Throughout locations across the world, all 32,000 McKesson employees are united by what is arguably the most important work of our generation: creating a healthcare system where quality is higher and costs are lower, clinicians have access to the information they need to make the right decisions, and patients are better informed and can take a more active role in their treatment.

McKesson employees often cite our ICARE shared principles as something that makes our company different from places where they have worked in the past. The core values guide each of us in our daily work and frame our commitment to investing in our employees' careers at McKesson. We believe in creating a safe and secure working environment for our employees, rewarding employees for their contribution to the company's success through a robust compensation and benefits program, and investing in employees' individual development and growth.

Creating Opportunities: It Starts With You

At the heart of McKesson are the people who commit to improving the healthcare system. Creating employment opportunities for people is one of the ways that we contribute most substantially to the communities where we operate. For the period covered in this report, an average 294,000 people applied for jobs with McKesson per year, and we hired an average of 7,000 new employees per year. As we stress to all new recruits, transforming the healthcare system starts with you.

We recognize, however, that a deeper understanding of our recruiting function's impact not only helps us become more thoughtful about our own hiring needs, but can also help us target specific populations with appropriate employment opportunities. In Fiscal Year 2009, we piloted a relational recruiting model which will help us create more meaningful relationships with candidates throughout the recruiting process and beyond. This model will help us develop meaningful careers for those candidates who join McKesson as employees and will also help us maintain strong relationships with candidates who might be strong fits with future job opportunities.

Employee Benefits and Compensation

McKesson recognizes the importance of providing world-class benefits to our employees. Our benefits offerings provide employees with the resources and tools they need to thrive both in their jobs and their everyday lives. The employee benefits in this chart include some of our more notable benefits offerings.

Our goal is to empower employees to use the benefits they most need and to take an active part in managing their own lives and careers. We put employees at the center of our robust benefits offering, providing tools and resources to help them fulfill their potential.

• You. Even Better. 2009 Employee Benefits
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One way that we measure the success of our benefits offerings is to survey our employees. In our employee opinion survey, McKesson employees are asked how McKesson's benefits compare to other companies and if the benefits program fits their needs. In 2009, our employees rated McKesson benefits nine points higher than the global high performing company benchmark. In fact, McKesson has exceeded this benchmark annually for several years running.

McKesson also considers compensation to be a vital tool for communicating performance expectations, improving productivity and rewarding employees for their contributions to the company's success. We believe that our competitive compensation program helps to attract, retain and motivate a high-performance workforce; gives employees the opportunity to share in ownership of the company; and remains flexible enough to meet the different needs of our diverse employee population.

Retirement Benefits

In addition to providing meaningful employment, McKesson hopes to provide our employees with means to be self-sufficient when they retire from the company by offering an array of retirement options that will contribute to a more secure financial future. As a result, employees can take a thoughtful approach in planning for their retirement needs.

Two of the benefits that help ease employees into retirement are the Profit-Sharing Investment Plan (PSIP) and the Employee Stock Purchase Plan (ESPP) as described in our 2007 Corporate Citizenship Report. McKesson also provides a defined benefit retirement plan for some current and former employees. According to our most recent filing with the IRS, coving calendar year 2007, 1,453 individuals are active participants in the plan. The plan, funded through a separate trust, is no longer available to new McKesson employees.

Investing in Successful Careers

One of McKesson's strategic priorities is to ensure our employees are excited about their careers. We invest heavily in employee growth and development. We do everything possible to help employees grow and learn through rewarding job assignments and one-on-one development with their managers. In fact, 49% of our employees have been with the company five years or more while 26% have been with the company for 10 years or more.

Our performance management process serves as a structure to aid employee-supervisor collaboration and ensures high rewards for strong performance. The goals of this performance management process are to:

• Create consistency across the business for managing, measuring and developing individual performance
• Align individual objectives and expectations with business goals
• Measure what individuals achieve and how they achieve it
• Foster employee development and coaching by encouraging open communication between supervisors and employees
• Differentiate rewards based upon performance results and competencies
• Recognize the relative contribution of individuals

In Fiscal Year 2008, 88% of our employees received a formal, year-end performance evaluation. In Fiscal Year 2009, the percentage of employees who received a formal, year-end performance evaluation increased to 95%.

Opportunities for Continued Learning

Complementing our performance management process are learning opportunities offered by the McKesson Center for Learning, our centralized training and development group. In a typical year, the McKesson Center for Learning offers approximately 650 instructor-led classes to McKesson managers and individual contributors. Employees are encouraged to use this rich resource to keep their skills current, expand their own knowledge and prepare themselves for the next step in their careers.

We understand that not all employees may be able to take advantage of the McKesson Center for Learning's instructor-led classes, so employees may also take advantage of thousands of online technical and business courses.

In Fiscal Year 2008, the McKesson Center for Learning delivered more than 200,000 hours of management, professional and technical training. In Fiscal Year 2009, the number of hours fell to 165,000. We believe this decrease is due to reduced departmental budgets and to the fact that many employees had already participated in our signature LEAD the Way curriculum.

With this in mind, we updated our LEAD the Way leadership certification program in Fiscal Year 2009. This program, targeting mid-level managers and all supervisors, has been divided into modules so that employees may enhance their skills by following their own unique paths.

Each of the 22 LEAD the Way classes develops core competencies and core skills; the chart below illustrates how courses develop particular competencies and skills.

• View LEAD the Way competency map

In addition to the courses offered by the McKesson Center for Learning, employees may receive specific business unit or job function-related training throughout their careers. Presently, we do not have a mechanism to capture all the training opportunities offered by McKesson as a whole.

McKesson also continues to offer an educational assistance program, which provides financial assistance to employees who want to enhance their competencies and career growth within the company by taking advantage of external continuing education opportunities. McKesson will reimburse $5,250 annually for full-time employees in all business units, with no lifetime maximum. In 2008, McKesson disbursed $2.6 million toward tuition assistance for the 1,248 employees who participated in this benefit.

Diversity and Inclusion

McKesson's commitment to diversity and inclusion reflects a deep-seated understanding that diversity is a business imperative. It is key to helping us attract the best and brightest employees. Fostering and embracing cultural competence will also help us execute our business strategies, innovate and maintain our competitive edge.

We believe that McKesson's employee population reflects substantial gender and racial diversity, and we continue to look for opportunities to improve as communities become more diverse.

• Gender and People of Color Representation within McKesson U.S. Workforce
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At the heart of our diversity and inclusion efforts are corporate policies that reinforce our ICARE shared principles. All McKesson employees are expected to uphold our Equal Employment Opportunity, Affirmative Action policy and the McKesson Anti-Harassment Policy. Employees are encouraged to report infractions against these policies to their managers or to Human Resources. To protect employees who fear possible repercussions for reporting violations to these policies, we provide an anonymous hotline to which employees may report policy violations.

We recognize that diversity and inclusion extend well beyond basic policies and have built a foundation to fully integrate diversity and inclusion into our business practices and to assess and reassess our progress. In Fiscal Year 2009, the Diversity and Inclusion team, led by our Corporate Diversity Officer, focused on building out the company's diversity and inclusion strategy in order to integrate diversity and inclusion into our business strategies and to foster a workplace that respects the many ways we are different from one another. In doing so, it encourages each employee to contribute to his or her fullest potential.

From a diversity governance standpoint, our Chairman's Diversity Council defines and implements the company's diversity strategy and reports of diversity developments are provided to the Board of Directors. We also have established Business Unit Champions and a Diversity Advisory Board with a mandate to integrate and align diversity and inclusion efforts across the enterprise.

Our Diversity Training

In the fourth quarter of Fiscal Year 2009, McKesson launched a new diversity training program entitled Leading Diversity and Inclusion at McKesson. This class focuses on enhancing cultural awareness and developing diversity management skills to help drive effective decision-making and business outcomes. Designed to help participants develop a skill-set to address diversity challenges, the program includes problem-solving and features individual action plan development. It provides practical skills and techniques that serve to bridge the gap between classroom learning and real-world application.

By the end of Fiscal Year 2009, most of our top 200 executives and Human Resources team had completed the new training program, with a satisfaction rate of 91%. We will roll out Leading Diversity and Inclusion at McKesson to all people managers in Fiscal Year 2010 and by the end of Fiscal Year 2011.

Diversity and Inclusion Goals

Although we have some employee network groups in various businesses and locations, in Fiscal Year 2010, we plan to formally launch Employee Network Groups across the company. Employee Network Groups foster employee professional personal development, support company goals and strengthen our ICARE shared principles. The first group, a women's network group, will be formed in Fiscal Year 2010 and Laureen Seeger, EVP and General Counsel, will serve as the group's executive sponsor.

Also in Fiscal Year 2010, the Diversity and Inclusion team will continue to partner with Talent Acquisition to enhance our diverse talent sourcing efforts to provide managers with more diverse slates of candidates for open positions. Building diverse candidate slates will not only ensure that our employee population remain diverse but also will help give hiring managers access to the best and brightest talent in the marketplace.

Creating a Safe and Healthy Work Environment

We discuss safety and security more than many other companies because these priorities are critical to the success of our company. McKesson's job is to help ensure the safety and security of our nation's pharmaceutical supply chain, from the loading dock to the patient's bedside. As a result, we consider safety and security an essential part of our company's culture.

Our Corporate Security and Safety department continually assesses the physical, electronic and procedural security risks within McKesson's businesses to develop cost-effective, threat-based security measures. We also provide employee education and training to both raise awareness of issues such as workplace violence and emergency preparedness and encourage employees to actively promote a secure environment through their everyday actions and decisions.

In Fiscal Year 2009, we implemented a series of employee health and safety initiatives to increase safety awareness among employees and to prevent injuries and accidents. Some key components of these initiatives include:

• A comprehensive, enterprise-wide Employee Health and Safety Program
• Standard Operating Procedures to clarify safety roles and responsibilities throughout the organization and to provide guidance on safety policies
• A safety performance scorecard with standardized metrics throughout the company
• A reward and recognition program to help communicate and celebrate outstanding safety performance.

In Fiscal Year 2009, we were proud to recognize 15 facilities that operated 12 consecutive months without an employee injury that resulted in lost work time. In addition, 11 facilities were honored for perfect Safety Performance Index (SPI) scores of 100. The SPI is a measurement of overall safety excellence based on a 0-100 scale.

We reduced overall employee injuries from Fiscal Year 2008 to Fiscal Year 2009 by 3%. Moreover, we did not have a single OSHA citation or fine in 2008.

It is important for us to continue our strong record of safety and security in the coming years. To this end, we are developing a mobile audit tool to better collect and manage safety and security performance data. In addition to data management improvements, we are enhancing our employee training offerings with additional workplace safety modules and workplace violence modules for both individual contributors and managers.