Eli Lilly 2007 Annual Report Download - page 114

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PROXY STATEMENT
112112
“High Concern” in Executive Pay.
• No shareholder right to:
1) Cumulative voting.
2) To act by written consent.
3) To call a special meeting.
• Five of our directors were potentially confl icted:
Mr. Bischoff
Mr. Prendergast
Mr. Feldstein
Mr. Fyrwald
Mr. Gilman
Additionally:
• Three directors were designated “Accelerated Vesting” directors by The Corporate Library—due to a director’s
involvement with a board that accelerated stock option vesting in order to avoid recognizing the corresponding
expense:
Mr. Cook
Mr. Feldstein
Ms. Marram
• Poison pill with a 15% trigger.
• We had no independent Chairman—Independent oversight concern.
• Plus our lead director, Ms. Horn had 20-year tenure—Independence concern.
The above concerns shows there is room for improvement and reinforces the reason to take one step forward
now to encourage our board to respond positively to our 62%-support for this topic:
Adopt Simple Majority Vote—
Yes on 8
Statement in Opposition to the Proposal Regarding Adopting a Simple Majority Vote Standard
This proposal, which does not pertain to the election of directors, calls for the elimination of provisions in the
company’s articles of incorporation that require more than a simple majority vote for certain actions to be ap-
proved. The board of directors believes that this would not be in the best long-term interest of the shareholders
and recommends that you vote against it.
Most proposals submitted to a vote of the company’s shareholders can already be adopted by a simple ma-
jority vote. However, in 1985 the company’s shareholders voted to increase the approval requirement for a few
fundamental corporate actions. These actions, which require the approval of at least 80 percent of the outstanding
shares of stock entitled to vote, relate to:
• removal of directors
• the amendment of the articles of incorporation’s provisions relating to the terms of offi ce and removal of
directors 1
• merger, consolidation, recapitalization, or certain other business combinations involving the company that are
not approved by the board of directors
• the amendment of the articles of incorporation’s provisions relating to such mergers and other business
combinations.
The board believes that in adopting these supermajority voting provisions, shareholders intended to preserve
and maximize the value of Lilly stock for all shareholders by protecting against short-term, self-interested actions
by one or a few large shareholders. These provisions help ensure that important corporate governance rules are
not changed without the clear consensus of a substantial majority of stockholders that such change is prudent and
in the best interests of the company.
The board has a fi duciary duty under the law to act in a manner it believes to be in the best interests of the
company and its shareholders. In the event of an unfriendly or unsolicited bid from one or a few large shareholders
to take over or restructure the company, these supermajority voting provisions encourage bidders to negotiate with
the board on behalf of all shareholders. In addition, they allow the board time and bargaining leverage to consider
1 Under Item 3, the board is recommending that the shareholders approve amendments to these provisions that would establish annual election of direc-
tors.