Eli Lilly 2007 Annual Report Download - page 74

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PROXY STATEMENT
7272
upon request to the company’s corporate secretary.
The audit committee and public policy and compliance committee assist in the board’s oversight of compliance
programs with respect to matters covered in the code of ethics.
V. Functioning of the Board
Executive Session of Directors
The independent directors meet alone in executive session at every regularly scheduled board meeting. In addition,
at least twice a year, the independent directors meet in executive session with the chief executive offi cer.
Presiding Director
The board appoints a presiding director from among the independent directors (currently Ms. Horn). The presiding
director:
• leads the board’s process for selecting and evaluating the chief executive offi cer;
• presides at all meetings of the board at which the chairman is not present, including executive sessions of
the independent directors unless the directors decide that, due to the subject matter of the session, another
independent director should preside;
• serves as a liaison between the chairman and the independent directors;
• approves meeting agendas and schedules and generally approves information sent to the board; and
• has the authority to call meetings of the independent directors.
Confl icts of Interest
Occasionally a director’s business or personal relationships may give rise to an interest that confl icts, or appears
to confl ict, with the interests of the company. Directors must disclose to the company all relationships that cre-
ate a confl ict or an appearance of a confl ict. The board, after consultation with counsel, takes appropriate steps
to ensure that all directors voting on an issue are disinterested. In appropriate cases, the affected director will be
excused from discussions on the issue.
To avoid any confl ict or appearance of a confl ict, board decisions on certain matters of corporate governance
are made solely by the independent directors. These include executive compensation and the selection, evaluation,
and removal of the chief executive offi cer.
Review and Approval of Transactions with Related Persons
The board has adopted a written policy and written procedures for review, approval, and monitoring of transac-
tions involving the company and “related persons” (directors and executive offi cers, their immediate family mem-
bers, or shareholders owning fi ve percent or greater of the company’s outstanding stock). The policy covers any
related-person transaction that meets the minimum threshold for disclosure in the proxy statement under the
relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has
a direct or indirect material interest).
Policy
• Related-person transactions must be approved by the board or by a committee of the board consisting solely
of independent directors, who will approve the transaction only if they determine that it is in the best interests
of the company. In considering the transaction, the board or committee will consider all relevant factors,
including as applicable (i) the company’s business rationale for entering into the transaction; (ii) the alternatives
to entering into a related-person transaction; (iii) whether the transaction is on terms comparable to those
available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential
for the transaction to lead to an actual or apparent confl ict of interest and any safeguards imposed to prevent
such actual or apparent confl icts; and (v) the overall fairness of the transaction to the company.
• The board or relevant committee will periodically monitor the transaction to ensure that there are no changed
circumstances that would render it advisable for the company to amend or terminate the transaction.
Procedures
• Management or the affected director or executive offi cer will bring the matter to the attention of the chairman,
the presiding director, the chair of the directors and corporate governance committee, or the secretary.
• The chairman and the presiding director shall jointly determine (or, if either is involved in the transaction, the
other shall determine in consultation with the chair of the directors and corporate governance committee)
whether the matter should be considered by the board or by one of its existing committees consisting only of