Eli Lilly 2012 Annual Report Download - page 119

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Policy: Related-person transactions must be approved
by the board or by a committee of the board consisting
solely of independent directors, who will approve the
transaction only if they determine that it is in the best
interests of the company. In considering the transaction,
the board or committee will consider all relevant
factors, including:
• the company’s business rationale for entering into
the transaction;
• the alternatives to entering into a related-person
transaction;
• whether the transaction is on terms comparable to
those available to third parties, or in the case of
employment relationships, to employees generally;
• the potential for the transaction to lead to an actual
or apparent conflict of interest and any safeguards
imposed to prevent such actual or apparent
conflicts; and
• the overall fairness of the transaction to the
company.
The board or relevant committee will periodically
monitor the transaction to ensure that there are no
changed circumstances that would render it advisable to
amend or terminate the transaction.
Procedures:
• Management or the affected director or executive
officer will bring the matter to the attention of the
chairman, the lead director, the chair of the
directors and corporate governance committee, or
the secretary.
• The chairman and the lead director shall jointly
determine (or, if either is involved in the
transaction, the other shall determine in
consultation with the chair of the directors and
corporate governance committee) whether the
matter should be considered by the board or by one
of its existing committees consisting only of
independent directors.
• If a director is involved in the transaction, he or she
will be recused from all discussions and decisions
about the transaction.
• The transaction must be approved in advance
whenever practicable, and if not practicable, must
be ratified as promptly as practicable.
• The board or relevant committee will review the
transaction annually to determine whether it
continues to be in the company’s best interests.
The directors and corporate governance committee has
approved the following related-party transactions.
Dr. John Bamforth, senior director, chief marketing
officer, Lilly Bio-Medicines, is the spouse of Dr. Susan
Mahony, senior vice president and president, Lilly
Oncology, and has been employed by the company for
over 20 years. In 2012, he was paid approximately
$362,000 in cash compensation, and he received grants
under the company’s performance-based equity
program valued at approximately $49,000 based upon
the fair value computed in accordance with stock-based
compensation accounting rules (FASB ASC Topic 718).
Similarly, Mr. Myles O’Neill, senior vice president, global
drug products, is the spouse of Dr. Fionnuala Walsh,
senior vice president, global quality, and has been
employed by the company for over 10 years. His cash
compensation in 2012 was approximately $684,000 and
his equity grants were valued at approximately
$141,000. Both Dr. Bamforth and Mr. O’Neill participate
in the company’s benefit programs generally available to
U.S. employees, and their compensation was
established in accordance with the company’s
compensation practices applicable to employees with
equivalent qualifications and responsibilities and
holding similar positions.
Orientation of New Directors; Director Education
A comprehensive orientation process is in place for new
directors. In addition, directors receive ongoing
continuing education through educational sessions at
meetings, the annual strategy retreat, and periodic
communications between meetings. We hold periodic
mandatory training sessions for the audit committee, to
which other directors and executive officers are invited.
We also afford directors the opportunity to attend
external director education programs.
Director Access to Management and Independent
Advisors
Independent directors have direct access to members of
management whenever they deem it necessary. The
company’s executive officers attend at least part of each
regularly scheduled board meeting. The independent
directors and committees are also free to retain their
own independent advisors, at company expense,
whenever they feel it would be desirable to do so. The
audit, compensation, and directors and corporate
governance committees have sole authority to retain
independent advisors to their respective committees.
Assessment of Board Processes and Performance
The directors and corporate governance committee
annually assesses the performance of the board, its
committees, and board processes based on inputs from
all directors.