Eli Lilly 2012 Annual Report Download - page 118

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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.
Throughout the year, significant corporate strategy
decisions are brought to the board in a timely way for its
consideration.
Code of Ethics
The board approves the company’s code of ethics. 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/business-practices/ethics-
compliance, or 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 of 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 the top prioritized risks are assigned
to a board committee or the full board for oversight. For
example, strategic risks are typically 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
periodically 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, and enterprise risks are also
addressed at the annual board strategy session.
Additional review or reporting on enterprise risks is
conducted as needed or as requested by the board or
relevant committee. Also, the compensation committee
periodically reviews the most important enterprise risks
to ensure that compensation programs do not
encourage excessive risk-taking. The board’s role in the
oversight of risk had no effect on the board’s leadership
structure.
V. Functioning of the Board
Executive Sessions of Directors
The independent directors meet alone in executive
session and in private session with the CEO at every
regularly scheduled board meeting.
Lead Director
The board annually appoints a lead director from among
the independent directors. Currently the lead director is
Ms. Marram. The board has no set policy for rotation of
the lead director role but believes that periodic rotation
is appropriate. The lead director:
• leads the board’s processes for selecting and
evaluating the CEO
• 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
• has the authority to retain advisers 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 identify actual or apparent conflicts
and ensure that all directors voting on an issue are
disinterested. A director will be excused from
discussions on the issue, as appropriate.
Review and Approval of Transactions with Related
Persons
The board has adopted a written policy and written
procedures for review, approval, and monitoring of
transactions involving the company and related persons
(directors and executive officers, their immediate family
members, or shareholders of 5 percent or greater of the
company’s outstanding stock). The policy covers any
related-person transaction that meets the minimum
threshold for disclosure in the proxy statement under
the relevant SEC rules (generally, transactions involving
amounts exceeding $120,000 in which a related person
has a direct or indirect material interest).