Eli Lilly 2012 Annual Report Download - page 131

27
Base Salary
Most employees around the globe did not
receive base salary increases for 2012 as part
of the company's efforts to manage costs
during this period of patent expirations. As a
result, executive officers' 2012 salaries
remained unchanged from 2011.
Annualized Base Salary (thousands)
Name 2011 2012 Percentage Increase
Dr. Lechleiter $1,500 $1,500 0%
Mr. Rice $990 $990 0%
Dr. Lundberg $979 $979 0%
Mr. Armitage $841 $841 0%
Mr. Conterno $670 $670 0%
Cash Incentive Bonuses
The company’s annual cash bonus program is designed to align employees’
individual goals with the company’s financial plans and pipeline delivery objectives
for the current year. For executive officers, cash incentive bonuses are made under
the Executive Officer Incentive Plan (EOIP), which establishes a maximum annual
incentive bonus and grants the committee discretion to reduce the bonus from the
maximum. Under the EOIP, the maximum bonuses are based on non-GAAP net
income (as defined under “Adjustments to Reported Results” below) for the year.
For the chief executive officer, chief operating officer (if any), and executive
chairman (if any), the maximum is 0.3 percent of non-GAAP net income. For other
executive officers, the maximum is 0.15 percent of non-GAAP net income. No
payments can be made unless the company has a positive non-GAAP net income
for the year. The committee has discretion to reduce, but not increase, the annual
incentive bonus.
Bonus Weighting:
• 25% adjusted revenue goals
• 50% adjusted non-GAAP
EPS goals
• 25% pipeline progress
2012 Targets:
• $22.3 billion adjusted
revenue
• $3.18 adjusted non-GAAP
EPS
• Achievement of pipeline
milestones
In exercising this discretion, the committee intends generally to award executive officers the lesser of (i) the
bonuses they would have received under the bonus plan or (ii) the EOIP maximum amounts. Each year the
committee establishes target bonuses for the executive officers based on a percentage of salary. At the end of
the year, the committee will reduce the bonuses from the EOIP maximum based on the company’s achievement
relative to performance-based goals (as described below) set by the committee in a manner consistent with the
committee’s administration of the bonus plan. Accordingly, actual payouts under the EOIP are expected to be less
than the EOIP maximum amounts. The committee retains further discretion to reduce the bonuses below the
results that would have been yielded under the bonus plan.
All other management employees worldwide, as well as a substantial number of nonmanagement employees in the
U.S., participate in the bonus plan. Under the plan, participants’ targets and company goals are set at the beginning
of each year. Bonus payouts range from zero to 200 percent of target amounts depending on the company’s
performance in regard to these goals. At the end of the performance period, the committee has discretion to adjust
a bonus payout downward (but not upward) from the amount yielded by the formula.
The committee considered the following when establishing the 2012 awards:
• Bonus targets. Consistent with our compensation
objectives, as employees assume greater responsibilities,
more of their pay is linked to company performance. Bonus
targets (expressed as a percentage of base salary) were
based on job responsibilities, internal relativity, individual
performance, and peer-group data. For each named
executive officer, the committee maintained the same
bonus targets as 2011.
Bonus Targets (as a percentage of base salary)
Name 2011 2012
Dr. Lechleiter 140% 140%
Mr. Rice 90% 90%
Dr. Lundberg 90% 90%
Mr. Armitage 80% 80%
Mr. Conterno 75% 75%
• Company performance measures. A bonus program’s goals should be challenging, yet achievable, in order to
motivate and retain employees. Since 2011, performance goals under our bonus plan are tied directly to our
internal annual operating goals. The committee established 2012 corporate goals with a 25 percent weighting
on adjusted revenue goals, 50 percent weighting on adjusted non-GAAP EPS goals, and 25 percent weighting
on our pipeline progress.
In establishing the 2012 goals, the committee used the company’s 2012 annual operating plan to set goals of
$22.3 billion in adjusted revenue, $3.18 in adjusted non-GAAP EPS, and measures of both the output and
sustainability of the pipeline. Payouts were determined by this formula: