Eli Lilly 2015 Annual Report Download - page 145

P29
Compensation Committee's Processes and Analyses
Process for setting compensation
The Compensation Committee considers the following in determining executive compensation:
• Assessment of the executive's individual performance and contribution.
• CEO: The independent directors, under the direction of the lead director, meet with the CEO at
the beginning of each year to agree upon the CEO's performance objectives for the year. At the
end of the year, the independent directors meet to assess the CEO's achievement of those
objectives along with other factors, including contribution to the company's performance and
ethics and integrity. The year-end evaluation is used in setting the CEO's compensation for the
next year.
• Other Executive Officers ("EOs"): The committee receives individual performance assessments
and compensation recommendations from the CEO and also exercises its judgment based on the
Board's knowledge and interactions with the EOs. Each other EO's performance assessment is
based on achievement of objectives established between such EO and the CEO at the start of
the year as well as other factors.
• Assessment of company performance. The Compensation Committee considers company
performance in two ways:
• As a factor in establishing 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, earnings per share (EPS), progress 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.
• Input from an independent compensation consultant concerning executive pay. 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 companies' market caps and revenue as measures of size,
and selects a peer group whose median market cap and revenues are broadly similar to Lilly. The committee
reviews the peer group at least every three years. The group includes: Abbott, Abbvie, Allergan, Amgen,
AstraZeneca, Baxter, Biogen, Bristol-Myers Squibb, Celgene, Gilead, GlaxoSmithKline, Hoffman-La Roche,
Johnson & Johnson, Medtronic, Merck, Novartis, Pfizer, and Sanofi-Aventis. 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 NEOs, when reviewed at the end of 2014, was
in the middle range of the peer group.