Eli Lilly 2009 Annual Report Download - page 111

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Consistent with the succession-management plan, the chief executive officer recommends to the board
candidates for the company’s principal corporate offices.
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. These strategy sessions also provide the board an opportunity to interact extensively
with the company’s senior leadership team. This assists the board in its succession-management
responsibilities.
Throughout the year, significant 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 NYSE and the
SEC. 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
•Code of Ethical Conduct for Lilly Financial Management, a supplemental code for our chief executive officer
and all members of financial management that recognizes the unique responsibilities of those individuals in
assuring proper accounting, financial reporting, internal controls, and financial stewardship.
Both documents are available online at http://www.lilly.com/about/compliance/conduct/ or in paper form
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.
Risk Oversight
The company has an enterprise risk management program overseen by its chief ethics and compliance officer
and senior vice president, enterprise risk management, who reports directly to the CEO and is a member of the
company’s top leadership committee. Enterprise risks are identified and prioritized by management, and each
prioritized risk is assigned to a board committee or the full board for oversight. For example, strategic risks are
overseen by the full board; financial risks are overseen by the audit or finance committee; compliance and
reputational risks are typically overseen by the public policy and compliance committee; and scientific risks are
overseen by the science and technology committee. Management regularly reports on each such risk to the
relevant committee or the board. The enterprise risk management program as a whole is reviewed annually at a
joint meeting of the audit and public policy and compliance committees, as well as at an annual board strategy
session. Additional review or reporting on enterprise risks is conducted as needed or as requested by the board
or committee. Also, the compensation committee periodically reviews the most important enterprise risks to
ensure that compensation programs do not encourage excessive risk-taking.
V. Functioning of the Board
Executive Session of Directors
The independent directors meet alone in executive session and in private session with the chief executive officer
at every regularly scheduled board meeting.
Lead Director
The board annually appoints a lead director from among the independent directors (currently Ms. Horn). The lead
director:
• leads the board’s processes for selecting and evaluating the chief executive officer;
• 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;
• has the authority to call meetings of the independent directors; and
• has the authority to retain advisors to the independent directors.
Conflicts of Interest
Occasionally a director’s business or personal relationships may give rise to an interest that conflicts, or appears
to conflict, with the interests of the company. Directors must disclose to the company all relationships that
create a conflict or an appearance of a conflict. 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.
13
PROXY STATEMENT