Eli Lilly 2008 Annual Report Download - page 81

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PROXY STATEMENT
7979
committee will consider the resignation offer and recommend to the board whether to accept it. The board will act
on the committee’s recommendation within 90 days following certifi cation of the shareholder vote. Board action on
the matter will require the approval of a majority of the independent directors.
The company will disclose the board’s decision on a Form 8-K furnished to the Securities and Exchange
Commission within four business days after the decision, including a full explanation of the process by which the
decision was reached and, if applicable, the reasons why the board rejected the director’s resignation. If the resig-
nation is accepted, the directors and corporate governance committee will recommend to the board whether to fi ll
the vacancy or reduce the size of the board.
Any director who tenders his or her resignation under this provision will not participate in the committee or
board deliberations regarding whether to accept the resignation offer. If each member of the directors and corpo-
rate governance committee fails to receive a majority of the votes cast at the same election, then the independent
directors who did receive a majority of the votes cast will appoint a committee amongst themselves to consider the
resignation offers and recommend to the board whether to accept them.
III. Director Compensation and Equity Ownership
The directors and corporate governance committee annually reviews board compensation. Any recommendations
for changes are made to the full board by the committee.
Directors should hold meaningful equity ownership positions in the company; accordingly, a signifi cant portion of
overall director compensation is in the form of company equity. Directors are required to hold Lilly stock valued at a
minimum of fi ve times their annual cash retainer; new directors are allowed fi ve years to reach this ownership level.
IV. Key Responsibilities of the Board
Selection of Chairman and Chief Executive Offi cer; Succession Planning
The board customarily combines the roles of chairman and chief executive offi cer, believing this generally provides
the most effi cient and effective leadership model for the company. The board anticipates that, in certain circum-
stances, and particularly during relatively short periods of leadership transition, these roles may be assigned to
two different persons. The presiding director recommends to the board an appropriate process by which a new
chairman and chief executive offi cer will be selected.
A key responsibility of the CEO and the board is ensuring that an effective process is in place to provide conti-
nuity of leadership over the long term at all levels in the company. Each year, succession planning reviews are held
at every signifi cant organizational level of the company, culminating in a full review of senior leadership talent by
the independent directors. During this review, the CEO and the independent directors discuss future candidates for
senior leadership positions, succession timing for those positions, and development plans for the highest-potential
candidates. This process ensures continuity of leadership over the long term, and it forms the basis on which the
company makes ongoing leadership assignments. It is a key success factor in managing the long planning and
investment lead times of our business.
In addition, the CEO maintains in place at all times, and reviews with the independent directors, a confi dential
plan for the timely and effi cient transfer of his or her responsibilities in the event of an emergency or his or her
sudden incapacitation or departure.
Evaluation of Chief Executive Offi cer
The presiding director leads the independent directors annually in assessing the performance of the chief execu-
tive offi cer. The results of this review are discussed with the chief executive offi cer and considered by the compen-
sation committee in establishing his or her compensation for the next year.
Corporate Strategy
Once each year, the board devotes an extended meeting to an update from management regarding the strategic
issues and opportunities facing the company, allowing the board an opportunity to provide direction for the corporate
strategic plan. Throughout the year, signifi cant corporate strategy decisions are brought to the board for approval.
Code of Ethics
The board approved the company’s code of ethics, which complies with the requirements of the New York Stock
Exchange and the Securities and Exchange Commission. This code is set out in:
• The Red Book, a comprehensive code of ethical and legal business conduct applicable to all employees worldwide
and to our board of directors
• the company’s Code of Ethical Conduct for Lilly Financial Management, a supplemental code for our chief executive