Eli Lilly 2015 Annual Report Download - page 156

P40
Share Ownership and Retention Guidelines; Prohibition on Hedging and
Pledging Shares
Share ownership and retention guidelines help to foster a focus on long-term growth. The CEO is required to
own company stock valued at least six times annual base salary. During 2015, the requirement for other
executive officers changed from a fixed number of shares to a multiple of annual base salary (2 or 3 times
annual base salary depending on the position). Until the required number of shares is reached, the executive
officer must retain 50 percent of net shares received from new equity payouts. Our executives have a long
history of maintaining significant levels of company stock. As of February 19, 2016, Dr. Lechleiter held shares
valued at approximately 49 times his annual salary. The following table shows the share requirements for
each NEO:
Name Share Requirement Owns Required Shares
Dr. Lechleiter six times base salary Yes
Mr. Rice three times base salary Yes
Dr. Lundberg three times base salary Yes
Mr. Harrington three times base salary Yes
Mr. Conterno three times base salary Yes
Executive officers are also required to hold all shares received from equity program payouts, net of acquisition
costs and taxes, for at least one year, even once share ownership requirements have been met. For PAs, this
holding requirement is met by the one-year service-vesting period that applies after the end of the
performance period.
Employees are not permitted to hedge their economic exposures to company stock through short sales or
derivative transactions. Non-employee directors and all members of senior management are prohibited from
pledging any company stock (i.e., using company stock as collateral for a loan or trading shares on margin).
Executive Compensation Recovery Policy
All incentive awards are subject to forfeiture upon termination of employment prior to the end of the
performance period or for disciplinary reasons. In addition, the Compensation Committee has adopted an
executive compensation recovery policy, which gives the committee broad discretion to claw back incentive
payouts from any member of senior management (approximately 160 employees) whose misconduct results
in a material violation of law or company policy that causes significant harm to the company, or who fails in his
or her supervisory responsibility to prevent such misconduct by others.
Additionally, the company can recover all or a portion of any incentive compensation in the case of materially
inaccurate financial statements or material errors in the performance calculation, whether or not they result in
a restatement and whether or not the executive officer has engaged in wrongful conduct.
The recovery policy covers any incentive compensation awarded or paid to an employee at a time when he or
she is a member of senior management. Subsequent changes in status, including retirement or termination of
employment, do not affect the company’s rights to recover compensation under the policy. Recoveries under
the plan can extend back as far as three years.