Eli Lilly 2005 Annual Report Download - page 71

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PROX Y S TATEM ENT
6969
The independent directors are responsible for overseeing succession and management development pro-
grams for senior leadership. The chief executive officer develops and maintains a process for advising the board on
succession planning for the chief executive officer and other key leadership positions. He or she reviews this plan
with the independent directors at least annually.
Evaluation of Chief Executive Officer
The chair of the compensation committee leads the independent directors annually in assessing the performance
of the chief executive officer. The results of this review are discussed with the chief executive officer and consid-
ered by the compensation committee in establishing his or her compensation for the next year.
Corporate Strategy
Once each year, the board devotes an extended meeting to an update from management regarding the strategic is-
sues and opportunities facing the company, allowing the board an opportunity to provide direction for the corporate
strategic plan. Throughout the year, significant corporate strategy decisions are brought to the board for approval.
Code of Ethics
The board 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:
• The Red Book, a comprehensive code of ethical and legal business conduct applicable to all employees worldwide
and to our board of directors
• the company’s Code of Ethical Conduct for Lilly Financial Management, a supplemental code for our chief
executive officer, chief operating officer, and all members of financial management that recognizes the unique
responsibilities of those individuals in assuring proper accounting, financial reporting, internal controls, and
financial stewardship.
Both documents are available online at http://investor.lilly.com/code_business_conduct.cfm or in paper form
upon request to the company’s corporate 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 at every regularly scheduled board meeting. In addition,
at least twice a year, the independent directors meet in executive session with the chief executive officer.
Presiding Director
The board appoints a presiding director from among the independent directors (currently Ms. Horn). The presiding
director:
• leads the board’s process for selecting and evaluating the chief executive officer;
• presides at all meetings of the board at which the chairman is not present, including executive sessions of
the independent directors unless the directors decide that, due to the subject matter of the session, another
independent director should preside;
• serves as a liaison between the chairman and the independent directors;
• generally approves information sent to the board and meeting agendas and schedules; and
• has the authority to call meetings of the independent directors.
Conflicts of Interest
Occasionally a director’s business or personal relationships may give rise to an interest that conflicts, or appears
to conflict, with the interests of the company. Directors must disclose to the company all relationships that cre-
ate a conflict or an appearance of a conflict. 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 conflict or appearance of a conflict, board decisions on certain matters of corporate governance
are made solely by the independent directors. These include executive compensation and the selection, evaluation,
and removal of the chief executive officer.