Eli Lilly 2013 Annual Report Download - page 125

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27
Performance and Holding Periods for PAs
2011 2012 2013 2014 2015 2016 2017
2011-2012 PA Performance Period
2012-1013 PA Restricted Stock Units
2013-2014 PA
2014-2015 PA
Performance and Holding Periods for SVAs
2011 2012 2013 2014 2015 2016 2017
2011-2012 SVA Performance Period
2012-1013 SVA Required Holding Period
2013-2014 SVA
2014-2015 SVA
The Compensation Committee believes that EPS growth is an effective measure of performance because it is
closely linked to shareholder value, is broadly communicated to the public, is easily understood by employees,
and allows for objective comparisons to peer-group performance. Consistent with our compensation objectives,
company performance exceeding the expected peer-group median will result in above-target payouts, while
company performance lagging the expected peer-group median will result in below-target payouts.
The measure of EPS used in the PA program differs from the adjusted measure used in our annual bonus
program in two ways. First, the bonus program measures EPS over a one-year period, while the PA program
measures EPS over a two-year period. Second, the target EPS goal in the bonus program is set with reference
to internal goals for the year, while the target EPS goal in the PA program is set relative to expected growth rates
among our peer group. Possible payouts range from 0 to 150 percent of the target depending on the EPS
growth over the performance period.
Shareholder Value Awards
SVAs are structured as a schedule of shares of company stock that may be earned based on Lilly's share price
performance over a three-year period. As reflected in the chart below, SVAs have a three-year performance
period and any shares paid out are subject to a one-year holding requirement. No dividends are accrued during
the performance period. SVAs pay out above target if Lilly stock outperforms an expected compounded annual
rate of return and below target if company stock underperforms that rate of return. The expected rate of return
includes dividends and is based on the total three-year shareholder return (TSR) that a reasonable investor
would consider appropriate for investing in a basket of large-cap U.S. companies (based on input from external
money managers). The share price payout schedule is based on this expected rate of return less the company’s
dividend yield, applied to the starting share price. Executive officers receive no payout if TSR for the three-year
period is zero or negative.
Possible payouts range from 0 to 140 percent of the target amount, depending on stock performance over the
period.
Pay for Performance
The mix of compensation for the CEO and other Named Executive Officers (NEOs) reflects the company's desire
to link executive compensation with company performance. As reflected in the charts below, a substantial
portion of the target pay for all NEOs is performance-based. Both the equity and annual bonus payouts are
determined by company performance, with the bonus factoring in performance over a one-year period, and
equity compensation factoring in performance over a longer term (as described above under "Components of
Executive Compensation - Equity Incentives").