Eli Lilly 2003 Annual Report Download - page 59

PROXY STATEMENT
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• a director who is an executive offi cer of a nonprofi t organization that receives grants or contributions from Lilly
in a single fi scal year exceeding the greater of $1 million or 2 percent of that organization’s gross revenues in a
single fi scal year.
Additionally, members of the audit, compensation, and directors and corporate governance committees must meet
all applicable independence tests of the New York Stock Exchange, Securities and Exchange Commission, and
Internal Revenue Service.
The board has determined that all 10 of the nonemployee directors listed on pages 52–55 are independent pursuant
to the above criteria and that the board committee members meet all applicable independence standards.
Director Tenure
Subject to the company’s charter documents, the governance guidelines establish the following expectations for
director tenure:
• Nonemployee directors will resign from the board effective at the annual meeting of shareholders following their
seventy-second birthday.
• Employee directors will resign from the board when they retire or otherwise cease to be active employees of the
company.
• A nonemployee director who retires or changes principal job responsibilities will offer to resign from the board.
The directors and corporate governance committee will assess the situation and recommend to the board
whether to accept the resignation.
III. Director Compensation and Equity Ownership
The directors and corporate governance committee annually reviews board compensation. Any recommendations
for changes are made to the full board by the committee.
Directors should hold meaningful equity ownership positions in the company; accordingly, a signifi cant portion of
overall director compensation is in the form of company equity.
IV. Key Responsibilities of the Board
Selection of Chairman and Chief Executive Offi cer; Succession Planning
The board customarily combines the roles of chairman and chief executive offi cer, believing this generally provides
the most effi cient and effective leadership model. The board recognizes that, in certain occasional circumstances,
such as leadership transition, it may be desirable to assign these roles to two different persons for a relatively
short period of time. The chair of the compensation committee recommends to the board an appropriate process
by which a new chairman and chief executive offi cer will be selected depending on the circumstances at the time.
The independent directors are responsible for overseeing succession planning. The chief executive offi cer devel-
ops and maintains a process for advising the board on succession planning for the chief executive offi cer and other
key leadership positions. He or she reviews this plan annually with the independent directors.
Evaluation of Chief Executive Offi cer
The chair of the compensation committee leads the independent directors annually in assessing the performance
of the chief executive offi cer. The results of this review are discussed with the chief executive offi cer and consid-
ered by the compensation committee in establishing his or her compensation for the next year.
Corporate Strategy
Once each year, the board, together with senior management, devotes an extended meeting to discussing and pro-
viding direction for the corporate strategic plan. Throughout the year, signifi cant corporate strategy decisions are
brought to the board for approval.
Code of Ethics
The board has approved the company’s code of ethics, which complies with the requirements of the New York Stock
Exchange and Securities and Exchange Commission. This code is set forth in: