Eli Lilly 2007 Annual Report Download - page 73

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PROXY STATEMENT
7171
her election than votes “for” such election (a “majority withheld vote”) shall promptly tender his or her resignation
following certifi cation of the shareholder vote. The directors and corporate governance committee will consider
the resignation offer and recommend to the board whether to accept it. The board will act on the committee’s rec-
ommendation within 90 days following certifi cation of the shareholder vote. 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
Commission within four business days after the decision, including a full explanation of the process by which the
decision was reached and, if applicable, the reasons why the board rejected the director’s resignation. If the resig-
nation is accepted, the directors and corporate governance committee will recommend to the board whether to fi ll
the vacancy or reduce the size of the board.
Any director who tenders his or her resignation under this provision will not participate in the committee or
board deliberations regarding whether to accept the resignation offer. If each member of the directors and corpo-
rate governance committee receives a majority withheld vote at the same election, then the independent directors
who did not receive a majority withheld vote will appoint a committee amongst themselves to consider the resigna-
tion offers and recommend to the board whether to accept them.
See Item 4 for management’s proposal to provide for the election of directors by a true majority vote.
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 signifi cant portion of
overall director compensation is in the form of company equity. Directors are required to hold Lilly stock valued at a
minimum of fi ve times their annual cash retainer; new directors are allowed fi ve years to reach this ownership level.
IV. Key Responsibilities of the Board
Selection of Chairman and Chief Executive Offi cer; Succession Planning
The board customarily combines the roles of chairman and chief executive offi cer, believing this generally provides
the most effi cient and effective leadership model for the company. The board anticipates that, in certain circum-
stances, and particularly during relatively short periods of leadership transition, these roles may be assigned to
two different persons. The presiding director recommends to the board an appropriate process by which a new
chairman and chief executive offi cer will be selected.
The independent directors are responsible for overseeing succession and management development pro-
grams for senior leadership. The chief executive offi cer develops and maintains a process for advising the board on
succession planning for the chief executive offi cer and other key leadership positions. He or she reviews this plan
with the independent directors at least annually.
Evaluation of Chief Executive Offi cer
The presiding director leads the independent directors annually in assessing the performance of the chief execu-
tive offi cer. The results of this review are discussed with the chief executive offi cer and considered by the compen-
sation 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, signifi cant 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 the Securities and Exchange Commission. This code is set out 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
offi cer, chief operating offi cer, and all members of fi nancial management that recognizes the unique responsibilities
of those individuals in assuring proper accounting, fi nancial reporting, internal controls, and fi nancial stewardship.
Both documents are available online at http://investor.lilly.com/code_business_conduct.cfm or in paper form