Eli Lilly 2015 Annual Report Download - page 167

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• Excise taxes. Upon a change in control, employees may be subject to certain excise taxes under
Section 280G of the Internal Revenue Code. The company does not reimburse the affected employees
for those excise taxes or any income taxes payable by the employee. To reduce the employee's exposure
to excise taxes, the employee’s change-in-control benefit may be decreased to maximize the after-tax
benefit to the individual.
Payments Upon Change in Control Alone. In general, the change-in-control plan is a “double trigger” plan,
meaning payments are made only if the employee suffers a covered termination of employment within
two years following the change in control. There are limited exceptions for pro-rata portions of PAs and SVAs,
based on performance to the date of the change in control, as noted above under "Acceleration of equity
awards."
Compensation Committee Matters
Background
Role of the Independent Consultant In Assessing Executive Compensation
The committee has retained Cimi B. Silverberg of Frederic W. Cook & Co., Inc., as its independent
compensation consultant. Ms. Silverberg reports directly to the committee. Neither she nor her firm is
permitted to have any business or personal relationship with management or the members of the
Compensation Committee. The consultant’s responsibilities are to:
• Review the company’s total compensation philosophy, peer group, and target competitive positioning for
reasonableness and appropriateness
• Review the company’s executive compensation program and advise the committee of evolving best
practices
• Provide independent analyses and recommendations to the committee on the CEO’s pay
• Review draft CD&A and related tables for the proxy statement
• Proactively advise the committee on best practices for board governance of executive compensation
• Undertake special projects at the request of the committee chair
Ms. Silverberg interacts directly with members of company management only on matters under the
committee’s oversight and with the knowledge and permission of the committee chair.
Role of Executive Officers and Management In Assessing Executive Compensation
With the oversight of the CEO and the senior vice president of human resources and diversity, the company’s
global compensation group formulates recommendations on compensation philosophy, plan design, and
compensation for executive officers (other than the CEO, as noted below). The CEO provides the committee
with a performance assessment and compensation recommendation for each of the other executive officers.
The committee considers those recommendations with the assistance of its consultant. The CEO and the
senior vice president of human resources and diversity attend committee meetings but are not present for
executive sessions or for any discussion of their own compensation. Only nonemployee directors and the
committee’s consultant attend executive sessions.
The CEO does not participate in the formulation or discussion of his pay recommendations and has no prior
knowledge of the recommendations that the consultant makes to the committee.
Risk Assessment Process
As a part of the company's overall enterprise risk management program, in 2015 the committee reviewed the
company’s compensation policies and practices and concluded that the programs and practices are not
reasonably likely to have a material adverse effect on the company. The committee noted numerous design
features of the company’s cash and equity incentive programs that reduce the likelihood of inappropriate risk-
taking, including, but not limited to: