Eli Lilly 2010 Annual Report Download - page 131

Download and view the complete annual report

Please find page 131 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
year against the objectives of the programs, assesses any features that could encourage excessive risk-taking, and
makes changes as necessary. Second, management has implemented effective controls that minimize unintended
and willful reporting errors.
The committee does not believe it is practical to apply a specific claw-back policy to SVAs since it is very difficult
to isolate the amount, if any, by which the stock price might benefit from misstated earnings over a three-year
performance period. In this case, the committee has the authority reduce or withhold payouts.
Compensation Changes for 2011 and 2012
Several changes to the company’s executive compensation program will take effect in 2011 or 2012:
• In light of the business challenges the company faces, Dr. Lechleiter requested that he receive no increase in
base salary or incentive targets in 2011. The committee agreed to maintain his 2010 compensation package for
2011.
• Amendments to the change-in-control severance pay plans to eliminate tax gross-ups are effective
October 2012.
• The following changes have been made to the bonus plan, effective January 2011:
—We added a research metric that measures the output and sustainability of our pipeline portfolio. Specific
measures of pipeline output include product approvals and new molecular entities that enter Phase III
clinical trials during the calendar year. Pipeline sustainability is measured by tracking each project’s
progression toward its next milestone and by an evaluation of pipeline quality.
—Financial performance will be measured against company goals.
• We are asking shareholders to approve a new executive officer incentive plan (see Item 7 below). This plan will
work in conjunction with the existing bonus plan and is not intended to change the annual cash bonus for named
executive officers, but to preserve the tax deductibility of these incentive payments.
Compensation Committee Report
The compensation committee (“we” or “the committee”) evaluates and establishes compensation for executive
officers and oversees the deferred compensation plan, the company’s management stock plans, and other
management incentive, benefit, and perquisite programs. Management has the primary responsibility for the
company’s financial statements and reporting process, including the disclosure of executive compensation. With this
in mind, we have reviewed and discussed with management the “Compensation Discussion and Analysis” found on
pages 25-37 of this proxy statement. The committee is satisfied that the “Compensation Discussion and Analysis”
fairly and completely represents the philosophy, intent, and actions of the committee with regard to executive
compensation. We recommended to the board of directors that the “Compensation Discussion and Analysis” be
included in this proxy statement for filing with the SEC.
Compensation Committee
Karen N. Horn, Ph.D., Chair
Michael L. Eskew
R. David Hoover
Ellen R. Marram
Kathi P. Seifert
37