Eli Lilly 2008 Annual Report Download - page 94

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PROXY STATEMENT
9292
• exceeded its sales and earnings targets;
• made signifi cant progress on the transformation agenda, including progressing the tailored therapy
strategy;
• exceeded its Six Sigma and related productivity goals;
• strengthened its public image; and
• met or exceeded its targets for research pipeline progress and acquisition of new compounds.
—Mr. Taurel’s decision to retire as CEO as of April 1, 2008, and as chairman as of December 31, 2008, resulted
in the committee’s decision to maintain his annual salary at the 2007 level through March 31, 2008, and then
reduce it by one-half for the remainder of 2008.
The committee reviewed similar performance considerations for each of the other named executives.
—With regard to Dr. Lechleiter, the committee considered his new position as chief executive offi cer and
increased Dr. Lechleiter’s annual salary by 21 percent effective April 1, 2008, to $1,400,000. The committee
considered Dr. Lechleiter’s strong leadership in 2007 in driving the company’s operational results and
transformational agenda.
—With regard to Dr. Paul, the committee noted that Lilly Research Laboratories met or exceeded nearly all 2007
pipeline progress goals and implemented several strategic actions to increase fl exibility and productivity. The
committee increased Dr. Paul’s annual salary by four percent.
—Mr. Carmine’s annual salary was increased by 79 percent upon his promotion, effective April 1, 2008, to
recognize his signifi cantly expanded responsibilities.
—Mr. Rice’s annual salary was increased 13 percent in recognition of his assumption of increased operational
responsibilities, his strong leadership of the fi nancial component, and outstanding contributions to the
management of the company.
—In establishing Mr. Armitage’s annual salary (a fi ve percent increase), the committee noted his leadership in
driving a culture of compliance and transparency, shaping intellectual property policy to foster innovation,
and implementing effective litigation strategies.
• Internal relativity, meaning the relative pay differences between different job levels.
• Peer group data specifi c to certain positions in which the jobs were viewed as comparable in content and
importance to the company. We used the peer group data not to target a specifi c position in range, but instead
as a market check for reasonableness and competitiveness. The salaries as determined by the other factors
were within the broad middle range of expected competitive pay and, therefore, no further adjustments were
necessary for competitiveness.
Cash Incentive Bonuses
The company’s annual cash bonus programs align employees’ goals with the company’s sales and earnings growth
objectives for the current year. Cash incentive bonuses for all management employees worldwide, as well as most
nonmanagement employees in the U.S., are determined under the Eli Lilly and Company Bonus Plan. Under the
plan, the company sets target bonus amounts (a percentage of base salary) for all participants at the beginning of
each year. Bonus payouts range from zero to 200 percent of target depending on the company’s fi nancial results rel-
ative to predetermined performance measures. At the end of the performance period, the committee has discretion
to adjust an award payout downward for executive offi cers, but not upward, from the amount yielded by the formula.
The committee considered the following when establishing the 2008 awards:
• Bonus targets. Bonus targets (expressed as a percentage of base salary) were based on job responsibilities,
internal relativity, and peer group data. Consistent with our compensation objectives, as executives assume
greater responsibilities, more of their pay is linked to company performance. For most executive offi cers, the
committee maintained the same bonus targets as 2007; for some, targets were increased due to peer group
trends or internal relativity. The committee determined that these targets appropriately refl ected internal
relativity and would maintain cash compensation within the broad middle range of expected competitive pay
given median peer group performance. The 2008 targets for the named executives were as follows:
—Mr. Taurel—140 percent (increased from 125 percent to approximate the peer group median)
—Dr. Lechleiter—140 percent (100 percent through March 31, 2008)
—Dr. Paul—85 percent
—Mr. Carmine—85 percent
—Mr. Rice—80 percent (increased from 75 percent due to internal relativity)
—Mr. Armitage—80 percent (increased from 75 percent due to internal relativity).
• Company performance measures. The committee established 2008 company performance measures with a 25
percent weighting on sales growth and a 75 percent weighting on growth in adjusted EPS (reported earnings per