Eli Lilly 2008 Annual Report Download - page 119

Download and view the complete annual report

Please find page 119 of the 2008 Eli Lilly annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

PROXY STATEMENT
117117
The Council of Institutional Investors recommends adoption of simple majority voting. The Council also rec-
ommends timely adoption of shareholder proposals upon receiving their fi rst 51% or higher vote.
Please encourage our board to respond positively to this proposal and take the steps necessary to adopt a
simple majority voting standard.
Statement in Opposition to the Proposal on Eliminating Supermajority Voting Provisions from the Company’s
Articles of Incorporation and Bylaws
The board of directors believes that this proposal is not in the best long-term interests of the shareholders and
recommends that you vote against it.
The supermajority vote requirements were approved by shareholders and are very limited.
Nearly all proposals submitted to a vote of shareholders can already be adopted by a simple majority vote. How-
ever, in 1985 the company’s shareholders voted to increase the approval requirement established in the articles
of incorporation for a few fundamental corporate actions. These actions, which require the approval of at least 80
percent of the outstanding shares, relate to:
• terms of offi ce of directors (i.e., the classifi ed board structure)
• removal of directors prior to the end of their elected term
•
the amendment of the articles of incorporation’s provisions relating to the terms of offi ce and removal of directors
• merger, consolidation, recapitalization, or certain other business combinations that are not approved by the
board of directors
• the amendment of the articles of incorporation’s provisions relating to such mergers and business combinations.
Under Item 3 of this proxy statement the board is recommending a vote to provide for annual election of directors.
If Item 3 is successful, the only signifi cant matters that would require an 80 percent vote would be (i) removal of
directors other than through the annual election process and (ii) approval of mergers and business combinations
that are opposed by the board. These are rare and dramatic corporate actions that should not be undertaken with-
out the approval of a very large majority of shareholders.
The vote requirements help the board preserve long-term value for shareholders in the face of short-term
opportunistic threats.
The board believes that in adopting these supermajority voting provisions, the 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 who would seek to make fundamental changes to the company without the
involvement of the board of directors.
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 unsolicited bid to take over or restructure the company, these
supermajority voting provisions encourage bidders to negotiate with the board and give the board substantial
bargaining leverage. The provisions also give the board valuable time to consider alternative proposals that might
provide greater value for all shareholders.
The board believes that these supermajority voting provisions protect all shareholders by making it more dif-
fi cult for one or a few large shareholders to restructure the company to further a special interest, or to take control
of the company, without negotiating with the board to assure that the best results are achieved for all shareholders.
In today’s troubled markets, takeover defenses are especially important.
In our analysis, the evidence does not support the view that large-scale pharmaceutical mergers have produced
sustained operating performance, competitive advantage, or superior returns for shareholders. Thus, under any
circumstances—and especially during a period of depressed stock prices—it is important that a board be able to
respond to opportunistic takeover bids from a position of strength, ensuring that the outcome is in the best inter-
ests of the company and all shareholders.
The board recommends that you vote AGAINST this proposal.