Eli Lilly 2010 Annual Report Download - page 115

PROXY STATEMENT
Director Nomination Process
The board delegates the screening process to the directors and corporate governance committee, which receives
direct input from other board members. Potential candidates are identified through recommendations from several
sources, including:
• incumbent directors
• management
• shareholders
• independent executive search firms that may be retained by the committee to assist in locating and screening
candidates meeting the board’s selection criteria.
The committee employs the same process for evaluating all candidates, including those submitted by
shareholders. The committee initially evaluates a 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 or the
search firm, gathers additional data on the candidate’s qualifications, availability, probable level of interest, and any
potential conflicts 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 final recommendation to the board to nominate the candidate for election by the shareholders (or to select
the candidate to fill a vacancy, as applicable).
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 qualifications to the chair of the
directors and corporate governance committee, in care of the corporate secretary, at Lilly Corporate Center,
Indianapolis, Indiana 46285. The candidate must meet the selection criteria described above and must be willing and
expressly interested in serving on the board.
Under Section 1.9 of the company’s bylaws, a shareholder who wishes to directly nominate a director candidate
at the 2012 annual meeting (i.e., to propose a candidate for election who is not otherwise nominated by the board
through the recommendation process described above) must give the company written notice by November 8, 2011
and no earlier than September 9, 2011. The notice should be addressed to the corporate secretary at Lilly Corporate
Center, Indianapolis, Indiana 46285. The notice must contain prescribed information about the candidate and about
the shareholder proposing the candidate as described in more detail in Section 1.9 of the bylaws. A copy of the
bylaws is available online at http://investor.lilly.com/governance.cfm. The bylaws will also be provided by mail
without charge upon request to the corporate secretary.
Audit Committee Matters
Audit Committee Membership
All members of the audit committee are independent as defined in the SEC regulations and NYSE listing standards
applicable to audit committee members. The board of directors has determined that Mr. Eskew, Mr. Hoover, and
Mr. Oberhelman are audit committee financial experts, as defined in the rules of the SEC.
Audit Committee Report
The audit committee (“we” or “the committee”) reviews the company’s financial reporting process on behalf of the
board. Management has the primary responsibility for the financial statements and the reporting process, including
the systems of internal controls and disclosure controls. In this context, we have met and held discussions with
management and the independent auditor. Management represented to us that the company’s consolidated financial
statements were prepared in accordance with generally accepted accounting principles (GAAP), and we have
reviewed and discussed the audited financial statements and related disclosures with management and the
independent auditor, including a review of the significant management judgments underlying the financial
statements and disclosures.
The independent auditor reports to us. We have sole authority to appoint and to replace the independent auditor.
We have discussed with the independent auditor matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees), as amended and as adopted by the Public Company
Accounting Oversight Board (PCAOB) in Rule 3200T, including the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements.
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