Eli Lilly 2005 Annual Report Download - page 70

Download and view the complete annual report

Please find page 70 of the 2005 Eli Lilly annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

PROX Y S TATEM ENT
6868
that exceed the greater of $1 million or 2 percent of that company’s gross revenues in a single fiscal year.
• a director who is an executive officer of a nonprofit organization that receives grants or contributions from Lilly
in a single fiscal year exceeding the greater of $1 million or 2 percent of that organization’s gross revenues in a
single fiscal year.
Members of the audit, compensation, and directors and corporate governance committees must meet all ap-
plicable 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 64–66 are independent pur-
suant 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:
• A company officer-director, including the chief executive officer, will resign from the board at the time he or she
retires or otherwise ceases to be an active employee of the company.
• Nonemployee directors will retire from the board not later than the annual meeting of shareholders that follows
their seventy-second birthday.
• Directors may stand for reelection even though the board’s retirement policy would prevent them from
completing a full three-year term.
• 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.
Voting for Directors
In an uncontested election, any nominee for director who receives a greater number of votes “withheld” from his or
her election than votes “for” such election (a “majority withheld vote”) shall promptly tender his or her resignation
following certification of the shareholder vote.
The directors and corporate governance committee shall consider the resignation offer and recommend to
the board whether to accept it. The board will act on the committee’s recommendation within 90 days following the
shareholder meeting. Board action on the matter will require the approval of a majority of the independent directors.
The company will disclose the board’s decision on a Form 8-K furnished to the Securities and Exchange Com-
mission within four business days after the decision, including a full explanation of the process by which the deci-
sion was reached and, if applicable, the reasons why the board rejected the directors’ resignation. If the resigna-
tion is accepted, the directors and corporate governance committee will recommend to the board whether to fill
the vacancy or reduce the size of the board.
Any director who tenders his or her resignation pursuant to this provision shall not participate in the commit-
tee or board deliberations regarding whether to accept the resignation offer.
If each member of the directors and corporate governance committee receives a majority withheld vote at the
same election, then the independent directors who did not receive a majority withheld vote shall appoint a commit-
tee amongst themselves to consider the resignation offers and recommend to the board whether to accept them.
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 significant portion
of overall director compensation is in the form of company equity.
IV. Key Responsibilities of the Board
Selection of Chairman and Chief Executive Officer; Succession Planning
The board customarily combines the roles of chairman and chief executive officer, believing this generally provides
the most efficient and effective leadership model for the company. The board anticipates that, in certain occasional
circumstances, and particularly during relatively short periods of leadership transition, these roles could be as-
signed to two different persons for a period of time. The presiding director recommends to the board an appropri-
ate process by which a new chairman and chief executive officer will be selected.