope of the audit and audit procedures.

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•

Reviews and discusses the independence of our independent registered public accounting firm.

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•

Reviews and discusses with management and our independent registered public accounting firm the Company’s audited financial statements and interim quarterly financial statements as well as management’s discussion and analysis of the statements as set forth in Forms 10-K and 10-Q filed with the Securities and Exchange Commission (SEC).

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•

Prepares the audit committee report as required by SEC rules.

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•

Discusses with management and/or our independent registered public accounting firm significant financial reporting and accounting issues and the adequacy of our internal control over financial reporting.

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•

Inquires of management (including the internal audit function) and our independent registered public accounting firm about significant risks or exposures (whether financial, operational, or otherwise) and assesses the steps management has taken to control such risks or exposures, including policies implemented for such purposes.

​

•

Reviews the internal audit function, internal audit plans, internal audit reports, and management’s response to such reports.

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•

Reviews the appointment, performance, and replacement of our chief audit executive.

​

 

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Corporate Governance and Related Matters | 2021 AmerisourceBergen Proxy

•

Assists the Board with oversight of the Company’s compliance with legal and regulatory requirements, including, as appropriate, participating in oversight of enterprise risk management.

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•

Discusses the Company’s guidelines, policies and practices with respect to the assessment, management and mitigation of risks.

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•

Reviews and approves all related persons transactions in accordance with our Related Persons Transactions Policy.

​

•

Reviews our information technology security program and reviews and discusses the controls around cybersecurity, including the development of business continuity and disaster recovery plans.

​

Compensation and Succession Planning Committee

•

Reviews and approves our executive compensation strategy and the individual elements of total compensation for the President and Chief Executive Officer and executive management.

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•

Evaluates performance of management annually.

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•

Ensures that our executive compensation strategy supports stockholder interests.

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•

Reviews and discusses with management the Compensation Discussion and Analysis and other disclosures about executive compensation that are required to be included in our proxy statement and Annual Report on Form 10-K.

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•

Prepares a compensation committee report as required by SEC rules.

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•

Administers and makes awards under our incentive compensation plans, including equity incentive plans, with discretion to adjust compensation upward or downward.

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•

Has sole authority for retaining and terminating any consulting firm used to assist the committee in its evaluation of the compensation of the President and Chief Executive Officer or any other executive officer and for evaluating the independence of such consulting firm.

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•

Monitors the activities of our internal Benefits Committee, including the Benefits Committee’s oversight of the administration and investment performance of our retirement plans.

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•

Oversees the administration of our health and welfare plans.

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•

Reviews with management and makes recommendations relating to succession planning and talent development and reviews and monitors the Company’s diversity and inclusion practices.

​

Compliance and Risk Committee

•

Oversees the implementation by management of an enterprise risk management program that is designed to assist the Company with monitoring and mitigating compliance, legal, regulatory, and operational risks related to the business, including emerging risks.

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•

Assists the Board in its oversight of the Company’s compliance with legal and regulatory requirements and reviews all significant litigation and internal and government investigations, other than those matters reserved for the Audit Committee’s review and oversight, with the appropriate members of management.

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•

Provides review and oversight of the Company’s compliance program and meets regularly with the Company’s Chief Compliance Officer to discuss matters within the committee’s oversight responsibility.

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•

Reports to the Board regarding the Company’s compliance functions and related risks.

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•

Oversees compliance with our Code of Ethics and Business Conduct.

​

Executive Committee

•

Exercises the authority of the Board of Directors between regularly scheduled meetings of our Board on matters that cannot be delayed, except as limited by Delaware law and our bylaws.

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Finance Committee

•

Provides oversight of our capital structure and other issues of financial significance to AmerisourceBergen.

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•

Reviews the asset and liability structure of the Company and considers its funding and capital needs.

​

 

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2021 AmerisourceBergen Proxy | Corporate Governance and Related Matters

•

Reviews proposed financing plans, credit facilities, and other financing transactions.

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•

Reviews our dividend policy.

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•

Reviews and proposes issuance or sale of our stock, stock repurchases, redemptions and splits.

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•

Reviews financial strategies developed by management to meet changing economic and market conditions.

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•

Reviews proposed major capital expenditures or commitments.

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•

Reviews proposed material acquisitions, divestitures, joint ventures, and other transactions involving AmerisourceBergen and periodically reviews performance and progress of completed acquisitions and capital spending projects.

​

Governance, Sustainability and Corporate Responsibility Committee

•

Reviews and makes recommendations to the Board about corporate governance and the Company’s corporate governance principles.

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•

Identifies and discusses with management the risks, if any, relating to the Company’s corporate governance structure and practices.

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•

Monitors the Company’s sustainability and corporate responsibility practices, including environmental, social and governance reporting and disclosure practices.

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•

Receives regular reports from the Company’s Global ESG Council and oversees the Company’s support for charitable, educational and business organizations, including the AmerisourceBergen Foundation and the AmerisourceBergen Associate Assistance Fund.

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•

Recommends selection and qualification criteria for directors and committee members and identifies and recommends qualified candidates to serve as directors of AmerisourceBergen, including those recommended by stockholders. The Committee includes, and has any search firm that it engages include, women and ethnically and racially diverse candidates in the pool from which the Committee selects director candidates.

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•

Reviews and makes recommendations relating to succession planning for our Board and Board committee leadership positions and prepares for Board vacancies.

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•

Oversees orientation of directors and continuing education of directors in areas related to the work of our Board and the directors’ committee assignments.

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•

Makes recommendations regarding the size and composition of our Board and the composition and responsibilities of Board committees.

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•

Oversees the evaluation of our Board and the Board committees and reviews the standing committee assignments.

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•

Reviews and makes recommendations to our Board regarding director compensation.

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•

Has sole authority for retaining and terminating any third-party firm used to assist in the annual Board and Board committee evaluation and with evaluation of the compensation of directors, and for evaluating the independence of such firm.

​

Special Litigation Committee

•

Established to review and evaluate a derivative complaint related to Medical Initiatives, Inc., a subsidiary that ceased operations in 2014.

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•

Determining the course of action that the Company will pursue with respect to the complaint.

​

Director Attendance

Average director attendance was 99% of the aggregate of  (i) the total number of meetings of the Board of Directors held during fiscal 2020 and (ii) the total number of meetings held by each committee of the Board on which such person served during fiscal 2020. There were 7 meetings of the full Board of Directors during fiscal 2020 and the number of committee meetings held during fiscal 2020 is provided in the chart on page 2 of this proxy statement.

 

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Meetings of the Independent Directors

The independent directors meet prior to the commencement of each of the regularly scheduled Committee meetings. Additionally, the independent directors, together with our one additional non-management director, meet following each regularly scheduled meeting of the full Board of Directors. The Lead Independent Director presides at such meetings and, if the Lead Independent Director is not present, the committee Chairs preside on a rotating basis.

Communications with Non-Management Directors

Interested parties who wish to make any concerns known to the non-management directors may submit communications at any time in writing to: Kourosh Q. Pirouz, Vice President, Associate General Counsel and Secretary, AmerisourceBergen Corporation, 1300 Morris Drive, Chesterbrook, PA 19087. AmerisourceBergen’s Secretary will determine, in his good faith judgment, which communications will be relayed to the Lead Independent Director and other non-management directors.

Code of Ethics

The Board of Directors adopted our Code of Ethics and Business Conduct in May 2004. We review and revise the Code of Ethics and Business Conduct from time to time, most recently in August 2020. It applies to directors and employees, including officers, and is intended to comply with the requirements of Section 303A.10 of the NYSE Listed Company Manual. Any waivers of the application of the Code of Ethics and Business Conduct to directors or executive officers must be approved by either the Board of Directors or the Compliance and Risk Committee.

We have also adopted our Code of Ethics for Designated Senior Officers in accordance with Item 406 of the SEC’s Regulation S-K. It applies to our President and Chief Executive Officer, our Executive Vice President and Chief Financial Officer and our Senior Vice President and Chief Accounting Officer.

Our Code of Ethics and Business Conduct and our Code of Ethics for Designated Senior Officers are posted on our website at investor.amerisourcebergen.com. Additionally, any waiver or amendment to either code will be disclosed promptly on our website at investor.amerisourcebergen.com.

Stockholder Engagement

We value open communications with our stockholders. The goal of our engagement and outreach efforts is to ensure that we work collaboratively to educate our investors about our business and governance practices as well as to identify issues of importance to our stockholders and our business. Our investor relations team regularly shares with our Board and senior executives the feedback that they have received from our stockholders.

On an ongoing basis, we proactively communicate with the investment community and stockholders about AmerisourceBergen’s financial performance, operations and strategic developments through the following:

•

Quarterly earnings releases and quarterly earnings release conference calls, investor presentations and webcasts;

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•

Regular reports filed with the SEC, including annual and quarterly reports;

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•

Conference calls, presentations and webcasts related to specific developments;

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•

Participation in numerous healthcare investor conferences with webcasted presentations;

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•

In-person and telephonic meetings with investors and stakeholders;

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•

Proactive outreach to institutional investors, pension funds and governance professionals from our largest stockholders; and

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•

Our annual stockholders meeting.

​

Specifically, in 2020 we communicated with our largest stockholders in order to seek their input on a variety of topics. We held phone calls with interested investors throughout 2020 and continue to engage with stockholders in order to provide them with updated information on our Company and in order to listen to their concerns. Throughout calendar year 2020, we reached out to non-affiliated stockholders (i.e., stockholders

 

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2021 AmerisourceBergen Proxy | Corporate Governance and Related Matters

other than Walgreens Boots Alliance, Inc.) who in the aggregate held approximately 25% of our Common Stock (i.e., approximately 35% of the shares of Common Stock held by parties other than Walgreens Boots Alliance, Inc.) in order to provide information regarding our corporate governance practices and the Company’s role in the pharmaceutical supply chain.

Our corporate governance principles, which were most recently revised in August 2020, describe the procedures through which stockholders may seek direct engagement with Board members. While management, through our President and Chief Executive Officer, our investor relations team, and our Corporate Secretary, ordinarily engages with stockholders, the Chairman of the Board, in consultation with the Lead Independent Director, will review and consider, on a case-by-case basis, stockholder requests for meetings with the Board of Directors related to key areas of Board oversight and determine whether such meetings would be appropriate and beneficial. Stockholders may communicate their views directly to the Board by writing to Kourosh Q. Pirouz, Vice President, Associate General Counsel and Secretary, AmerisourceBergen Corporation, 1300 Morris Drive, Chesterbrook, Pennsylvania 19087.

Stockholder Recommendations for Director Nominees

The advance notice provision for nomination of directors in our bylaws allows a stockholder to propose nominees for consideration by the Governance, Sustainability and Corporate Responsibility Committee by submitting specified information concerning itself and the proposed nominee, including the name, appropriate biographical information and qualifications of the proposed nominee. This and other information required under the advance notice provision must be provided to us in writing to: Kourosh Q. Pirouz, Vice President, Associate General Counsel and Secretary, AmerisourceBergen Corporation, 1 W. First Avenue, Conshohocken, PA 19428, no earlier than November 10, 2021 and no later than December 10, 2021 to be considered for the 2022 Annual Meeting of Stockholders.

The proxy access provision in our bylaws allows an eligible stockholder or group of no more than 20 eligible stockholders that has maintained continuous ownership of 3% or more of our Common Stock for at least three years to include in our proxy materials for an annual meeting of stockholders a number of director nominees up to the greater of two or 20% of the directors then in office. Loaned stock that can be recalled within three days may count towards an eligible stockholder’s 3% beneficial ownership requirement, which must be maintained at least until the annual meeting at which the proponent’s nominee will be considered. Proxy access nominees who do not receive at least a 25% vote in favor of election will be ineligible as a nominee for the following two years. Provisions in the Shareholders Agreement with Walgreens Boots Alliance would not permit Walgreens Boots Alliance to use proxy access. If any stockholder proposes a director nominee under our advance notice provision, we are not required to include any proxy access nominee in our proxy statement for the annual meeting. Information required under the proxy access provision must be provided to us in writing to: Kourosh Q. Pirouz, Vice President, Associate General Counsel and Secretary, AmerisourceBergen Corporation, 1 W. First Avenue, Conshohocken, PA 19428, no earlier than August 31, 2021 and no later than September 30, 2021 to be considered for the 2022 Annual Meeting of Stockholders. In considering any nominee proposed by a stockholder in accordance with the requirements set forth in our bylaws, the Governance, Sustainability and Corporate Responsibility Committee will reach a conclusion based on the nominee evaluation criteria described above. After full consideration, the stockholder proponent will be notified of the decision of the committee.

 

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Audit Committe Matters | 2021 AmerisourceBergen Proxy

Audit Committe Matters

 

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2021 AmerisourceBergen Proxy | Audit Committe Matters

Audit Committee Financial Experts

The Board of Directors has determined that each of Mr. Durcan and Mr. Nally is an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K. Mr. Durcan serves as Chair of the Audit Committee. A description of the financial expertise of Mr. Durcan and Mr. Nally accompanies their biographies on pages 12 and 15, respectively.

Policy for Pre-Approval of Audit and Non-Audit Services

The Audit Committee’s policy is to pre-approve all audit services and all non-audit services that the Company’s independent registered public accounting firm is permitted to perform for the Company under applicable federal securities regulations. As permitted by the applicable regulations, the committee’s policy utilizes a combination of specific pre-approval on a case-by-case basis of individual engagements of the independent registered public accounting firm and general pre-approval of certain categories of engagements up to predetermined dollar thresholds that are reviewed annually by the committee. Specific pre-approval is mandatory for the annual financial statement audit engagement, among others.

Independent Registered Public Accounting Firm’s Fees

During the fiscal years ended September 30, 2020 and 2019, EY, AmerisourceBergen’s independent registered public accounting firm, billed the Company the fees set forth below in connection with services rendered by the independent registered public accounting firm to the Company:

Audit fees consisted of fees for the audit of AmerisourceBergen’s annual financial statements, consultation concerning financial accounting and reporting standards and consultation concerning matters relating to Section 404 of the Sarbanes-Oxley Act of 2002, reviews of quarterly financial statements as well as services normally provided in connection with statutory and regulatory filings or engagements, comfort letters, consents and assistance with and review of Company documents filed with the SEC. Audit fees also included fees for the audit of the effectiveness of the Company’s internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002.

Audit-related fees consisted of fees for assurance and related services, including employee benefit plan audits. Audit-related fees in fiscal year 2020 also included due diligence fees related to the previously announced agreement to acquire the majority of the Alliance Healthcare businesses from Walgreens Boots Alliance and other corporate development activity.

Tax fees consisted of fees for services related to tax compliance, tax advice and tax planning services.

Other fees consisted of subscription fees for Internet-based professional literature.

Our Audit Committee reviewed and approved all fees charged by EY in accordance with the policy described above and monitored the relationship between audit and permissible non-audit services provided. The policy is intended to ensure that the fees earned by EY are consistent with the maintenance of the independent registered public accounting firm’s independence in the conduct of its auditing functions.

 

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Executive Compensation and Related Matters | 2021 AmerisourceBergen Proxy

pharmaceutical manufacturers with an assortment of related services, including data analytics, outcomes research, reimbursement and pharmaceutical consulting services, niche premium logistics services, inventory management, pharmacy automation, pharmacy management, and packaging solutions.

COVID-19 Response

Throughout the COVID-19 pandemic, AmerisourceBergen’s role in supporting and protecting the pharmaceutical supply chain has been critical. During 2020, AmerisourceBergen implemented measures to both protect the welfare of our associates and enable our businesses to continue to play their crucial role in supporting the sustainability of the pharmaceutical supply chain and enabling patient access. In order to protect the health and well-being of our associates we provided associates in our distribution centers and other operational locations with personal protective equipment and implemented strict safety and cleaning protocols. We invested in enhanced pay, including weekly incentives for our frontline associates and a one-time special bonus at year-end for more than 15,000 associates globally. Further, we offered paid leave for associates unable to work due to COVID-19-related issues and provided back-up dependent care programs as well as mental health and well-being resources to all associates.

Our Named Executed Officers

Our fiscal year 2020 named executive officers were:

2020 Fiscal Year Business Highlights

AmerisourceBergen delivered solid performance in fiscal year 2020 while working in an unprecedented environment and managing through the COVID-19 pandemic. We had strong revenue and adjusted diluted earnings per share (“adjusted EPS”) growth driven by increased volume associated with growth of some of our largest customers, continued robust specialty product sales, and success at our Global Commercialization Services & Animal Health businesses. During the pandemic, we have continued to service our customers, maintained operations at our distribution centers while also implementing enhanced cleaning protocols, and successfully shifted all suitable employee roles to remote work. Through all of this, our focus has remained on delivering products and services to our customers, while protecting the health and safety of our employees.

The following fiscal year 2020 highlights include non-GAAP financial measures. Appendix A to this proxy statement presents reconciliations to the most comparable GAAP financial measures and information about the reasons such non-GAAP financial measures are disclosed.

•

One-year Total Shareholder Return (TSR) of approximately 19.7%.

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•

Revenue of  $189.9 billion, representing a 5.7% increase over prior year revenue.

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•

Diluted loss per share of  $16.65, compared to diluted earnings per share of  $4.04 in the prior year.

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Adjusted gross profit of  $5.2 billion, representing a 4.4% increase over prior year adjusted gross profit.1

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Operating loss of  $5.1 billion, compared to operating income of  $1.1 billion in the prior year.

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•

Adjusted operating income of  $2.2 billion, representing a 7.5% increase over prior year adjusted operating income.1

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•

Operating loss margin of 2.70%, representing a decrease of 332 basis points over prior year operating income (loss) margin.

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Adjusted operating income margin of 1.16%, representing an increase of 2 basis points over prior year adjusted operating income margin.1

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2021 AmerisourceBergen Proxy | Executive Compensation and Related Matters

•

Net cash provided by operating activities of  $2.2 billion, and adjusted free cash flow of  $1.9 billion.1

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Returned a substantial amount of cash to our stockholders in fiscal year 2020 through $343.6 million in dividends and $420.4 million in stock repurchases.

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Invested $369.7 million in the Company through capital expenditures.

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1

See Appendix A for additional information regarding non-GAAP financial measures, including GAAP to non-GAAP reconciliations. For a comprehensive discussion of our GAAP financial results beyond those discussed in Appendix A, please refer to our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

​

2020 Compensation Program Structure and Outcomes

The following table provides a summary of the compensation program and performance outcomes for our named executive officers in 2020:

We seek to pay our executive officers fairly and competitively and to link pay with performance. The main elements of our compensation program are base salary, a short-term incentive in the form of an annual cash bonus, and long-term equity incentive awards. We emphasize compensation opportunities that reward our executive officers when they deliver targeted financial results. A significant portion of our executive officers’ compensation is incentive-based. In fiscal year 2020, incentive compensation (annual cash bonus and equity incentive awards) accounted for approximately 90.3% of our CEO’s total direct compensation (base salary, annual cash bonus and equity incentive awards) and approximately 81.9% of the average total direct compensation of the other named executive officers.

 

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Executive Compensation and Related Matters | 2021 AmerisourceBergen Proxy

Fiscal Year 2020 Compensation Practices and Policies

We believe our executive pay is reasonable and provides appropriate incentives to our executive officers to achieve our financial and strategic goals without encouraging them to take excessive risks in their business decisions. The Board and its committees regularly evaluate major risks to our business, including how risks taken by management could affect the value of executive compensation. To this end, our compensation program encompasses the following:

 

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2021 AmerisourceBergen Proxy | Executive Compensation and Related Matters

2020 Say-On-Pay Vote and Stockholder Engagement

In fiscal 2020, we continued to emphasize our pay for performance culture. The compensation of our named executive officers was approved by stockholders in March 2020 with approximately 95% of stockholder votes cast in favor of our 2020 “say-on-pay” resolution. Our “say-on-pay” resolutions have received consistently strong support since the inception of the “say-on-pay” voting requirement implemented under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Compensation Committee considered the results of the stockholder vote and believes it supports the view that compensation for our named executive officers closely aligns with our stockholders’ interests.

During fiscal 2020, the Compensation Committee reviewed our executive compensation peer group and worked to further align pay opportunities for our executive officers with our compensation philosophy. The Compensation Committee also approved performance metrics for incentive pay that, consistent with prior years, were designed to correlate with the way we evaluate our operational results, reflect measures of performance that drive returns for our stockholders and support our long-term strategy.

2020 Fiscal Year Executive Compensation Objectives and Actions

The Compensation Committee reviews and determines executive officer compensation, including the amount of base salary, short-term incentive awards and long-term incentive awards made to our named executive officers. In making these decisions, the Compensation Committee takes into account our financial and business results, individual performance and competitive data. In light of these considerations, the Compensation Committee made the following executive compensation decisions in fiscal year 2020:

•

Continued to emphasize equity-based incentives under which executive officers earn amounts only when AmerisourceBergen’s performance is strong and our stockholders have benefited.

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Established fiscal year 2020 performance goals for our annual cash bonus plan, including a target adjusted EPS of  $7.37 per share, a target adjusted operating income of  $2.13 billion, and a target adjusted free cash flow of  $1.48 billion. These performance goals were calculated consistently with the way in which our publicly disclosed non-GAAP financial measures were calculated. (See Appendix A for more information about our non-GAAP financial measures, including reconciliations to GAAP.)

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Set target incentive levels for fiscal year 2020 cash bonuses of 150% of base salary for the CEO and of 100% of base salary for the other named executive officers.

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Approved fiscal year 2020 cash bonus payouts that were paid at 127.2% of target to all of our named executive officers.

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Granted annual equity incentive awards to our named executive officers after considering our compensation philosophy and the Compensation Committee’s assessment of the executive officer’s expected future contributions. In fiscal year 2020, the grant value of each annual equity award was divided among performance shares (50%), stock options (30%) and restricted stock units (20%).

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Approved performance metrics of compound annual adjusted EPS (“Compound Annual Adjusted EPS”) and adjusted average annual return on invested capital (“Average Annual Adjusted ROIC”) for the performance shares granted to our named executive officers in fiscal year 2020 (covering the three-year performance period ending September 30, 2022). (See “Performance Share Awards—Payout of FY18-FY20 Performance Shares” below for more information about Average Annual Adjusted ROIC.)

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We believe that the fiscal year 2020 compensation of our executive officers was aligned with AmerisourceBergen’s fiscal year 2020 adjusted results and met our compensation objectives. Our compensation policies have enabled us to attract and retain talented and experienced executive officers. We believe that these policies have benefited AmerisourceBergen over time and will position us for growth in future years.

Setting Executive Compensation

We consider market pay practices as a starting reference point when setting executive compensation. The Compensation Committee assesses whether our level of executive pay is appropriate when compared to industry and market standards. The Compensation Committee’s independent compensation consultant assists the Compensation Committee in developing a peer group of companies to serve as the basis for comparing the pay of our named executive officers to the market. We conduct a detailed market review of executive pay to evaluate each element of pay and benefit competitiveness, review pay practices and compare performance against our peer group.

 

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Executive Compensation and Related Matters | 2021 AmerisourceBergen Proxy

Our peer group consists of companies with business models and operations comparable to our own, including our two largest direct competitors, and companies that we believe have a similar financial and operational profile. Metrics used to select our peer group include: revenue; market capitalization; number of employees; net income; operating income margin; and return on invested capital. We believe that the companies included in our peer group reflect the type and complexity of business risks managed by our named executive officers and that we compete with many of the companies in our peer group for executive talent.

In fiscal year 2020, the Compensation Committee, in consultation with its independent compensation consultant, evaluated our peer group to ensure that our peer group companies remained appropriate. Starting with review of compensation in fiscal year 2021, the Compensation Committee has added Cigna Corporation and Humana Inc. to the peer group to reflect their respective acquisitions of Express Scripts and Kindred Healthcare. Due to Cigna Corporation’s acquisition of Express Scripts, we have removed Express Scripts from our peer group. As determined by the Compensation Committee, our peer group is as follows:

The Compensation Committee reviews peer group proxy statement data in evaluating our named executive officers’ pay and published compensation survey data in evaluating our other executive officers’ pay. When assessing pay levels, the Compensation Committee also reviews our executive officers’ compensation in relation to each other. The Compensation Committee’s consultant concluded that our overall competitive posture for executive pay in fiscal 2020 remained aligned with our pay for performance compensation philosophy.

Target Percentile Compensation Opportunity

We target total direct compensation opportunity at the 50th percentile relative to our peer group. We believe that targeting pay opportunities at the median of our peer group enables us to retain talented and experienced executive officers and is consistent with market-leading practices.

Components of the Executive Compensation Program

 

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2021 AmerisourceBergen Proxy | Executive Compensation and Related Matters

Base Salary

In fiscal 2020, we made adjustments to base salaries to reflect executives’ individual performance and to better align them with the market. As a result, in November 2019, Messrs. Collis, Cleary, Chou and Mauch and Ms. Clark received increases to their base salaries of 6.9%, 7.7%, 2.3%, 3.7%, and 15.0%.

FY2020 Short-Term Cash Incentive

The Compensation Committee approves the performance goals and incentive levels for each of our executive officers, and assigns a relative weighting to each performance measure under our cash incentive plan. For each performance measure, there is a threshold and a target. Threshold refers to the minimum acceptable level of performance and target is the desired level of performance. We do not pay a bonus for performance that is below the threshold established for financial performance goals and we pay a bonus of 25% of the target amount if performance is at the threshold. For performance that exceeds the threshold but does not meet the target, bonus payments are based on the level of performance and are increased ratably until the target is reached. All cash incentive awards are issued to the executive officers pursuant to our Omnibus Incentive Plan.

Executive officers may receive an amount in excess of their target bonus (up to a maximum of 200% of the target amount) if we exceed target amounts with respect to applicable key performance metrics. Therefore, an individual’s actual bonus consists of  (i) an amount that is based upon having met or exceeded the thresholds (which we refer to as the “earned” bonus) and (ii) if applicable, an amount that is based upon the extent to which actual performance exceeded target amount (which we refer to as a “stretch” bonus). In 2020, the key performance metrics for all of the named executive officers were the Company’s adjusted EPS and the Company’s adjusted operating income. Executive officers were only eligible to receive a “stretch” bonus to the extent such metric exceeded its target range. The stretch portion is calculated by increasing the earned bonus by an additional 5% for every 1% that actual performance exceeds target on the key performance metric. Each key performance metric is equally weighted for purposes of calculating the stretch bonus.

In November 2019, the Compensation Committee approved the following corporate-level performance goals for our fiscal year 2020 cash incentive plan:

(1)

See Appendix A to this proxy statement for additional information regarding non-GAAP financial measures, including GAAP to non-GAAP reconciliations.

​

The Compensation Committee chose adjusted EPS, adjusted operating income and adjusted free cash flow as corporate-level performance goals because they are the key metrics used by management to set business goals and evaluate our financial results. In addition, we communicate our expectations about future business performance to investors by providing an adjusted EPS guidance range each fiscal year. We generally set adjusted EPS targets to reflect our long-term business goal of growing adjusted EPS in the low to mid-single digits, while allowing for reasonable flexibility to set our annual targets based on the impact of industry trends, other market factors and special items from year to year.

The Compensation Committee chose adjusted operating income to encourage our executive officers to grow our Company’s profitability. We use adjusted free cash flow as a corporate-level financial metric because the amount of free cash flow that we generate each year is essential for us to maintain appropriate working capital, complete acquisitions, and return capital to stockholders through dividends. We define the non-GAAP financial measure of adjusted free cash flow as net cash provided by operating activities plus cash payments made relating to unfavorable legal settlements, minus cash payments received related to favorable legal settlements, and minus capital expenditures. Target adjusted free cash flow did not increase in fiscal year 2020 due to expected operating losses at PharMEDium, a subsidiary of the Company which has since been shut down, as well as higher expected cash taxes and capital expenditures as compared to the prior year.

In fiscal 2020, AmerisourceBergen exceeded the target on the adjusted EPS, adjusted operating income, and adjusted free cash flow performance metrics. As a result, the bonus payout for corporate-level metrics was, in the aggregate, approximately 127.2% of the target incentive amount.

 

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Target and actual fiscal year 2020 cash bonuses for our named executive officers were as follows:

The fiscal year 2020 cash bonuses for the named executive officers were designed to reflect enterprise-wide performance. As a result, 100% of their respective earned bonus payments was dependent upon the achievement of corporate-level performance goals with adjusted EPS weighted at 30% of the total target incentive, adjusted operating income weighted at 40% of the total target incentive and adjusted free cash flow weighted at 30% of the total target incentive. Additionally, because AmerisourceBergen exceeded the target amounts for adjusted EPS performance and adjusted operating income, which were the two key performance metrics for the named executive officers, each of them received a stretch bonus to the extent that adjusted EPS and adjusted operating income exceeded their respective targets.

After reviewing the Company’s strong performance, including the response to the challenges presented by the COVID-19 pandemic, the Compensation Committee concluded that it would not exercise any discretion to adjust the size of named executive officers’ cash bonuses for fiscal year 2020.

Looking Ahead: Fiscal Year 2021 Cash Bonus

In November 2020, the Compensation Committee approved performance measures for our fiscal year 2021 annual cash incentive plan. In 2021, the fiscal year cash bonus will continue to be paid upon the attainment of financial performance metrics, subject to the Compensation Committee’s continued discretion to adjust any portion of a calculated award. In fiscal 2021, all named executive officers’ cash bonus opportunities will continue to be based on the Company’s adjusted EPS, adjusted operating income and adjusted free cash flow. In fiscal 2021, adjusted free cash flow will also be treated as a key metric for purposes of calculating the stretch bonus.

Performance goals are intended to be challenging and to provide an incentive to achieve the goals set out in our fiscal year 2021 business plan and the strategic and other priorities established by our long-range plan. The fiscal year 2021 target incentive level for the CEO is 165% of base salary and for the other named executive officers is 100% of base salary, with the opportunity for each named executive officer to earn up to a maximum of 200% of target incentive if we exceed our financial performance goals.

Long-Term Equity Incentives

We use equity awards to motivate our executive officers to achieve superior business results over the long term. Equity awards support our stock ownership requirements and further enhance the alignment between management and stockholder interests. For fiscal year 2020, the allocation of the annual equity award for our executive officers was 50% in performance shares, 30% in stock options and 20% in restricted stock units. For fiscal year 2021, the allocation of the annual equity award for our executive officers is 60% in performance shares and 40% in restricted stock units. This mix provides an incentive to achieve favorable long-term results at a reasonable cost to the Company. Additionally, beginning in fiscal year 2021, restricted stock units will vest ratably each year during the three-year vesting period. All long-term equity incentives are awarded under our Omnibus Incentive Plan.

In fiscal year 2020, we awarded our named executive officers 107,738 target performance shares, options to purchase 334,042 shares of our Common Stock and 43,096 restricted stock units of our Common Stock. These awards represented approximately 40.3% of the total equity incentives granted to management and other employees in fiscal year 2020. We believe that it was appropriate to award approximately 40.3% of total annual equity incentives to our named executive officers because they are in the best position to drive our future results and implement our long-term business strategy. Equity incentives represented approximately 71.7% of

 

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2021 AmerisourceBergen Proxy | Executive Compensation and Related Matters

Mr. Collis’s total direct compensation and approximately 58.9%, on average, of the total direct compensation of the other named executive officers in fiscal year 2020.

In approving fiscal year 2020 long-term equity incentive awards, the Compensation Committee considered a number of factors:

•

Skills, experience, time in role and expected future contributions.   The size of an equity award depends, in part, on the scope of an executive officer’s job responsibilities and the impact he or she can be expected to have on our future operating results.

​

•

Company performance.   The Compensation Committee reviews our prior year financial performance and the executive officers’ leadership and focus on fostering our strategic initiatives.

​

•

Market alignment.   The Compensation Committee sets the target value of equity awards so that our executive officers will have a target long-term incentive near the median of our peer group. The target values are informed by the Compensation Committee’s review of the competitive positioning of each element of pay based on compensation data prepared by the external compensation consultant with reference to our peer group for our named executive officers and with reference to published market compensation survey data for the other executive officers.

​

•

The emphasis placed on equity in the mix of total compensation.   The Compensation Committee believes that incentive compensation should constitute the majority of each executive officer’s overall compensation package to provide incentives to meet our performance objectives and grow our stock price over time.

​

•

Average annual share burn rate.   The Compensation Committee also takes into account the average annual shares awarded for total equity incentives granted to employees in order to provide stock options, restricted stock units and performance shares to eligible employees at a reasonable rate and cost to AmerisourceBergen and its stockholders.

​

Equity awards are subject to vesting, forfeiture and clawback provisions, described in more detail below and in the sections following the Summary Compensation Table. When an executive officer becomes eligible for retirement and retires, unvested equity awards will continue to vest according to their schedule. We believe these requirements support our goal of retaining executive officers and aligning individual performance with our long-term growth. The post-retirement provisions provide an additional incentive for executive officers, particularly those near retirement, to continue to focus on our long-term performance. Forfeiture and clawback provisions serve as a means to redress detrimental behavior by current and former employees. For additional information about our long-term equity incentive awards see the narrative discussion following the Summary Compensation Table below.

Performance Share Awards

Our performance plan is designed to encourage our executive officers to focus on initiatives that promote the achievement of our long-term goals. Performance share awards are granted annually, and each performance award is based on a performance period covering three fiscal years. Performance shares are subject to the attainment of performance goals approved by the Compensation Committee. Vesting (or payout of shares) is based on cumulative performance at the end of the applicable three-year performance cycle.

A participating executive officer has the opportunity to earn a payout of between 0% and 200% of his or her target award. If threshold performance for a particular metric is not attained, the executive officer forfeits the right to receive any payout based on that metric. Threshold performance for each metric will result in a share payout equal to 50% of the target award. Target performance for each metric will result in a share payout equal to 100% of the target award. Attaining the maximum goal for each metric will result in a share payout equal to 200% of the target award. Each of our named executive officers was an executive officer of the Company when performance share awards were granted in fiscal year 2018. Accordingly, each named executive officer received performance shares for the FY18—FY20 performance period.

The Compensation Committee has selected compound annual adjusted EPS and average annual adjusted ROIC as the metrics used for awarding performance shares. Compound annual adjusted EPS was chosen because adjusted EPS is a key metric used by management to set business goals and evaluate our financial results. Average annual adjusted ROIC reflects adjusted operating income divided by invested capital over time. We use adjusted operating income and thus average annual adjusted ROIC to encourage our executive officers to grow our Company’s profitability.

 

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in control) and severance and include non-competition, confidentiality, and related provisions. The employment agreements do not include specified amounts of salary, bonus opportunities, or equity-based compensation for future years.

Severance Benefits.   We provide severance benefits under specified circumstances to give executive officers a measure of financial security following the loss of employment, to protect the Company from competitive activities after the departure of certain executive officers, and because we believe that these benefits are important to attract and retain our executive officers in a competitive industry. We will provide severance benefits if we discharge an executive officer without cause or such executive officer leaves the Company for good reason. Good reason means a reduction in base salary or our failure to comply with our obligations (including, in some cases, by diminishing the executive officer’s authority, duties and responsibilities) under his or her employment agreement. The terms of the severance benefits for our named executed officers are set out in employment agreements and various plans, which are described in the section of this proxy statement titled “Executive Compensation and Related Matters—Potential Payments Upon Termination of Employment on Change in Control.”

We do not provide severance benefits if an executive officer is terminated for cause or leaves without good reason. In that case, we would only pay the amount of accrued obligations.

Change in Control.   The vesting of equity awards will be accelerated if an executive officer’s employment is involuntarily terminated within two years after a change in control. In the event of a change in control, a shortened performance period, which extends only through the end of the fiscal quarter preceding the change in control, will be used to determine the payout under awards of performance shares. We provide these benefits to offer some financial protection to employees following an involuntary loss of employment in connection with a change in control and to enable our executive officers to focus on important business decisions should we be acquired without regard to how the transaction may affect them personally. We believe that this structure provides executive officers with an appropriate incentive to cooperate in completing a change in control transaction. The Board and the Compensation Committee also have discretion under our equity plans to take certain actions in the event of a change in control. These actions include canceling options that are not exercised within 30 days after a change in control; cashing out outstanding options; canceling any restricted stock awards in exchange for the payment of cash, property or a combination of cash and property equal to the award’s value; or substituting other property (including securities of another entity) for awards granted under our equity plans.

In addition, the Compensation Committee has discretion under the Annual Incentive Plan to pay the annual cash incentive awards during any year in which a change in control occurs. If this discretion is exercised, bonus payments would be made at target level and/or based on performance for the portion of the fiscal year until the change in control event and paid within 75 days of the change in control.

Under the employment agreements for our executive officers, if amounts otherwise payable to an executive officer in connection with a change in control would constitute excess parachute payments within the meaning of Section 280G of the Internal Revenue Code, the Company will reduce such payments to an amount that would avoid any excise taxes under Section 4999 of the Internal Revenue Code, but only if such reduction would provide the executive officer with a greater net after-tax benefit than would no reduction.

Additionally, an executive officer may receive additional severance if his or her employment is involuntarily terminated without cause or such executive officer leaves the Company for Good Reason upon or within two years following a change in control. See the section of this proxy statement titled “Executive Compensation and Related Matters—Potential Payments Upon Termination of Employment or Change in Control” below.

Executive Compensation Governance

Compensation Forfeiture and Recoupment (“Clawback”) Provisions

Our executive officers receive their annual cash bonus and equity awards under our Omnibus Incentive Plan, pursuant to which such awards are subject to forfeiture and clawback provisions. The forfeiture or clawback of shares or other amounts received would apply if the executive officer is terminated for cause, breaches restrictive covenants (during the employment period or two years thereafter), engages in any conduct that results in AmerisourceBergen having to restate its financial statements (during the employment period or three years thereafter), or engages in certain other misconduct. All of our other employees who are eligible for equity awards also receive those awards pursuant to the Omnibus Incentive Plan. Accordingly, forfeiture and clawback provisions apply to all employees who receive equity awards from us.

 

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2021 AmerisourceBergen Proxy | Executive Compensation and Related Matters

Additionally, in connection with the previously disclosed Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services, we adopted a Financial Recoupment Policy. Under this policy, cash and equity compensation awarded to executive officers and senior employees in certain businesses are subject to additional forfeiture and clawback provisions.

Clawback Disclosure Policy

The Company has a clawback disclosure policy that applies to all incentive compensation made to any officer (as such term is defined under Section 16 of the Securities Exchange Act of 1934, as amended) under the Company’s Omnibus Incentive Plan and Annual Incentive Plan. Under the policy, if incentive compensation is ever forfeited or required to be repaid by an officer and the underlying event has been publicly disclosed, then we will disclose the aggregate amount forfeited or to be repaid. The disclosure will include a general description of the circumstances giving rise to the clawback and will be made in a document filed publicly with the SEC or posted to a clearly identifiable location on our investor website at investor.amerisourcebergen.com. The disclosure policy is subject to exceptions: (i) if such disclosure would violate an individual’s privacy rights; (ii) if such disclosure would result in or exacerbate existing or threatened litigation; or (iii) if such disclosure is contrary to law or regulation. The policy is administered by the Board, which has exclusive authority to interpret and carry out the policy.

Equity Award Grant Practices

We have a written policy on equity grants designed to formalize our equity grant practices and ensure that equity awards will generally be made at specified times. Our equity award policy is designed to encourage consistency in practice, but is not intended to and does not limit the authority of the Compensation Committee under our equity incentive plans, including the Omnibus Incentive Plan. The Compensation Committee generally will review and approve annual equity awards to executive officers and other eligible employees in November of each year, which is near the beginning of our fiscal year. This allows the Compensation Committee to make annual equity awards at the beginning of the relevant performance cycle with the benefit of reviewing results from the immediately preceding performance cycle. We also may make equity awards at other times during the year for new hires or for other reasons, including, for example, a job promotion, as a result of an acquisition or for retention purposes. In accordance with our policy and our Omnibus Incentive Plan, the Compensation Committee has delegated limited authority to our CEO to approve grants to non-executive officers. Such awards may only be made on the first business day of a month. The Compensation Committee must approve any equity awards to our named executive officers.

The exercise price of any stock option award is the closing price of our Common Stock on the date of grant. We do not backdate or retroactively grant options or restricted stock units. We generally schedule Board and Compensation Committee meetings at least one year in advance and, as noted above, generally make annual equity awards to our executive officers at approximately the same time each year. We do not time our equity awards to take advantage of the release of earnings or other major announcements by us or market conditions.

Executive Stock Ownership

Our executive officers must own shares of our Common Stock in an amount equal to a multiple of their base salary. Stock ownership aligns management’s interests with those of our stockholders and provides a continuing incentive for management to focus on long-term growth. Under our executive stock ownership guidelines, our CEO must own shares worth six times his base salary and the other executive officers must own shares worth three times their base salaries. Executive officers who become subject to the guidelines have five years from the date of hire or change in status, whichever is later, to comply with the ownership requirements, but must retain all options and equity grants until required ownership levels are met. Following its annual review, the Compensation Committee determined that each of the named executive officers is in compliance with the guidelines.

Derivatives Trading and Hedging Prohibition

AmerisourceBergen considers it improper and inappropriate for its directors, officers and employees to engage in short-term or speculative transactions in our securities, including hedging or monetization transactions. Many forms of speculative transactions are inconsistent with the goal to improve our long-term performance. Accordingly, AmerisourceBergen has a policy that prohibits directors, officers and employees from engaging in the following transactions involving AmerisourceBergen securities: short sales, hedging or monetization transactions, and transactions in publicly-traded options on our securities, such as puts, calls and other derivatives.

 

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