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

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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Preliminary Proxy Statement

 

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

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Definitive Proxy Statement

 

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Definitive Additional Materials

 

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Soliciting Material Pursuant to §240.14a-12

LOGO


AmerisourceBergen Corporation

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
         
Payment of Filing Fee (Check the appropriate box):

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

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LOGO

NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS

TIME AND DATE:

2:00 p.m., Eastern Time
Thursday, March 5, 2020

HOW TO VOTE
It is important that your shares be represented and
voted at the Annual Meeting. We urge you to vote
by using any of the below methods.




PLACE:

Four Seasons Hotel
One North 19th Street
Philadelphia, Pennsylvania 19103



 



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Vote via the Internet
Visit www.envisionreports.com/ABC and
follow the instructions.



 

ITEMS OF BUSINESS:

1.  Elect the ten directors named in this proxy statement.

2.  Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2020.

3.  Conduct an advisory vote to approve the compensation of our named executive officers.

4.  Vote on the stockholder proposals set forth in this proxy statement, if properly presented at the 2020 Annual Meeting.

5.  Transact any other business properly coming before the meeting.

WHO MAY VOTE:

Stockholders of record on January 6, 2020.



 


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Vote by phone
Call Toll-Free 1-800-652-VOTE (8683)
inside the United States or Puerto Rico
and follow the instructions.

Vote by mail
If you received a proxy/voting
instruction card by mail, you can mark,
date, sign and return it in the
postage-paid envelope furnished for
that purpose.

Vote in Person
If you attend the Annual Meeting, you
may vote in person if you wish, even if
you have voted previously.



 
DATE OF AVAILABILITY:

This notice and proxy statement, together with our Annual Report on Form 10-K for the fiscal year ended September 30, 2019, are being made available to stockholders on or about January 24, 2020.

By order of the Board of Directors,

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Important Notice Regarding Availability of
Proxy Materials for AmerisourceBergen's
Annual Meeting of Stockholders to be held on
March 5, 2020.
 

JOHN G. CHOU
Executive Vice President, Chief Legal Officer
and Secretary


 


The Proxy Statement and Annual Report on
Form 10-K are available at
investor.amerisourcebergen.com.


 


  Important Information If You Plan to Attend the Meeting in Person:
  In order to be admitted to the Annual Meeting, individuals must bring a government issued photo ID and proof of ownership of AmerisourceBergen common stock.

Table of Contents


TABLE OF CONTENTS

Letter from Our Lead Independent Director

  1

Proxy Statement Highlights

  2

Highlights of Our Corporate Governance Practices and Policies

  5

Oversight of Controlled Substances

  7

Corporate Governance and Related Matters

  8

Item 1—Election of Directors

 
8

Non-Employee Director Compensation at 2019 Fiscal Year End

 
15

Corporate Governance

 
17

Information on Board Committees

 
22

Code of Ethics

 
24

Stockholder Engagement

 
24

Audit Committee Matters

 
26

Item 2—Ratification of Appointment of Independent Registered Public Accounting Firm

 
26

Audit Committee Financial Experts

 
27

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

 
27

Independent Registered Public Accounting Firm's Fees

 
27

Report of the Audit Committee

 
28

Executive Compensation and Related Matters

 
29

Compensation Discussion and Analysis

 
29

Compensation Committee Report

 
39

Compensation Committee Matters

 
40

Executive Compensation Tables

 
41

Employment Agreements

 
47

Potential Payments Upon Termination of Employment or Change in Control

 
47

CEO Pay Ratio

 
51

Item 3—Advisory Vote to Approve the Compensation of our Named Executive Officers

 
52

Related Person Transactions

 
53

Ownership of and Trading in Our Stock

 
55

Beneficial Ownership of Common Stock

 
55

Equity Compensation Plan Information

 
56

Delinquent Section 16(a) Reports

 
56

Stockholder Proposals

 
57

Item 4—Stockholder Proposal to Permit Action by Written Consent of the Stockholders

 
57

Item 5—Stockholder Proposal Regarding the Use of a Deferral Period for Certain Compensation of Senior Executives

 
60

Other Information

 
63

Availability of the Annual Report on Form 10-K

 
63

About the 2020 Annual Meeting of Stockholders and Voting at the Meeting

 
63

Requirements for Submission of Proxy Proposals, Nomination of Directors, and Other Business of Stockholders

 
66

Appendix A—Supplemental Information: GAAP to Non-GAAP Reconciliation

 
A-1

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LOGO

January 24, 2020

Dear Stockholder:

        As your Lead Independent Director, I am pleased to invite you to attend our 2020 Annual Meeting of Stockholders on Thursday, March 5, 2020 at 2:00 p.m. Eastern Time. The meeting will be held at the Four Seasons Hotel, One North 19th Street, Philadelphia, Pennsylvania. The Notice of the 2020 Annual Meeting of Stockholders and the proxy statement describe the items of business for the meeting. Your vote is very important. Whether or not you plan to attend the 2020 Annual Meeting of Stockholders, we urge you to vote and to submit your proxy over the Internet, by telephone or by mail.

        The AmerisourceBergen Board of Directors believes that our governance structure should be continually reviewed and enhanced. As described on page 19 of this proxy statement, the Board recently established a Compliance and Risk Committee 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.

        We continue to value input from our stockholders. In 2019, AmerisourceBergen undertook significant outreach, as discussed in the "Stockholder Engagement" section on page 24. This engagement included key discussions on corporate governance, risk management and corporate citizenship. Through meetings with institutional investors and others, we identified issues that our investors and stakeholders consider important, as well as topics for which they requested and we provided more information.

        The publication in September 2019 of a report titled the Safe and Secure Distribution of Controlled Substances is an example of our commitment to clear and direct communication. Through this report and the annual Corporate Citizenship Report, as well as additional disclosures that can be found on the Company's website, we have provided greater transparency regarding distribution operations and other matters that are of particular interest to our stakeholders, including sustainability, diversity, and the efforts of the AmerisourceBergen Foundation.

        We also view Board refreshment as integral to maintaining independent oversight of management. The Board recently expanded from nine to ten members and elected Dennis M. Nally, the former Chairman of PricewaterhouseCoopers, as an eighth independent director. In his role as Chairman of PwC, Mr. Nally oversaw a complex multinational business during a time when its industry underwent significant regulatory change. While leading PwC, he prioritized management of human capital and leadership development and led the firm's growth to over 195,000 employees worldwide. Mr. Nally brings an extraordinary combination of skills and experience that will serve the Board, AmerisourceBergen and our stockholders well. Mr. Nally is one of ten director nominees up for re-election at the 2020 Annual Meeting of Stockholders and I encourage you to review his biography and the biographies of the other director nominees beginning on page 10 of this proxy statement.

        In 2019, AmerisourceBergen delivered strong financial performance, as discussed on page 30. Highlights include solid year-over-year revenue increase of 6.9% and a notable increase in gross profit across both the Pharmaceutical Distribution Services and Global Commercialization & Animal Health businesses. We continue to focus on our One ABC initiative, which will include the opening of a single headquarters in calendar year 2021. Working together as a unified and connected organization, AmerisourceBergen created value for stockholders, partners, customers and patients in the past year and is well positioned for further growth in 2020.

        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.

        Thank you for your continued investment in AmerisourceBergen.

Sincerely,

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Jane E. Henney
Lead Independent Director

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Table of Contents

Proxy Statement Highlights  |  2020 AmerisourceBergen Proxy

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 Annual Meeting materials are available at investor.amerisourcebergen.com.

    Voting Items


    Board Recommendation
    Further information

ITEM 1
Election of Directors

           GRAPHIC  For       8

ITEM 2
Ratification of Appointment of Independent Registered Public Accounting Firm


 
       GRAPHIC  For     26
       

ITEM 3
Advisory Vote to Approve the Compensation of our Named Executive Officers

           GRAPHIC  For       52

ITEM 4
Stockholder Proposal to Permit Action by Written Consent of the Stockholders


 
       GRAPHIC  Against     57
       

ITEM 5
Stockholder Proposal Regarding the Use of a Deferral Period for Certain Compensation of Senior Executives

           GRAPHIC  Against       60

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2020 AmerisourceBergen Proxy   |  Proxy Statement Highlights

Director Nominees and Board Summary

    Name


   
Age
   

Director
Since


   
Independent
   
Executive
   
Audit
   



Compensation
and
Succession
Planning




   
Compliance and Risk
   
Finance
   

Governance
and
Nominating
 

Ornella Barra
Co-Chief Operating Officer of Walgreens Boots Alliance, Inc.

        66         2015         No                                       X         X            

Steven H. Collis
President, CEO and Chairman of AmerisourceBergen Corporation


 
  58     2011     No     Chair                      
                                   

D. Mark Durcan
Retired CEO of Micron Technology, Inc.

        58         2015         Yes         X         Chair                             X            

Richard W. Gochnauer
Retired CEO of United Stationers Inc.


 
  70     2008     Yes     X         X         Chair      
                                   

Lon R. Greenberg
Retired CEO of UGI Corporation

        69         2013         Yes         X         X                   Chair                   X  

Jane E. Henney, M.D.
Home Secretary for the National Academy of Medicine


 
  72     2002     Yes     X     EO     EO     EO     EO     EO  
                                   

Kathleen W. Hyle
Retired Senior Vice President and Chief Operating Officer of Constellation Energy

        61         2010         Yes                             X         X         X            

Michael J. Long
CEO of Arrow Electronics, Inc.


 
  61     2006     Yes     X         Chair             X  
                                   

Henry W. McGee
Senior Lecturer at Harvard Business School and Retired President of HBO Home Entertainment

        66         2004         Yes         X         X                                       Chair  

Dennis M. Nally
Retired Chairman of Pricewaterhouse Coopers International Ltd.


 
  67     2020     Yes                          
                                   

Number of Meetings in FY2019:

        1         10         4       N/A*           5         4  
*
Compliance and Risk Committee was created effective December 1, 2019.

X
Member

EO
Ex Officio Member

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Table of Contents

Proxy Statement Highlights  |  2020 AmerisourceBergen Proxy

Snapshot of Board Composition

Presented below is a snapshot of the expected composition of our Board of Directors immediately following the 2020 annual meeting, assuming the election of the ten nominees named in the proxy statement. For comparison purposes, we have also presented comparable metrics for the constituents of the S&P 500 Index. (Data for the S&P 500 Index is based on the SpencerStuart Board Index 2019.)

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Table of Contents

2020 AmerisourceBergen Proxy   |  Highlights of our Corporate Governance Practices and Policies

HIGHLIGHTS OF OUR CORPORATE GOVERNANCE 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:

  Board of Directors
   
    Independence       The majority of our director nominees are independent (eight out of ten). Our corporate governance principles require us to maintain a minimum of 70% independent directors on our Board (see page 18).
  Independence of Key Oversight Committees     All members of our Audit Committee, Compensation and Succession Planning Committee, and Governance and Nominating Committee are independent (see page 19).
     
    Lead Independent Director       Our corporate governance principles require the election of a Lead Independent Director whenever our Chief Executive Officer ("CEO") also serves as Chairman of the Board and that we clearly define the Lead Independent Director's authority and significant responsibilities in the governance of our Board (see page 17).
  Succession Planning for Chairman     The Company plans to split the role of Chairman of the Board and CEO, commencing with the Company's next CEO. At that time, the Chairman role will be assumed by an independent director (see page 18).
     
    Succession Planning for CEO       We undertake succession planning and maintain an emergency succession plan for our CEO.
  Risk Oversight     Our full Board and each of our Board committees actively engage in risk assessment and management for all aspects of our business, including our compensation policies and practices, with certain specific responsibilities for risk oversight also designated in committee charters and our corporate governance principles. Our corporate officers and senior managers report on risk exposure at regular intervals to the appropriate committee or full Board.
     
    Compliance and Risk Committee       We created a Compliance and Risk Committee in December 2019 to assist the Board in oversight of enterprise risk management and legal and regulatory compliance (see page 19).
  Opioid Report     At the direction of our Board, we published a report in September 2019 on the safe and secure distribution of controlled substances as part of our commitment to transparency.
     
    Diversity       Our directors have diverse business experiences, backgrounds and expertise in a wide range of fields, all of which are critical to understanding our businesses, competitive position and risks. Our Board has a long-standing interest in gender and ethnic diversity and is especially proud of the representation on our Board of three leading women in the fields of business, medicine, and pharmaceuticals and a leading African-American businessman with extensive experience in corporate governance.
  Overboarding Policy     Pursuant to our overboarding policy, if our CEO serves as a director, he or she may only serve on the board of one other public company. Non-employee directors should not serve on more than three other public company boards (see page 8).
     
    Tenure Policy       Our policy for directors' tenure provides that a director will resign at the annual meeting of stockholders following his or her 75th birthday and a director will tender his or her resignation for consideration by the Governance and Nominating Committee when his or her employment or principal business association changes materially. A director who is an employee will resign when he or she retires or is no longer employed by us.
  Refreshment     Three of our nine non-employee director nominees have served on the Board for five years or less. Additionally, we encourage our Board to rotate its committee Chairs on a regular basis.
     
    Annual Evaluation Process       Our Board has a comprehensive annual evaluation process for the Board and each of its committees, which is led by the Chair of our Governance and Nominating Committee and the Board's Lead Independent Director. The Governance and Nominating Committee and the full Board also conduct an annual review and update of our corporate governance principles and committee charters (see pages 21).
  Stockholder Communication and Engagement     We actively engage with our stockholders throughout the year to seek their input on a variety of topics, including our corporate governance practices and our role in the pharmaceutical supply chain (see page 24).
     

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Highlights of our Corporate Governance Practices and Policies  |  2020 AmerisourceBergen Proxy

    Executive Compensation

   
    Alignment with Stockholders' Interests       We align executive compensation with the Company's performance through performance metrics. We also require executives to adhere to stock ownership guidelines and holding requirements that align their interests with those of our stockholders and encourage long-term growth (see page 39).
  Clawback     We have the right to claw back the value of cash and equity awards held by current and former executives as a result of misconduct, including misconduct that leads to the restatement of our financial statements. We will publicly disclose instances of clawback pursuant to our Clawback Disclosure Policy (see page 37).
     
    Independent Compensation Consultant       The consultant to our Compensation and Succession Planning Committee provides no other services to the Company (see page 40).
    Rights of Stockholders

   
    Annual Director Elections       All of our directors are elected annually.
  Majority Vote Standard     Our bylaws and corporate governance principles establish majority voting standards for the election of directors and require each director nominee to tender an irrevocable resignation prior to each annual meeting in the event an incumbent director does not receive the required votes for re-election (see page 21).
     
    Removal of Directors With or Without Cause       Our organizational documents permit stockholders to remove directors with or without cause.
  Right to Call Special Meetings       Stockholders with at least 25% of the outstanding shares of our common stock ("Common Stock") have the right to call special meetings.
     
    Proxy Access       A stockholder, or a group of up to 20 stockholders, who have continuously owned at least 3% of our outstanding Common Stock for 3+ years may nominate directors to fill up to the greater of two or 20% of the available board seats (see page 25).
  Annual Say-on-Pay Vote     We have an annual say-on-pay vote (see page 52).
     
    No Supermajority Requirement       Majority vote is required for stockholder action.
  No Poison Pill     We do not have a "poison pill" stockholder rights agreement in place.
    Corporate Citizenship

   
    Overview       At AmerisourceBergen, corporate citizenship means building healthier futures by fostering a positive impact on the environment and society through the work we do, the people that do it, and the communities we service. Below are our Corporate Citizenship priorities.
  Engaged Associates     We continue to foster an inclusive culture that attracts, develops, retains and engages a diverse workforce. We participate in multiple benchmarking reports and applications to track our progress and stay up-to-date on industry best practices. AmerisourceBergen has been recognized annually since 2017 by Diversity Inc. as a noteworthy company based on our continued commitment to advance our programs, training and practices.
     
    Sustainable Operations       We have implemented practices that reduce energy use and waste, such as our deployment of a data management system to allocate and track usage of resources. We have made investments in climate adaptation, waste optimization programs, energy efficiency projects, renewable energy, and sustainable building infrastructure, including the construction of new LEED Certified office spaces. We began responding to the CDP Climate Change Survey in 2016 with information on our largest business unit and expanded to enterprise-wide information in our 2017 response. In 2019, we again submitted an enterprise-wide response and will continue to do so annually.
  Healthier Communities     We leverage associate volunteer opportunities and social investments to increase access to healthcare for human and animal populations and ensure prescription drug safety. In addition, the AmerisourceBergen Foundation is a separate not-for-profit charitable giving organization established by the Company to support health-related causes that enrich that global community. During fiscal year 2019, the Foundation donated nearly $8 million to 100+ organizations in support of its mission.
     

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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2020 AmerisourceBergen Proxy   |  Oversight of Controlled Substances

 

OVERSIGHT OF CONTROLLED SUBSTANCES

The driving force behind everything we do is our Purpose—we are united in our responsibility to create healthier futures. This Purpose drives every facet of our business and is more important today than ever as we and the country grapple with the opioid crisis.

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. While we continue to look for ways to promote safety and security in the supply chain, we believe a multifaceted approach, with efforts that stretch across the federal-, local-, industry-, and company-level, is imperative for a sustainable and holistic solution to the opioid crisis.

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.

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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/governance.

Board Oversight of Risks and Creation of Compliance and Risk Committee

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. The Board receives at least quarterly updates on the status of pending litigation related to the distribution of opioids and also receives regular updates on our anti-diversion program, legislative and regulatory developments related to controlled substances, and stockholder feedback. Additionally, in December 2019, our Board created a Compliance and Risk Committee in furtherance of the Board's responsibility for oversight of the Company's businesses, including our long-standing commitment to ethics and compliance. 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 19 of this proxy statement.

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Corporate Governance and Related Matters  |  2020 AmerisourceBergen Proxy

CORPORATE GOVERNANCE AND RELATED MATTERS
Item 1—Election of Directors

Annual Election of Directors

Directors are elected annually. Any nominee who is elected to serve as a director at our 2020 Annual Meeting of Stockholders will be elected to serve a term of one year and is expected to hold office until the 2021 Annual Meeting of Stockholders and until their successors are elected and qualified. Similarly, any director who is appointed to fill a vacancy on the Board will serve until the next annual meeting of stockholders after his or her appointment and until his or her successor is elected and qualified.

Each nominee for director has consented to his or her nomination and, so far as the Board of Directors and management are aware, intends to serve a full term as a director if elected. However, if any of the nominees should become unavailable or unable to stand for election prior to the election, the shares represented by proxies may be voted for the election of substitute nominees selected by the Board of Directors.

Board Size, Nominees and Independence

The size of the Board of Directors is ten. The director nominees are Ornella Barra, Steven H. Collis, 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.

Messrs. Durcan, Gochnauer, Greenberg, Long, McGee, and Nally, Dr. Henney and Ms. Hyle are independent (as independence is defined in Section 303A of the NYSE Listed Company Manual and in our corporate governance principles).

Additionally, there are no family relationships among AmerisourceBergen's directors and executive officers.

Walgreens Boots Alliance's Designated Director Nominee

Pursuant to the Shareholders Agreement between AmerisourceBergen and Walgreens Boots Alliance, Inc. (as successor in interest to Walgreen Co. and Alliance Boots GmbH), Walgreens Boots Alliance has the right to designate a director to our Board once Walgreens Boots Alliance and certain of its subsidiaries collectively own five percent or more of our Common Stock. On May 1, 2014, Walgreens Boots Alliance notified us that they had acquired at least five percent of our Common Stock. Ms. Barra, Co-Chief Operating Officer of Walgreens Boots Alliance, has been designated by Walgreens Boots Alliance to serve on our Board. She was appointed to the Board on January 16, 2015 and is a current nominee for election as director. In addition, upon the acquisition in full by Walgreens Boots Alliance and its subsidiaries of 19,859,795 shares of AmerisourceBergen in the open market, Walgreens Boots Alliance will be entitled to designate a second director to the Board of Directors. For so long as Walgreens Boots Alliance has a right to designate a director to the Board, subject to certain exceptions, including matters related to acquisition proposals, Walgreens Boots Alliance and its subsidiaries will be obligated to vote their shares in accordance with our Board on all matters submitted to a vote of our stockholders. Please refer to "Related Person Transactions" beginning on page 53 of this proxy statement and our Current Report on Form 8-K filed on March 20, 2013 for more detailed information regarding the Shareholders Agreement and related agreements and arrangements.

Governance and Nominating Committee Identification and Evaluation of Director Nominees

Our Governance and Nominating Committee seeks director nominees who possess qualifications, experience, attributes and skills that will enable them to contribute meaningfully to the leadership of our Board and to effectively guide and supervise management in driving AmerisourceBergen's growth and financial and operational performance. Each director nominee should:

    possess the highest personal and professional ethics, integrity and values;

    be committed to representing the long-term interests of our stockholders; and

    have an inquisitive and objective perspective, practical wisdom and mature judgment.

Each nominee should also have sufficient time to effectively carry out his or her duties as a director. Except for the CEO of AmerisourceBergen, who may serve on no more than one other public company board, director nominees may serve on no more than three other public company boards.

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2020 AmerisourceBergen Proxy   |  Corporate Governance and Related Matters

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

Corporate Governance

Distribution and Logistics

Executive Leadership

Financial Literacy

Global Markets

Healthcare
Information Technology

Regulatory

Risk Oversight

Sustainability and Corporate Citizenship

Talent Management and Executive Compensation

We seek individuals with diverse backgrounds, skills and expertise to serve on our Board, including women and minorities. 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 and Nominating 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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Corporate Governance and Related Matters  |  2020 AmerisourceBergen Proxy

Biographical information about our nominees

 

ORNELLA BARRA
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Age: 66
Director since January 2015  
                                                                        

Committees:

Compliance and Risk

Finance

 

Principal Occupation, Business Experience and Directorships

Ms. Barra has served on our Board since January 2015 and currently serves as a Co-Chief Operating Officer of Walgreens Boots Alliance, Inc. Previously, she served as Executive Vice President of Walgreens Boots Alliance,  Inc. and President and Chief Executive of Global Wholesale and International Retail from February 2015 until June 2016. Ms. Barra served as Chief Executive, Wholesale and Brands of Alliance Boots GmbH from September 2013 until January 2015 and as Chief Executive of the Pharmaceutical Wholesale Division of Alliance Boots GmbH from January 2009 until September 2013. Prior to her role as Chief Executive of the Pharmaceutical Wholesale Division, Ms. Barra was the Wholesale and Commercial Affairs Director and a Board member of Alliance Boots plc. Prior to the merger of Alliance UniChem Plc and Boots Group plc, Ms. Barra was Executive Director of Alliance UniChem Plc, having been appointed to its Board in 1997 when Alliance Sante merged with UniChem Plc. Ms. Barra is an honorary Professor of the University of Nottingham's School of Pharmacy and is a member of the International Advisory Council of Bocconi University. Ms. Barra was formerly a member of the board of Directors of Assicurazioni Generali S.p.A., one of the largest Italian insurance companies, from April 2013 until April 2019. Ms. Barra was a member of the Board of Directors of Alliance Boots GmbH between June 2007 and February 2015, and was Chairman of its Corporate Social Responsibility Committee from 2009 to 2014. She serves as the Vice Chairman of the Board of International Federation of Pharmaceutical Wholesalers, Inc. and is a member of the Board of Efficient Consumer Response Europe.

Key Attributes, Expertise, Experience and Skills:

Global Markets: Demonstrated expertise and understanding of global markets by leading and expanding international operations of multinational company.

Healthcare and Distribution Expertise: Heads global wholesale and international retail operations for Walgreens Boots Alliance, Inc. Acquired extensive experience in pharmaceutical wholesale distribution and pharmaceutical retail industries through long career at Alliance Boots GmbH and predecessor companies, and trained as a pharmacist.

Risk Oversight: Serves as Co-Chief Operating Officer of Walgreens Boots Alliance, Inc. and served as a director of one of the largest insurance companies in Italy.

Sustainability & Corporate Citizenship: Serves as Chair of the Walgreens Boots Alliance, Inc. Corporate Social Responsibility Committee and served as Chairman of the Corporate Social Responsibility Committee for Alliance Boots GmbH.

Compensation/Benefits Oversight: Served as Chair of Appointments and Remuneration Committee at Assicurazioni Generali.

Academic Credentials: Honorary Professor of the University of Nottingham's School of Pharmacy and a member of the International Advisory Council of Bocconi University.

     
 

STEVEN H. COLLIS
GRAPHIC

Age: 58
Chairman of the Board since March 2016
Director since May 2011
                                                                    

Committees:

Executive (Chair)

 

Principal Occupation, Business Experience and Directorships

Mr. Collis is the President and Chief Executive Officer of AmerisourceBergen Corporation and has served in this position since July 2011. He has been a member of our Board since 2011 and has served as our Board's Chairman since March 2016. From November 2010 to July 2011, Mr. Collis served as President and Chief Operating Officer of AmerisourceBergen Corporation. He served as Executive Vice President and President of AmerisourceBergen Drug Corporation from September 2009 to November 2010, as Executive Vice President and President of AmerisourceBergen Specialty Group from September 2007 to September 2009 and as Senior Vice President of AmerisourceBergen Corporation and President of AmerisourceBergen Specialty Group from August 2001 to September 2007. Mr. Collis has held a variety of other positions with AmerisourceBergen Corporation and its predecessors since 1994. Mr. Collis is a member of the Board of CEOs Against Cancer (PA Chapter), and is a member of the American Red Cross Board of Governors. He previously served on the Board of International Federation of Pharmaceutical Wholesalers, Inc. until October 2018 and the board of Thoratec Corporation from 2008 to 2015.

Key Attributes, Expertise, Experience and Skills:

Healthcare and Distribution Expertise: Has held various senior executive leadership positions with AmerisourceBergen Corporation and has extensive business and operating experience in wholesale pharmaceutical distribution and in-depth knowledge of the healthcare distribution and services market.

Global Markets: Leads multinational company that has significantly expanded international operations.

Governance and Risk Oversight: Serves as Chairman, President and Chief Executive Officer and director and previously served as a director of Thoratec Corporation.

     
 

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2020 AmerisourceBergen Proxy   |  Corporate Governance and Related Matters

 

D. MARK DURCAN
GRAPHIC

Age: 58

Director since September 2015      
                                                                    

Committees:

Audit (Chair)

Executive

Finance
                                                           

 

Principal Occupation, Business Experience and Directorships

Mr. Durcan has served on our Board since September 2015. He served as Chief Executive Officer and Director of Micron Technology, Inc. from February 2012 until his retirement in May 2017. Mr. Durcan served in a variety of roles at Micron Technology, Inc., including as President and Chief Operating Officer from June 2007 to February 2012, and as Chief Technology Officer from June 1997 to February 2006. Between 1984 and February 2006, Mr. Durcan held various other positions with Micron Technology, Inc. and its subsidiaries and served as an officer from 1996 through his retirement. Mr. Durcan served as a director of MWI Veterinary Supply, Inc. from March 2014 until its acquisition by AmerisourceBergen in February 2015. Mr. Durcan has been a director for St. Luke's Health System of Idaho since February 2017. He also has served as a director for Advanced Micro Devices since October 2017 and for Veoneer since April 2018. He served as a director at Freescale Semiconductor, Inc. from 2014 through 2015. Mr. Durcan has also served on the Semiconductor Industry Association Board and the Technology CEO Council.

Key Attributes, Expertise, Experience and Skills:

Financial Expertise: Brings substantial experience in the area of finance, executive leadership and strategic planning in his former roles as Chief Executive Officer and Chief Operating Officer of Micron Technology, Inc.

Global Markets: Contributes deep understanding of global markets and extensive experience in managing global manufacturing, procurement, supply chain and quality control for a multinational corporation and, as former member of the board of MWI Veterinary Supply, Inc., has important insight into wholesale distribution of animal health products.

Information Technology: Has unique and in-depth knowledge of technology and capability to drive technological innovation.

     
 

RICHARD W. GOCHNAUER
GRAPHIC

Age: 70
Director since September 2008
                                                                    

Committees:

Compensation and Succession Planning

Executive

Finance (Chair)

 

Principal Occupation, Business Experience and Directorships

Mr. Gochnauer has served on our Board since September 2008. He served as Chief Executive Officer of United Stationers Inc. from December 2002 until his retirement in May 2011 and as Chief Operating Officer of United Stationers Inc. from July 2002 to December 2002. Mr. Gochnauer served as Vice Chairman and President, International, and President and Chief Operating Officer of Golden State Foods Corporation from 1994 to 2002. He currently serves as a member of the Boards of UGI Corporation, Golden State Foods Corporation, Vodori Inc., and Rush University Medical Center and previously served as a director of Fieldstone Communities, Inc. from 2000 to 2008 and United Stationers Inc. from July 2002 to May 2011. Mr. Gochnauer is also a member of the Center for Higher Ambition Leadership.

Key Attributes, Expertise, Experience and Skills:

Distribution and Logistics: Provides strategic direction and valuable perspective on measures to drive operating growth and compete effectively in the distribution business gained through his management of diverse distribution businesses.

Governance Experience: Serves as director of UGI Corporation and Golden State Foods Corporation and held senior executive leadership roles at United Stationers Inc. and Golden State Foods Corporation.

Risk Oversight: Extensive experience overseeing the management of risk on an enterprise-wide basis.

     
 

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LON R. GREENBERG
GRAPHIC

Age: 69
Director since May 2013              
                                                                    

Committees:

Audit

Compliance and Risk (Chair)

Executive

Governance and Nominating
                                                           

 

Principal Occupation, Business Experience and Directorships

Mr. Greenberg has served on our Board since May 2013. He served as Chairman of UGI Corporation's Board of Directors from 1996 until January 2016 and as director of UGI Utilities, Inc. and AmeriGas Propane, both UGI Corporation subsidiaries. Mr. Greenberg served as Chief Executive Officer of UGI Corporation from 1995 until his retirement in April 2013. Mr. Greenberg served in various leadership positions throughout his tenure with UGI Corporation. He is a member of the Board of Directors of Ameriprise Financial, Inc. and the Board of Directors of the United Way of Greater Philadelphia and Southern New Jersey. Mr. Greenberg is a member of the Board of Trustees of Temple University and the Board of The Philadelphia Foundation and previously served as Chairman of the Board of Directors of Temple University Health System and as a member of the Board of Directors of Fox Chase Cancer Center. Mr. Greenberg previously served as a member of the Board of Aqua America, Inc.

Key Attributes, Expertise, Experience and Skills:

Financial Expertise: Brings financial literacy and sophistication acquired through various executive, legal and corporate roles, as well as membership on the boards of other NYSE listed companies.

Global Markets: Has valuable business and executive management experience in distribution and global operations acquired as Chief Executive Officer of UGI Corporation.

Healthcare Expertise: Contributes experience and knowledge of the healthcare industry from his perspective as a former director of healthcare organizations.

Governance and Regulatory Experience: Served as Chief Executive Officer and Chairman of the Board of UGI Corporation, as a director of subsidiaries of UGI Corporation, and as a director of Aqua America, Inc. Mr. Greenberg also currently serves as a director of Ameriprise Financial, Inc.

     
 

JANE E. HENNEY, M.D.
GRAPHIC

Age: 72
Lead Independent Director
since March 2016
Director since January 2002
                                                                    

Committees:

Executive

Serves ex officio on each of the Board's other committees

 

Principal Occupation, Business Experience and Directorships

Dr. Henney has served as our Board's Lead Independent Director since March 2016 and as a Director since January 2002. She has served as Home Secretary for the National Academy of Medicine since April 1, 2014. Dr. Henney was a Professor of Medicine at the College of Medicine at the University of Cincinnati from January 2008 until December 2012. She served as Senior Vice President and Provost for Health Affairs at the University of Cincinnati from July 2003 to January 2008 and was the Commissioner of Food and Drugs at the United States Food and Drug Administration from 1998 to 2001. Dr. Henney served as Vice President for Health Sciences at the University of New Mexico from 1994 to 1998. Dr. Henney previously served as a director of CIGNA Corporation from April 2004 until April 2018, AstraZeneca PLC from September 2001 to April 2011, Cubist Pharmaceuticals, Inc. from March 2012 to January 2014 and The China Medical Board from July 2004 until June 2019. Dr. Henney is a National Association of Corporate Directors (NACD) Board Leadership Fellow. Dr. Henney is a former member of the Board of The Commonwealth Fund and The Monnell Center for the Chemical Senses.

Key Attributes, Expertise, Experience and Skills:

Governance and Risk Oversight: Former director of CIGNA Corporation, AstraZeneca PLC and Cubist Pharmaceuticals, Inc., and is a NACD Board Leadership Fellow.

Healthcare Expertise: Provides in-depth knowledge and industry-specific perspective acquired through her experience as a medical oncologist, prominent government and academic posts, and tenure as director of pharmaceutical and insurance companies.

Regulatory: As a former Commissioner of Food and Drugs for the United States Food and Drug Administration, Dr. Henney has extensive insight into federal regulatory matters.

     
 

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2020 AmerisourceBergen Proxy   |  Corporate Governance and Related Matters

 

KATHLEEN W. HYLE
GRAPHIC

Age: 61
Director since May 2010        
                                                                  
Committees:

Compensation and Succession Planning

Compliance and Risk

Finance

 

Principal Occupation, Business Experience and Directorships

Ms. Hyle has served on our Board since May 2010. She served as Senior Vice President of Constellation Energy and Chief Operating Officer of Constellation Energy Resources from November 2008 until March 2012. Ms. Hyle served as Chief Financial Officer for Constellation Energy Nuclear Group and for UniStar Nuclear Energy, LLC from June 2007 to November 2008. Prior to joining Constellation Energy in 2003, Ms. Hyle served as the Chief Financial Officer of ANC Rental Corp., Vice President and Treasurer of Auto-Nation, Inc., and Vice President and Treasurer of Black & Decker Corporation. She is the Chair of the Board of Bunge Limited and a member of the Board of Trustees of Center Stage in Baltimore, MD. Ms. Hyle is a member in WKW LLC, a limited liability company and is a former member of the Board of Sponsors for the Loyola University Maryland Sellinger School of Business and Management.

Key Attributes, Expertise, Experience and Skills:

Financial Expertise: Provides critical insight into, among other things, financial statements, accounting principles and practices, internal control over financial reporting and risk management processes.

Governance and Risk Oversight: Current Chair of Bunge Limited and former director of The ADT Corporation.

Risk Management: Held senior management positions at Constellation Energy, ANC Rental Corp., and Black & Decker Corporation and brings extensive experience in management, operations, capital markets, international business, financial risk management and regulatory compliance.

     
 

MICHAEL J. LONG
GRAPHIC

Age: 61
Director since May 2006
                                                                    

Committees:

Compensation and Succession Planning (Chair)

Executive

Governance and Nominating

 

Principal Occupation, Business Experience and Directorships

Mr. Long has served on our Board since May 2006. He has served as the Chief Executive Officer of Arrow Electronics, Inc. since May 2009 and as Chairman of the Board since 2010. Previously, he served as President and Chief Operating Officer of Arrow Electronics, Inc. from February 2008 until May 2009 and as a Senior Vice President of Arrow Electronics, Inc. from January 2006 to February 2008. Since 2018, he has served as a member of the Board of Directors of UCHealth and of National Western Stock Show. He served as a member of the Board of Trustees of the Denver Zoo from 2010 until 2017.

Key Attributes, Expertise, Experience and Skills:

Financial Expertise: Brings relevant experience in the areas of finance, operations, management, leadership, strategic planning, executive compensation and global competition drawn from his current and prior leadership positions at Arrow Electronics, Inc.

Global Markets and Distribution Expertise: Contributes critical insight into international markets and has an in-depth knowledge of business and strategic opportunities for wholesale distribution.

Governance and Risk Oversight: Serves as Chairman, President and Chief Executive Officer of Arrow Electronics, Inc.

Information Technology: Familiarity with technology solutions and IT services through experience in electronic components industry.

     
 

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HENRY W. MCGEE
GRAPHIC

Age: 66
Director since November 2004
                                                                    

Committees:

Audit

Executive

Governance and Nominating (Chair)
                                                           

 

Principal Occupation, Business Experience and Directorships

Mr. McGee has served on our Board since November 2004. He is a Senior Lecturer at Harvard Business School, a position he has held since July 2013. From April 2013 to August 2013, Mr. McGee served as a Consultant at HBO Home Entertainment. Previously, Mr. McGee served as President of HBO Home Entertainment from 1995 until his retirement in March 2013. He served as Senior Vice President, Programming, HBO Video, from 1988 to 1995 and prior to that, Mr. McGee served in leadership positions in various divisions of HBO. Mr. McGee is the former President of the Alvin Ailey Dance Theater Foundation and the Film Society of Lincoln Center. He has served on the Boards of the Sundance Institute, the Public Theater, Save the Children and the Time Warner Foundation. He is currently a member of the Board of Tegna Inc., the Pew Research Center and the Black Filmmaker Foundation. He was recognized by Savoy Magazine in 2016 and 2017 as a member of the Power 300 list of the Most Influential Black Corporate Directors. In 2018, the National Association of Corporate Directors named Mr. McGee to the Directorship 100, the organization's annual recognition of the country's most influential boardroom members.

Key Attributes, Expertise, Experience and Skills:

Global Markets and Distribution Expertise: Contributes significant operational, marketing and wholesale distribution expertise and knowledge of international markets acquired in senior management and leadership roles during his long career with HBO.

Information Technology: Has a deep understanding of the uses of technology and application to marketing and media. Teaches courses on digital transformation.

Governance and Risk Oversight: Current director of Tegna Inc. and Pew Research Center. Has taught MBA courses on leadership and corporate accountability. Served as President of HBO Home Entertainment and in other leadership positions within HBO.

     
 

DENNIS M. NALLY
GRAPHIC

Age: 67
Director since January 2020    

                                                                  

 

Principal Occupation, Business Experience and Directorships

Mr. Nally joined our Board in January 2020. He served as Chairman of PricewaterhouseCoopers International Ltd., the coordinating and governance entity of the PwC network, from 2009 to 2016. From 2002 to 2009, he served as Chairman and Senior Partner of the U.S. firm PricewaterhouseCoopers LLP. He joined PricewaterhouseCoopers LLP in 1974 and became partner in 1985, serving in numerous leadership positions within the organization, including National Director of Strategic Planning, Audit and Business Advisory Services Leader and Managing Partner. Mr. Nally is a member of the board of Morgan Stanley and Globality, Inc.

Key Attributes, Expertise, Experience and Skills:

Financial Expertise: Has extensive knowledge of financial statements, accounting principles and practices, internal control over financial reporting and risk management processes.

Governance and Risk Oversight: Experience as a director at Morgan Stanley and as senior executive at PricewaterhouseCoopers provides Mr. Nally with expertise in highly regulated industries.

     
 

Board of Directors Vote Recommendation

We recommend that you vote For the election of each of the ten nominees named in this proxy statement to the Board of Directors.

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Non-Employee Director Compensation at 2019 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, which are identified on page 32. Our Governance and Nominating Committee reviews non-employee director compensation regularly to confirm that it appropriately addresses the time, effort, expertise, and accountability required of active board members.

The following table summarizes the total compensation earned by directors who were not employees of AmerisourceBergen during fiscal year 2019. 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.

    Name


  Retainer/
Fees
Earned or
Paid in
Cash
($)(1)






  Stock
Awards
($)(2)



  Option
Awards
($)(3)



  All Other
Compensation
($)(4)



  Total
($)

Ornella Barra(5)

         

Douglas R. Conant(6)

50,000 6,320 56,320

D. Mark Durcan

  100,000   175,000     6,320   281,320

Richard W. Gochnauer

113,750 175,000 6,320 295,070

Lon R. Greenberg

  123,750   175,000       298,750

Jane E. Henney, M.D.

125,000 200,000 7,582 332,582

Kathleen W. Hyle

  100,000   175,000     6,320   281,320

Michael J. Long

118,750 175,000 6,320 300,070

Henry W. McGee

  113,750   175,000     17,197   305,947

Dennis M. Nally(7)

(1)
These amounts include amounts earned for service as Committee Chairs and amounts deferred into our deferred compensation plan. In fiscal year 2019, Mr. Long received 1,410 shares of Common Stock in lieu of the retainer.

(2)
As of September 30, 2019, each of the non-employee directors held the following shares of outstanding restricted stock units: Ms. Barra—0; Mr. Conant—2,700; Mr. Durcan—4,801; Mr. Gochnauer—7,825; Mr. Greenberg—4,801; Dr. Henney—5,640; Ms. Hyle—4,801; Mr. Long—4,801; Mr. McGee—6,218; and Mr. Nally—0.

    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 2019. See Note 10 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 for assumptions used to estimate the fair values of restricted stock units granted during fiscal 2019.

(3)
No stock options were granted to directors in fiscal year 2019. As of September 30, 2019, each of the non-employee directors held outstanding stock options as follows: Ms. Barra—0; Mr. Durcan—0; Mr. Gochnauer—10,585; Mr. Greenberg—0; Dr. Henney—3,528; Ms. Hyle—19,932; Mr. Long—0; Mr. McGee—0; and Mr. Nally—0.

(4)
These amounts represent the dividends accrued and paid on restricted stock units that vested in fiscal year 2019. In addition, the amount shown for Mr. McGee also includes the value of prescription drug benefits provided to Mr. McGee and his spouse during fiscal year 2019.

(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.

(6)
Mr. Conant retired effective February 28, 2019, the date of the Annual Meeting of Stockholders. Mr. Conant's compensation reflects payment for a portion of fiscal year 2019. Due to his retirement, Mr. Conant did not receive the annual equity award of restricted stock units in 2019.

(7)
Mr. Nally was elected as a director in January 2020 and as such received no compensation throughout fiscal year 2019.

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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 32 for a description of our peer group.)


Compensation Element










2020 Compensation Program



Annual Retainer

      $100,000 Non-Employee Director
$125,000 Lead Independent Director

Annual Equity Award

    $175,000 Non-Employee Director
$200,000 Lead Independent Director
   

Chair Fee

      $25,000 Audit Committee
$20,000 Compensation and Succession Planning Committee
$25,000 Compliance and Risk Committee
$15,000 Finance Committee
$15,000 Governance and Nominating Committee

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 February 28, 2019, each of the non-employee directors (other than Ms. Barra, who waived compensation, and Mr. Nally, who was not yet appointed as director) 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.

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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 CEO 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 February 2019, 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 CEO 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 CEO, 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, Compensation and Succession Planning Committee, and Governance and Nominating 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:

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

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

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

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

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

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

serves on the Executive Committee;

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

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

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supports the Chair of the Governance and Nominating 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;

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

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.

Our Board conducts annual evaluations, under the oversight of our Governance and Nominating 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 CEO. 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 CEO 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 CEO in the future, commencing with the Company's next CEO. 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 and Nominating 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 Board's 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 and Nominating Committee. 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.

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 and Nominating 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 2020 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.

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Our Board has also determined that each of the members of our Audit Committee, Compensation and Succession Planning Committee and Governance and Nominating 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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The Board executes its oversight responsibility for risk management directly and through its committees, as follows:

    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 ("CFO") 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.

    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.

    In December 2019, our Board created a new Compliance and Risk Committee to assist 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. This new committee was created in furtherance of the Board's responsibility for oversight of the Company's businesses, including our long-standing commitment to ethics and compliance.

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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.

    The Board's other committees oversee risks associated with their respective areas of responsibility. For example, the Governance and Nominating 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.

    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, which 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 reported to the Audit Committee through fiscal year 2019, began reporting to the Compliance and Risk Committee in December 2019 and reports 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.

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 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:

    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;

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

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

    For fiscal year 2019, 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;

    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;

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

    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.

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Board Orientation and Education

We provide our directors with comprehensive orientation and continuing education, as needed, which is overseen by the Governance and Nominating 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. We 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 and Nominating Committee and our Lead Independent Director. As required by our corporate governance principles, the evaluation occurs annually. Either the Chair of our Governance and Nominating 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 2019, the interview process was led by the Lead Independent Director. 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 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 and Nominating 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 and Nominating Committee's recommendation; and

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

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Information on Board Committees

Audit Committee

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

    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.

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

    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).

    Prepares the audit committee report as required by SEC rules.

    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.

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

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

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

    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 CEO and executive management.

    Evaluates performance of management annually.

    Ensures that our executive compensation strategy supports stockholder interests.

    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.

    Prepares a compensation committee report as required by SEC rules.

    Administers and makes awards under our incentive compensation plans, including equity incentive plans.

    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 CEO or any other executive officer and for evaluating the independence of such consulting firm.

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

    Oversees the administration of our health and welfare plans.

    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.

    Assists the Board in its oversight of the Company's compliance with legal and regulatory requirements.

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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.

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

    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.

Finance Committee

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

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

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

    Reviews our dividend policy.

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

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

    Reviews proposed major capital expenditures or commitments.

    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 and Nominating Committee

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

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

    Recommends selection and qualification criteria for directors and committee members.

    Identifies and recommends qualified candidates to serve as directors of AmerisourceBergen.

    Considers nominees for directors recommended by stockholders.

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

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

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

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

    Reviews and makes recommendations to our Board regarding director compensation.

    Has sole authority for retaining and terminating any consulting firm used to assist in the evaluation of the compensation of directors and for evaluating the independence of such consulting firm.

    Monitors the Company's corporate citizenship function, including its sustainability and corporate responsibility practices and its support of charitable, educational and business organizations.

Director Attendance

Yes, average director attendance was 98% of the aggregate of (i) the total number of meetings of the Board of Directors held during fiscal 2019 and (ii) the total number of meetings held by each committee of the Board on which such person served during fiscal 2019. There were 6 meetings of the full Board of Directors during fiscal 2019 and the number of committee meetings held during fiscal 2019 is provided in the chart on page 3 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: John G. Chou, Executive Vice President, Chief Legal Officer 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 2019. 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 CEO, our Executive Vice President and CFO 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;

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

    Participation in numerous healthcare investor conferences with webcasted presentations;

    In-person meetings with investors and stakeholders;

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

    Conference calls, presentations and webcasts related to specific developments, as needed; and

    Our annual stockholders meeting.

Specifically, in 2019 we communicated with our largest stockholders in order to seek their input on a variety of topics. Following our 2019 annual meeting, we reached out to non-affiliated stockholders (i.e., stockholders other than Walgreens Boots Alliance, Inc.) who in the aggregate held 18% of our Common Stock (i.e., 25% 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. We also held phone calls with interested investors throughout 2019 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.

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Our corporate governance principles, which were most recently revised in December 2019, describe the procedures through which stockholders may seek direct engagement with Board members. While management, through our President and CEO, 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 John G. Chou, Executive Vice President, Chief Legal Officer 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 and Nominating 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: John G. Chou, Executive Vice President, Chief Legal Officer and Secretary, AmerisourceBergen Corporation, 1300 Morris Drive, Chesterbrook, Pennsylvania 19087, no earlier than November 5, 2020 and no later than December 5, 2020 to be considered for the 2021 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: John G. Chou, Executive Vice President, Chief Legal Officer and Secretary, AmerisourceBergen Corporation, 1300 Morris Drive, Chesterbrook, Pennsylvania 19087, no earlier than August 27, 2020 and no later than September 26, 2020 to be considered for the 2021 Annual Meeting of Stockholders. In considering any nominee proposed by a stockholder in accordance with the requirements set forth in our bylaws, the Governance and Nominating 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 Committee  |  2020 AmerisourceBergen Proxy

AUDIT COMMITTEE MATTERS

Item 2—Ratification of Appointment of Ernst & Young LLP as
AmerisourceBergen's Independent Registered Public Accounting Firm
For Fiscal Year 2020

What am I voting on?

You are voting on the ratification of the appointment of Ernst & Young LLP as AmerisourceBergen's independent registered public accounting firm for the fiscal year ending September 30, 2020. The Audit Committee of the Board of Directors has appointed Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal year 2020. Although our governing documents do not require the submission of the appointment of AmerisourceBergen's independent registered public accounting firm to the stockholders for approval, the Board considers it desirable that the stockholders ratify the appointment of Ernst & Young LLP. Should the stockholders not ratify the appointment of Ernst & Young LLP as AmerisourceBergen's independent registered public accounting firm for the fiscal year ending September 30, 2020, the Audit Committee will investigate the reasons and will reconsider the appointment of Ernst & Young LLP.

What is the oversight relationship between the Audit Committee and our external auditor?

Under its charter, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of AmerisourceBergen's external auditor. To execute this responsibility, the Audit Committee engages in a comprehensive annual evaluation of the external auditor's qualifications, performance and independence. In accordance with SEC rules, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to AmerisourceBergen. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The Audit Committee reviews the process that we and Ernst & Young LLP undertake to ensure the rotation of the audit partner responsible for reviewing the audit, and evaluates the qualifications and experience of the individual selected to serve as lead partner for our audit. Ernst & Young LLP has been retained as the external auditor of AmerisourceBergen since 2001 and of its predecessor entity AmeriSource Health Corporation since 1985. The members of the Audit Committee believe that the continued retention of Ernst & Young LLP to serve as our external auditor is in the best interests of AmerisourceBergen and its stockholders.

What services will the independent registered public accounting firm provide?

Audit services provided by Ernst & Young LLP for fiscal year 2020 will include examination of the consolidated financial statements of AmerisourceBergen and services related to periodic SEC filings. Audit services for fiscal year 2020 also will include the audit of the effectiveness of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002. Additionally, Ernst & Young LLP may provide audit-related, tax and other services comparable in nature to the services performed in fiscal years 2018 and 2019, as described under the heading "Independent Registered Public Accounting Firm's Fees."

Will representatives of the independent registered public accounting firm be present at the 2020 Annual Meeting of Stockholders?

Representatives of Ernst & Young LLP are expected to be present at the 2020 Annual Meeting of Stockholders. Such representatives will have an opportunity to make a statement and will be available to respond to appropriate questions.

How does the Board of Directors recommend that I vote?

We recommend that you vote For the ratification of the appointment of Ernst & Young LLP as AmerisourceBergen's independent registered public accounting firm for fiscal year 2020.

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Audit Committee Financial Experts

The Board of Directors has determined that each of Mr. Durcan and Mr. Greenberg 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. Greenberg accompanies their biographies on pages 11 and 12, 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, 2019 and 2018, Ernst & Young LLP, 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:

    Fee Category








Fiscal Year 2019








Fiscal Year 2018

Audit Fees

  $ 7,871,000   $ 7,185,000

Audit-Related Fees

$ 890,000 $ 577,000

Tax Fees

  $ 1,494,000   $ 2,173,000

All Other Fees

$ 5,000 $ 2,000

TOTAL

  $ 10,260,000   $ 9,937,000

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.

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 Ernst & Young LLP 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 Ernst & Young LLP 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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Report of the Audit Committee  |  2020 AmerisourceBergen Proxy

Report of the Audit Committee

The Audit Committee consists of the three directors named at the end of this report. All of the Audit Committee members are independent under SEC and NYSE rules and our corporate governance principles. The Board of Directors has concluded that each member is financially literate and that two of the members qualify as audit committee financial experts. The key responsibilities of the Audit Committee are set forth in its charter, which was most recently revised by the Board of Directors in December 2019. The Audit Committee is responsible for, among other matters, the appointment and retention of the independent auditor and in connection therewith annually considers the performance of Ernst & Young LLP (EY). The Audit Committee charter is available on our website at investor.amerisourcebergen.com.

AmerisourceBergen's management has the primary responsibility for the Company's financial statements and its internal control over financial reporting. AmerisourceBergen's independent registered public accounting firm, EY, is responsible for performing an independent audit of AmerisourceBergen's consolidated financial statements and for issuing a report on the effectiveness of AmerisourceBergen's internal control over financial reporting. The Audit Committee meets regularly with EY, with and without management present, to review the overall scope and plans for EY's audit work and to discuss the results of its examinations, the evaluation of AmerisourceBergen's internal control over financial reporting and the overall quality of AmerisourceBergen's accounting and financial reporting. AmerisourceBergen's management has represented to the Audit Committee that the financial statements contained in our Annual Report on Form 10-K for fiscal year 2019 were prepared in accordance with U.S. generally accepted accounting principles and that our internal control over financial reporting was effective as of September 30, 2019.

The Audit Committee reviewed and discussed with AmerisourceBergen's management and EY the audited financial statements contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 and our internal control over financial reporting. The Audit Committee discussed with EY, which is responsible for expressing an opinion on the conformity of the audited financial statements with U.S. generally accepted accounting principles, the firm's judgments as to the quality, not just the acceptability, of the Company's accounting principles, the reasonableness of significant judgments reflected in the financial statements and the clarity of disclosures in the financial statements. The Audit Committee also discussed with EY the matters related to the conduct of the audit that are required to be discussed with the Audit Committee under the standards of the Public Company Accounting Oversight Board (PCAOB), including the matters required to be discussed by the PCAOB Auditing Standard No. 1301, "Communication with Audit Committees." In addition, the Audit Committee discussed with EY the firm's independence from the Company and its management, including the matters in the written disclosures and letter that were received by the Audit Committee from EY as required by applicable requirements of the PCAOB regarding EY's communications with the Audit Committee concerning independence. The Audit Committee further considered whether the provision of non-audited related services by EY to the Company is compatible with maintaining the independence of that firm from the Company. The Audit Committee also discussed with EY the firm's audit of the effectiveness of the Company's internal control over financial reporting as of September 30, 2019.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in AmerisourceBergen's Annual Report on Form 10-K for fiscal year 2019.

  AUDIT COMMITTEE

 

D. Mark Durcan, Chair
Lon R. Greenberg
Henry W. McGee

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2020 AmerisourceBergen Proxy   |  Executive Compensation and Related Matters

EXECUTIVE COMPENSATION AND RELATED MATTERS

Compensation Discussion and Analysis

Overview

AmerisourceBergen Corporation is one of the largest global pharmaceutical sourcing and distribution services companies, helping both healthcare providers and pharmaceutical and biotech manufacturers improve patient access to products and enhance patient care. The purpose of our executive compensation program is to attract, motivate and retain the individuals who lead our Company and to align their interests with the long-term interests of our stockholders.

Our fiscal year 2019 named executive officers were:

Steven H. Collis   Chairman, President and Chief Executive Officer
James F. Cleary   Executive Vice President and Chief Financial Officer
John G. Chou   Executive Vice President, Chief Legal Officer and Secretary
Gina K. Clark   Executive Vice President and Chief Communications & Administration Officer
Robert P. Mauch   Executive Vice President and Group President
Tim G. Guttman   Former Executive Vice President and Chief Financial Officer

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 2019, incentive compensation (annual cash bonus and equity incentive awards) accounted for approximately 89% of our CEO's total direct compensation (base salary, annual cash bonus and equity incentive awards) and approximately 80% of the average total direct compensation of the other named executive officers.

 
   
CEO   Other NEOs

GRAPHIC

 

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2019 Say-On-Pay Vote

In fiscal 2019, we continued to emphasize our pay for performance culture. The compensation of our named executive officers was approved by stockholders in February 2019 with approximately 94% of stockholder votes cast in favor of our 2019 "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 and Succession Planning Committee (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 2019, 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 and reflect measures of performance that drive returns for our stockholders.

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Fiscal Year 2019 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:


Highlights of Our Executive Compensation Program—Linking Pay with Performance and Mitigating Risk

What We Do

  GRAPHIC   Use financial metrics to make a substantial portion of executive pay contingent on performance.

  GRAPHIC   Engage with stockholders on compensation and governance.

  GRAPHIC   Cap payouts under our annual cash bonus plan and performance share plans.

  GRAPHIC   Apply robust clawback obligations to annual cash bonus and equity awards for executive officers.

  GRAPHIC   Require our CEO to own stock equal in value to six times his base salary, and our CFO and other executive officers to own stock equal in value to three times their respective base salaries.

  GRAPHIC   Require executive officers to retain all options and equity grants until required ownership levels are met.

  GRAPHIC   Consider and implement, as appropriate, the advice provided by the independent compensation consultant to the Compensation Committee.

  GRAPHIC   Consider a peer group in establishing named executive officer compensation and published compensation survey data for all other executive officers.

  GRAPHIC   Prohibit short sales or hedging of our stock by our executive officers and directors.

  GRAPHIC   Require forfeiture of awards upon violation of restrictive covenants.

  GRAPHIC   Require a double-trigger for change in control payments.

  GRAPHIC   Consider burn rate in equity grant decisions and manage use of equity awards conservatively.

What We Do

  GRAPHIC   Tie incentive compensation to specific product sales, including prescription opioid medication sales.

Not Do

  GRAPHIC   Grant stock options with an exercise price lower than fair market value.

  GRAPHIC   Backdate or retroactively grant options or restricted stock units.

  GRAPHIC   Pay dividends on unearned and unvested performance shares.

  GRAPHIC   Reprice stock options.

  GRAPHIC   Provide tax gross-ups in the event of a change in control.
   

2019 Fiscal Year Business Highlights

The Company delivered solid performance in fiscal year 2019 driven by our continued growth in specialty distribution, increased volume from some larger customers, and growth in the MWI Animal Health business. The Company continued to invest in and provide innovative services and solutions to our manufacturer and provider customers, with a focus on enhancing efficiency and customer experience. The following fiscal year 2019 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.

    Revenue of $179.6 billion, representing a 6.9% increase over prior year revenue.

    Diluted earnings per share of $4.04, compared to $7.53 in the prior year.

    Adjusted diluted earnings per share ("adjusted EPS") of $7.09, representing a 9.2% increase over prior year adjusted EPS.1,2

    Gross profit of $5.1 billion, representing a 11.4% increase over prior year gross profit.

    Adjusted gross profit of $5.0 billion, representing a 5.7% increase over prior year adjusted gross profit.1

    Operating income of $1.1 billion, representing a 23.0% decrease over prior year operating income.

    Adjusted operating income of $2.1 billion, representing a 3.5% increase over prior year adjusted operating income.1

    Operating income margin of 0.62%, representing a decrease of 24 basis points over prior year operating income margin.

    Adjusted operating income margin of 1.14%, representing a decrease of 4 basis points over prior year adjusted operating income margin.1

    Net cash provided by operating activities of $2.3 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 2019 through $339.0 million in dividends and $674.0 million in stock repurchases.

    Invested $310.2 million in the Company through capital expenditures.

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, 2019.

2
As described below, in determining whether the adjusted EPS performance target had been met for purposes of determining the eligibility and amounts of awards of short-term incentive compensation, the Compensation Committee excluded the impact of stock repurchases above the amount planned when the performance thresholds and targets were established.

2019 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 2019:

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

    Established fiscal year 2019 performance goals for our annual cash bonus plan, including a target adjusted EPS of $7.05 per share, a target adjusted operating income range of $2.04 billion to $2.11 billion, and a target adjusted free cash flow of $1.48 billion at the corporate level. 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.)

    Set target incentive levels for fiscal year 2019 cash bonuses of 150% of base salary for the CEO and of 100% of base salary for the other named executive officers.

    Approved fiscal year 2019 cash bonus payouts that were paid at 100.4% of target to all of our named executive officers.

    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. The grant value of each annual equity award was divided among performance shares (50%), stock options (30%) and restricted stock units (20%).

    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 2019 (covering the three-year performance period ending September 30, 2021). (See "Performance Share Awards—Payout of FY17-FY19 Performance Shares" below for more information about Average Annual Adjusted ROIC.)

We believe that the fiscal year 2019 compensation of our executive officers was aligned with AmerisourceBergen's fiscal year 2019 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.

Our peer group is composed 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.

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In fiscal year 2019, the Compensation Committee, in consultation with its independent compensation consultant, evaluated our peer group to ensure that our peer group companies remained appropriate. Following its review, the Compensation Committee concluded that our current peers remained reasonable. However, for fiscal year 2020, Express Scripts Holding Company was removed from our peer group as it was acquired by Cigna Corporation in December 2018. Our 2019 peer group, as determined by the Compensation Committee, is as follows:

  2019 Peer Group

 


    Abbott Laboratories
    Cardinal Health, Inc.
    CVS Health Corporation
    Eli Lilly and Company
    Express Scripts Holding Company
    FedEx Corporation








    HCA Healthcare, Inc.
    Henry Schein, Inc.
    IQVIA Holdings Inc.
    The Kroger Co.
    Laboratory Corporation of America
    McKesson Corporation








    Mylan N.V.
    Quest Diagnostics Incorporated
    Sysco Corporation
    Target Corporation
    United Parcel Service, Inc.
    Walgreens Boots Alliance, Inc.








In fiscal year 2019, the Compensation Committee reviewed 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 2019 remained aligned with our pay for performance compensation philosophy.

Target Percentile Compensation Opportunity

Our compensation program targets executive officer pay relative to our peer group as follows:

    
Base Salary





    Total Cash Compensation
(Base Salary + Cash Bonus)


    Total Direct Compensation
(Base Salary + Cash Bonus + LTI)

35th percentile of peer group

      50th percentile of peer group       50th percentile of peer group

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


Pay Element










Award Type









 

Purpose









 

Fixed vs. Variable









 

Performance Measure

Base Salary

     

Cash

     

Provide a regular stream of income and security

     

Fixed

     

The Compensation Committee takes into account job performance, scope of role, duties and responsibilities, expected future contributions, peer group and other market pay data.

Short-Term Incentive

 

 

Cash

 

 

Motivate executives to improve financial performance year-over-year

Reward executive officers who deliver targeted financial results

 

 

Variable

 

 

Actual payout based on Company performance.

               

Long-Term Incentives

     

Performance Shares, Restricted Stock Units and Stock Options

     

Motivate executive officers to achieve superior business results over long-term

Enhance alignment between management and stockholder interests

Support stock ownership requirements

     

Variable

     

Actual value is determined by Company performance over a three-year time frame and/or linked to stock price.

Base Salary

We target base salary in the 35th percentile for similar positions in our peer group. By positioning base salary below our peer median, we place greater emphasis on incentive compensation for our executive officers. In fiscal year 2019, Mr. Cleary received an increase to his base salary of 13% in connection with his promotion to CFO. None of our other named executive officers, including our CEO, received increases to base salaries.

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FY2019 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 2019, the key performance metrics for Messrs. Collis, Cleary and Chou and Ms. Clark were the Company's adjusted EPS and the Company's adjusted operating income. In 2019, the key performance metrics for Mr. Mauch were the Company's adjusted EPS and operating income of the Company's Pharmaceutical Distribution & Strategic Global Sourcing businesses. 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 2018, the Compensation Committee approved the following corporate-level performance goals for our fiscal year 2019 cash incentive plan:

    Corporate Performance Measure(1)




    ​Threshold




    ​Target




    ​Actual

Adjusted EPS

      $6.12       $7.05       $7.06 (2)

Adjusted Operating Income

    $1.84 billion     $2.04 billion - $2.11 billion     $2.05 billion
           

Adjusted Free Cash Flow

      $1.23 billion       $1.48 billion       $1.94 billion
(1)
See Appendix A to this proxy statement for additional information regarding non-GAAP financial measures, including GAAP to non-GAAP reconciliations.

(2)
As described below, in determining whether the adjusted EPS performance target had been met for purposes of determining the eligibility and amounts of awards of short-term incentive compensation, the Compensation Committee excluded the impact of stock repurchases above the amount planned when the performance thresholds and targets were established.

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. In fiscal 2019, in determining whether the adjusted EPS performance target had been met for purposes of determining the eligibility and amount of awards of short-term incentive compensation, the Compensation Committee excluded the impact of stock repurchases above the amount planned when the performance thresholds and targets were established. As a result, we used adjusted EPS of $7.06 to determine awards under our cash incentive plan for fiscal year 2019, rather than the Company's adjusted EPS of $7.09.

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.

The Compensation Committee determined not to increase adjusted operating income and adjusted free cash flow targets in fiscal year 2019 over the targets chosen for fiscal year 2018 due to previously disclosed challenges related to the Company's subsidiary PharMEDium.

AmerisourceBergen exceeded the target on the adjusted EPS and adjusted free cash flow performance metrics and achieved, but did not exceed, the target on the adjusted operating income performance metric. As a result, the bonus payout for corporate-level metrics was, in the aggregate, approximately 100.4% of the target incentive amount.

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Target and actual fiscal year 2019 cash bonuses for our named executive officers were as follows:


Target Incentive


         

Name


  2019 Base
Salary
($)



  Percent of
Base Salary
(%)



  Target
Amount
($)



  Maximum Bonus
Potential
($)



  Percentage
Payout versus
Target Incentive
(%)




  Actual Bonus
Payout
($)

Steven H. Collis

  1,240,000   150   1,860,000   3,720,000   100.4 %   1,866,596

James F. Cleary

650,000 100 650,000 1,300,000 100.4 % 652,305

John G. Chou

  660,000   100   660,000   1,320,000   100.4 %   662,340

Gina K. Clark

500,000 100 500,000 1,000,000 100.4 % 501,773

Robert P. Mauch

  675,000   100   675,000   1,350,000   100.4 %   677,394

The fiscal year 2019 cash bonuses for Messrs. Collis, Cleary and Chou and Ms. Clark 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 30% of the total target incentive and adjusted free cash flow weighted at 40% of the total target incentive. Additionally, because AmerisourceBergen exceeded the target range on the adjusted EPS performance metric, which was one of two key performance metrics for Messrs. Collis, Cleary and Chou and Ms. Clark, each of Messrs. Collis, Cleary, Chou and Ms. Clark received a stretch bonus to the extent that adjusted EPS exceeded the target range.

During fiscal year 2019, the Company's Pharmaceutical Distribution & Strategic Global Sourcing businesses reported to Mr. Mauch. As such, the fiscal year 2019 cash bonus for Mr. Mauch was based on the following metrics and weighting: 30% on the Company's adjusted EPS; 20% on the Company's adjusted operating income; 30% on the operating income of the Pharmaceutical Distribution & Strategic Global Sourcing businesses; and 20% on the free cash flow of the Pharmaceutical Distribution & Strategic Global Sourcing businesses (see Appendix A for additional information regarding the non-GAAP financial measure of free cash flow of the Pharmaceutical Distribution & Strategic Global Sourcing businesses). The Compensation Committee believes this mix appropriately linked pay to the operating responsibilities of Mr. Mauch while also aligning his goals with the broader organization. The Compensation Committee chose operating income of the Pharmaceutical Distribution & Strategic Global Sourcing businesses because it is the primary indicator of profitability and emphasizes our drive toward efficiency in our operations, and it chose free cash flow to focus on capital efficient growth. The 2019 stretch bonus for Mr. Mauch was based on the Company's adjusted EPS and the operating income of the Pharmaceutical Distribution & Strategic Global Sourcing businesses.

The goals for Mr. Mauch were intended to be challenging and to provide an incentive for him to drive the businesses he oversaw during the fiscal year to help achieve our strategic objectives. The Company's objectives for the Pharmaceutical Distribution & Strategic Global Sourcing businesses included driving customer experience, continuing to diversify services provided to manufacturers and customers, and adapting to pricing changes in the industry. In fiscal year 2019, the businesses in Pharmaceutical Distribution & Strategic Global Sourcing achieved target for operating income and exceeded target for free cash flow.

The Compensation Committee did not exercise any discretion to increase or decrease the size of named executive officers' cash bonuses for fiscal year 2019. Mr. Guttman was not eligible for a short-term incentive bonus in fiscal year 2019 in connection with his retirement from the position of Executive Vice President and CFO on November 9, 2018.

Looking Ahead: Fiscal Year 2020 Cash Bonus

In November 2019, the Compensation Committee approved performance measures for our fiscal year 2020 annual cash incentive plan. In 2020, 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 increase or reduce any portion of a calculated award for reasons including, but not limited to, issues that may positively or negatively impact the Company. In fiscal 2020, all named executive officers' cash bonus opportunities will be based on the Company's adjusted EPS, adjusted operating income and adjusted free cash flow.

Performance goals are intended to be challenging and to provide an incentive to achieve the goals set out in our fiscal year 2020 business plan and the strategic and other priorities established by our long-range plan. The fiscal year 2020 target incentive level for the CEO is 150% 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. These target amounts are unchanged from 2019.

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2020 AmerisourceBergen Proxy   |  Executive Compensation and Related Matters

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. The allocation of the annual equity award for our executive officers is 50% in performance shares, 30% in stock options and 20% in restricted stock units. This mix provides an incentive to achieve favorable long-term results at a reasonable cost to the Company. Long-term equity incentives are awarded under our Omnibus Incentive Plan.

In fiscal year 2019, we awarded our named executive officers 87,072 target performance shares, options to purchase 251,656 shares of our Common Stock and 34,830 restricted stock units of our Common Stock. These awards represented approximately 21% of the total equity incentives granted to management and other employees in fiscal year 2019. We believe that it was appropriate to award approximately 21% 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 72% of Mr. Collis's total direct compensation and approximately 60%, on average, of the total direct compensation of the other named executive officers in fiscal year 2019.

In approving fiscal year 2019 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.

For the FY17 - FY19 performance period, a participating executive officer had the opportunity to earn a payout of between 0% and 150% of his or her target award. For the FY19 - FY21 performance period, 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 would result in a share payout equal to 150% of the target award for the FY17 - FY19 performance period and 200% of the target award for the FY19 - FY21 performance period. Each of our named executive officers was an executive officer of the Company when performance share awards were granted in fiscal year 2017. Accordingly, each named executive officer received performance shares for the FY17 - FY19 performance period.

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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 is calculated by dividing after-tax adjusted operating income by invested capital. We use average annual adjusted ROIC to encourage our executive officers to grow our Company's profitability.

Payout of FY17 - FY19 Performance Shares

In November 2019, the Compensation Committee approved the vesting and payment of the FY17 - FY19 performance shares at 22.1% of their target award level. The Compensation Committee's determination was based on AmerisourceBergen's achievement of a Compound Annual Adjusted EPS growth rate of 8.05% and an Average Annual Adjusted ROIC of 16.53%, in each case, for the three-year performance period ended September 30, 2019. (See the footnotes to the table below for how these non-GAAP performance measures are calculated.)

The award metrics for the FY17 - FY19 performance share awards were as follows:

               
Threshold


  Target
  Maximum
  Actual
Performance
                                   

Metric


    Weighting
    Baseline
    Goal
    Payout
Ratio