Eli Lilly 2013 Annual Report Download - page 123

25
• Assessment of company performance. The Compensation Committee considers company performance
in two ways:
• Prior to establishing total potential compensation for the coming year, the committee considers overall
company performance during the prior year across a variety of metrics.
• To determine payouts under the cash and equity incentive programs, the committee establishes
specific company performance goals related to revenue, EPS, delivery of our pipeline portfolio, and
stock price growth.
• . The committee uses peer-group data as a market check for compensation decisions,
but does not use this data as the sole basis for its compensation targets. The company does not target a
specific position within the range of market data.
•
. The role of the independent compensation consultant is described in more detail
under "Compensation Committee Matters" that follows the CD&A.
Our peer group is comprised of companies that directly compete with us, operate in a similar business model,
and employ people with the unique skills required to operate an established biopharmaceutical company. In
selecting the peer group, the committee considers market cap and revenue as measures of size. The committee
reviews the peer group at least every three years. The group includes: Abbott, Allergan, Amgen, AstraZeneca,
Biogen, Baxter, Bristol-Myers Squibb, Celgene, Covidien (prior to the spin off of Mallinckrodt), Gilead,
GlaxoSmithKline, Hoffman-La Roche, Johnson & Johnson, Medtronic, Merck, Novartis, Pfizer, and Sanofi-
Aventis. Lilly fell in the middle of this peer group in terms of both revenue and market cap when the peer group
was established in 2012. With the exception of Johnson & Johnson, Novartis, and Pfizer, peer companies were
no greater than three times our size with regard to both measures. The committee included these three
companies despite their size because they compete directly with Lilly, have similar business models, and seek to
hire from the same pool of management and scientific talent. In the aggregate, the company’s total
compensation to named executive officers for 2012 was in the middle range of the peer group.
We have three elements of compensation for executive officers: (1) base salary; (2) an annual bonus, which is
calculated based on company performance on revenue, EPS, and the progress of the pipeline relative to internal
targets; and (3) two different forms of equity incentives: (i) "Performance Awards" (PAs) - performance-based
equity awards that pay out as restricted stock units based upon the company's two-year earnings per share
(EPS) growth relative to the expected industry growth over the period; and (ii) "Shareholder Value
Awards" (SVAs) - performance-based equity awards that pay out based on company stock price growth over a
three-year period. Executives also receive the company benefits package, described below under "Employee
Benefits".
The Compensation Committee has authority to adjust the reported earnings per share (EPS) on which PAs and
the annual bonus are determined in order to eliminate the distorting effect of unusual income or expense items
that may occur during a given year that impact year-over-year growth percentages. Further details on the
adjustments for 2013 and the rationale for making these adjustments are set forth in Appendix A ("Summary of
Adjustments to EPS Related to the Annual Bonus and PA") to this proxy. For ease of reference, throughout the
CD&A and the other compensation disclosures we refer simply to "EPS" but we encourage you to review the
information in Appendix A to understand the adjustments that may have been made to EPS.
Base salaries are reviewed and established annually, and may be adjusted upon promotion, following a change
in job responsibilities, or to maintain market competitiveness. Salaries are based on each person's level of
contribution, responsibility, expertise, and market data.
Base salary increases, if granted during a given year, are established based upon a corporate budget for salary
increases, which is set considering company performance over the prior year, expected company performance
• . The Compensation Committee considers company performance
in two ways:
• Prior to establishing total potential compensation for the coming year, the committee considers overall
company performance during the prior year across a variety of metrics.
• o determine payouts under the cash and equity incentive programs, the committee establishes
specific company performance goals related to revenue, EPS, delivery of our pipeline portfolio, and
stock price growth.
• Peer-group analysis. The committee uses peer-group data as a market check for compensation decisions,
but does not use this data as the sole basis for its compensation targets. The company does not target a
specific position within the range of market data.
•
. The role of the independent compensation consultant is described in more detail
under "Compensation Committee Matters" that follows the CD&A.
Our peer group is comprised of companies that directly compete with us, operate in a similar business model,
and employ people with the unique skills required to operate an established biopharmaceutical company. In
selecting the peer group, the committee considers market cap and revenue as measures of size. The committee
reviews the peer group at least every three years. The group includes: Abbott, Allergan, Amgen, AstraZeneca,
Biogen, Baxter, Bristol-Myers Squibb, Celgene, Covidien (prior to the spin off of Mallinckrodt), Gilead,
GlaxoSmithKline, Hoffman-La Roche, Johnson & Johnson, Medtronic, Merck, Novartis, Pfizer, and Sanofi-
Aventis. Lilly fell in the middle of this peer group in terms of both revenue and market cap when the peer group
was established in 2012. With the exception of Johnson & Johnson, Novartis, and Pfizer, peer companies were
no greater than three times our size with regard to both measures. The committee included these three
companies despite their size because they compete directly with Lilly, have similar business models, and seek to
hire from the same pool of management and scientific talent. In the aggregate, the company’s total
compensation to named executive officers for 2012 was in the middle range of the peer group.
We have three elements of compensation for executive officers: (1) base salary; (2) an annual bonus, which is
calculated based on company performance on revenue, EPS, and the progress of the pipeline relative to internal
targets; and (3) two different forms of equity incentives: (i) "Performance Awards" (PAs) - performance-based
equity awards that pay out as restricted stock units based upon the company's two-year earnings per share
(EPS) growth relative to the expected industry growth over the period; and (ii) "Shareholder Value
Awards" (SVAs) - performance-based equity awards that pay out based on company stock price growth over a
three-year period. Executives also receive the company benefits package, described below under "Employee
Benefits".
The Compensation Committee has authority to adjust the reported earnings per share (EPS) on which PAs and
the annual bonus are determined in order to eliminate the distorting effect of unusual income or expense items
that may occur during a given year that impact year-over-year growth percentages. Further details on the
adjustments for 2013 and the rationale for making these adjustments are set forth in Appendix A ("Summary of
Adjustments to EPS Related to the Annual Bonus and PA") to this proxy. For ease of reference, throughout the
CD&A and the other compensation disclosures we refer simply to "EPS" but we encourage you to review the
information in Appendix A to understand the adjustments that may have been made to EPS.
Base salaries are reviewed and established annually, and may be adjusted upon promotion, following a change
in job responsibilities, or to maintain market competitiveness. Salaries are based on each person's level of
contribution, responsibility, expertise, and market data.
Base salary increases, if granted during a given year, are established based upon a corporate budget for salary
increases, which is set considering company performance over the prior year, expected company performance
• . The Compensation Committee considers company performance
in two ways:
• Prior to establishing total potential compensation for the coming year, the committee considers overall
company performance during the prior year across a variety of metrics.
• o determine payouts under the cash and equity incentive programs, the committee establishes
specific company performance goals related to revenue, EPS, delivery of our pipeline portfolio, and
stock price growth.
• . The committee uses peer-group data as a market check for compensation decisions,
but does not use this data as the sole basis for its compensation targets. The company does not target a
specific position within the range of market data.
• The Compensation Committee seeks input from an independent compensation consultant
concerning CEO pay. The role of the independent compensation consultant is described in more detail
under "Compensation Committee Matters" that follows the CD&A.
Our peer group is comprised of companies that directly compete with us, operate in a similar business model,
and employ people with the unique skills required to operate an established biopharmaceutical company. In
selecting the peer group, the committee considers market cap and revenue as measures of size. The committee
reviews the peer group at least every three years. The group includes: Abbott, Allergan, Amgen, AstraZeneca,
Biogen, Baxter, Bristol-Myers Squibb, Celgene, Covidien (prior to the spin off of Mallinckrodt), Gilead,
GlaxoSmithKline, Hoffman-La Roche, Johnson & Johnson, Medtronic, Merck, Novartis, Pfizer, and Sanofi-
Aventis. Lilly fell in the middle of this peer group in terms of both revenue and market cap when the peer group
was established in 2012. With the exception of Johnson & Johnson, Novartis, and Pfizer, peer companies were
no greater than three times our size with regard to both measures. The committee included these three
companies despite their size because they compete directly with Lilly, have similar business models, and seek to
hire from the same pool of management and scientific talent. In the aggregate, the company’s total
compensation to named executive officers for 2012 was in the middle range of the peer group.
We have three elements of compensation for executive officers: (1) base salary; (2) an annual bonus, which is
calculated based on company performance on revenue, EPS, and the progress of the pipeline relative to internal
targets; and (3) two different forms of equity incentives: (i) "Performance Awards" (PAs) - performance-based
equity awards that pay out as restricted stock units based upon the company's two-year earnings per share
(EPS) growth relative to the expected industry growth over the period; and (ii) "Shareholder Value
Awards" (SVAs) - performance-based equity awards that pay out based on company stock price growth over a
three-year period. Executives also receive the company benefits package, described below under "Employee
Benefits".
The Compensation Committee has authority to adjust the reported earnings per share (EPS) on which PAs and
the annual bonus are determined in order to eliminate the distorting effect of unusual income or expense items
that may occur during a given year that impact year-over-year growth percentages. Further details on the
adjustments for 2013 and the rationale for making these adjustments are set forth in Appendix A ("Summary of
Adjustments to EPS Related to the Annual Bonus and PA") to this proxy. For ease of reference, throughout the
CD&A and the other compensation disclosures we refer simply to "EPS" but we encourage you to review the
information in Appendix A to understand the adjustments that may have been made to EPS.
Base salaries are reviewed and established annually, and may be adjusted upon promotion, following a change
in job responsibilities, or to maintain market competitiveness. Salaries are based on each person's level of
contribution, responsibility, expertise, and market data.
Base salary increases, if granted during a given year, are established based upon a corporate budget for salary
increases, which is set considering company performance over the prior year, expected company performance
• . The Compensation Committee considers company performance
in two ways:
• Prior to establishing total potential compensation for the coming year, the committee considers overall
company performance during the prior year across a variety of metrics.
• o determine payouts under the cash and equity incentive programs, the committee establishes
specific company performance goals related to revenue, EPS, delivery of our pipeline portfolio, and
stock price growth.
• . The committee uses peer-group data as a market check for compensation decisions,
but does not use this data as the sole basis for its compensation targets. The company does not target a
specific position within the range of market data.
•
. The role of the independent compensation consultant is described in more detail
under "Compensation Committee Matters" that follows the CD&A.
Competitive pay assessment
Our peer group is comprised of companies that directly compete with us, operate in a similar business model,
and employ people with the unique skills required to operate an established biopharmaceutical company. In
selecting the peer group, the committee considers market cap and revenue as measures of size. The committee
reviews the peer group at least every three years. The group includes: Abbott, Allergan, Amgen, AstraZeneca,
Biogen, Baxter, Bristol-Myers Squibb, Celgene, Covidien (prior to the spin off of Mallinckrodt), Gilead,
GlaxoSmithKline, Hoffman-La Roche, Johnson & Johnson, Medtronic, Merck, Novartis, Pfizer, and Sanofi-
Aventis. Lilly fell in the middle of this peer group in terms of both revenue and market cap when the peer group
was established in 2012. With the exception of Johnson & Johnson, Novartis, and Pfizer, peer companies were
no greater than three times our size with regard to both measures. The committee included these three
companies despite their size because they compete directly with Lilly, have similar business models, and seek to
hire from the same pool of management and scientific talent. In the aggregate, the company’s total
compensation to named executive officers for 2012 was in the middle range of the peer group.
We have three elements of compensation for executive officers: (1) base salary; (2) an annual bonus, which is
calculated based on company performance on revenue, EPS, and the progress of the pipeline relative to internal
targets; and (3) two different forms of equity incentives: (i) "Performance Awards" (PAs) - performance-based
equity awards that pay out as restricted stock units based upon the company's two-year earnings per share
(EPS) growth relative to the expected industry growth over the period; and (ii) "Shareholder Value
Awards" (SVAs) - performance-based equity awards that pay out based on company stock price growth over a
three-year period. Executives also receive the company benefits package, described below under "Employee
Benefits".
The Compensation Committee has authority to adjust the reported earnings per share (EPS) on which PAs and
the annual bonus are determined in order to eliminate the distorting effect of unusual income or expense items
that may occur during a given year that impact year-over-year growth percentages. Further details on the
adjustments for 2013 and the rationale for making these adjustments are set forth in Appendix A ("Summary of
Adjustments to EPS Related to the Annual Bonus and PA") to this proxy. For ease of reference, throughout the
CD&A and the other compensation disclosures we refer simply to "EPS" but we encourage you to review the
information in Appendix A to understand the adjustments that may have been made to EPS.
Base salaries are reviewed and established annually, and may be adjusted upon promotion, following a change
in job responsibilities, or to maintain market competitiveness. Salaries are based on each person's level of
contribution, responsibility, expertise, and market data.
Base salary increases, if granted during a given year, are established based upon a corporate budget for salary
increases, which is set considering company performance over the prior year, expected company performance
• . The Compensation Committee considers company performance
in two ways:
• Prior to establishing total potential compensation for the coming year, the committee considers overall
company performance during the prior year across a variety of metrics.
• o determine payouts under the cash and equity incentive programs, the committee establishes
specific company performance goals related to revenue, EPS, delivery of our pipeline portfolio, and
stock price growth.
• . The committee uses peer-group data as a market check for compensation decisions,
but does not use this data as the sole basis for its compensation targets. The company does not target a
specific position within the range of market data.
•
. The role of the independent compensation consultant is described in more detail
under "Compensation Committee Matters" that follows the CD&A.
Our peer group is comprised of companies that directly compete with us, operate in a similar business model,
and employ people with the unique skills required to operate an established biopharmaceutical company. In
selecting the peer group, the committee considers market cap and revenue as measures of size. The committee
reviews the peer group at least every three years. The group includes: Abbott, Allergan, Amgen, AstraZeneca,
Biogen, Baxter, Bristol-Myers Squibb, Celgene, Covidien (prior to the spin off of Mallinckrodt), Gilead,
GlaxoSmithKline, Hoffman-La Roche, Johnson & Johnson, Medtronic, Merck, Novartis, Pfizer, and Sanofi-
Aventis. Lilly fell in the middle of this peer group in terms of both revenue and market cap when the peer group
was established in 2012. With the exception of Johnson & Johnson, Novartis, and Pfizer, peer companies were
no greater than three times our size with regard to both measures. The committee included these three
companies despite their size because they compete directly with Lilly, have similar business models, and seek to
hire from the same pool of management and scientific talent. In the aggregate, the company’s total
compensation to named executive officers for 2012 was in the middle range of the peer group.
Components of Our Compensation
We have three elements of compensation for executive officers: (1) base salary; (2) an annual bonus, which is
calculated based on company performance on revenue, EPS, and the progress of the pipeline relative to internal
targets; and (3) two different forms of equity incentives: (i) "Performance Awards" (PAs) - performance-based
equity awards that pay out as restricted stock units based upon the company's two-year earnings per share
(EPS) growth relative to the expected industry growth over the period; and (ii) "Shareholder Value
Awards" (SVAs) - performance-based equity awards that pay out based on company stock price growth over a
three-year period. Executives also receive the company benefits package, described below under "Employee
Benefits".
The Compensation Committee has authority to adjust the reported earnings per share (EPS) on which PAs and
the annual bonus are determined in order to eliminate the distorting effect of unusual income or expense items
that may occur during a given year that impact year-over-year growth percentages. Further details on the
adjustments for 2013 and the rationale for making these adjustments are set forth in Appendix A ("Summary of
Adjustments to EPS Related to the Annual Bonus and PA") to this proxy. For ease of reference, throughout the
CD&A and the other compensation disclosures we refer simply to "EPS" but we encourage you to review the
information in Appendix A to understand the adjustments that may have been made to EPS.
Base salaries are reviewed and established annually, and may be adjusted upon promotion, following a change
in job responsibilities, or to maintain market competitiveness. Salaries are based on each person's level of
contribution, responsibility, expertise, and market data.
Base salary increases, if granted during a given year, are established based upon a corporate budget for salary
increases, which is set considering company performance over the prior year, expected company performance
• . The Compensation Committee considers company performance
in two ways:
• Prior to establishing total potential compensation for the coming year, the committee considers overall
company performance during the prior year across a variety of metrics.
• o determine payouts under the cash and equity incentive programs, the committee establishes
specific company performance goals related to revenue, EPS, delivery of our pipeline portfolio, and
stock price growth.
• . The committee uses peer-group data as a market check for compensation decisions,
but does not use this data as the sole basis for its compensation targets. The company does not target a
specific position within the range of market data.
•
. The role of the independent compensation consultant is described in more detail
under "Compensation Committee Matters" that follows the CD&A.
Our peer group is comprised of companies that directly compete with us, operate in a similar business model,
and employ people with the unique skills required to operate an established biopharmaceutical company. In
selecting the peer group, the committee considers market cap and revenue as measures of size. The committee
reviews the peer group at least every three years. The group includes: Abbott, Allergan, Amgen, AstraZeneca,
Biogen, Baxter, Bristol-Myers Squibb, Celgene, Covidien (prior to the spin off of Mallinckrodt), Gilead,
GlaxoSmithKline, Hoffman-La Roche, Johnson & Johnson, Medtronic, Merck, Novartis, Pfizer, and Sanofi-
Aventis. Lilly fell in the middle of this peer group in terms of both revenue and market cap when the peer group
was established in 2012. With the exception of Johnson & Johnson, Novartis, and Pfizer, peer companies were
no greater than three times our size with regard to both measures. The committee included these three
companies despite their size because they compete directly with Lilly, have similar business models, and seek to
hire from the same pool of management and scientific talent. In the aggregate, the company’s total
compensation to named executive officers for 2012 was in the middle range of the peer group.
We have three elements of compensation for executive officers: (1) base salary; (2) an annual bonus, which is
calculated based on company performance on revenue, EPS, and the progress of the pipeline relative to internal
targets; and (3) two different forms of equity incentives: (i) "Performance Awards" (PAs) - performance-based
equity awards that pay out as restricted stock units based upon the company's two-year earnings per share
(EPS) growth relative to the expected industry growth over the period; and (ii) "Shareholder Value
Awards" (SVAs) - performance-based equity awards that pay out based on company stock price growth over a
three-year period. Executives also receive the company benefits package, described below under "Employee
Benefits".
The Compensation Committee has authority to adjust the reported earnings per share (EPS) on which PAs and
the annual bonus are determined in order to eliminate the distorting effect of unusual income or expense items
that may occur during a given year that impact year-over-year growth percentages. Further details on the
adjustments for 2013 and the rationale for making these adjustments are set forth in Appendix A ("Summary of
Adjustments to EPS Related to the Annual Bonus and PA") to this proxy. For ease of reference, throughout the
CD&A and the other compensation disclosures we refer simply to "EPS" but we encourage you to review the
information in Appendix A to understand the adjustments that may have been made to EPS.
1. Base Salary
Base salaries are reviewed and established annually, and may be adjusted upon promotion, following a change
in job responsibilities, or to maintain market competitiveness. Salaries are based on each person's level of
contribution, responsibility, expertise, and market data.
Base salary increases, if granted during a given year, are established based upon a corporate budget for salary
increases, which is set considering company performance over the prior year, expected company performance