Eli Lilly 2010 Annual Report Download - page 119

Download and view the complete annual report

Please find page 119 of the 2010 Eli Lilly annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 164

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164

PROXY STATEMENT
Compensation Discussion and Analysis
Summary
Executive compensation for 2010 aligned well with the objectives of our compensation philosophy and with our
performance, driven by these factors:
•Strong growth in operating results drove strong annual bonus and performance award (PA)
payouts. Strong operating performance included 6.7 percent revenue growth (adjusted for
the impact of U.S. health care reform) and 12.7 percent non-GAAP earnings per share
(EPS) growth (adjusted for the impact of U.S. health care reform). For the 2009-2010 PA,
the annual compounded EPS growth rate was 14.2 percent. These results exceeded our
targets (based on expected peer group performance) and resulted in above-target cash
bonus and PA payouts for all participants.
Highlights:
•Strong operating results
•Stock price results in no
executive officer SVA payout
•No increase to CEO salary
or incentive targets for 2010
or 2011
•Lagging stock price resulted in no payout of shareholder value
awards (SVAs). Total shareholder return (TSR) for 2008-2010
failed to meet the threshold for the SVA; as a result, awards
granted to executive officers did not pay out.
•Cost-effective equity design maintained for 2010, with emphasis
on long-term performance. In 2010, we continued our two-year
PA program and our three-year SVA program and maintained
a 50/50 mix of PAs and SVAs for all members of senior
management.
•A balanced program fosters employee achievement, retention,
and engagement. We delivered a total compensation package
composed of salary, performance-based cash and equity
incentives, and a competitive employee benefits program.
Together these elements reinforced pay-for-performance,
provided a balanced focus on both long- and short-term
performance, and encouraged employee retention and
engagement.
In addition:
•No increase in CEO target compensation for 2010 or 2011.Ashe
did last year and in light of the business challenges the
company currently faces, Dr. Lechleiter requested, and the
compensation committee approved, no increases to his 2011
salary or incentive targets.
•The compensation committee reviewed the connection between
compensation and risk. The committee reviewed our
compensation programs and policies for features that may
encourage excessive risk taking and found the overall
program to be sound.
2%
8%
7%*
13%* 16%
-20%
-10%
0%
10%
20%
Revenue
Growth
2010
Non-GAAP
EPS Growth
2010
Non-GAAP
EPS Growth
2009
3-Year TSR
Growth**
Percentage Growth
Lilly Performance
Expected
peer group
performance
Lilly 2010
performance
-34%
1.00
1.42
2.00
0.00
0.00
1.00
2.00
3.00
4.00
Bonus (cash)
2010
PA (stock)
2009-2010
SVA (stock)**
2008-2010
Multiple of Target
2010 Incentive Program Payouts
Target
Actual
1.001.00
8%
*adjusted for U.S. health care reform
**SVA payout based on performance against absolute target set when award is initially granted
using an expected compounded annual rate of total shareholder return (TSR) for large-cap
companies
The Committee’s Processes and Analyses
Linking Business Strategy and Compensation Program Design
At Lilly, we aim to discover, develop, and acquire innovative new therapies—medicines that
make a real difference for patients and deliver clear value for payers. In addition, we must
continually improve productivity in all that we do. To achieve these goals, we must attract,
engage, and retain highly-talented individuals who are committed to the company’s core values
of integrity, excellence, and respect for people. Our compensation and benefits programs are
based on these objectives:
•Reflect individual and company performance. We link all employees’ pay to individual and
company performance.
Executive Compensation
Philosophy:
•Individual and company
performance
•Long-term focus
•Efficient and egalitarian
•Consideration of both
internal relativity and
competitive pay
—As employees assume greater responsibilities, more of their pay is linked to company performance and
shareholder returns through increased participation in equity programs.
—We seek to deliver above-market compensation given top-tier individual and company performance, but
below-market compensation where individual performance falls short of expectations or company
performance lags the industry.
25