ELI LILLY & Co PRE 14A, filed Mar 8, 2024

ELI LILLY & Co (LLY)

PRE 14A 2024-03-08 For: 2024-03-08

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x						Preliminary Proxy Statement
o						Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o						Definitive Proxy Statement
o						Definitive Additional Materials
o						Soliciting Material Pursuant to §240.14a-12


Notice of 2024 Annual Meeting of Shareholders		1
Proxy Statement Summary		2
Governance		11
	Director Qualifications	11
	Director Nominations	26
	Director Compensation	28
	Item 1 - Election of Directors	31
	Leadership Structure	31
	Board Structure	34
	Governance Practices	37
	Board Alignment	42
	Communication with the Board of Directors	43
	Shareholder Engagement on Governance Issues	44
Ownership of Company Stock		45
Compensation		46
	Item 2 - Approval, on an Advisory Basis, of the Compensation Paid to the Company’s Named Executive Officers	46
	Talent and Compensation Committee Matters	47
	Compensation Discussion and Analysis	48
	Executive Compensation Tables	67
	CEO Pay Ratio	76
	Pay versus Performance	77
Audit Matters		81
	Item 3 - Ratification of the Appointment of the Independent Auditor	81
Management Proposals		84
	Item 4 - Proposal to Amend the Company’s Articles of Incorporation to Eliminate the Classified Board Structure	84
	Item 5 - Proposal to Amend the Company’s Articles of Incorporation to Eliminate Supermajority Voting Provisions	85
Shareholder Proposals		86
	Item 6 through Item 10
Other Information		100
	Meeting and Voting Logistics	100
	Other Matters	103
Appendix A - Summary of Adjustments Related to the Annual Cash Bonus and Performance Award		A-1
Appendix B - Proposed Amendments to the Company’s Articles of Incorporation		B-1



	Frequently Referenced Topics


Director Diversity		12
Director Biographies		14
Director Skills		13
Lead Independent Director Duties		31
Board and Committee Oversight of:
Sustainability		39
Cybersecurity		39
Human Capital Management		40
Political Activities		40
Transactions with Related Persons		42
Share Ownership and Retention Guidelines		65
Compensation Recovery Policy (Clawback)		66


ITEMS OF BUSINESS
Item 1			Election of each of the four director nominees to serve three-year terms
Item 2			Approval, on an advisory basis, of the compensation paid to the company’s named executive officers
Item 3			Ratification of the appointment of Ernst & Young LLP as the independent auditor for 2024
Item 4			Approval of amendments to the company’s articles of incorporation to eliminate the classified board structure
Item 5			Approval of amendments to the company’s articles of incorporation to eliminate supermajority voting provisions
Item 6			Shareholder proposal to publish an annual report disclosing lobbying activities
Item 7			Shareholder proposal to report on effectiveness of the company’s diversity, equity, and inclusion efforts
Item 8			Shareholder proposal to establish and report on a process by which the impact of extended patent exclusivities on product access would be considered in deciding whether to apply for secondary and tertiary patents
Item 9			Shareholder proposal to eliminate supermajority voting requirements
Item 10			Shareholder proposal to adopt a comprehensive human rights policy


ADMISSION									WHEN 8:30 a.m. EDT Monday, May 6, 2024
The 2024 annual meeting of shareholders (the Annual Meeting) of Eli Lilly and Company will be held virtually via live webcast. The webcast is designed to provide shareholders the opportunity to participate virtually to facilitate shareholder attendance and to provide a consistent experience to all shareholders, regardless of location. You will be able to attend the Annual Meeting, vote, and submit questions virtually via live webcast by visiting virtualshareholdersmeeting.com/LLY2024. To be admitted to the Annual Meeting webcast, you must enter the 16-digit control number found on the proxy card, voting instruction form, or notice you received. For further information on Annual Meeting logistics, see the section titled “Other Information—Meeting and Voting Logistics.” This proxy statement is dated March 22, 2024. We mailed a notice of internet availability of proxy materials on or about that date to our shareholders of record as of February 28, 2024 (other than those who previously requested electronic or paper delivery of our proxy materials and certain participants in The Lilly Employee 401(k) plan (401(k) Plan)).
									WHERE Virtually at www.virtualshareholder meeting.com/LLY2024
									RECORD DATE February 28, 2024
YOUR VOTE IS IMPORTANT
Every shareholder vote is important. Even if you plan to attend the Annual Meeting, we encourage you to vote promptly online, by telephone, or, if you received or requested paper copies of your proxy materials, by signing, dating, and returning your proxy card or voting instruction form by mail, so that a quorum may be represented at the meeting.


ELI LILLY AND COMPANY
(Name of Registrant as Specified In Its Charter)


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)


Dear Fellow Shareholders, Thank you for your continued support of Eli Lilly and Company. As we reflect on our company’s progress in 2023, we are proud that we received approval for several life-changing medicines, served more patients around the world and advanced exciting new research into unmet medical needs. Our accomplishments included the regulatory approvals of Omvoh for patients with ulcerative colitis, Jaypirca for patients with MCL or CCL, and the approval and launch of Zepbound for obesity, an important medicine that has the potential to positively impact millions of lives. We released results from the landmark Trailblazer-ALZ 2 study that showed a slowing of cognitive and functional decline of early Alzheimer’s disease. We also worked hard to deliver value to you, posting strong total shareholder returns through December 31, 2023, in terms of both total share price appreciation and dividends. We also invested in creating a stronger community and more positive world. In 2023, Lilly donated over $4 billion in medicines to charitable organizations that provide medicines for free to qualifying patients in the US. In addition, working with humanitarian organizations, Lilly and its affiliates provided more than $68 million in diabetes, cancer, and other therapies around the world to support disaster preparedness, disaster relief and humanitarian aid. These and other efforts contributed to Lilly’s 30x30 goal of improving quality health care for 30 million people living in resource limited settings, annually, by 2030. At the time of this letter, Lilly’s 30x30 reach is estimated to reach or exceed 15 million patients, halfway to our 2030 goal of 30 million patients. Lilly continues to work diligently to meet the needs of vulnerable communities around the world. Since our 2023 annual meeting, we have spoken with many investors on an array of subjects, including drug pricing and global access to our products; key enterprise risks; and environmental, social and governance topics. We value this engagement and the constructive feedback we’ve received. As a result of ongoing input, and as in past years, the board is putting forward management proposals at the 2024 annual meeting of shareholders (the Annual Meeting) to eliminate the classified board structure and supermajority voting requirements in our articles of incorporation.
At Lilly we are committed to making medicines that make life better for people all over the world, and that commitment is not possible without your support. We look forward to welcoming you at the Annual Meeting.


IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD MAY 6, 2024: The annual report to shareholders and proxy statement are available at ProxyVote.com as well as on our website at lilly.com/policies-reports/annual-report.


	Operating Performance
$34.1 billion in 2023 revenue		$5.80 earnings per share (EPS) in 2023 on a reported basis	$6.32 EPS on a non-GAAP basis in 2023
Reported results were prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include all revenue and expenses recognized during the periods. A reconciliation of EPS on a reported basis to EPS on a non-GAAP basis is included in Appendix A.


Name	Age	Director Since	Other Public Boards	Principal Occupation		Committee Membership
Katherine Baicker, Ph.D. Independent Director	52	2011	0	Provost, the Emmett Dedmon Professor, Harris School of Public Policy, University of Chicago	Ethics and Compliance (Chair) Science and Technology
J. Erik Fyrwald Independent Director	64	2005	1	Chief Executive Officer and board member, International Flavors & Fragrances Inc.	Science and Technology Talent and Compensation
Jamere Jackson Independent Director	55	2016	0	Chief Financial Officer, AutoZone, Inc.	Audit (Chair) Directors and Corporate Governance
Gabrielle Sulzberger Independent Director	63	2021	3	Chair of Global ESG Advisory, Teneo	Audit Directors and Corporate Governance


•Bonus Plan Result: In 2023, the company exceeded its annual cash bonus targets for revenue and EPS. We also made significant pipeline advances. For purposes of the bonus, the Talent and Compensation Committee adjusted revenue and adjusted non-GAAP EPS to exclude the impact of transactions associated with the divestiture of certain legacy products, as well as acquired in-process research and development (IPR&D) charges, both of which were not included in 2023 bonus targets. See the CD&A for further discussion of the Eli Lilly and Company Bonus Plan (Bonus Plan).			1.81 Bonus Plan Multiple


•2022-2024 Performance Award (PA) Result: We exceeded the two-year EPS growth target set for our PA program. The PA target is based on expected EPS growth of peer companies over a two-year period. As a result of exceeding the EPS growth target set for our PA program, the PA payout was above target. See the CD&A for further discussion on the PA program.			128% 2022-2024 PA Payout
•2021-2023 Shareholder Value Award (SVA) Result: Our total stock price growth exceeded the target range in our SVA program, which is based on expected large-cap company returns over a three-year period. This performance resulted in a SVA payout above target. See the CD&A for further discussion on the SVA program.			175% 2021-2023 SVA Payout
•2021-2023 Relative Value Award (RVA) Result: The RVA measures Lilly’s relative total shareholder return (TSR) against its peers. Lilly’s TSR performance exceeded the peer median TSR for the 2021-2023 performance period resulting in a payout above target. See the CD&A for further discussion on the RVA program.			175% 2021-2023 RVA Payout



ONLINE	BY TELEPHONE	BY MAIL	AT THE MEETING
Visit the website listed on your notice, proxy card, or voting instruction form	Call 1-800-690-6903 and follow the instructions provided	If you received or requested paper copies of your proxy materials, sign, date, and return your proxy card or voting instruction form	Attend the Annual Meeting, online by live webcast at virtualshareholdermeeting.com/LLY2024 on Monday, May 6, 2024, at 8:30 a.m. EDT


Our directors are elected by the company’s shareholders to oversee the actions and results of the company’s management. The Directors and Corporate Governance Committee, which is chaired by the lead independent director, regularly assesses the effectiveness of the board to ensure that directors reflect the skill sets, experiences, diverse viewpoints and characteristics necessary to oversee our complex and evolving business. Execution of our robust assessment and refreshment process, guided by key governance guidelines, has resulted in a mix of directors that balances experienced institutional knowledge and fresh perspectives, and reflects a broad range of backgrounds and viewpoints.


8 Years Average Director Tenure						Tenure: Our director composition reflects a mix of tenure on the board, which provides an effective balance of historical perspective and an understanding of the evolution of our business with fresh perspectives and insights.


			In making its independence determinations, the board considered that Ms. Walker is affiliated with the Goldman Sachs Group, which the company may use for advisory, investment banking or similar services from time to time. In addition, the board considered that some of the current non-employee directors are affiliated with companies or entities to which the company sold products or made payments, or from which the company purchased products or services during the year. Drs. Baicker, Kaelin, Hedley, and Runge are employed at medical or academic institutions with which the company engages in clinical research,


Diversity: The board strives to achieve diversity in the broadest sense, including persons diverse in geography, gender, ethnicity, age, and experience. Although the board does not establish specific diversity goals or have a standalone diversity policy, the board’s overall diversity is an important consideration in the director selection and nomination process. The Directors and Corporate Governance Committee assesses the effectiveness of board diversity efforts in connection with the annual nomination process as well as in new director searches. The company’s current 12 directors range in age from 51 to 69 and include five women and five minority group members (MGM).


65% board service annual retainer amounts linked to the long-term performance of Lilly stock			5x annual board retainer share ownership requirement for non-employee directors			CAPPED total annual compensation for non-employee directors


Compensation Element	Payment or Value2
Board Service1
Annual board retainer	$110,000
Annual equity grant3	$200,000 in deferred stock units
Lead independent director	$40,000
Committee Service1
Annual Committee Retainer2	Chair	Member
Audit Committee	$26,000	$6,000
Science and Technology Committee	$18,000	$6,000
Talent and Compensation Committee	$17,000	$3,000
Ethics and Compliance Committee	$17,000	$3,000
Directors and Corporate Governance Committee	$17,000	$3,000
Total Compensation Value Cap of $800,0004


Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)1	All Other Compensation and Payments ($)2	Total ($)3
Mr. Alvarez	$136,000	$200,000	$0	$336,000
Dr. Baicker	$136,000	$200,000	$0	$336,000
Mr. Fyrwald	$119,000	$200,000	$25,884	$344,884
Dr. Hedley	$119,000	$200,000	$0	$319,000
Mr. Jackson	$145,000	$200,000	$0	$345,000
Ms. Johnson	$116,000	$200,000	$0	$316,000
Dr. Kaelin	$137,000	$200,000	$12,150	$349,150
Mr. Luciano	$173,000	$200,000	$0	$373,000
Dr. Runge	$119,000	$200,000	$0	$319,000
Ms. Sulzberger	$119,000	$200,000	$16,500	$335,500
Ms. Walker	$119,000	$200,000	$40,000	$359,000

Former Director:
Mr. Tai4	$39,987	$83,333	$70,000	$193,320


2024 Nominees

Katherine Baicker Independent Director	J. Erik Fyrwald Independent Director	Jamere Jackson Independent Director	Gabrielle Sulzberger Independent Director


We believe that high board effectiveness promotes the long-term interests of our shareholders, strengthens the accountability of the board of directors and management, and improves our standing as a trusted member of the communities we serve. In addition to having the right mix of directors, there are many factors involved in operating an effective board.


Members: •Mr. Alvarez* •Mr. Jackson* (Chair) •Ms. Sulzberger* •Ms. Walker * Financial Experts Meetings in 2023: 6			Key responsibilities and areas of risk oversight: •oversees integrity of financial information provided to our shareholders and others •oversees management’s systems of internal controls and disclosure controls •oversees performance of internal and independent audit functions •establishes qualifications and determines independence of the company’s independent auditor •has sole authority to appoint or replace the independent auditor •oversees compliance with legal and regulatory requirements •oversees processes and procedures related to identifying and mitigating enterprise-level risks •oversees the company’s programs, policies, procedures, and risk management activities related to information security and data protection •together with the ethics and compliance committee, oversees the company’s compliance with the company’s code of ethics


Members: •Mr. Alvarez (Chair) •Mr. Fyrwald •Ms. Johnson •Mr. Luciano •Ms. Walker Meetings in 2023: 6			Key responsibilities and areas of risk oversight: •establishes the compensation of the CEO (in consultation with independent directors and external compensation consultant) and other executive officers •oversees global compensation philosophy and human capital management efforts, including diversity, equity, and inclusion efforts •has authority to appoint or replace the compensation consultant •acts as the oversight committee with respect to the company’s deferred compensation plans, management stock plans, and other management incentive and benefit programs •reviews succession plans for the CEO and other key senior leadership positions, including a broad review of our succession management •advises management and the board regarding other human capital management, diversity, equity, and inclusion efforts, and employee compensation and benefits matters •reviews, monitors, and oversees stock ownership guidelines for executive officers •oversees the company’s executive compensation recovery policy •oversees the company’s engagement with shareholders regarding executive compensation matters, including reviewing and evaluating the results of advisory votes on executive compensation


Members: •Mr. Jackson •Dr. Kaelin •Mr. Luciano (Chair) •Ms. Sulzberger Meetings in 2023: 7			Key responsibilities and areas of risk oversight: •reviews and recommends to the board the size and composition of the board and its committees •leads the process for director recruitment, together with the lead independent director •reviews recommendations for nominees for the board of directors •oversees matters of corporate governance, including board performance, non-employee director independence and compensation, corporate governance guidelines, and shareholder engagement on governance matters •identifies and brings to the attention of the board as appropriate current and emerging environmental, social, political, and governance trends and public policy issues that may affect the business operations, performance, or reputation of the company •annually assesses the performance of the board, board committees and board processes, and reviews such findings with the board


Members: •Dr. Baicker (Chair) •Dr. Hedley •Ms. Johnson •Dr. Runge Meetings in 2023: 3			Key responsibilities and areas of risk oversight: •reviews, identifies and, when appropriate, brings to the attention of the board legal and regulatory trends and issues, and compliance and quality matters that may have an impact on the business operations, financial performance, or reputation of the company •reviews, monitors, and makes recommendations to the board on corporate policies and practices related to compliance, including those related to employee health and safety •together with the audit committee, assists the board in its oversight of legal and regulatory compliance and oversees the company’s compliance with its code of ethics


Members: •Dr. Baicker •Mr. Fyrwald •Dr. Hedley •Dr. Kaelin (Chair) •Dr. Runge Meetings in 2023: 6			Key responsibilities and areas of risk oversight: •reviews and advises the board regarding the company’s long-term strategic goals and objectives and the quality and direction of the company’s research and development programs •reviews and advises the board and management on the company’s major technology positions and strategies relative to emerging technologies, emerging concepts of therapy and health care, and changing market requirements •monitors and evaluates developments, technologies, and trends in pharmaceutical research and development •regularly reviews the company’s product pipeline •assists the board with its oversight responsibility for enterprise risk management in areas affecting the company’s research and development


We are committed to ensuring pay is administered equitably across our workforce. For more than 20 years, we have regularly conducted pay equity studies of our workforce in the United States and have more recently started conducting studies of our workforce outside of the United States. Where appropriate, we have made pay adjustments as warranted.						20+
						Years
						of pay equity studies in the U.S.


	Common Stock1
Beneficial Owners	Shares Owned2	Stock Units Distributable Within 60 Days3	Percent of Class	Stock Units Not Distributable Within 60 Days4
Ralph Alvarez	—	—	*	53,906
Anat Ashkenazi	42,521	—	*	18,203
Katherine Baicker, Ph.D.	—	—	*	22,710
J. Erik Fyrwald	100	—	*	71,786
Anat Hakim	30,479	—	*	6,704
Mary Lynne Hedley	346	—	*	1,201
Jamere Jackson	—	—	*	8,810
Kimberly H. Johnson	—	—	*	2,597
William G. Kaelin, Jr., M.D.	—	—	*	21,064
Juan R. Luciano	—	—	*	15,612
David A. Ricks	687,161	—	*	36,314
Marschall S. Runge, M.D., Ph.D.	202	—	*	16,421
Daniel Skovronsky, M.D., Ph.D.	193,738	—	*	12,290
Gabrielle Sulzberger	—	—	*	2,098
Jake Van Naarden	20,489	—	*	4,134
Karen Walker	—	—	*	5,919
All directors and current executive officers as a group (24 people):	1,194,105	—	*	350,050


Name and Address		Number of Shares Beneficially Owned	Percent of Class*
Lilly Endowment Inc. (the Endowment) 2801 North Meridian Street Indianapolis, IN 46208	1	99,768,810	10.5%
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355	2	71,604,696	7.5%
BlackRock, Inc. 55 East 52nd Street New York, NY 10055	3	64,376,027	6.8%
The PNC Financial Services Group, Inc. 300 Fifth Avenue Pittsburgh, PA 15222	4	51,540,105	5.4%


Name and principal occupation
			David Ricks Chair, President, and CEO
			Anat Ashkenazi Executive Vice President and Chief Financial Officer
			Daniel Skovronsky, M.D., Ph.D. Executive Vice President, Chief Scientific Officer and President, Lilly Research Laboratories and Lilly Immunology
			Anat Hakim Executive Vice President, General Counsel and Secretary
			Jake Van Naarden Executive Vice President and President, Loxo@Lilly


At our 2023 annual meeting of shareholders, greater than 95 percent of the votes cast were in favor of the company’s say-on-pay proposal on executive compensation. Management and the Talent and Compensation Committee view this vote as supportive of the company’s overall approach toward executive compensation.			95% Support for Say-On-Pay


Lilly 2023 Goals			Weighting
Revenue performance			25%
EPS performance			50%
Pipeline progress			25%


Name	2022 Annual Base Salary Effective March 6, 2022	2023 Annual Base Salary Effective March 5, 2023	Increase
Mr. Ricks	$1,500,000	$1,650,000	10.0	%
Ms. Ashkenazi	$950,000	$1,050,000	10.5	%
Dr. Skovronsky	$1,250,000	$1,350,000	8.0	%
Ms. Hakim	$900,000	$1,000,000	11.1	%
Mr. Van Naarden	$750,000	$850,000	13.3	%


Name	2022 Bonus Target		2023 Bonus Target
Mr. Ricks	150	%	150	%
Ms. Ashkenazi	100	%	100	%
Dr. Skovronsky	100	%	100	%
Ms. Hakim	100	%	100	%
Mr. Van Naarden	100	%	100	%