Eli Lilly 2010 Annual Report Download - page 108

PROXY STATEMENT
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.
Review and Approval of Transactions with Related Persons
The board has adopted a written policy and written procedures for review, approval, and monitoring of transactions
involving the company and related persons (directors and executive officers, their immediate family members, or
shareholders of 5 percent or greater of the company’s outstanding stock). The policy covers any related-person
transaction that meets the minimum threshold for disclosure in the proxy statement under the relevant SEC rules
(generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect
material interest).
•Policy. Related-person transactions must be approved by the board or by a committee of the board consisting
solely of independent directors, who will approve the transaction only if they determine that it is in the best
interests of the company. In considering the transaction, the board or committee will consider all relevant
factors, including:
—the company’s business rationale for entering into the transaction;
—the alternatives to entering into a related-person transaction;
—whether the transaction is on terms comparable to those available to third parties, or in the case of
employment relationships, to employees generally;
—the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards
imposed to prevent such actual or apparent conflicts; and
—the overall fairness of the transaction to the company.
The board or relevant committee will periodically monitor the transaction to ensure that there are no
changed circumstances that would render it advisable for the company to amend or terminate the transaction.
•Procedures.
—Management or the affected director or executive officer will bring the matter to the attention of the
chairman, the lead director, the chair of the directors and corporate governance committee, or the
secretary.
—The chairman and the lead director shall jointly determine (or, if either is involved in the transaction, the
other shall determine in consultation with the chair of the directors and corporate governance committee)
whether the matter should be considered by the board or by one of its existing committees consisting only
of independent directors.
—If a director is involved in the transaction, he or she will be recused from all discussions and decisions
about the transaction.
—The transaction must be approved in advance whenever practicable, and if not practicable, must be ratified
as promptly as practicable.
—The board or relevant committee will review the transaction annually to determine whether it continues to
be in the company’s best interests.
Dr. John Bamforth, spouse of Dr. Susan Mahony, senior vice president and president, Lilly oncology, has been
employed by the company for over 20 years. In 2010, he was paid approximately $400,000 (including base salary and
cash incentive compensation). In addition, he received grants under the company’s performance-based equity
program with target payouts of approximately 2,900 shares of company stock. Dr. Bamforth also participated in the
company’s benefit programs generally available to U.S. employees. Dr. Bamforth’s compensation was established in
accordance with the company’s compensation practices applicable to employees with equivalent qualifications and
responsibilities and holding similar positions.
Orientation of New Directors; Director Education
A comprehensive orientation process is in place for new directors. In addition, directors receive ongoing continuing
education through educational sessions at meetings, the annual strategy retreat, and periodic communications
between meetings. We hold periodic mandatory training sessions for the audit committee, to which other directors
and executive officers are invited. We also afford directors the opportunity to attend external director education
programs.
Director Access to Management and Independent Advisors
Independent directors have direct access to members of management whenever they deem it necessary. The
independent directors and committees are also free to retain their own independent advisors, at company expense,
whenever they feel it would be desirable to do so. In accordance with NYSE listing standards, the audit,
compensation, and directors and corporate governance committees have sole authority to retain independent
advisors to their respective committees.
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