Eli Lilly 2007 Annual Report Download - page 79

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PROXY STATEMENT
7777
• Deferred Compensation Account. Funds in this account earn interest each year at a rate of 120 percent of the
applicable federal long-term rate, compounded monthly, as established the preceding December by the U.S.
Treasury Department under Section 1274(d) of the Internal Revenue Code. The rate for 2008 is 5.5 percent.
The aggregate amount of interest that accrued in 2007 for the participating directors was $188,706, at a rate of
5.7 percent.
Both accounts may be paid in a lump sum or in annual installments for up to 10 years. Amounts in the deferred
share account are paid in shares of Lilly stock.
Directors and Corporate Governance Committee Matters
Overview
The directors and corporate governance committee recommends candidates for membership on the board and
board committees. The committee also oversees matters of corporate governance, director independence, direc-
tor compensation, and board performance. The committee’s charter is available online at http://investor.lilly.
com/board-committees.cfm or in paper form upon request to the company’s corporate secretary.
All committee members are independent as defi ned in the New York Stock Exchange listing requirements.
Director Nomination Process
The board seeks independent directors who represent a mix of backgrounds and experiences that will enhance the
quality of the board’s deliberations and decisions. Candidates shall have substantial experience with one or more pub-
licly traded national or multinational companies or shall have achieved a high level of distinction in their chosen fi elds.
Board membership should refl ect diversity in its broadest sense, including persons diverse in geography, gen-
der, and ethnicity. The board is particularly interested in maintaining a mix that includes the following backgrounds:
• active or retired chief executive offi cers and senior executives, particularly those with experience in
operations, fi nance or banking, and marketing or sales
• international business
• medicine and science
• government and public policy
• health care environment
• information technology.
The board delegates the screening process to the directors and corporate governance committee, which
receives direct input from other board members. Potential candidates are identifi ed by recommendations from
several sources, including:
• incumbent directors
• management
• shareholders
• an independent executive search fi rm retained by the committee to assist in locating candidates meeting the
board’s selection criteria.
The committee employs the same process for evaluating all candidates, including those submitted by share-
holders. The committee initially evaluates the candidate based on publicly available information and any additional
information supplied by the party recommending the candidate. If the candidate appears to satisfy the selection
criteria and the committee’s initial evaluation is favorable, the committee, assisted by management, gathers ad-
ditional data on the candidate’s qualifi cations, availability, probable level of interest, and any potential confl icts
of interest. If the committee’s subsequent evaluation continues to be favorable, the candidate is contacted by the
chairman of the board and one or more of the independent directors for direct discussions to determine the mutual
levels of interest in pursuing the candidacy. If these discussions are favorable, the committee makes a fi nal recom-
mendation to the board to nominate the candidate for election by the shareholders (or to select the candidate to fi ll
a vacancy, as applicable). Mr. Eskew, who is standing for election, was referred to the committee by Mr. Taurel.
Process for Submitting Recommendations and Nominations
A shareholder who wishes to recommend a director candidate for evaluation by the committee pursuant to this
process should forward the candidate’s name and information about the candidate’s qualifi cations to the chairman