Eli Lilly 2011 Annual Report Download - page 101

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PROXY STATEMENT
Highlights of the Company’s Corporate Governance Guidelines
The following summary provides highlights of the company’s guidelines established by the board of directors. A
complete copy of the guidelines is available online at http://investor.lilly.com/governance.cfm or in paper form upon
request to the company’s corporate secretary.
I. Role of the Board
The directors are elected by the shareholders to oversee the actions and results of the company’s management.
Their responsibilities include:
• providing general oversight of the business
• approving corporate strategy
• approving major management initiatives
• providing oversight of legal and ethical conduct
• overseeing the company’s management of significant business risks
• selecting, compensating, and evaluating directors
• evaluating board processes and performance
• selecting, compensating, evaluating, and, when necessary, replacing the chief executive officer, and compensat-
ing other senior executives
• ensuring that a succession plan is in place for all senior executives.
II. Composition of the Board
Mix of Independent Directors and Officer-Directors
There should always be a substantial majority (75 percent or more) of independent directors. The chief executive
officer should be a board member. Other officers may, from time to time, be board members, but no officer other
than the chief executive officer should expect to be elected to the board by virtue of his or her position in the com-
pany.
Selection of Director Candidates
The board selects candidates for board membership and establishes the criteria to be used in identifying potential
candidates. The board delegates the screening process to the directors and corporate governance committee. For
more information on the director nomination process, including the current selection criteria, see “Directors and
Corporate Governance Committee Matters.”
Independence Determinations
The board annually determines the independence of directors based on a review by the directors and corporate
governance committee. No director is considered independent unless the board has determined that he or she has
no material relationship with the company, either directly or as a partner, significant shareholder, or officer of an
organization that has a material relationship with the company. Material relationships can include commercial,
industrial, banking, consulting, legal, accounting, charitable, and familial relationships, among others. To evaluate
the materiality of any such relationship, the board has adopted categorical independence standards consistent with
the New York Stock Exchange (NYSE) listing standards, except that the “look-back period” for determining whether a
director’s prior relationship with the company impairs independence is extended from three to four years.
Specifically, a director is not considered independent if (i) the director or an immediate family member is a cur-
rent partner of the company’s independent auditor (currently Ernst & Young LLP); (ii) the director is a current
employee of such firm; (iii) the director has an immediate family member who is a current employee of such firm and
who participates in the firm’s audit, assurance, or tax compliance (but not tax planning) practice; or (iv) the director
or an immediate family member was within the last four years (but is no longer) a partner or employee of such firm
and personally worked on our audit within that time.
In addition, a director is not considered independent if any of the following relationships existed within the pre-
vious four years:
• a director who is an employee of the company, or whose immediate family member is an executive officer of the
company. Temporary service by an independent director as interim chairman or chief executive officer will not
disqualify the director from being independent following completion of that service.
• a director who receives any direct compensation from the company other than the director’s normal director
compensation, or whose immediate family member receives more than $120,000 per year in direct compensa-
tion from the company other than for service as a nonexecutive employee.
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