Eli Lilly 2004 Annual Report Download - page 66

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PROXY STATEMENT
6464
Both documents are available online at http://investor.lilly.com/code_business_conduct.cfm or in paper form
upon request to the company’s 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.
V. Functioning of the Board
Executive Session of Directors
The independent directors meet alone in executive session after every regularly scheduled board meeting. In addi-
tion, at least twice a year, the independent directors meet in executive session with the chief executive offi cer.
Presiding Director
The chair of the compensation committee (currently Dr. Beering) leads the process for selecting and evaluating the
chief executive offi cer. The chair of the compensation committee also presides at other executive sessions of inde-
pendent directors unless the directors decide that, due to the subject matter of the session, another independent
director should preside. Following Dr. Beering’s retirement, Ms. Horn will replace him as chair of the compensation
committee.
Confl icts of Interest
Occasionally a director’s business or personal relationships may give rise to an interest that confl icts, or appears
to confl ict, with the interests of the company. Directors must disclose to the company all relationships that cre-
ate a confl ict or an appearance of a confl ict. The board, after consultation with counsel, takes appropriate steps
to ensure that all directors voting on an issue are disinterested. In appropriate cases, the affected director will be
excused from discussions on the issue.
To avoid any appearance of a confl ict, board decisions on certain matters of corporate governance are made
solely by the independent directors. These include executive compensation and the selection, evaluation, and re-
moval of the chief executive offi cer.
Orientation and Continuing 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 mailings between
meetings. We hold periodic mandatory training sessions for the audit committee, to which other directors and ex-
ecutive offi cers are invited. We also afford directors the opportunity to attend external director education programs.
Director Access to Management and Independent Advisers
Independent directors have direct access to members of management whenever they wish. In addition, the inde-
pendent directors and the committees are free to retain their own independent advisers, at company expense,
whenever they wish.
Assessment of Board Processes and Performance
The directors and corporate governance committee annually assesses the performance of the board, its commit-
tees, and board processes based on inputs from all directors. The committee also considers the contributions of
individual directors at least every three years when considering whether to recommend nominating the director to
a new three-year term.
VI. Board Committees
Number, Structure, and Independence
The duties and membership of the six board-appointed committees are described below. Only independent direc-
tors may serve on the audit, compensation, directors and corporate governance, and public policy and compliance
committees. All other committees must have a majority of independent directors, and only independent directors
may chair any committee.
Committee membership and selection of committee chairs are recommended to the board by the directors
and corporate governance committee after consulting the chairman of the board and after considering the desires
of the board members.
Functioning of Committees
Each committee reviews its own charter annually, and the directors and corporate governance committee reviews
all committee charters annually. The board may form new committees or disband a current committee (except the
audit, compensation, and directors and corporate governance committees) as appropriate. The chair of the com-