Eli Lilly 2007 Annual Report Download - page 90

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PROXY STATEMENT
8888
Equity Incentive Grant Mechanics and Timing
The committee approves target grant values for equity incentives prior to the grant date. On the grant date, those
values are converted to shares based on:
• the closing price of Lilly stock on the grant date
• the same valuation methodology the company uses to determine the accounting expense of the grants under
Statement of Financial Accounting Standards (SFAS) 123R.
The committee’s procedure for timing of equity grants assures that grant timing is not being manipulated for
employee gain. The annual equity grant date for all eligible employees is in mid-February. This date is established
by the committee well in advance—typically at the committee’s October meeting. The mid-February grant date tim-
ing is driven by these considerations:
• It coincides with the company’s calendar-year-based performance management cycle, allowing supervisors to
deliver the equity awards close in time to performance appraisals, which increases the impact of the awards by
strengthening the link between pay and performance.
•
It follows the annual earnings release by approximately two weeks, so that the stock price at that time can
reasonably be expected to fairly represent the market’s collective view of our then-current results and prospects.
Grants to new hires and other off-cycle grants are effective on the fi rst trading day of the following month.
Employee and Post-Employment Benefi ts
The company offers core employee benefi ts coverage in order to:
• provide our global workforce with a reasonable level of fi nancial support in the event of illness or injury
• enhance productivity and job satisfaction through programs that focus on work/life balance.
The benefi ts available are the same for all U.S. employees and include medical and dental coverage, disability
insurance, and life insurance.
In addition, the Lilly 401(k) Plan and the Lilly Retirement Plan provide a reasonable level of retirement income
refl ecting employees’ careers with the company. U.S. employees are eligible to participate in these plans. To the
extent that any employee’s retirement benefi t exceeds IRS limits for amounts that can be paid through a qualifi ed
plan, Lilly also offers a nonqualifi ed retirement plan and a nonqualifi ed savings plan. These plans provide only the
difference between the calculated benefi ts and the IRS limits, and the formula is the same for all U.S. employees.
The cost of both employee and post-employment benefi ts is partially borne by the employee, including each
executive offi cer.
Perquisites
The company does not provide signifi cant perquisites to executive offi cers, except that the company aircraft is
made available for the personal use of Mr. Taurel and Dr. Lechleiter, where the committee believes the security
and effi ciency benefi ts to the company clearly outweigh the expense. The company aircraft is also made available
to other executive offi cers for travel to outside board meetings. In addition, depending on seat availability, family
members of executive offi cers may travel on the company aircraft to accompany executives who are traveling on
business. There is no incremental cost to the company for these trips.
Mr. Taurel’s primary use of the corporate aircraft for personal fl ights in 2007 was to attend outside board
meetings for the two public companies at which he serves as an independent director. The committee believes that
Mr. Taurel’s service on these boards, and his ability to conduct Lilly business while traveling to board meetings,
provides clear benefi ts to the company. As described on pages 100–101, Mr. Taurel has entered into a time-share
arrangement for the corporate aircraft under which he pays the company a lease fee for personal use, other than
for attending outside board meetings. This amount offsets part of the company’s incremental cost of providing the
aircraft. Dr. Lechleiter did not use the corporate aircraft for personal fl ights during 2007.
Deferred Compensation Program
Executives may defer receipt of part or all of their cash compensation under the company’s deferred compensation
program. The program allows executives to save for retirement in a tax-effective way at minimal cost to the company.
Under this unfunded program, amounts deferred by the executive are credited at an interest rate of 120 percent of the
applicable federal long-term rate, as described in more detail following the Nonqualifi ed Deferred Compensation in
2007 table on page 97.