Eli Lilly 2008 Annual Report Download - page 79

Download and view the complete annual report

Please find page 79 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
7777
Highlights of the Company’s Corporate Governance Guidelines
The board of directors has established guidelines that it follows in matters of corporate governance. The following
summary provides highlights of those guidelines. A complete copy of the guidelines is available online at
h ttp://investor.lilly.com/governance.cfm or in paper form upon request to the company’s corporate secretary.
I. Role of the Board
The directors are elected by the shareholders to oversee the actions and results of the company’s management.
Their responsibilities include:
• providing general oversight of the business
• approving corporate strategy
• approving major management initiatives
• providing oversight of legal and ethical conduct
• overseeing the company’s management of signifi cant business risks
• selecting, compensating, and evaluating directors
• evaluating board processes and performance
• selecting, compensating, evaluating, and, when necessary, replacing the chief executive offi cer, and
compensating other executive offi cers
• ensuring that a succession plan is in place for all senior executives.
II. Composition of the Board
Mix of Independent Directors and Offi cer-Directors
There should always be a substantial majority (75 percent or more) of independent directors. The chief executive
offi cer should be a board member. Other offi cers may, from time to time, be board members, but no offi cer other
than the chief executive offi cer should expect to be elected to the board by virtue of his or her offi ce.
Selection of Director Candidates
The board is responsible for selecting candidates for board membership and for establishing the criteria to be
used in identifying potential candidates. The board delegates the screening process to the directors and corporate
governance committee. For more information on the director nomination process, including the current selection
criteria, see “Directors and Corporate Governance Committee Matters” on pages 85–86.
Independence Determinations
The board annually determines the independence of directors based on a review by the directors and corporate
governance committee. No director is considered independent unless the board has determined that he or she has
no material relationship with the company, either directly or as a partner, shareholder, or offi cer of an organization
that has a material relationship with the company. Material relationships can include commercial, industrial, bank-
ing, consulting, legal, accounting, charitable, and familial relationships, among others. To evaluate the materiality
of any such relationship, the board has adopted categorical independence standards consistent with the New York
Stock Exchange listing guidelines.
Specifi cally, a director is not considered independent if (i) the director or an immediate family member is a
current partner of Lilly’s independent auditor (currently Ernst & Young LLP); (ii) the director is a current employee
of such fi rm; (iii) the director has an immediate family member who is a current employee of such fi rm and who
participates in the fi rm’s audit, assurance, or tax compliance (but not tax planning) practice; or (iv) the director or
an immediate family member was within the last three years (but is no longer) a partner or employee of such fi rm
and personally worked on the listed company’s audit within that time.
In addition, a director is not considered independent if any of the following relationships existed within the
previous three years:
• a director who is an employee of Lilly, or whose immediate family member is an executive offi cer of Lilly.
Temporary service by an independent director as interim chairman or chief executive offi cer will not disqualify
the director from being independent following completion of that service.
• a director who receives any direct compensation from Lilly other than the director’s normal director
compensation, or whose immediate family member receives more than $120,000 per year in direct
compensation from Lilly other than for service as a nonexecutive employee.
• a director who is employed (or whose immediate family member is employed as an executive offi cer) by another
company where any Lilly executive offi cer serves on the compensation committee of that company’s board.