Eli Lilly 2004 Annual Report Download - page 82

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PROXY STATEMENT
8080
Shareholder Proposals
Proponent Information
The following six proposals were submitted by shareholders. We will provide the names and addresses of the pro-
ponents of these proposals, as well as the number of shares of Lilly stock owned by them, upon request by phone
at 317-433-5112, by e-mail at annualmeeting@lilly.com, or in writing to the company’s secretary at Lilly Corporate
Center, Indianapolis, Indiana 46285.
Item 3. Shareholder Proposal Regarding Separating the Roles of Chairman and Chief Executive Offi cer
The board recommends that you vote AGAINST this proposal.
Separating the Roles of Chairman and Chief Executive Offi cer
Resolved, The shareholders of Lilly (Eli) and Company (the “Company”) request the Board of Directors establish a
policy of, whenever possible, separating the roles of Chairman and Chief Executive Offi cer, so that an independent
director who has not served as an executive offi cer of the Company serves as Chair of the Board of Directors.
This proposal shall not apply to the extent that complying would necessarily breach any contractual obliga-
tions in effect at the time of the 2005 shareholder meeting.
Statement of Support: We believe in the principle of the separation of the roles of Chairman and Chief Executive
Offi cer. This is a basic element of sound corporate governance practice. In addition, the lack of access to medicines
has created a leadership crisis at our company which a separation of the Chair and CEO would begin to address.
We believe an independent Board Chair—separated from the CEO—is the preferable form of corporate gover-
nance. The primary purpose of the Board of Directors is to protect shareholder’s interests by providing indepen-
dent oversight of management and the CEO. The Board gives strategic direction and guidance to our Company.
The Board will likely accomplish both roles more effectively by separating the roles of Chair and CEO. An inde-
pendent Chair will enhance investor confi dence in our Company and strengthen the integrity of the Board of Directors.
A number of respected institutions recommend such separation. CalPER’s Corporate Core Principles and
Guidelines state: “the independence of a majority of the Board is not enough” and that “the leadership of the board
must embrace independence, and it must ultimately change the way in which directors interact with management.”
An independent board structure will also help the board address complex policy issues facing our company,
foremost among them the crisis in access to pharmaceutical products.
Millions of Americans and others around the world have no access to our company’s life-saving medicines.
This is an emergency, and our company’s charitable work, while laudable, is neither a suffi cient nor strategic re-
sponse. We believe an independent Chair and vigorous Board will bring greater focus to this ethical imperative, and
be better able to forge solutions for shareholders and patients to address this crisis.
The current business model of the pharmaceutical sector is undergoing signifi cant challenges. The industry
has generated substantial revenue from American purchasers, who pay higher prices for medicines than people
in other developed countries. Pressure on drug pricing and dependence on this business model may impact our
company’s long-term value.
In order to ensure that our Board can provide the proper strategic direction for our Company with indepen-
dence and accountability, we urge a vote FOR this resolution.
Statement in Opposition to the Proposal Regarding Separating the Roles of Chairman and Chief Executive Offi cer
The directors and corporate governance committee and the public policy and compliance committee of the board
have reviewed this proposal, and believe that the strategy of combining the roles of board chair and chief execu-
tive offi cer (“CEO”) generally provides the most effi cient and effective leadership model for the company and that
the board’s corporate governance principles ensure the board’s independence. In addition, while there is an urgent
need for health care reforms in the United States, the board does not agree that the means outlined under this
proposal will achieve greater pharmaceutical access or allow us to better address the pressures on our business.
Lilly has a strong, independent board that operates under sound principles of corporate governance. See
pages 62–65 for a full description of the board’s governance principles. The board is currently composed entirely of
independent, nonemployee members with two exceptions, the chief fi nancial offi cer and the CEO, who also serves
as chair. The board’s policy is that there should always be a substantial majority (75 percent or more) of inde-
pendent, nonemployee directors. The independent chair of the compensation committee serves as the presiding
director of the board. He or she recommends to the board the process by which a new chairman and chief execu-