Eli Lilly 2006 Annual Report Download - page 104

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PROXY STATEMENT
102102
Statement in Opposition to Animal Care and Use Proposal and International Outsourcing of Animal Research
Proposal
Please see the “Statement in Opposition” following Item 5 above.
The board recommends that you vote AGAINST this proposal.
Item 7. Shareholder Proposal Regarding Separating the Roles of Chairman and Chief Executive Offi cer
The Adrian Dominican Sisters, 1257 East Siena Heights Drive, Adrian, Michigan, 49221-1793, benefi cial owner of
approximately 50 shares, has submitted the following proposal.
Resolved: The shareholders of Eli Lilly & 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 2007 shareholder meeting.
Supporting Statement: 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.
We believe an Independent Board Chair—separated from the CEO—is the preferable form of corporate gover-
nance. This 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 limited or no access to our company’s life-saving
medicines. We believe an independent Chair and vigorous Board will bring greater focus to this ethical imperative,
and be better able to forge solutions to address the 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 those
in other developed countries. Pressure on drug pricing and dependence on this business model may impact our
company’s long-term value. We believe Independent Board leadership will better position our company to respond
to these enduring challenges.
A similar resolution voted on in 2006 was supported by 27.15 percent of shareholders.
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 board of directors, the directors and corporate governance committee, and the public policy and compliance
committee of the board have reviewed this proposal and recommend a vote against it. We believe that Lilly already
has a strong, independent board operating under sound principles of corporate governance. (See pages 66–70 for
a description of the board’s governance principles.) These principles are designed to ensure board independence,
whether or not the chairman and chief executive offi cer (CEO) roles are separated, through a counterbalancing
governance structure.
The board is composed of a majority of independent board members, currently 10 out of 12 directors; under
our governance principles, 75 percent of the board must be independent, non-employee members. Additionally,
the presiding director, an independent director who is appointed by the board, presides at all meetings of the board
at which the chairman is not present (unless another independent director is chosen based on the subject matter),
including an executive session after each regular board meeting and an annual review of the CEO’s performance.
In addition, the presiding director:
• leads the board process for selecting and evaluating the CEO