Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Soliciting Material Pursuant to §240.14a-12

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

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





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Notice of 2020 Annual Meeting of Shareholders and Proxy Statement









Your vote is important
Please vote online, by telephone, or by signing, dating, and returning the enclosed proxy card by mail.




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Letter from Our Chairman and Lead Independent Director



Dear fellow Lilly shareholders,

Thank you for your continued support of Eli Lilly and Company. We cordially invite you to attend the 2020 Annual Meeting of Shareholders. We are pleased with Lilly's strong performance in 2019 and look forward to an exciting year in 2020.

Board engagement with shareholders and other key stakeholders is core to how we govern the company. In 2019, we spoke with a number of investors on topics such as eliminating the company's classified board and supermajority voting requirements; environmental, social, and governance topics including drug pricing, product quality, and safety; our board and corporate culture; litigation and key enterprise risks; the company's executive compensation; and proxy access, among other topics. As a result of input from stakeholders, we recently amended the company's bylaws to include proxy access provisions. Further, this year, as in past years, the board is putting forward management proposals to eliminate the classified board structure and supermajority voting provisions.

We are dedicated to effective oversight of our business and believe that governance is key to the board's oversight of our long-term performance, strategy, key risks, and compliance. Our board believes independence is essential to strong corporate governance. Having both an executive chair and a strong, lead independent director is important in balancing inputs. Our chief executive officer provides strong operational leadership coupled with a long-term strategic agenda. This is vital to our innovative research and development business with prolonged product development cycles. Further, the lead independent director, currently a chief executive officer for a Fortune 100 company, drives an “outside in” analysis of company decisions and performance and leads our independent directors in their important oversight function.

We remain committed to serving you and the millions of patients around the world whose lives it is our mission to make better. We look forward to seeing you at the 2020 Annual Meeting of Shareholders.

Sincerely,
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David A. Ricks                                    Juan Luciano
Chairman, President, and CEO                            Lead Independent Director




Table of Contents
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P2



Notice of 2020 Annual Meeting of Shareholders

To the holders of Common Stock of Eli Lilly and Company:
The 2020 Annual Meeting of Shareholders of Eli Lilly and Company will be held as shown below:
TIME AND DATE
LOCATION*
WHO CAN VOTE
11:00 a.m. EDT, Monday,
May 4, 2020
The Lilly Center Auditorium
Lilly Corporate Center
Indianapolis, Indiana 46285
Shareholders of record at close of business on March 9, 2020
This proxy statement is dated March 20, 2020, and is first being sent or given to our shareholders on or about that date.

ITEMS OF BUSINESS
Management Proposals
Board Voting Recommendation
Page Reference
Item 1
Election of the five directors listed in the proxy statement to serve three-year terms
FOR
 each of the director nominees
10
Item 2
Approval, by non-binding vote, of the compensation paid to the company's named executive officers
FOR
34
Item 3
Ratification of Ernst & Young LLP as the independent auditor for 2020
FOR
62
Item 4
Approve amendments to the Articles of Incorporation to eliminate the classified board structure
FOR
64
Item 5
Approve amendments to the Articles of Incorporation to eliminate supermajority voting provisions
FOR
65
Shareholder Proposals
 
 
Item 6
Shareholder proposal to disclose direct and indirect lobbying activities and expenditures
AGAINST
67
Item 7
Shareholder proposal to publish a report on the effectiveness of the forced swim test
AGAINST
68
Item 8
Shareholder proposal to amend the bylaws to require an independent board chair
AGAINST
70
Item 9
Shareholder proposal on board diversity requesting disclosures of specific minimum qualifications and board nominee skills, experience, and ideological perspective
AGAINST
72
Item 10
Shareholder proposal to publish feasibility report on incorporating public concern over drug prices into senior executive compensation arrangements
AGAINST
74
Item 11
Shareholder proposal to implement a bonus deferral policy
AGAINST
75
Item 12
Shareholder proposal to disclose clawbacks on executive incentive compensation due to misconduct
AGAINST
76

Admission procedure for attending the annual meeting: In 2019, we introduced a new admission procedure to attend the annual meeting, and we will be utilizing the same procedure again this year. To attend the meeting, you must preregister for an admission ticket before 5:00 p.m. on April 28, 2020. For further details on the admission process and for information regarding how to attend the meeting, see the section titled "Other Information - Meeting and Voting Logistics."

Every shareholder vote is important. Even if you plan to attend the meeting in person, we encourage you to sign, date, and return your proxy card or voting instructions by mail, or to vote by telephone or online promptly so that a quorum may be represented at the meeting.
By order of the Board of Directors,
 
 
 
Bronwen L. Mantlo
*As part of our precautions regarding the coronavirus or COVID-19, we are planning for the possibility that the annual meeting may be held by means of remote communication. If we take this step, we will announce the decision to do so in advance, and details on how to participate will be available at investor.lilly.com/proxy.
Secretary 
 
March 20, 2020
 
Indianapolis, Indiana
 

Important notice regarding the availability of proxy materials for the shareholder meeting to be held May 4, 2020: The annual report and proxy statement are available at lilly.com/disclosures/2019-annual-report.

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Proxy Statement Summary

New in This Year's Proxy Statement
In May 2019, Ellen Marram retired from the board; Juan Luciano was elected by the board to serve as the board's lead independent director following the 2019 annual meeting of shareholders.

After considering the interests of the company and our shareholders, we recently amended the company's bylaws to include proxy access provisions. Further, this year, as in past years, the board has approved, and recommends that the shareholders approve, the following management proposals at this year's meeting. The board recommends approval of amendments to the company’s articles of incorporation to eliminate the classified board structure (see Item 4 herein) and to eliminate supermajority voting provisions (see Item 5 herein). The board believes these two proposals balance shareholder interests and demonstrate its accountability and willingness to take steps that address shareholder-expressed concerns.

The information contained in, or that can be accessed through, our website is not a part of, or incorporated by reference in, this proxy statement.

Highlights of 2019 Company Performance
The following provides a brief look at our 2019 performance in three dimensions: operating performance, progress in our innovation pipeline, business development, and shareholder return (both absolute and relative). See our 2019 annual report on Form 10-K for more details.

Operating Performance
Performance highlights:
2019 revenue increased 4 percent to approximately $22.3 billion.
2019 earnings per share (EPS) on a reported basis were $8.89, compared to 2018 EPS on a reported basis of $3.13.
2019 EPS increased 11 percent on a non-GAAP basis to $6.04.

Reported results were prepared in accordance with U.S. generally accepted accounting principles (GAAP), include all revenue and expenses recognized during the periods, and reflect Elanco Animal Health as discontinued operations. A reconciliation of EPS on a reported basis to EPS on a non-GAAP basis is included in Appendix A.

2019 Innovation and Business Development Progress
We made significant pipeline advances in 2019, including:
U.S. approval of Reyvow (lasmiditan), an oral medication for the acute treatment of migraine.
U.S. approval of Baqsimi® (glucagon) nasal powder for the treatment of severe hypoglycemia in people with diabetes.
U.S. approval of a new indication for Emgality® (galcanezumab-gnlm) for the treatment of episodic cluster headache.
U.S. approval of a new indication for Taltz® (ixekizumab) for the treatment of active ankylosing spondylitis, also known as radiographic axial spondyloarthritis.
U.S. approval of a new indication for Alimta® (pemetrexed for injection) in combination with Keytruda® and platinum chemotherapy for the first-line treatment of patients with metastatic nonsquamous non-small cell lung cancer.
EU approval of an update to the Trulicity® (dulaglutide) label and indication statement to include results from the REWIND cardiovascular outcomes trial.
Introduction in the U.S. of Insulin Lispro, a lower-priced version of Humalog®, providing patients with diabetes an insulin option with a list price 50 percent lower than the current Humalog list price.

We also completed multiple significant strategic development activities in 2019, including:
the divestiture of Elanco Animal Health, Inc.
acquisitions, license agreements, and research collaborations to strengthen our pipeline, including the acquisition of Loxo Oncology, Inc., broadening the scope of Lilly's oncology portfolio into precision medicines through the addition of a promising pipeline of investigational medicines, including LOXO-292 (selpercatinib), a first-in-class oral RET inhibitor, and LOXO-305, an oral BTK inhibitor.

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Shareholder Returns
We generated strong shareholder returns (share price appreciation plus dividends, reinvested quarterly) through year-end 2019. Our returns significantly exceeded both the compensation peer group and the S&P 500 across the three- and five-year time periods presented below:
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Governance
Item 1: Election of Directors
 
 
Further information see page 10
 
 

 
Name and principal occupation
Public boards
Management recommendation
Vote required 
to pass

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Michael L. Eskew, 70
3M Corporation
IBM Corporation
Allstate Insurance Company
Vote FOR
Majority of
 votes cast
Retired Chairman and CEO, United Parcel Service, Inc.
Director since 2008
 
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William G. Kaelin, Jr., M.D., 62
 
Vote FOR
Majority of
 votes cast
Sidney Farber Professor of Medicine
Harvard Medical School

Director since 2012
 
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David A. Ricks, 52
Adobe

Vote FOR
Majority of
votes cast
Chairman, President, and CEO, Eli Lilly and Company
Director since 2017
 
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Marschall S. Runge, M.D., Ph.D., 65
 
Vote FOR
Majority of
 votes cast
Executive Vice President for Medical Affairs and Medical School Dean, University of Michigan; CEO Michigan Medicine
Director since 2013
 
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Karen Walker, 58
 
Vote FOR
Majority of votes cast
Senior Vice President and Chief Marketing Officer, Intel Corporation
Director since 2018
 


Our Corporate Governance Policies Reflect Best Practices
Strategy and risk oversight
ü Our board actively oversees and approves our corporate strategy.
ü Our board and board committee agendas are structured to engage our directors in informed reviews of
strategic and forward-looking issues, as well as in constructive challenge to management initiatives and
programs. 
ü Our board oversees the state of our compliance program and reviews our enterprise-level risks and risk management practices.
ü We have a comprehensive code of ethical and legal business conduct applicable to our board and all
employees worldwide. This code is reviewed and approved annually by the board.

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ü We have a supplemental code for our CEO and all members of financial management, in recognition of their unique responsibilities to ensure proper accounting, financial reporting, internal controls, and financial stewardship.
ü The charters of the board committees clearly establish the committees’ respective roles and responsibilities.
ü We have an annual cap on director compensation.

Board skills and experience
ü Our board membership is characterized by leadership, experience, and diversity.
ü We conduct orientation and continuing education programs for directors.
ü Our board conducts a robust annual assessment of board performance led by the lead independent director, including an annual assessment of each individual director.
ü We are committed to board refreshment and seek to balance continuity and fresh perspectives. Our director composition reflects a mix of tenure on the board. Currently, eight directors have served on the board for six years or more and five directors have served on the board for five years or less.

Focus on independence
ü 12 of our 13 directors are independent.
ü We have a strong, independent, clearly defined lead independent director role with significant governance duties, including conducting regular executive sessions of independent directors.
ü All standing board committees are composed solely of independent directors.
ü Our board holds executive sessions of the independent directors at every regular board meeting and most committee meetings.
ü Our independent directors actively engage in board meetings, have direct access to management, and have sole discretion to hire independent advisors at the company’s expense.
ü Our independent directors select and evaluate our CEO and ensure we have a strong succession plan for executive officer roles. Our Compensation Committee determines the compensation for our CEO and other executive officers.
ü Our conflict of interest policy requires disclosures of potential conflicts to Lilly and clarifies when Lilly board service must be disclosed to others.

Governance and accountability to shareholders
ü Our board values active shareholder engagement. In response to input from shareholders, we have put forward for consideration at this year's annual meeting management proposals to eliminate our classified board structure and supermajority voting provisions.
ü In addition, in December 2019, the board amended the company’s bylaws to add proxy access rights for shareholders holding at least three percent of the company’s stock for at least three years to nominate board candidates for up to 20 percent of the board seats.
ü We have a majority voting standard and resignation policy for the election of directors in uncontested
elections.
ü We have no shareholder rights plan (“poison pill”).
ü We have meaningful stock ownership and retention guidelines for our directors and executive officers to foster alignment with shareholders.

Sustainability
ü Our board has a longstanding commitment to corporate responsibility.
ü We have strong governance and disclosure of corporate political spending.
ü We have transparent public policy engagement.
ü Our board oversees and maintains ongoing engagement with our senior executives on key environmental, social, and governance matters, including cybersecurity, sustainability, and human capital management.
ü
We publish annual corporate responsibility reports describing our corporate citizenship efforts across key focus areas.


P5



Compensation
Item 2: Advisory Vote on Compensation Paid
to Named Executive Officers

Further information see page 34

Management recommendation

Vote FOR
Vote required to pass

Majority of votes cast

Our Executive Compensation Programs Reflect Best Practices
ü
We have had strong shareholder support of our compensation practices: for the last five consecutive years, over 97 percent of shares cast voted in favor of our executive compensation programs.
ü
Our compensation programs are designed to align with shareholder interests and link pay to performance through a blend of short- and long-term performance measures.
ü
Our Compensation Committee annually reviews our compensation programs to ensure they provide incentives to deliver long-term, sustainable business results while discouraging excessive risk-taking and other adverse behaviors.
ü
We have a broad compensation recovery or "clawback" policy that applies to all executives and covers a wide range of misconduct.
ü
Our executive officers are subject to robust stock ownership and retention guidelines and are prohibited from hedging or pledging their company stock.
ü
We do not have "top hat" retirement plans. Supplemental plans are open to all employees and are limited to restoring benefits lost due to IRS limits on qualified plans.
ü
We do not provide tax gross-ups to executive officers (except for limited gross-ups related to international assignments).
ü
We have a very restrictive policy on perquisites.
ü
Our severance plans related to change-in-control generally require a double trigger.
ü
We do not have employment agreements with any of our executive officers.

Executive Compensation Summary for 2019
At the time the total target compensation was established at the end of 2018, target compensation for our named executive officers (the five officers whose compensation is disclosed in this proxy statement) was slightly below median of the company's peer group. Incentive compensation payouts exceeded target, consistent with the company's strong performance in 2019.

Pay for Performance
As described in the Compensation Discussion and Analysis (CD&A), we link our incentive pay programs to a mix of measures on three dimensions of company performance: operating performance; progress with our innovation pipeline; and shareholder return (both absolute and relative). The Compensation Committee adjusts reported EPS results to eliminate the distorting effect of certain unusual items on incentive compensation performance measures.

The summary below highlights how our incentive pay programs are intended to align with company performance. Please also see Appendix A for any adjustments that were made to EPS for incentive compensation programs.


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2019 Bonus Plan Multiple
The company exceeded its annual cash bonus targets for EPS and pipeline progress and nearly achieved its target for revenue. See the CD&A for further discussion on the Eli Lilly and Company Bonus Plan (Bonus Plan). For purposes of the bonus, EPS was adjusted for the same items reflected in the non-GAAP financial results included in our 2019 earnings announcement.

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2018-2020 Performance Award Multiple
We exceeded the EPS growth targets under our performance award program, which has targets based on expected EPS growth of peer companies over a two-year period. For purposes of the performance award, EPS was adjusted as detailed in Appendix A. This performance resulted in a performance award payout above target. See the CD&A for further discussion on the performance award program.

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2017-2019 Shareholder Value Award Multiple
Our stock price growth exceeded the target range (16.1 percent to 28.6 percent) under our shareholder value award program, which is based on expected large-cap company returns over a three-year period. This performance resulted in a shareholder value award payout above target.

For individuals who were executive officers when the award was granted, shareholder value award payouts were modified based on a three-year cumulative total shareholder return (TSR) relative to peer companies. Our relative TSR was 32 percent above the peer group median, resulting in a +20 percent modifier, which resulted in a final payout of 1.80 percent of target. See the CD&A for further discussion on the shareholder value award program and the TSR modifier.

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Audit Matters
Item 3: Ratification of Appointment of Independent Auditor

Further information see page 62


Management recommendation

Vote FOR
Vote required to pass

Majority of votes cast

Management Proposals

Item 4: Approval of Amendments to the Articles of
Incorporation to Eliminate the Classified Board Structure

Further information see page 64

Management recommendation

Vote FOR
Vote required to pass

80% of outstanding shares

Item 5: Approval of Amendments to the Articles of
Incorporation to Eliminate Supermajority Voting Provisions

Further information see page 65

Management recommendation

Vote FOR
Vote required to pass

80% of outstanding shares


P8



Shareholder Proposals

Item 6: Proposal to Disclose Direct and Indirect Lobbying Activities and Expenditures

Further information see page 67

Management recommendation

Vote AGAINST
Vote required to pass

Majority of votes cast

Item 7: Proposal to Publish a Report on the Effectiveness of the Forced Swim Test

Further information see page 68

Management recommendation

Vote AGAINST
Vote required to pass

Majority of votes cast

Item 8: Proposal to Amend the Bylaws to Require an Independent Board Chair

Further information see page 70

Management recommendation

Vote AGAINST
Vote required to pass

Majority of votes cast

Item 9: Shareholder Proposal on Board Diversity Requesting Disclosures of Specific Minimum Qualifications and Board Nominee Skills, Experience, and Ideological Perspective

Further information see page 72

Management recommendation

Vote AGAINST
Vote required to pass

Majority of votes cast

Item 10: Proposal to Publish Feasibility Report on Incorporating Public Concern Over Drug Prices into Senior Executive Compensation Arrangements

Further information see page 74

Management recommendation

Vote AGAINST
Vote required to pass

Majority of votes cast

Item 11: Proposal to Implement a Bonus Deferral Policy

Further information see page 75

Management recommendation

Vote AGAINST
Vote required to pass

Majority of votes cast

Item 12: Proposal to Disclose Clawbacks on Executive Incentive Compensation Due to Misconduct

Further information see page 76

Management recommendation

Vote AGAINST
Vote required to pass

Majority of votes cast

Voting

How to Vote in Advance of the Meeting
Even if you plan to attend the 2020 annual meeting in person, we encourage you to vote prior to the meeting via one of the methods described below.

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ONLINE
BY TELEPHONE
BY MAIL
Visit the website listed on your proxy card or voting instruction form
Call the telephone number on your proxy card or voting instruction form
Sign, date, and return your proxy card or voting instruction form

Further information on how to vote is provided at the end of the proxy statement under "Other Information."

Voting at our 2020 Annual Meeting
You may also opt to vote in person at the 2020 annual meeting, which will be held on Monday, May 4, 2020, at the Lilly Corporate Center, Indianapolis, IN 46285, at 11:00 a.m., EDT. See the section titled "Other Information" for instructions.

Governance
Item 1. Election of Directors

Under the company’s articles of incorporation, the board is divided into three classes with approximately one-third of the directors standing for election each year. The term for directors to be elected this year will expire at the annual meeting of shareholders held in 2023. Each of the director nominees listed below has agreed to serve that term. The following sections provide information about our directors, including their qualifications, the director nomination process, and director compensation.

Board Recommendation on Item 1

The board recommends that you vote FOR each of the following nominees:
Michael L. Eskew
Williams G. Kaelin, Jr., M.D.
David A. Ricks
Marschall S. Runge, M.D., Ph.D.
Karen Walker

Board Operations and Governance

Board of Directors
Each of our directors is elected to serve until his or her successor is duly elected and qualified. If a bona fide nominee set forth in this proxy statement is unable to serve or for good cause will not serve, proxy holders may vote for another nominee proposed by the board or, as an alternative, the board may reduce the number of directors to be elected at the annual meeting.

Director Biographies
Set forth below is information as of March 20, 2020, regarding the nominees for election, which has been confirmed by each of them for inclusion in this proxy statement. We have provided the most significant experiences, qualifications, attributes, and skills that led to the conclusion that each director or director nominee should serve as a director in light of our business and structure. Full biographies for each of our directors are available on our website at lilly.com/about/board-of-directors/Pages/board-of-directors.aspx.

No family relationship exists among any of our directors, director nominees, or executive officers. To the best of our knowledge, there are no pending material legal proceedings in which any of our directors or nominees for director, or any of their associates, is a party adverse to us or any of our affiliates, or has a material interest adverse to us or any of our affiliates. Additionally, to the best of our knowledge, there have been no events under any bankruptcy act, no criminal proceedings and no judgments, sanctions, or injunctions during the past 10 years that are material to

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the evaluation of the ability or integrity of any of our directors or nominees for director. There is no arrangement between any director or director nominee and any other person pursuant to which he or she was or is to be selected as a director or director nominee.

Class of 2020
The five directors listed below will seek election at this year's annual meeting. Four of these directors are standing for reelection; Karen Walker was appointed to the board in December 2018 to replace a retiring director and is seeking election for the first time. See “Item 1. Election of Directors” above for more information.

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Michael L. Eskew

Age: 70, Director since 2008, Board Committees: Audit; Compensation; Directors and Corporate Governance (chair)
PUBLIC BOARDS
NON-PROFIT BOARDS
 
3M Corporation;
Chairman of the board of trustees of The Annie E. Casey Foundation
IBM Corporation;
 
Allstate Insurance Company
 
 
CAREER HIGHLIGHTS
United Parcel Service, Inc., a global shipping and logistics company

     - UPS Board of Directors (1998 - 2014)
     - Chairman and CEO (2002 - 2007)

     - Vice Chairman (2000 - 2002)
QUALIFICATIONS
Mr. Eskew has CEO experience with UPS, where he established a record of success in managing complex worldwide
operations, strategic planning, and building a strong consumer brand focus. He is an audit committee financial expert,
based on his CEO experience and his service on other U.S. public company audit committees. He has extensive corporate
governance experience through his service on the boards of other companies.



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William G. Kaelin, Jr., M.D.

Age: 62, Director since 2012, Board Committees: Finance; Science and Technology (chair)
INDUSTRY MEMBERSHIPS
HONORS
National Academy of Medicine;
Nobel Prize in Physiology or Medicine;
National Academy of Sciences;
Albert Lasker Basic Medical Research Award;
American College of Physicians;
Wiley Prize in Biomedical Sciences from the Rockefeller University;
Association of American Physicians;
Steven C. Beering Award from the Indiana University School of
American Society of Clinical Investigation (ASCI)
Medicine; ASCI's Stanley J. Korsmeyer Award; Paul Marks Prize for
 
Cancer Research from the Memorial Sloan Kettering Cancer Center;
 
Richard and Hinda Rosenthal Prize from the American Association for
 
Cancer Research; Scientific Grand Prix of the Foundation Lefoulon-
 
Delalande; Canada Gairdner International Award; Doris Duke
 
Distinguished Clinical Scientist Award; Helis Award from Baylor
 
College of Medicine; Massry Prize from the Meira and Shaul G.
  
 
Massry Foundation
CAREER HIGHLIGHTS
• Harvard Medical School

     - Sidney Farber Professor of Medicine (2002 - present)
Brigham and Women's Hospital
     - Professor (2002 - present)
• Howard Hughes Medical Institute
     - Investigator (2002 - present)
     - Assistant Investigator (1998 - 2002)
QUALIFICATIONS
Dr. Kaelin is a prominent medical researcher and academician. He has extensive experience at Harvard Medical School,
a major medical institution, as well as special expertise in oncology, a key component of Lilly's business. He also has
deep expertise in basic science, including mechanisms of drug action, and experience with pharmaceutical discovery
research.


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David A. Ricks

Age: 52, Director since 2017, Board Committees: none
PUBLIC BOARDS
NON-PROFIT BOARDS
INDUSTRY MEMBERSHIPS
Adobe
Board of Governors for Riley Children's Foundation;
International Federation of Pharmaceutical
 
Central Indiana Corporate Partnership
Manufacturers & Associations (IFPMA);
 
 
Pharmaceutical Research and Manufacturers
 
 
of America (PhRMA)
CAREER HIGHLIGHTS
• Eli Lilly and Company

     - Chairman, President, and CEO (2017 - present)
     - Senior Vice President and President, Lilly Bio-Medicines (2012 - 2016)
QUALIFICATIONS
Mr. Ricks was named President and CEO on January 1, 2017, and Chairman on June 1, 2017. Mr. Ricks joined Lilly in 1996
and most recently served as President of Lilly Bio-Medicines. He has deep expertise in product development, global
sales and marketing, as well as public policy. He has significant global experience in leading the company's commercial
operations.

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Marschall S. Runge, M.D., Ph.D.

Age: 65, Director since 2013, Board Committees: Public Policy and Compliance; Science and Technology
NON-PROFIT BOARDS
MEMBERSHIPS + OTHER ORGANIZATIONS
Michigan Medicine
Experimental Cardiovascular Sciences Study Section of the National Institutes of Health
CAREER HIGHLIGHTS
• University of Michigan

     - CEO, Michigan Medicine (2015 - present)
     - Executive Vice President for Medical Affairs (2015 - present)
     - Dean, Medical School (2015 - present)
• University of North Carolina, School of Medicine
     - Executive Dean (2010 - 2015)
     - Chair of the Department of Medicine (2000 - 2015)
     - Principal Investigator and Director of the North Carolina Translational and Clinical Sciences Institute (2010 - 2015)
QUALIFICATIONS
Dr. Runge brings the unique perspective of a practicing physician who has a broad background in health care and
academia. He has extensive experience as a practicing cardiologist, a strong understanding of health care facility
systems, and deep expertise in biomedical research and clinical trial design.

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Karen Walker

Age: 58, Director since 2018, Board Committees: Audit; Public Policy and Compliance
NON-PROFIT BOARDS
MEMBERSHIPS + OTHER ORGANIZATIONS
Salvation Army Advisory Board of Silicon Valley
Association of National Advertisers; Sprout Social
CAREER HIGHLIGHTS
Intel Corporation, a leader in the semiconductor industry

     - Senior Vice President and Chief Marketing Officer (2019 - present)
Cisco Systems, a provider of packaging products, aerospace, and other technologies and services to commercial and

     governmental customers
     - Senior Vice President and Chief Marketing Officer (2015 - 2019)
     - Senior Vice President, Marketing (2013 - 2015)
     - Senior Vice President of Segment, Services and Partner Marketing (2012 - 2013)
QUALIFICATIONS
Ms. Walker brings extensive marketing and digital expertise. She has valuable commercial experience developed
through her business and consumer leadership positions in the information technology industry and is a recognized
industry authority on both technology and marketing. Her business expertise includes senior field and marketing roles
in Europe, North America, and the Asia-Pacific region.

Class of 2021
The following four directors are serving terms that will expire in May 2021.

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Katherine Baicker, Ph.D.

Age: 48, Director since 2011, Board Committees: Audit, Public Policy and Compliance (chair)
MEMBERSHIPS + OTHER ORGANIZATIONS
Board member of HMS Holdings; Panel of Health Advisers to the Congressional Budget Office; Advisory Board
of the National Institute for Health Care Management; Editorial Board of Health Affairs; Research Associate
of the National Bureau of Economic Research; Trustee of the Mayo Clinic; Member of the Mayo Clinic; Member of the
National Academy of Medicine; The National Academy of Social Insurance; The Council on Foreign Relations; and
American Academy of Arts and Sciences
CAREER HIGHLIGHTS
• Harris School of Public Policy, University of Chicago

     - Dean and the Emmett Dedmon Professor (2017 - present)
• Harvard T.H. Chan School of Public Health, Department of Health Policy and Management
     - C. Boyden Gray Professor (2014 -2017)
     - Acting Chair (2014 - 2016)
     - Professor of health economics (2007 - 2017)
• Council of Economic Advisers, Executive Office of the President
     - Member (2005 - 2007)
     - Senior Economist (2001 - 2002)
QUALIFICATIONS
Dr. Baicker is a leading researcher in the fields of health economics, public economics, and labor economics. As a valued
adviser to numerous health care-related commissions and committees, her expertise in health policy and health care
delivery is recognized in both academia and government.

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J. Erik Fyrwald

Age: 60, Director since 2005, Board Committees: Compensation; Science and Technology
PUBLIC BOARDS
PRIVATE BOARDS
NON-PROFIT BOARDS
Bunge Limited
Syngenta International
UN World Food Program Farm to Market Initiative;
 
 
CropLife International; Swiss-American Chamber of Commerce;
 
 
Syngenta Foundation for Sustainable Agriculture (chair)
CAREER HIGHLIGHTS
Syngenta, a global Swiss-based agriculture technology company that produces agrochemicals and seeds
     - CEO (2016 - present)
 Univar, Inc., a leading distributor of chemicals and provider of related services
     - President and CEO (2012 - 2016)
Ecolab, a leading provider of cleaning, sanitization, and water products and services
     - President (2012)
Nalco Company, a leading provider of water treatment products and services
     - Chairman and Chief Executive Officer (2008 - 2011)
E.I. duPont de Nemours and Company, a global chemical company
     - Group Vice President, agriculture and nutrition (2003 - 2008)
QUALIFICATIONS
Mr. Fyrwald has a strong record of operational and strategic leadership in three complex worldwide businesses with a
focus on technology and innovation. He is an engineer by training and has significant CEO experience with Syngenta,
Univar, and Nalco.

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Jamere Jackson

Age: 51, Director since 2016, Board Committees: Audit (chair); Finance
CAREER HIGHLIGHTS
Hertz Global Holdings Inc., a global vehicle rental, leasing, and fleet management business

     - Chief Financial Officer (2018 - present)
Nielsen Holdings plc, a global measurement and data analytics company
     - Chief Financial Officer (2014 - 2018)
GE
     - Vice President and CFO, GE Oil & Gas, drilling and surface division (2013 - 2014)
     - Senior Executive, Finance, GE Aviation (2007 - 2013)
     - Finance Executive, GE Corporate (2004 - 2007)
QUALIFICATIONS
Through his senior financial roles at Hertz, Nielsen, and GE, Mr. Jackson brings to the board significant global financial
expertise and a strong background in strategic planning, having spent his professional career in a broad range of
financial and strategic planning roles. He is an audit committee financial expert, based on his CFO experience and
his training as a certified public accountant.



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https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-jacksontaiboardcirclephotos1.jpg
Jackson P. Tai

Age: 69, Director since 2013, Board Committees: Audit; Directors and Corporate Governance; Finance
PUBLIC BOARDS
PRIOR PUBLIC BOARDS
NON-PROFIT BOARDS
MEMBERSHIPS + OTHER
ORGANIZATIONS
MasterCard Incorporated;
Canada Pension Plan
Metropolitan Opera;
Harvard Business School;
HSBC Holdings (chair, Group
Investment Board;
Rensselaer Polytechnic
Asia-Pacific Advisory Board
Risk Committee)
Royal Phillips NV;
Institute
 
 
The Bank of China Limited;
 
 
 
Singapore Airlines;
 
 
 
NYSE Euronext;
 
 
 
ING Group NV;
 
 
 
CapitaLand (Singapore);
 
 
 
DBS Holdings and DBS Bank
 
 
CAREER HIGHLIGHTS
DBS Group Holdings Ltd and DBS Bank Ltd (formerly the Development Bank of Singapore), one of the largest
 

     financial services groups in Asia
     - Vice Chairman and Chief Executive Officer (2002 - 2007)
     - President and Chief Operating Officer (2001 - 2002)
     - Chief Financial Officer (1999 - -2001)
J.P. Morgan & Co. Incorporated, a leading global financial institution
     - Managing Director in the Investment Banking Division (1974 - 1999)
 
QUALIFICATIONS
 
Mr. Tai is a former CEO with extensive experience in international business and finance, and is an audit committee
financial expert. He has deep expertise in the Asia-Pacific region, an important growth market for Lilly. He also has
broad corporate governance experience from his service on public company boards in North America, Europe, and Asia.


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Class of 2022
The following four directors are serving terms that will expire in May 2022.

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Ralph Alvarez

Age: 64, Director since 2009, Board Committees: Compensation (chair); Science and Technology
PUBLIC BOARDS
PRIOR PUBLIC BOARDS
MEMBERSHIPS + OTHER ORGANIZATIONS
Lowe's Companies, Inc.;
McDonald's Corporation; KeyCorp;

University of Miami: President's Council
Dunkin' Brands Group, Inc.
Skylark Co., Ltd.; Realogy Holdings Corp.
 
CAREER HIGHLIGHTS
Advent International Corporation, a leading global private equity firm

     - Operating Partner (2017 - present)
• Skylark Co., Ltd., a leading restaurant operator in Japan
     - Chairman of the Board (2013 - 2018)
McDonald's Corporation  
     - President and Chief Operating Officer (2006 - 2009)
QUALIFICATIONS
Through his positions at Skylark Co., Ltd. and McDonald's Corporation, as well as with other global restaurant
businesses, Mr. Alvarez has extensive experience in consumer marketing, global operations, international business, and
strategic planning. His international experience includes a special focus on Japan and emerging markets. He also has
extensive corporate governance experience through his service on other public company boards.

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Carolyn R. Bertozzi, Ph.D.

Age: 53, Director since 2017, Board Committees: Public Policy and Compliance; Science and Technology
NON-PROFIT BOARDS
MEMBERSHIPS + OTHER ORGANIZATIONS
Glenn Foundation;
National Institute of Medicine; National Academy of Sciences; Foreign Member of the
Grace Science Foundation
Royal Society; and American Academy of Arts and Sciences
HONORS
 
Solvay Prize for the Future of Chemistry; MacArthur Foundation Fellowship; Lemelson MIT Prize; Heinrich Wieland
Prize; National Academy of Sciences Award in the Chemical Sciences; UC Berkeley Distinguished Teaching Award;
Donald Sterling Noyce Prize for Excellence in Undergraduate Teaching
CAREER HIGHLIGHTS
• Stanford University

     - Anne T. and Robert M. Bass Professor of Chemistry, Professor of Chemical and Systems Biology and 
        Radiology by courtesy (2015 - present)
     - Baker Family Co-Director of Stanford ChEM-H (2017 - present)
Howard Hughes Medical Institute 
     - Investigator (2000 - present)
University of California, Berkeley
     - T.Z. and Irmgard Chu Professor of Chemistry and Professor of Molecular and Cell Biology (1996 - 2015)
QUALIFICATIONS
Dr. Bertozzi is a prominent researcher and academician. She has extensive experience at Stanford University and the
University of California, Berkeley, two major research institutions. Her deep expertise spans the disciplines of
chemistry and biology, with an emphasis on studies of cell surface glycosylation associated with cancer, inflammation,
and bacterial infection and exploiting this knowledge for development of diagnostic and therapeutic approaches.


https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-juanlucianoboardcirclephotos.jpg
Juan R. Luciano

Age: 58, Director since 2016, Lead Independent Director since 2019. Board Committees: Directors and Corporate Governance; Finance (chair)
PUBLIC BOARDS
NON-PROFIT BOARDS
MEMBERSHIPS + OTHER ORGANIZATIONS
Archer Daniels Midland Company;
Intersect Illinois;
Economic Club of Chicago; Commercial Club of Chicago
 
Boys and Girls Clubs of America;
 
 
Kellogg School of Management,
 
 
Northwestern University
 
CAREER HIGHLIGHTS
Archer Daniels Midland Company, a global food-processing and commodities-trading company

     - Chairman (2016 - present)
     - CEO and President (2015 - present)
     - President (2014 - 2015)
     - Executive Vice President and Chief Operating Officer (2011 - 2014)
The Dow Chemical Company, a multinational chemical company
     - Executive Vice President and President, Performance Division (2010 - 2011)
QUALIFICATIONS
Mr. Luciano has CEO and global business experience with Archer Daniels Midland Company, where he has established
a reputation for strong results-oriented and strategic leadership, as well as many years of global leadership at The Dow
Chemical Company. He brings to the board a strong technology and operations background, along with expertise in the
highly regulated food and agriculture sectors.

P18




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Kathi P. Seifert

Age: 70, Director since 1995, Board Committees: Compensation; Directors and Corporate Governance
PUBLIC BOARDS
PRIOR PUBLIC BOARDS
NON-PROFIT BOARDS
Investors Community Bank
Albertsons;
Community Foundation for the Fox Valley Region;
 
Revlon Consumer Products Co.;
Fox Cities Building for the Arts;
 
Supervalu Inc.;
Fox Cities Chamber of Commerce; New North;
 
Lexmark International, Inc.
Greater Fox Cities Area Habitat for Humanity;
 
 
Riverview Gardens; Bubolz Nature Preserve; Fox Valley
 
 
Humane Association
CAREER HIGHLIGHTS
Katapult, LLC, a provider of pro bono mentoring and consulting services to nonprofit organizations

     - Chairman (2004 - present)
Kimberly-Clark Corporation, a global consumer products company
     - Executive Vice President (1999 - 2004)
QUALIFICATIONS
Ms. Seifert is a retired senior executive of Kimberly-Clark. She has strong expertise in consumer marketing and brand
management, having led sales and marketing for several worldwide brands, with a special focus on consumer health.
She has extensive corporate governance experience through her other board positions.


P19



Director Qualifications and Nomination Process

Director Qualifications
Experience: Our directors are responsible for overseeing the company's business consistent with their fiduciary duties. This significant responsibility requires highly skilled individuals with various qualities, attributes, and professional experience. We believe the board is well-rounded, with a balance of relevant perspectives and experience, as illustrated in the following chart. Categories referencing "expertise" indicate that the director is an expert in the field, while "experience" indicates direct experience, including management and oversight of significant operations:
CEO Experience:
 
5

 
 
 
 
 
Financial Expertise:
 
6

 
 
 
 
Relevant Scientific/Academic Expertise:
 
4

 
 
 
 
 
 
Healthcare Experience:
 
5

 
 
 
 
 
Operational/Strategic Expertise:
 
9

 
International Experience:
 
7

 
 
 
Marketing and Sales Expertise:
 
6

 
 
 
 
Digital Expertise:
 
2

 
 
 
 
 
 
 
 

Board Tenure: As the following chart demonstrates, 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.
3 Years or Less:
 
1

 
 
 
 
 
3-5 Years:
 
4

 
 
 
6-10 Years:
 
4

 
 
 
More than 10 Years:
 
4

 
 
 

Diversity: The board strives to achieve diversity in the broadest sense, including persons diverse in geography, gender, ethnicity, age, and experiences. 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 13 directors range in age from 48 to 71 and include four women and five members of underrepresented groups.

Character: Board members should possess the personal attributes necessary to be an effective director, including unquestioned integrity, sound judgment, a collaborative spirit, and commitment to the company, our shareholders, and other constituencies.

Director Refreshment
The Directors and Corporate Governance Committee performs periodic assessments of the overall composition and skills of the board to ensure that the board and management are actively engaged in succession planning for directors, and that our board reflects the viewpoints, diversity, and expertise necessary to support our complex and evolving business. The Directors and Corporate Governance Committee, with input from all board members, also considers the contributions of the individual directors.

The results of these assessments inform the board's recommendations on nominations for directors at the annual meeting each year and help provide us with insight on the types of experiences, skills, and other characteristics we should be seeking for future director candidates. Based on this assessment, the Directors and Corporate Governance Committee has recommended that the directors in the 2020 class be elected at the 2020 annual meeting.

P20




The board delegates the director screening process to the Directors and Corporate Governance Committee, which receives input from other board members. Director candidates are identified from several sources, including executive search firms retained by the committee, incumbent directors, management, and shareholders.

The Directors and Corporate Governance committee employs the same process for evaluating all candidates, including those submitted by shareholders. The committee initially evaluates a candidate based on publicly available information and any additional information supplied by the party recommending the candidate. If the candidate appears to satisfy the selection criteria and the committee’s initial evaluation is favorable, the committee, assisted by management or a search firm, gathers additional data on the candidate’s qualifications, availability, probable level of interest, and any potential conflicts of interest. If the committee’s subsequent evaluation continues to be favorable, the candidate is contacted by the chairman of the board and one or more of the independent directors, including the lead independent director, for direct discussions to determine the mutual level of interest in pursuing the candidacy. If these discussions are favorable, the committee recommends that the board nominate the candidate for election by the shareholders (or elects the candidate to fill a vacancy, as applicable).

Director Compensation

Director compensation is reviewed and approved annually by the board, on the recommendation of the Directors and Corporate Governance Committee. Directors who are employees receive no additional compensation for serving on the board.

Cash Compensation
The following table shows the retainers and meeting fees in effect in 2019 for all non-employee directors.
Board and Committee Membership Retainers
(annual, paid in monthly installments)
 
 
Leadership Retainers 
(annual, paid in monthly installments)
 
 
 
 
Annual Board Retainer
$110,000
 
Lead Independent Director
$35,000
 
 
 
 
Audit Committee, Science and Technology Committee members (including the chairs)
$6,000
 
Audit Committee chair
$18,000
Compensation Committee, Directors and Corporate Governance Committee, Finance Committee, Public Policy and Compliance Committee members (including the chairs)
$3,000
 
Science and Technology Committee chair
$15,000
 
 
 
All other committee chairs
$12,000

Directors are reimbursed for customary and usual travel expenses in connection with their travel to and from board meetings and other company events. Directors may also receive additional cash compensation for serving on ad hoc committees that may be formed by the board from time to time.

Stock Compensation
Directors are required to hold meaningful equity ownership positions in the company and may not sell the equity compensation they earn as a director until after leaving the board. A significant portion of director compensation is in the form of deferred Lilly stock payable after they leave the board. Directors are required to hold Lilly stock, directly or through company plans, valued at not less than five times their annual board retainer; new directors are allowed five years to reach this ownership level. All directors serving at least five years have satisfied these guidelines, and all other directors are making progress toward these requirements.

In 2019, non-employee directors received an annual grant of $175,000 of equity compensation (but no more than 7,500 shares), deposited in a deferred stock account in the Lilly Directors’ Deferral Plan (as described below). This award is prorated for time served and payable beginning the second January following the director's departure from board service.

Annual Compensation Cap for Directors
In 2018, the board approved a cap to the total annual compensation (cash and equity compensation) for non-employee directors of $800,000. The cap is intended to avoid excessive director compensation and is included in

P21



both our Directors' Deferral Plan and in the Amended and Restated 2002 Lilly Stock Plan approved by shareholders at the 2018 annual shareholders' meeting.

Lilly Directors’ Deferral Plan: The Lilly Directors' Deferral Plan allows non-employee directors to defer receipt of all or part of their cash compensation until after their service on the board has ended. Each director can choose to invest the amounts deferred in one or both of the following two accounts:

Deferred Stock Account. This account allows the director, in effect, to invest his or her deferred cash compensation in company stock. Funds in this account are credited as hypothetical shares of company stock based on the closing stock price on pre-set monthly dates. In addition, the annual stock compensation award as described above is also credited to this account. The number of shares credited is calculated by dividing the $175,000 annual compensation figure by the closing stock price on a pre-set annual date. Hypothetical dividends are “reinvested” in additional shares based on the market price of the stock on the date dividends are paid. Actual shares are issued on the second January following the director's departure from board service.

Deferred Compensation Account. Funds in this account earn interest each year at a rate of 120 percent of the applicable federal long-term rate, compounded monthly, as established the preceding December by the U.S. Treasury Department under Section 1274(d) of the Internal Revenue Code of 1986 (the Internal Revenue Code). The aggregate amount of interest that accrued in 2019 for the participating directors was $164,734, at a rate of 3.9 percent. The rate for 2020 is 2.5 percent.

Both accounts may generally only be paid out in a lump sum or in annual installments for up to 10 years, beginning the second January following the director’s departure from board service. Amounts in the deferred stock account are paid in shares of company stock.

2019 Compensation for Non-Employee Directors
Name
Fees Earned
or Paid in Cash ($)
 
Stock Awards ($)1
 
All Other
Compensation
and Payments ($)
2
 
Total ($)3
 
Mr. Alvarez
$131,000
 
$175,000
 
$0
 
$306,000
 
Dr. Baicker
$131,000
 
$175,000
 
$0
 
$306,000
 
Dr. Bertozzi
$119,000
 
$175,000
 
$0
 
$294,000
 
Mr. Eskew
$136,000
 
$175,000
 
$0
 
$311,000
 
Mr. Fyrwald
$119,000
 
$175,000
 
$31,000
 
$325,000
 
Mr. Jackson
$131,000
 
$175,000
 
$0
 
$306,000
 
Dr. Kaelin
$134,000
 
$175,000
 
$3,000
 
$312,000
 
Mr. Luciano
$151,333
 
$175,000
 
$0
 
$326,333
 
Dr. Runge
$119,000
 
$175,000
 
$0
 
$294,000
 
Ms. Seifert
$117,000
 
$175,000
 
$10,667
 
$302,667
 
Mr. Tai
$122,000
 
$175,000
 
$60,000
 
$357,000
 
Ms. Walker
$144,000
 
$175,000
 
$0
 
$319,000
 
Retired
 
Ms. Marram
$67,917
 
$72,917
 
$38,000
 
$178,834
 
     
1 Each non-employee director received an award of stock valued at $175,000 (approximately 1,534 shares), except Ms. Marram, who retired from the board in May 2019 and received a pro-rated award for a partial year of service. This stock award and all prior stock awards are fully vested; however, the shares are not issued until the second January following the director's departure from board service, as described above under “Lilly Directors’ Deferral Plan.” The column shows the grant date fair value for each director’s stock award computed in accordance with FASB ASC Topic 718, based on the closing stock price on the grant date. See Note 12 of the consolidated financial statements in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, for additional detail regarding assumptions underlying the valuation of equity awards. Aggregate outstanding stock awards are shown in the “Common Stock Ownership by Directors and Executive Officers” table in the “Stock Units Not Distributable Within 60 Days” column.


P22



2 
This column consists of amounts donated by the Eli Lilly and Company Foundation, Inc. (Foundation) under its matching gift program, which is generally available to U.S. employees as well as non-employee directors. Under this program, the Foundation matched 100 percent of charitable donations over $25 made to eligible charities, up to a maximum of $30,000 per year for each individual. The Foundation matched these donations via payments made directly to the recipient charity. The amounts for Mr. Fyrwald, Dr. Kaelin, Ms. Marram, and Mr. Tai include matching contributions for donations made at the end of 2018 (Mr. Fyrwald - $1,000; Dr. Kaelin - $3,000; Ms. Marram - $8,000; and Mr. Tai - $30,000), for which the matching contribution was not paid until 2019.

3 
Directors do not participate in a company pension plan or non-equity incentive plan.

2020 Director Compensation
In 2019, the Directors and Corporate Governance Committee reviewed the company’s compensation for independent directors, including a peer group analysis which showed total director compensation slightly above the median of the general industry peer group (though below pharmaceutical industry peers). As a result of this analysis, the committee recommended no changes to independent director compensation for 2020.

Director Independence

The board annually determines the independence of directors based on a review by the Directors and Corporate Governance Committee. No director is considered independent unless the board has determined that he or she has no material relationship with the company, either directly or as a partner, significant shareholder, or officer of an organization that has a material relationship with the company. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships, among others. To evaluate the materiality of any such relationship, the board has adopted categorical independence standards consistent with the New York Stock Exchange (NYSE) listing standards, except that the “look-back period” for determining whether a director’s prior relationship(s) with the company impairs independence is extended from three to four years.
The company's process for determining director independence is set forth in our Standards for Director Independence, which can be found on our website at lilly.com/who-we-are/governance, along with our Corporate Governance Guidelines.
On the recommendation of the Directors and Corporate Governance Committee, the board determined that each current non-employee director is independent. Prior to her retirement in 2019, the board reached the same conclusions regarding Ms. Marram, and determined that the members of each committee also meet our and the NYSE's independence standards. The board determined that none of the non-employee directors has had during the last four years (i) any of the relationships identified in the company’s categorical independence standards or (ii) any other material relationship with the company that would compromise his or her independence. The table that follows includes a description of categories or types of transactions, relationships, or arrangements the board considered in reaching its determinations.


P23



Director
Organization
Type of Organization
Director Relationship to Organization
Primary Type of Transaction/ Relationship/ Arrangement between Lilly and Organization
2019 Aggregate Percentage of Organization's Revenue
Dr. Baicker
University of Chicago
Educational Institution
Employee
Clinical Research
Less than 0.1 percent
Dr. Bertozzi
Stanford University
Educational Institution
Employee
Clinical Research
Less than 0.1 percent
Mr. Fyrwald
Syngenta International AG
For-profit Corporation
Executive Officer
Purchase of products
Less than 0.1 percent
Mr. Jackson
Hertz Global Holdings Inc
For-profit Corporation
Executive Officer
Purchase of products
Less than 0.1 percent
Dr. Kaelin
Harvard University
Educational Institution
Employee
Research grants
Less than 0.1 percent
Brigham and Women's Hospital
Health Care Institution
Employee
Clinical Research
Less than 0.1 percent
Dana-Farber Cancer Institute
Health Care Institution
Employee
Clinical Research
Approximately 0.2 percent
Mr. Luciano
Archer Daniels Midland
For-profit Corporation
Executive Officer
Purchase of products
Less than 0.1 percent
Sale of products
Less than 0.1 percent of Lilly's revenue
Dr. Runge
University of Michigan Medical School
Educational Institution
Executive Officer
Clinical Research
Less than 0.1 percent
Ms. Walker
Cisco Systems Inc
For-profit Corporation
Former Employee
Purchase of products
Less than 0.1 percent

All of the transactions described above were entered into at arm’s length in the normal course of business and, to the extent they are commercial relationships, have standard commercial terms. Aggregate payments to each of the organizations, in each of the last four fiscal years, did not exceed the greater of $1 million or 2 percent of that organization's consolidated gross revenues in a single fiscal year for the relevant four-year period. No director had any direct business relationships with the company or received any direct personal benefit from any of these transactions, relationships, or arrangements.

Committees of the Board of Directors

The duties and membership of the six board-appointed committees are described below. All committee members are independent as defined in the NYSE listing requirements and Lilly's independence standards. The members of the Audit and Compensation Committees each meet the additional independence requirements applicable to them as members of those committees.

The Directors and Corporate Governance Committee makes recommendations to the board regarding director committee membership and selection of committee chairs. The board has no set policy for rotation of committee members or chairs but annually reviews committee memberships and chair positions, seeking the best blend of continuity and fresh perspectives.

The chair of each committee determines the frequency and agenda of committee meetings. The Audit, Compensation, and Public Policy and Compliance Committees meet alone in executive session on a regular basis; all other committees meet in executive session as needed.


P24



Membership and Meetings of the Board and Its Committees

In 2019, each director attended at least 80 percent of the total number of meetings of the board and the committees on which he or she served during his or her tenure as a board or committee member. In addition, all board members are expected to attend the 2020 annual meeting, and all directors then serving attended the annual meeting in 2019. Current committee membership and the number of meetings of the board and each committee in 2019 are shown in the table below.
Name
Board
Audit
Compensation
Directors and
Corporate Governance
Finance
Public Policy and
Compliance
Science and
Technology
Mr. Alvarez
ü
 
C
 
 
 
ü
Dr. Baicker
ü
ü
 
 
 
C
 
Dr. Bertozzi
ü
 
 
 
 
ü
ü
Mr. Eskew
ü
ü
ü
C
 
 
 
Mr. Fyrwald
ü
 
ü
 
 
 
ü
Mr. Jackson
ü
C
 
 
ü
 
 
Dr. Kaelin
ü
 
 
 
ü
 
C
Mr. Luciano
LD
 
 
ü
C
 
 
Mr. Ricks
ü
 
 
 
 
 
 
Dr. Runge
ü
 
 
 
 
ü
ü
Ms. Seifert
ü
 
 ü
ü
 
 
 
Mr. Tai
ü
ü
 
ü
ü
 
 
Ms. Walker
ü
ü
 
 
 
ü
 
Number of 2019 Meetings
10
10
6
4
8
4
6

C    Committee Chair
LD
Lead Independent Director

All six committee charters are available online at lilly.com/who-we-are/governance, or upon request to the company's corporate secretary. Key responsibilities of each committee are set forth below.

Audit Committee
The Audit Committee assists the board in fulfilling its oversight responsibilities by monitoring:
the integrity of financial information provided to the shareholders and others
management's systems of internal controls and disclosure controls
the performance of internal and independent audit functions
the company's compliance with legal and regulatory requirements.

The committee has sole authority to appoint or replace the independent auditor, subject to shareholder ratification.

The board has determined that Mr. Eskew, Mr. Jackson, and Mr. Tai are audit committee financial experts, as defined in the SEC rules.

Compensation Committee
The Compensation Committee:
oversees the company’s global compensation philosophy and policies
establishes the compensation of our CEO and other executive officers
acts as the oversight committee with respect to the company’s deferred compensation plans, management stock plans, and other management incentive compensation programs
reviews succession plans for the CEO and other key senior leadership positions as well as the company’s diversity and inclusion efforts
reviews, monitors, and oversees stock ownership guidelines for executive officers.

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Compensation Committee Interlocks and Insider Participation
None of the Compensation Committee members:
has ever been an officer or employee of the company
is or has been a participant in a related-person transaction with the company (see “Review and Approval of Transactions with Related Persons” for a description of our policy on related-person transactions)
has any other interlocking relationships requiring disclosure under applicable SEC rules.

Directors and Corporate Governance Committee
The Directors and Corporate Governance Committee:
leads the process for director recruitment, together with the lead independent director
recommends to the board candidates for membership on the board and its committees, as well as for the role of lead independent director
oversees matters of corporate governance, including board performance, director independence and compensation, corporate governance guidelines, and shareholder engagement on governance matters.

Finance Committee
The Finance Committee reviews and makes recommendations to the board regarding financial matters, including:
capital structure and strategies
dividends
stock repurchases
capital expenditures
investments, financing, and borrowings
benefit plan funding and investments
financial risk management
significant business development opportunities.

Public Policy and Compliance Committee
The Public Policy and Compliance Committee:
reviews, identifies, and when appropriate, brings to the attention of the board ethical, social, environmental, political, and legal trends and issues, and compliance and quality matters that may have an impact on the business operations, financial performance, or public image of the company
reviews, monitors, and makes recommendations to the board on corporate policies and practices that relate to public policy and compliance, including those related to employee health and safety.

Science and Technology Committee
The Science and Technology Committee:
reviews and makes recommendations regarding the company’s strategic research goals and objectives
reviews new developments, technologies, and trends in pharmaceutical research and development
reviews the progress of the company's product pipeline
reviews the scientific aspects of significant business development opportunities
oversees matters of scientific and medical integrity and risk management.


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Board Oversight of Strategy, Compliance, and Risk Management

The board takes an active approach to its role in overseeing the development and execution of the company’s business strategies. On an annual basis, the board and executive management conducts an extended review and discussion of the company’s strategy, reviewing goals, the external environment, key questions, and key risks. Board meetings include discussions of company performance relative to the strategy. The board also reviews strategic focus areas for the company, such as innovation, information security, and human capital management.

The board, together with its committees, oversees the processes by which the company conducts its business to ensure the company operates in a manner that complies with laws and regulations and reflects the highest standards of integrity. On an annual basis, the full board reviews the company's overall state of compliance and the Public Policy and Compliance Committee receives an update on compliance at each meeting.

The chief ethics and compliance officer reports directly to the CEO.

The company also has an enterprise risk management program directed by its chief ethics and compliance officer. Enterprise risks are identified and prioritized by management through both top-down and bottom-up processes. The risk management program is overseen by the full board, and certain prioritized risks are reviewed by a board committee or the full board. Company management is charged with managing risk through robust internal processes and controls. The enterprise risk management program as a whole is reviewed annually at a full board meeting, and enterprise risks are also addressed in periodic business function reviews and at the annual board and senior management strategy session.

Code of Ethics
The board approves the company's code of ethics, which is set out in:

The Red Book: a comprehensive code of ethical and legal business conduct applicable to all employees worldwide and to our board. The Red Book is reviewed and approved annually by the board.

Code of Ethical Conduct for Lilly Financial Management: a supplemental code for our CEO and all members of financial management, in recognition of their unique responsibilities to ensure proper accounting, financial reporting, internal controls, and financial stewardship.

These documents are available online at lilly.com/who-we-are/governance/ethics-and-compliance-program and lilly.com/ethical-conduct-for-financial-management, or upon request to the company's corporate secretary. In the event of any amendments to, or waivers from, a provision of the code affecting the CEO, chief financial officer, chief accounting officer, controller, or persons performing similar functions, we intend to post on the above website within four business days after the event a description of the amendment or waiver as required under applicable SEC rules, and we will maintain that information on our website for at least 12 months.

Highlights of the Company’s Corporate Governance

The company is committed to good corporate governance, which promotes the long-term interests of shareholders and other company stakeholders, builds confidence in our company leadership, and strengthens accountability by the board and company management. The board has adopted corporate governance guidelines that set forth the company's basic principles of corporate governance. The section that follows outlines key elements of the guidelines and other governance matters. Investors can learn more by reviewing the corporate governance guidelines, which are available online at lilly.com/who-we-are/governance or upon request to the company’s corporate secretary.

Role of the Board
The directors are elected by the shareholders to oversee the actions and results of the company’s management. The board exercises oversight over a broad range of areas, but the board's key responsibilities include the following (certain of which are carried out through the board's committees):
providing general oversight of the business
approving corporate strategy
approving major management initiatives

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selecting, compensating, evaluating, and, when necessary, replacing the CEO, and compensating other key senior leadership positions
ensuring that an effective succession plan is in place for all key senior leadership positions and reviewing the broader talent management process, including diversity and inclusion
overseeing the company’s ethics and compliance program and management of significant business risks
nominating, compensating, and evaluating directors
overseeing the company's enterprise risk management program.

The board takes an active role in its oversight of our corporate strategy. Each year, the board and executive management closely examine the company's strategy, including key risks and decisions facing the company. Decisions reached in this session are updated throughout the year, including as the board discusses the company's financial performance, the performance of our business units, and progress in our pipeline.

Board Composition and Requirements
Mix of Independent Directors and Officer-Directors
We believe there should always be a substantial majority (75 percent or more) of independent directors. The CEO should be a member of the board.

Voting for Directors
In an uncontested election, directors are elected by a majority of votes cast. An incumbent nominee who fails to receive a greater number of votes “for” than “against” his or her election will tender his or her resignation from the board (following the certification of the shareholder vote). The board, on recommendation of the Directors and Corporate Governance Committee, will decide whether to accept the resignation. The company will promptly disclose the board's decision, including, if applicable, the reasons the board rejected the resignation.

Director Tenure and Retirement Policy
Non-employee directors must retire no later than the date of the annual meeting that follows their seventy-second birthday, although the Directors and Corporate Governance Committee has authority to recommend exceptions to this policy. The Directors and Corporate Governance Committee, with input from all board members, also considers the contributions of the individual directors annually, with a more robust assessment at least every three years when considering whether to nominate directors to new three-year terms. The company has not adopted term limits because the board believes that the company benefits from having a mix of longer- and shorter-tenured members of the board.

Other Board Service
In general, no director may serve on more than three other public company boards. The Directors and Corporate Governance Committee may approve exceptions if it determines that the additional service will not impair the director's effectiveness on the Lilly board.

Board Confidentiality Policy
The board has adopted a Confidentiality Policy, applicable to all current and future members of the board. The policy prohibits a director from sharing confidential information obtained in his or her role as a director with any outside party except under limited circumstances where the director is seeking legal advice or is required by law to disclose information. The Confidentiality Policy can be viewed on the company's website: lilly.com/about/corporate-governance/Pages/corporate-governance.aspx.

Leadership Structure; Oversight of Chairman, CEO, and Senior Management
Leadership Structure
The board currently believes that combining the role of chairman of the board and CEO, coupled with a strong lead independent director position (see the description of the role below), is the most efficient and effective leadership model for the company, fostering clear accountability, effective decision making, and alignment on corporate strategy. The board periodically reviews its leadership structure and developments in the area of corporate governance to ensure that this approach continues to strike the appropriate balance for the company and our stakeholders and enables it to promote the long-term interests of shareholders. Such a review was conducted during the succession-management process relating to the appointment of Mr. Ricks as chairman, effective June 2017, and more recently in considering the shareholder proposal that has been put forward as Item 8 below. The board believes that Mr. Ricks

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has served the company well as the chairman and CEO, and that the combined role provides unified leadership and focus on the company’s strategy, business plans, and efficiency efforts.

Mr. Luciano serves as the current lead independent director. Mr. Luciano is a strong, lead independent director who fulfilled each of the duties below during the past year. As the CEO and president of Archer Daniels Midland Company, he brings diverse experience and outside perspective to his lead independent director role, which permits him to serve as a trusted adviser to Mr. Ricks and ensure effective board management.

In 2019, the independent directors, led by Mr. Luciano, met at every board meeting in executive session to discuss various matters related to the oversight of the company, the management of the board’s affairs, and the CEO’s performance. We believe Mr. Luciano fosters an open and constructive dialogue during these sessions as well as during individual discussions with the independent directors. Mr Luciano advised Mr. Ricks on the independent directors’ discussions, including performance feedback.

Board Independence
The board has put in place a number of governance practices to ensure effective independent oversight, including:

Executive sessions of the independent directors: held after every regular board meeting.

Annual performance evaluation of the chairman and CEO: conducted by the independent directors, the
results of which are reviewed with the CEO and considered by the Compensation Committee in establishing
the CEO’s compensation for the next year.

A strong, independent, clearly defined lead independent director role: The lead independent director's
responsibilities include:
leading the board’s processes for selecting and evaluating the CEO
presiding at all meetings of the board at which the chairman is not present
serving as a liaison between the chairman and the independent directors
if requested by major shareholders, ensuring that he or she is available for consultation and direct
communication
approving meeting agendas and schedules and generally approving information sent to the board 
conducting executive sessions of the independent directors
overseeing the independent directors' annual performance evaluation of the chairman and CEO
together with the board chair and the chair of the Directors and Corporate Governance Committee,
conducting the annual board assessment process
together with the Directors and Corporate Governance Committee, leading the director recruitment
process.

The lead independent director also has authority to call meetings of the independent directors and to retain
advisors for the independent directors.

The lead independent director is appointed annually by the board, which conducts an assessment of his or
her performance as part of the annual board assessment process. Currently Mr. Luciano is the lead
independent director.

Director access to management and independent advisors: Independent directors have direct access to members of management whenever they deem it necessary, and the company's executive officers attend part of each regularly scheduled board meeting. The independent directors and all committees are also free to retain their own independent advisors, at the company's expense, whenever they feel it would be desirable to do so.

CEO Succession Planning
The Compensation Committee, board, and CEO annually review the company's succession plans for the CEO and other key senior leadership positions. The independent directors also meet without the CEO to discuss CEO succession planning.


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During these reviews, the CEO and directors discuss:
future candidates for the CEO and other senior leadership positions
succession timing
development plans for the highest-potential candidates.

The independent directors and the CEO maintain a confidential plan for the timely and efficient transfer of the CEO's responsibilities in the event of an emergency or his sudden departure, incapacitation, or death.

The company ensures that the directors have multiple opportunities to interact with the company's top leadership talent in both formal and informal settings to allow them to most effectively assess the candidates' qualifications and capabilities.

Board Education and Annual Performance Assessment
The company engages in a comprehensive orientation process for incoming new directors. Directors also attend ongoing continuing educational sessions on areas of particular relevance or importance to our company, and we hold periodic mandatory training sessions for the Audit Committee.

Every year the Directors and Corporate Governance Committee, together with the chair and the lead independent director, conducts a robust assessment of the board's performance, board committee performance, and all board processes, based on input from all directors. We also conduct an annual assessment of each individual director's performance, and every three years we conduct a detailed review of individual director performance when considering whether to nominate the director to a new three-year term.

Conflicts of Interest and Transactions with Related Persons
Conflicts of Interest
Occasionally a director's business or personal relationships may give rise to an interest that conflicts, or appears to conflict, with the interests of the company. As outlined in the company's corporate governance guidelines, directors must disclose to the company all relationships that could create a conflict or an appearance of a conflict. The board, after consultation with counsel, takes appropriate steps to identify actual or apparent conflicts and ensure that all directors voting on an issue are disinterested with respect to that issue. A director may be excused from board discussions and decisions on an issue related to an actual or apparent conflict, as appropriate.

In addition, a director’s relationship with Lilly may give rise to an interest that conflicts, or appears to conflict, with the interests of another company, institution, or other stakeholder. A director must disclose his or her relationship with Lilly in connection with any scientific publication, using the International Committee of Medical Journal Editors (ICMJE) conflict of interest form for this purpose when possible. Each director must disclose his or her service on the board to his or her employer and any other organization with which the director has a relationship of trust and where the relationship with the company is relevant. In addition, directors must follow the internal conflict of interest policies and procedures of each such organization.

Review and Approval of Transactions with Related Persons
The board has adopted a policy and procedures for review, approval, and monitoring of transactions involving the company and related persons (directors and executive officers, their immediate family members, or shareholders of more than 5 percent of the company’s outstanding stock). The policy covers any related-person transaction that meets the minimum threshold for disclosure in the proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest).

Policy:
Related-person transactions must be approved by the board or by a committee of the board consisting solely of independent directors, who will approve the transaction only if the board or committee determines that it is in the best interests of the company. In considering the transaction, the board or committee will consider all relevant factors, including:

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the company’s business rationale for entering into the transaction
the alternatives to entering into a related-person transaction
whether the transaction is on terms comparable to those available to third parties, or in the case of employment relationships, to employees generally
the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts
the overall fairness of the transaction to the company.

Procedures:
Management or the affected director or executive officer will bring the matter to the attention of the chairman, the lead independent director, the chair of the Directors and Corporate Governance Committee, or the corporate secretary.
The chairman and the lead independent director shall jointly determine (or, if either is involved in the transaction, the other shall determine) whether the matter should be considered by the board or by one of its existing committees.
If a director is involved in the transaction, he or she will be recused from all discussions and decisions about the transaction.
The transaction must be approved in advance whenever practicable, and if not practicable, must be ratified, if appropriate, as promptly as practicable.
The board or relevant committee will review the transaction annually to determine whether it continues to be in the company’s best interests.

In 2019, there were no related party transactions to report pursuant to the relevant SEC rules and no required proxy statement disclosure.

Communication with the Board of Directors

You may send written communications to members of the board, including independent directors, addressed to:
Board of Directors
Eli Lilly and Company
c/o Corporate Secretary
Lilly Corporate Center
Indianapolis, IN 46285

Shareholder Engagement on Governance Issues

Each year, the company engages large shareholders and other key constituents to discuss areas of interest or concern related to corporate governance, as well as any specific issues for the coming proxy season. In 2019, we spoke with a number of investors, both large and small, on topics such as eliminating the company's classified board and supermajority voting requirements; environmental, social, and governance topics including drug pricing, product quality and safety, and our board and corporate culture; litigation and key enterprise risks; the company's executive compensation; and proxy access, among other topics. The overall tone of these conversations was productive and positive, and the investors with whom we spoke were generally supportive of our performance and overall compensation and governance policies, although a few shareholders communicated differing views on some of our governance practices. This feedback has been discussed with our chairman and CEO, the lead independent director, our Compensation Committee, and our Directors and Corporate Governance Committee, and it was a key input into board discussions on corporate governance topics. As a result of these discussions and its own deliberations, the board decided to amend the company's bylaws to implement proxy access and recommend in favor of the two management proposals described below. We are committed to continuing to engage with our investors to ensure their diverse perspectives on corporate governance and other issues are thoughtfully considered.


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Management Proposals to Eliminate Classified Board and Supermajority Voting Requirements
Each year between 2007 and 2012, and again in 2018 and 2019, our management put forward proposals to eliminate the company's classified board structure. The proposals did not pass because they failed to receive a “supermajority vote” of 80 percent of the outstanding shares of our common stock, as required in the company's articles of incorporation. In addition, in 2010, 2011, 2012, 2018, and 2019, we submitted management proposals to eliminate the supermajority voting requirements themselves. Those proposals also fell short of the required 80 percent vote.   

Prior to 2012, these proposals received support ranging from 72 to 77 percent of the outstanding shares. In 2012, the vote in support of these proposals was approximately 63 percent of the outstanding shares, driven in part by a 2012 NYSE rule revision prohibiting brokers from voting their clients' shares on corporate governance matters absent specific instructions from such clients. In 2018, the vote in support was approximately 62 percent of the outstanding shares and in 2019, the vote in support was approximately 66 percent of the outstanding shares.

After considering the interests of the company and our shareholders, we have resubmitted management proposals to eliminate the classified board and supermajority voting requirements for consideration at the 2020 annual meeting (see Items 4 and 5). We will continue to engage with our shareholders on these and other topics to ensure that we continue to demonstrate strong corporate governance and accountability to shareholders.

Shareholder Proposals
If a shareholder wishes to have a proposal considered for inclusion in next year’s proxy statement, he or she must submit the proposal in writing so that we receive it by November 20, 2020. Proposals should be addressed to the company’s corporate secretary, Lilly Corporate Center, Indianapolis, Indiana 46285. In addition, the company’s bylaws provide that any shareholder wishing to propose any other business at the 2021 annual meeting must give the company written notice by November 20, 2020, and no earlier than September 21, 2020. That notice must provide certain other information as described in the bylaws. Copies of the bylaws are available online at lilly.com/who-we-are/governance or upon request to the company’s corporate secretary.

Shareholder Recommendations and Nominations for Director Candidates
A shareholder who wishes to recommend a director candidate for evaluation should forward the candidate's name and information about the candidate's qualifications to:

Chair of the Directors and Corporate Governance Committee
c/o Corporate Secretary
Lilly Corporate Center
Indianapolis, IN 46285

The candidate must meet the selection criteria described above under "Director Qualifications and Nomination Process - Director Qualifications" and must be willing and expressly interested in serving on the board.

Under Section 1.9 of the company’s bylaws, a shareholder who wishes to directly nominate a director candidate at the 2021 annual meeting (i.e., to propose a candidate for election who is not otherwise nominated by the board through the recommendation process described above) must give the company written notice by November 20, 2020, and no earlier than September 21, 2020. The notice should be addressed to the corporate secretary at the address provided above. The notice must contain prescribed information about the candidate and about the shareholder proposing the candidate as described in more detail in Section 1.9 of the bylaws. A copy of the bylaws is available online at lilly.com/who-we-are/governance. The bylaws will also be provided by mail upon request to the corporate secretary.

We have not received any notice regarding shareholder nominations for board candidates or other shareholder business to be presented at the 2020 shareholders' meeting.

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Ownership of Company Stock

Common Stock Ownership by Directors and Executive Officers
The following table sets forth the number of shares of company common stock beneficially owned by the directors, the named executive officers, and all directors and executive officers as a group, as of February 14, 2020. None of the stock or stock units owned by any of the listed individuals has been pledged as collateral for a loan or other obligation.
Beneficial Owners
Common Stock 1
Stock Units Not Distributable Within 60 Days 4
 
Shares Owned 2
 
Stock Units Distributable Within 60 Days 3
 
Ralph Alvarez

 

46,909

 
Katherine Baicker, Ph.D.

 

18,779

 
Carolyn R Bertozzi, Ph.D.

 

4,924

 
Enrique A. Conterno (retired)
124,501

5 

21,779

 
Michael L. Eskew

 

41,825

 
J. Erik Fyrwald
100

 

64,493

 
Michael J. Harrington (retired)
119,299

6 

22,968

 
Jamere Jackson

 

5,652

 
William G. Kaelin, Jr., M.D.

 

17,224

 
Juan R. Luciano

 

11,152

 
David A. Ricks
290,911

7 

75,387

 
Marschall S. Runge, M.D., Ph.D.

 

12,840

 
Kathi P. Seifert
3,533

 

71,174

 
Daniel Skovronsky, M.D., Ph.D.
97,159

 


 
Joshua L. Smiley
39,045

 

27,213

 
Jackson P. Tai
45,570

 

12,515

 
Karen Walker

 

2,921

 
All directors and current executive officers as a group
(26 people):
890,301

 
97

487,143

 

1 
The sum of the "Shares Owned" and "Stock Units Distributable Within 60 Days" columns represents the shares considered "beneficially owned" for purposes of disclosure in the proxy statement. Unless otherwise indicated in a footnote, each person listed in the table possesses sole voting and sole investment power with respect to their shares. No person listed in the table owns more than 0.03 percent of the outstanding common stock of the company. The directors and executive officers as a group own approximately 0.09 percent of the outstanding common stock of the company.
2 This column includes the number of shares of common stock held individually as well as the number of
401(k) Plan shares held by the beneficial owners indirectly through the 401(k) Plan.
3 This column sets forth restricted stock units that vest within 60 days of February 14, 2020.
4 For the executive officers, this column reflects restricted stock units that will not vest within 60 days of February 14, 2020. For the independent directors, this column reflects the number of stock units credited to the directors' accounts in the Lilly Directors' Deferral Plan.
5 The shares shown for Mr. Conterno are as of his retirement, December 31, 2019, and are excluded from the aggregate totals for all directors and current officers as a group.
6 The shares shown for Mr. Harrington are as of his retirement, January 31, 2020, and are excluded from the aggregate totals for all directors and current officers as a group.
7 The shares shown for Mr. Ricks include 16,026 shares that are owned by a family foundation for which he is a director. Mr. Ricks has shared voting power and shared investment power with respect to the shares held by the foundation.



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Principal Holders of Stock
Based on reports filed with the SEC pursuant to Regulation 13D-G of the Securities Exchange Act of 1934 (the Exchange Act), the only beneficial owners of more than 5 percent of the outstanding shares of the company’s common stock, as of December 31, 2019, are the shareholders listed below:
Name and Address
Number of Shares
Beneficially Owned
Percent of Class
Lilly Endowment Inc. (the Endowment)1
2801 North Meridian Street
Indianapolis, IN 46208
114,560,599
11.9%
The Vanguard Group2
100 Vanguard Blvd.
Malvern, PA 19355
70,920,050
7.3%
BlackRock, Inc.3
55 East 52nd Street
New York, NY 10055
60,879,212
6.3%
The PNC Financial Services Group, Inc.4
101 W Washington St.
Indianapolis, IN 46255
52,130,652
5.4%

1 The Endowment has sole voting and sole dispositive power with respect to all of its shares. The board of directors of the Endowment is composed of N. Clay Robbins, chairman, president & CEO; Mary K. Lisher; William G. Enright; Daniel P. Carmichael; Charles E. Golden; Eli Lilly II; David N. Shane; Craig Dykstra; Jennett M. Hill; and John C. Lechleiter.
2 The Vanguard Group provides investment management services for various clients. It has sole voting power with respect to 1,317,587 of its shares and shared voting power with respect to 259,876 of its shares. It has sole dispositive power with respect to 69,419,868 of its shares and shared dispositive power with respect to 1,500,182 of its shares.
3 BlackRock, Inc. provides investment management services for various clients. It has sole voting power with respect to 52,609,640 of its shares and sole dispositive power with respect to all of its shares.
4 The PNC Financial Services Group, Inc.; PNC Bancorp, Inc.; PNC Bank, National Association; PNC Capital Advisors, LLC; PNC Delaware Trust Company; and PNC Investments LLC (collectively, “PNC”) beneficially owns 52,130,652 shares altogether. PNC has sole voting power with respect to 2,090,752 of its shares and shared voting power with respect to 50,000,308 of its shares. PNC has sole dispositive power with respect to 1,700,429 of its shares and shared dispositive power with respect to 50,358,773 of its shares. Of the total shares of common stock reported for PNC above, 50,000,000 shares (5.21% of the class) are held in the Eli Lilly and Company Compensation Trust account for which PNC Bank, National Association (“PNC Bank”) serves as directed trustee. As directed trustee, PNC Bank is deemed to share both voting power and investment discretion with respect to those 50,000,000 shares.


Compensation

Item 2. Advisory Vote on Compensation Paid to Named Executive Officers

Section 14A of the Securities Exchange Act of 1934 provides the company's shareholders with the opportunity to approve, on an advisory basis, the compensation of the company's named executive officers as disclosed in the proxy statement. Our compensation philosophy is designed to attract, engage, and retain highly talented individuals and motivate them to create long-term shareholder value by achieving top-tier corporate performance while embracing the company’s values of integrity, excellence, and respect for people.

The Compensation Committee and the board believe that our executive compensation aligns well with our philosophy and with corporate performance. Executive compensation is an important matter for our shareholders. We routinely review our compensation practices and engage in ongoing dialogue with our shareholders to ensure our practices are aligned with stakeholder interests and reflect best practices.

We request shareholder approval, on an advisory basis, of the compensation of the company’s named executive officers as disclosed in this proxy statement. As an advisory vote, this proposal is not binding on the company.

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However, the Compensation Committee values input from shareholders and will consider the outcome of the vote when making future executive compensation decisions.

Board Recommendation on Item 2

The board recommends that you vote FOR the approval, on an advisory basis, of the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis (CD&A), the compensation tables, and related narratives provided below in this proxy statement.


Compensation Committee Matters

Background
Role of the Independent Consultant in Assessing Executive Compensation
The Compensation Committee has retained Frederic W. Cook & Co., Inc., ("FW Cook") as its independent compensation consultant. FW Cook reports directly to the Compensation Committee, and it is not permitted to have any business or personal relationship with management or 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 Compensation Committee of evolving best practices
provide independent analyses and recommendations to the Compensation Committee on the CEO’s pay
review draft CD&A and related tables for the proxy statement
proactively advise the Compensation Committee on best practices for board governance of executive compensation
undertake special projects at the request of the Compensation Committee chair.

FW Cook interacts directly with members of company management only on matters under the Compensation Committee’s oversight and with the knowledge and permission of the Compensation 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 Compensation Committee with a performance assessment and compensation recommendation for each of the other executive officers. The Compensation Committee considers those recommendations with the assistance of its compensation consultant. The CEO and the senior vice president of human resources and diversity attend Compensation Committee meetings; they are not present for executive sessions or any discussion of their own compensation. Only non-employee directors and the Compensation Committee’s consultant attend executive sessions.

The CEO does not participate in the formulation or discussion of his pay recommendations. He has no prior knowledge of the recommendations that the consultant makes to the Compensation Committee.

Risk Assessment Process
As part of the company's overall enterprise risk management program, in 2019 (consistent with prior years), the Compensation 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 Compensation Committee noted numerous policy and design features of the company’s compensation programs and governance structure that reduce the likelihood of inappropriate risk-taking, including, but not limited to:
Only independent directors serve on the Compensation Committee
The Compensation Committee engages its own independent compensation consultant
The Compensation Committee has downward discretion to lower compensation plan payouts
The Compensation Committee approves all adjustments to financial results that affect compensation calculations
Different measures and metrics are used across multiple incentive plans that appropriately balance cash/stock, fixed/variable pay, and short-term/long-term incentives

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Incentive plans have predetermined maximum payouts
Performance objectives are challenging but achievable
Programs with operational metrics have a continuum of payout multiples based upon achievement of performance milestones, rather than "cliffs" that might encourage suboptimal or improper behavior
A compensation recovery policy is in place for all members of senior management; negative compensation consequences can result in cases involving serious compliance violations
Meaningful share ownership and retention requirements are in place for all members of senior management and the board.

Compensation Committee Report
The Compensation Committee evaluates and establishes compensation for executive officers and oversees the deferred compensation plan, management stock plans, and other management incentive and benefit programs. Management has the primary responsibility for the company’s financial statements and reporting process, including the disclosure of executive compensation. With this in mind, the Compensation Committee has reviewed and discussed with management the CD&A above. The Compensation Committee recommended to the board that the CD&A be included in this proxy statement for filing with the SEC.

Compensation Committee
Ralph Alvarez, Chair
Michael L. Eskew
J. Erik Fyrwald
Kathi P. Seifert

Compensation Discussion and Analysis

This CD&A describes our executive compensation philosophy, the Compensation Committee’s process for setting executive compensation, the elements of our compensation program, the factors the Compensation Committee considered when setting executive compensation for 2019, and how the company’s results affected incentive payouts. This CD&A provides compensation information for our CEO, David Ricks, our chief financial officer, Joshua Smiley, and the three other most highly compensated executive officers who were serving as executive officers on December 31, 2019, Daniel Skovronsky, Enrique Conterno (retired), and Michael Harrington (retired).

Our Philosophy on Compensation
At Lilly, our purpose is to unite caring with discovery to create medicines that make life better for people around the world. To do this, we must attract, engage, and retain highly talented individuals who are committed to our core values of integrity, excellence, and respect for people. Our compensation programs are designed to help us achieve these goals while balancing the long-term interests of our shareholders and customers.

Objectives
Our compensation and benefits programs are based on the following objectives:
Reflect individual and company performance: We reinforce a high-performance culture by linking pay with individual and company performance. As employees assume greater responsibilities, the proportion of total compensation based on company performance and shareholder returns increases. We perform annual reviews to ensure our programs provide an incentive to deliver long-term, sustainable business results while discouraging excessive risk-taking or other adverse behaviors.

Attract and retain talented employees: Compensation opportunity should be market competitive and reflect the level of job impact and responsibilities. Retention of talent is an important factor in the design of our compensation and benefit programs.

Implement broad-based programs: While the amount of compensation paid to employees varies, the overall structure of our compensation and benefit programs is broadly similar across the organization to encourage and reward all employees who contribute to our success.

Consider shareholder input: Management and the Compensation Committee consider the results of our annual say-on-pay vote and other sources of shareholder feedback when designing executive compensation and benefit programs.

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Say-on-Pay Results for 2019
At last year's annual meeting, more than 97 percent of the shares cast voted in favor of the company's say-on-pay proposal on executive compensation. Management and the Compensation Committee view this vote as supportive of the company's overall approach toward executive compensation.

Compensation Committee's Processes and Analyses
Setting Compensation
The Compensation Committee considers individual performance assessments, compensation recommendations from the CEO (with respect to all other named executive officers), company performance, peer group data, input from its compensation consultant, and its own judgment when determining compensation for the company's executive officers.
Individual performance: Generally, the independent directors, under the direction of the lead independent director, meet with the CEO at the beginning of each year to establish the CEO's performance objectives. 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, ethics, and integrity. This evaluation is used in setting the CEO's compensation opportunity for the next year.

The Compensation Committee receives individual performance assessments and target compensation recommendations from the CEO for each of the remaining executive officers. Each executive officer’s performance assessment is based on the achievement of objectives established at the start of the year, as well as other factors, including the demonstration of Lilly values and leadership behaviors. The Compensation Committee considers these inputs, its knowledge of and interactions with each executive officer, and its judgment to develop a final individual performance assessment. For new executive officers, target compensation is set by the Compensation Committee at the time of promotion or offer.

Company performance: Lilly performance is considered in two ways:
Overall performance for the prior year based on a variety of metrics is a factor in establishing target compensation for the coming year.
Specific performance goals are established at the beginning of each performance year to determine payouts under cash and equity incentive programs.

Peer group analysis: The Compensation Committee uses data from the peer group described below as a market check for compensation decisions but does not use this data as the sole basis for its compensation targets and does not target a specific position within that range of market data.

Input from an independent compensation consultant concerning executive pay: The Compensation Committee considers the advice of its independent compensation consultant, FW Cook, when setting executive officer compensation.

Competitive Pay Assessment
Lilly’s peer group is composed of companies that directly compete with Lilly, use a similar business model, and employ people with the unique skills required to operate an established biopharmaceutical company. The Compensation Committee selects a peer group whose median market cap and revenue are broadly similar to Lilly's. The Compensation Committee reviews the peer group at least every three years. The Compensation Committee established the following peer group in May 2018 for purposes of assessing competitive pay:

AbbVie
Celgene
Novo Nordisk
Allergan
Gilead
Pfizer
Amgen
GlaxoSmithKline
Roche
AstraZeneca
Johnson & Johnson
Sanofi
Biogen
Merck
Shire
Bristol-Myers Squibb
Novartis
Takeda


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At the time of the review in May 2018, all peer companies were no greater than two times our revenue or market cap except Johnson & Johnson, Novartis, Pfizer, and Roche. The Compensation Committee included these four 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.

When determining pay levels for target compensation, the Compensation Committee considers an analysis of peer group pay for each executive officer position (except CEO), along with internal factors such as the performance and experience of each executive officer. The independent compensation consultant for the Compensation Committee provides a similar analysis when recommending pay levels for the CEO. The CEO analysis includes a comparison of our CEO actual total direct compensation in the prior year to company performance on an absolute basis and on a relative basis to the peer group. The analysis also includes a comparison of current target total direct compensation for our CEO to the most recently available data on CEO target total direct compensation for our peer companies. On average, the named executive officer's target total direct compensation for 2019 was below the median of the peer group, which reflects several named executive officers being relatively new to their roles.

Components of Our Compensation
Our 2019 executive compensation was primarily composed of three components:
base salary
annual cash bonus, which is generally calculated based on company performance relative to internal targets for revenue, EPS, and the progress of our pipeline
two different forms of equity incentives:
performance awards, which are performance-based equity awards that vest over three years and have a performance component measuring the company's two-year change in EPS relative to the expected peer group change followed by a 13-month service-vesting period
shareholder value awards, which are performance-based equity awards that pay out based on absolute company stock price growth and TSR relative to peers, both measured over a three-year period, followed by a one-year holding period.
 
Executives also receive a company benefits package, described below under "Other Compensation Practices and Information - Employee Benefits."

Adjustments to Reported Financial Results
The Compensation Committee has authority to adjust the company's reported revenue and EPS upon which incentive compensation payouts are determined to eliminate the distorting effect of unusual income or expense items. The adjustments are intended to:
align award payments with the underlying performance of the core business
avoid volatile, artificial inflation or deflation of awards due to unusual items in the award year, and, where relevant, the previous (comparator) year
eliminate certain counterproductive short-term incentives—for example, incentives to refrain from acquiring new technologies, to defer disposing of underutilized assets, or to defer settling legacy legal proceedings to protect current bonus payments
facilitate comparisons with peer companies.

The Compensation Committee considers the adjustments approved by the Audit Committee for reporting non-GAAP EPS and other adjustments, based on guidelines approved by the Compensation Committee prior to the performance period. The Compensation Committee reviews and approves adjustments on a quarterly basis and may adjust payouts for items, including but not limited to, the impact of significant acquisitions or divestitures, the impact of share repurchases that differ significantly from business plan, and large swings in foreign exchange rates. For the 2018-2020 performance award, the Compensation Committee adjusted for the expected impact of the acquisition of Loxo Oncology, Inc., and the impact of the Elanco Animal Health, Inc., divestiture. Further details on the adjustments for 2019 and the rationale for making these adjustments are set forth in Appendix A, "Summary of Adjustments Related to the Annual Cash Bonus and Performance Award." For ease of reference, throughout the CD&A and the other compensation disclosures, we refer simply to "revenue" and "EPS" but we encourage you to review the information in Appendix A to understand the adjustments from reported EPS that were approved.

The Compensation Committee also has general authority to apply downward (but not upward) discretion to bonus, performance award, and shareholder value award payouts for individual executive officers.


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1.
Base Salary

In setting salaries, Lilly seeks to retain, motivate, and reward successful performers while maintaining affordability within the company's business plan. 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 competitiveness and are compared annually with peer group data.

Base salary increases for 2019 were established based upon a corporate budget for salary increases, which is set considering company performance over the prior year, expected company performance for the following year, and general external trends.

2.
Annual Cash Bonus

The Bonus Plan is designed to reward the achievement of the company’s annual financial and innovation objectives. All the named executive officers participated in the Bonus Plan during 2019.

Bonus Plan
The Compensation Committee sets performance goals and individual bonus targets for the Bonus Plan at the beginning of each year. The bonus is based on three areas of company performance measured relative to internal targets: revenue, EPS, and innovation progress. The annual cash bonus payout is calculated as follows:https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-lillybonuspayoutnotitle02032.jpg

Actual payouts can range from 0 to 200 percent of an individual's bonus target. The Compensation Committee references the annual operating plan and pipeline objectives to establish performance targets and to assess the relative weighting for each objective. The 2019 weightings remain unchanged from the prior year:

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

Based on this weighting, the company bonus multiple is calculated as follows:https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-bonusplanmultiplenotitle0203.jpg

Executive officer bonuses for 2019 were also subject to the terms of the Executive Officer Incentive Plan (EOIP). Under the EOIP, the maximum annual cash bonus allowable was calculated based on non-GAAP net income (generally described in "Adjustments for 2019 Bonus Plan" in Appendix A) for the year. For Mr. Ricks, the maximum amount for 2019 was 0.3 percent of non-GAAP net income. For other executive officers, the maximum amount was 0.15 percent of non-GAAP net income. In addition, none of the executive officers were eligible to receive an annual cash bonus payment unless the company had positive non-GAAP net income for the year.

Under the EOIP, the Compensation Committee had the discretion to reduce (but not to increase) the amount to be paid. In exercising this discretion, the Compensation Committee awarded the lesser of (i) the bonus the executive officer would have received under the Bonus Plan, or (ii) the EOIP maximum payout. As described further in “Looking Ahead to 2020 Compensation” below, the EOIP was terminated effective January 1, 2020.

3.
Equity Incentives

The company grants two types of equity incentives to executives and certain other employees: performance awards that are designed to focus leaders on multi‑year operational performance relative to peer companies and shareholder value awards that are intended to align earned compensation with long-term growth in shareholder value and relative TSR performance within our industry. The Compensation Committee has the discretion to adjust

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any payout from an equity award granted to an executive officer downward (but not upward) from the amount yielded by the applicable formula.

Performance Awards
Performance awards vest over three years. Payouts are based on achieving EPS growth targets over a two-year performance period, followed by an additional 13-month service-vesting period for executive officers, during which the award is held in the form of restricted stock units. The growth-rate targets are set relative to the median expected EPS growth for our peer group over the same performance period. These awards do not accumulate dividends during the two-year performance period, but they do accumulate dividend equivalent units during the service-vesting period.

The Compensation Committee believes EPS growth is an effective measure of operational performance because it is closely linked to shareholder value, is broadly communicated to the public, is understood by Lilly employees, and allows for objective comparisons to performance of Lilly's peer group. Consistent with the objectives established by the Compensation Committee, Lilly company performance exceeding the expected peer group median results in above‑target payouts, while Lilly company performance lagging the expected peer group median results in below‑target payouts. Possible payouts range from 0 percent to 150 percent of the target number of shares, depending on Lilly EPS growth over the performance period.

The measure of EPS used in the performance award program differs from the measure used in the Bonus Plan in two ways. First, the EPS goal in the Bonus Plan is set with reference to internal goals that align to our annual operating plan for the year, while the EPS goal in the performance award program is set based on the expected growth rates of our peer group. Second, the Bonus Plan measures EPS over a one-year period, while the performance award program measures EPS over a two-year period. In a given year, the Bonus Plan may pay above target while the performance award pays below target (or vice versa).

Shareholder Value Awards
Shareholder value awards are earned based on Lilly's share price and relative TSR performance. Shareholder value awards pay above target if Lilly's stock outperforms an expected rate of return and below target if Lilly's stock underperforms that expected rate of return. The expected rate of return is based on the three-year TSR that a reasonable investor would consider appropriate when investing in a basket of large-cap U.S. companies, as determined by the Compensation Committee. The minimum price to achieve target is calculated by multiplying the starting share price of Lilly's stock by the three-year compounded expected rate of return less Lilly's dividend yield. Shareholder value awards have a three-year performance period, and any shares paid are subject to a one-year holding requirement. No dividends are accrued during the performance period. Executive officers receive no payout if Lilly's TSR for the three-year period is zero or negative. Possible payouts are based on share price growth and range from 0 to 150 percent of the target number of shares.

A modifier based on Lilly's three-year cumulative TSR relative to our peer companies' median TSR performance is applied to executive officer payouts. The committee added the relative TSR modifier to the shareholder value award to align executive officers' rewards with strong relative performance within the industry. The payout is increased by one percent for every percentage point that Lilly's TSR exceeds the median (up to a maximum of 20 percent). Likewise, the payout is reduced by one percent for every percentage point that Lilly’s TSR is below the median (maximum reduction of 20 percent).

Pay for Performance
The mix of compensation for our named executive officers reflects Lilly’s desire to link executive compensation with individual and company performance. As reflected in the charts below, a substantial portion of the target pay for executive officers is performance-based. The annual cash bonus and equity payouts are contingent upon company performance, with the bonus factoring in performance over a one-year period, and equity compensation factoring in performance over two- and three-year periods (as described above). The charts below depict the annualized mix of target compensation for Lilly’s CEO and the average for the other named executive officers.


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https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-targetcompensationmix0123202.jpg


2019 Target Total Compensation
Performance Review Process
In setting 2019 target compensation for the named executive officers, the Compensation Committee considered individual contributions, Lilly performance during 2018, internal relativity, peer group data, and input from the CEO for named executive officers other than himself.

2018 Individual Named Executive Officer Performance
A summary of the Compensation Committee's review of individual named executive officer performance is provided below:

David Ricks, Chairman, President, and CEO: In accordance with the company’s Corporate Governance Guidelines, the independent directors conducted an assessment of Mr. Ricks’ performance led by the lead independent director. The independent directors believe the company largely met or exceeded its combined financial and strategic goals for 2018 under Mr. Ricks’ leadership. In 2018, Mr. Ricks and his team:

delivered on the company's financial commitments, including with relation to our mid-term guidance
launched new innovative medicines to patients around the world, including the approval of Emgality in the U.S. and ten other product approvals in Europe, Japan, and the rest of world
progressed numerous potential medicines into Phase 1 and Phase 2 clinical development from both internal research efforts and external sources
implemented a cross-company productivity agenda resulting in savings that funded increased investment in research and development and allowed above-plan capital return to shareholders
completed the initial public offering of Elanco in anticipation of Elanco’s complete divestiture in early 2019
built on the company's program to improve diversity and inclusion across the company, increased the representation of women and minorities in management, and conducted pay equity studies to ensure equality in pay
drove the refinement of the strategy for Lilly 30x30, a program to improve access to quality health care in resource-limited settings for 30 million people on an annual basis by 2030, and clarified tactics to ensure forward progress
improved certain environmental performance areas, such as greenhouse gas emissions, energy efficiency, waste efficiency, and wastewater.

In addition, the company was named one of the world’s most ethical companies by Ethisphere Institute.

Joshua Smiley, Senior Vice President and Chief Financial Officer: Mr. Smiley contributed to the strong financial performance of the company in his first year as chief financial officer. Mr. Smiley’s 2018 accomplishments included:


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drove the company’s 2018 strategic planning and business planning process
led the strategic review of Lilly’s Elanco Animal Health business unit and its initial public offering
championed the company’s productivity agenda during the 2018 strategic and operations planning processes
co-led the evaluation and due diligence for numerous business development deals
led the capital allocation process allowing for investment in several in-licensing deals and increased funding for the advancement of new medicines
established excellent rapport with the investment community in his first year as CFO
partnered well with the business unit presidents and chief scientific officer to drive resource allocation
provided leadership and executive sponsorship of Lilly’s Indian Network, an employee resource group focused on supporting and advancing people of Indian heritage in the company. 

Daniel Skovronsky, M.D., Ph.D., Senior Vice President, Chief Scientific Officer, and President, Lilly Research Laboratories: Dr. Skovronsky became senior vice president and chief scientific officer on June 1, 2018. Prior to this promotion, Dr. Skovronsky was senior vice president for product development. In 2018, Dr. Skovronsky led efforts including:

advanced innovative medicines through the product pipeline, including the first approval of Emgality in the U.S., ten other product approvals around the world, and the entry of several new potential medicines into Phase 1 and Phase 2 testing
co-led the evaluation and due diligence for numerous business development deals
increased the speed of research by expanding the number of internal teams with governance designed to enable agile decision making
enhanced strategies to further reduce the time drug candidates spend in development, leading to earlier potential product launch
sponsored an increase in Lilly’s external research efforts, including expansion of key research hubs in Boston and San Francisco 
led diversity and inclusion strategies in research and development to improve innovation and productivity; acted as executive sponsor of Lilly’s Japanese Network, an employee resource group focused on supporting and advancing people of Japanese heritage in the company.

Enrique Conterno (retired), Senior Vice President and President, Lilly Diabetes and President, Lilly USA: Mr. Conterno demonstrated strong leadership of Lilly Diabetes and across the company prior to his retirement effective December 31, 2019. In 2018, he:

drove volume growth within the diabetes business unit, primarily from newer products
championed the development of new insulin delivery devices incorporating digital technology to provide patients with better diabetes control
led the company’s U.S. commercial business, which is the company's largest market, as well as the company's human pharmaceutical commercial operations in China, Japan, and Canada
created the Lilly Diabetes Solutions Center to provide insulin affordability support
initiated late clinical testing for tirzepitide, a potential advancement for the treatment of type 2 diabetes
served as executive sponsor of WILL (Women’s Initiative for Leading at Lilly), the company’s employee resource group focused on supporting and advancing the development of women across the company.

Michael Harrington (retired), Senior Vice President and General Counsel: Mr. Harrington was effective and influential in his role as general counsel prior to his retirement effective January 31, 2020, and he was a productive partner with the executive team. In 2018, he:

defended several key patents, including patents for Alimta in the U.S., Europe, and Japan
developed and implemented legal strategies in the areas of mergers and acquisitions, product liability, regulatory reform, and pharmaceutical pricing
provided sound legal counsel throughout the Elanco Animal Health initial public offering in anticipation of its complete divestiture in early 2019 as well as numerous business development deals
influenced the company’s ethics and compliance programs globally to ensure the company lives its long-standing value of integrity
led a company initiative to increase protection of Lilly's intellectual property assets and partnered with the chief technology officer to improve cybersecurity

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led and served as an executive sponsor of the company’s Pride organization, an employee resource group focused on supporting and advancing lesbian, gay, bisexual, transgender, and queer/questioning employees.

2019 Target Compensation
The information below reflects total compensation at target for named executive officers for 2019. The actual compensation received in 2019 is summarized below in "2019 Compensation Results."

Rationale for Changes to Named Executive Officer Target Compensation
The Compensation Committee established 2019 target total compensation for each named executive officer based on the named executive officer's 2018 performance, internal relativity, and peer group data.

Base Salary
The following table shows the approved annualized salary effective at the beginning of March for each named executive officer. Each named executive officer's actual base salary earned during 2019 is reflected in the Summary Compensation Table in the "Executive Compensation" section of this proxy.

Name
2018 Annual Base Salary
2019 Annual Base Salary
Increase (effective March 1, 2019)
Mr. Ricks
$1,400,000
$1,400,000
Mr. Smiley
$875,000
$900,000
3%
Dr. Skovronsky
$900,000
$900,000
Mr. Conterno (retired)
$800,000
$840,000
5%
Mr. Harrington (retired)
$860,300
$900,000
5%

Annual Cash Bonus Targets
Based on a review of internal relativity, peer group data, and individual performance, the Compensation Committee decided to increase Mr. Conterno's bonus target and retain the same bonus targets for Mr. Ricks, Mr. Smiley, Dr. Skovronsky, and Mr. Harrington as in 2018. Bonus targets are shown in the table below as a percentage of each named executive officer’s earnings from base salary in 2019:

Name
2018 Bonus Target
2019 Bonus Target
Mr. Ricks
150%
150%
Mr. Smiley
95%
95%
Dr. Skovronsky
95%
95%
Mr. Conterno (retired)
80%
95%
Mr. Harrington (retired)
80%
80%

Equity Incentives - Target Grant Values
For 2019 equity grants, the Compensation Committee set the total target values for named executive officers based on peer group data, individual performance, and internal relativity. Named executive officers have 60 percent of their equity target allocated to shareholder value awards and 40 percent to performance awards. Total target values for the 2018 and 2019 equity grants to the named executive officers were as follows:

Name
2018 Annual Equity Grant
2019 Annual Equity Grant
Mr. Ricks
$9,000,000
$10,500,000
Mr. Smiley
$2,300,000
$2,700,000
Dr. Skovronsky
$2,300,000
$3,500,000
Mr. Conterno (retired)
$2,600,000
$2,600,000
Mr. Harrington (retired)
$2,550,000
$2,550,000





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Performance Goals for 2019 Incentive Programs
Annual Cash Bonus Goals
The Compensation Committee established the company performance targets using the company's 2019 annual operating plan, which was approved by the board in 2018. These targets are described below under "2019 Compensation Results."

2019-2021 Performance Award
In February 2019, the Compensation Committee established a compounded two-year EPS growth target of 5.8 percent per year based on investment analysts’ EPS growth estimates for our peer group companies at that time. Payouts for the 2019-2021 performance award can range from 0 to 150 percent of the target number of shares, as shown below:
 
 
 
 
50% payout
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-pointera05.jpg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Target
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payout Multiple
 
0.00
 
0.50
 
 
0.75
 
 
1.00
 
 
1.25
 
 
1.50
Cumulative 2-Year EPS
$5.10
 
$9.87
 
 
$10.48
 
 
$11.10
 
 
$11.75
 
$12.41
EPS Growth
 
 
 
(2.2)%
 
 
1.8%
 
 
5.8%
 
 
9.8%
 
13.8%

2019-2021 Shareholder Value Award
For purposes of establishing the stock price target for the shareholder value awards, the starting price was $112.38 per share, the average closing stock price for all trading days in November and December 2018. The target share price was established using the expected annual rate of return for large-cap companies (8 percent), less an assumed Lilly dividend yield of 2.30 percent. To determine payout, the ending price will be the average closing price of company stock for all trading days in November and December 2021. The award is designed to deliver no payout to executive officers if the shareholder return (including projected dividends) is zero or negative. Possible payouts based on share price ranges are illustrated in the grid below.

Ending Stock Price
Less than $103.43
$103.43 - $118.07
$118.08 - $132.72
$132.73 - $147.37
$147.38 - $162.02
 Greater than $162.02
Compounded Annual Share Price Growth Rate (excluding dividends)
Less than (2.7%)
(2.7%)-1.7%
1.7%-5.7%
5.7%-9.5%
9.5% -13.0%
Greater than 13.0%
Percent of Target
0%
50%
75%
100%
125%
150%

Executive officer awards are subject to a relative TSR modifier, as shown in the grid below. The number of shares to be paid will increase or decrease by one percent for every percentage point Lilly's three-year TSR deviates from our peer group's median three-year TSR, capped at 20 percent.

https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-tsrmodifier.jpg


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2019 Compensation Results
The information in this section reflects the amounts paid to named executive officers under the Bonus Plan and for equity awards granted in prior years for which the relevant performance period ended in 2019.

Lilly Performance
In 2019 we exceeded our targets for EPS and stock price, and nearly achieved our target for revenue. We also exceeded our target for pipeline progress. Key pipeline highlights include the first regulatory approval for Baqsimi and Reyvow. The discussion below details the measures used in each program, what the performance goal was to obtain target performance, how performance outcomes were assessed and what the compensation committee approved as the final payout multiple.

Bonus Plan
The company utilized revenue change, EPS change, and pipeline progress to incent the achievement of 2019 company objectives. Each measure contributes to the final payout multiple on a weighted basis: Revenue change (25 percent), EPS change (50 percent), and pipeline progress (25 percent). Each performance measure is assessed a payout multiple contribution of 0 to 200 percent.

The company exceeded its annual cash bonus target for EPS and nearly achieved its target for revenue. The Science and Technology Committee's assessment of the company's product pipeline achievements is detailed below:
Activity
Objective
Achievement
Approvals
2 new drug first approvals
11-12 other approvals
2 new drug first approvals
15 other approvals
Potential new drug Phase 3 starts
2
1
Potential new drug Phase 1 starts
12-14
16
Potential new indication or line extension Phase 3 starts
5
4
Plan Boldly
Meet industry benchmark for speed of development
Exceeded industry benchmark for speed of development
Deliver to Launch
Meet planned project timelines
Met planned project timelines
Qualitative Assessment
Assessment of the chief scientific officer's evaluation of performance against strategic objectives

Based on the recommendation of the Science and Technology Committee, the Compensation Committee approved a pipeline multiple of 1.30.

The company's performance compared to targets as well as the resulting bonus multiple, is illustrated below:


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https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-a2019bonusplanmultiple021020.jpg

For additional information on financial results, see Appendix A, "Summary of Adjustments Related to the Annual Cash Bonus and Performance Award."

When combined, the revenue, EPS, and pipeline multiples yielded a bonus multiple of 1.39.
https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-a2019lillybonusplanmultipl01.jpg

The 2019 bonuses paid to the applicable named executive officers under the Bonus Plan were as follows:

Name
2019 Bonus ($)
Mr. Ricks
$2,919,000
Mr. Smiley
$1,182,948
Dr. Skovronsky
$1,188,450
Mr. Conterno (retired)
$1,100,417
Mr. Harrington (retired)
$993,442

2018-2020 Performance Awards
The target cumulative EPS for the 2018-2020 performance award was set in the first quarter of 2018, reflecting expected industry growth of 8.1 percent each year over the two-year performance period of 2018-2019. The company's adjusted EPS growth for the two-year period was 24.3 percent. The compensation committee adjusted non-GAAP EPS by $0.35 for the expected impact of the acquisition of Loxo Oncology, Inc., and to neutralize the impact of the Elanco divestiture.

https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-a20182020performanceawardmul.jpg


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For the named executive officers other than Dr. Skovronsky, shares earned for the 2018-2019 performance period are subject to an additional 13-month service-vesting period and are shown in the table below as restricted stock units. Dr. Skovronsky’s 2018-2019 performance award was paid in shares of Lilly common stock.

Name
Target Shares
Shares Earned
RSUs Earned
Mr. Ricks
50,258
 N/A
75,387
Mr. Smiley
12,844
 N/A
19,266
Dr. Skovronsky
16,055
24,083
 N/A
Mr. Conterno (retired)
14,519
 N/A
21,779
Mr. Harrington (retired)
14,240
 N/A
21,360

2017-2019 Shareholder Value Award
The target stock price range of $83.80 to $92.79 (16.1 percent to 28.6 percent total stock price growth) for the 2017-2019 shareholder value award was set in 2017 based on a beginning stock price of $72.15, which was the average closing price for Lilly stock for all trading days in November and December 2016. The ending stock price of $119.76 represents stock price growth of approximately 66 percent over the relevant three-year period resulting in a payout multiple of 1.50.

The TSR modifier applies to those individuals who were executive officers when the award was granted. The cumulative TSR median for the company’s peer group was 46.6 percent, and Lilly’s TSR over the same period was 78.6 percent. Given this positive relative performance, the shareholder value award payout multiple was increased by 20 percent, making the final performance multiple 1.80.

https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-a20172019shareholder22620.jpg

The number of shares paid to each of our named executive officers for the 2017-2019 performance period were as follows:


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Name
Target Shares
Shares Paid Out
Mr. Ricks
78,089
140,560
Mr. Smiley*
5,258
7,887
Dr. Skovronsky*
9,764
14,646
Mr. Conterno (retired)
22,967
41,341
Mr. Harrington (retired)
21,130
38,034

*The TSR modifier did not apply to Mr. Smiley’s and Dr. Skovronsky’s 2017-2019 shareholder value award payouts since neither one was an executive officer at the time of grant.

Other Compensation Practices and Information
Employee Benefits
The company offers core employee benefits coverage to:
provide our workforce with a reasonable level of financial support in the event of illness or injury
provide post-retirement income
enhance productivity and job satisfaction through benefit programs that focus on overall well-being.

The benefit programs available to executive officers are offered to all U.S. employees and include medical and dental coverage, disability insurance, and life insurance. In addition, The Lilly Employee 401(k) plan (401(k) Plan) and The Lilly Retirement Plan (the Retirement Plan) are intended to provide U.S. employees a reasonable level of retirement income reflecting employees’ careers with the company. To the extent that any employee’s retirement benefit exceeds Internal Revenue Service (IRS) limits for amounts that can be paid through a qualified plan, the company also offers a nonqualified pension plan and a nonqualified savings plan. These plans provide only the difference between the calculated benefits and the IRS limits, and the formula is the same for all U.S. employees. The cost of employee benefits is partially borne by the employee, including each executive officer.

Perquisites
The company provides very limited perquisites to executive officers. The company generally does not allow personal use of the corporate aircraft. In rare cases when the security and efficiency benefits outweigh the expense, the corporate aircraft is made available to Mr. Ricks for personal use. The company did not incur any expenses for personal use of its aircraft in 2019 by Mr. Ricks, and he did not receive any reportable perquisites. Depending on seat availability, family members and personal guests may accompany executive officers who are traveling for business on the company aircraft. There is no incremental cost to the company for these trips by family members and personal guests.

The Lilly Deferred Compensation Plan
Members of senior management may defer receipt of part or all of their cash compensation under The Lilly Deferred Compensation Plan (Deferred Compensation Plan), which allows executives to save for retirement in a tax-effective way at minimal cost to the company. Under this unfunded plan, amounts deferred by the executive are credited at an interest rate of 120 percent of the applicable federal long-term rate, as described in more detail following the “Nonqualified Deferred Compensation in 2019” table.

Severance Benefits
Except in the case of certain terminations following a change in control of the company, the company is generally not obligated to pay severance to executive officers upon termination of their employment; any such payments are at the discretion of the Compensation Committee.

The company has adopted change-in-control severance pay plans for nearly all employees, including executive officers. The plans are intended to preserve employee morale and productivity and encourage retention in the face of the disruptive impact of an actual or rumored change in control. In addition, the plans are intended to align executive and shareholder interests by enabling executives to evaluate corporate transactions that may be in the best interests of the shareholders and other constituents of the company without undue concern over whether the transactions may jeopardize the executives’ own employment.


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Highlights of Our Change-in-Control Severance Plans
all regular employees are covered
double trigger generally required
no tax gross-ups
up to two-year pay protection
18-month benefit continuation

Although benefit levels may differ depending on the employee’s job level and seniority, the basic elements of the plans are comparable for all eligible employees:
Double trigger: Unlike “single trigger” plans that pay out immediately upon a change in control, our plans require a “double trigger” — a change in control followed by an involuntary loss of employment within two years. This is consistent with the plan's intent to provide employees with financial protection upon loss of employment. With respect to unvested equity, performance to the date of the change in control will be used to determine the number of shares earned under an award, but vesting does not accelerate immediately upon a change in control. Rather, the performance-adjusted awards will convert to time-based restricted stock units that continue to vest with the new company. Shares will pay out upon the earlier of the completion of the original award period; upon a covered termination; or if the successor entity does not assume, substitute, or otherwise replace the awards.

Covered terminations: Employees are eligible for payments if, within two years of the change in control, their employment is terminated (i) without cause by the company or (ii) for good reason by the employee, each as defined in the plan. See “Executive Compensation - Payments Upon Termination or Change in Control” for a more detailed discussion, including a discussion of what constitutes a change in control.

Employees who suffer a covered termination receive up to two years of pay and 18 months of benefits protection: These provisions ensure employees a reasonable period of protection of their income and core employee benefits.
Severance payment. Eligible terminated employees would receive a severance payment ranging from six months to two years’ base salary. Executives are all eligible for two years’ base salary plus two times the then-current year’s target bonus.
Benefit continuation. Basic employee benefits such as health and life insurance would continue for 18 months following termination of employment, unless the individual becomes eligible for coverage with a new employer. All employees would receive an additional two years of both age and years-of-service credit for purposes of determining eligibility for retiree medical and dental benefits.

Accelerated vesting of equity awards: Any unvested equity awards would vest at the time of a covered termination.

Excise tax: In some circumstances, the payments or other benefits received by the employee in connection with a change in control could exceed limits established under Section 280G of the Internal Revenue Code. The employee would then be subject to an excise tax on top of normal federal income tax. The company does not reimburse employees for these taxes. However, the amount of change-in-control-related benefits will be reduced to the 280G limit if the effect would be to deliver a greater after-tax benefit than the employee would receive with an unreduced benefit.

Share Ownership and Retention Guidelines
Share ownership and retention guidelines help create direct alignment of interests between senior management and shareholders over the longer term. Lilly has established a formal share ownership policy under which the CEO and other senior executives are required to acquire and hold Lilly shares in an amount representing a multiple of base salary.

Until the required number of shares is reached, an executive officer must hold 50 percent of all shares, net of tax, from all equity payouts. Executive officers are also required to hold all shares received from equity program payouts, net of taxes, for at least one year, even once share ownership requirements have been met. For performance awards granted to executive officers, this holding requirement is met by the 13-month service-vesting period after the end of the performance period.


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All of the named executive officers are compliant with the share ownership guidelines. The following graphic shows each respective named executive officers' guideline and each named executive officers’ holdings as of December 31, 2019:
https://cdn.kscope.io/3c504238c0cc4a0278f83e05675b1594-shareownershipharringtonreti.jpg

Prohibition on Hedging and Pledging Shares
Non-employee directors and employees, including executive officers, 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 (approximately 140 employees in 2019) 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 or vesting period or for disciplinary reasons. In addition, the Compensation Committee has adopted an executive compensation recovery policy that gives the Compensation Committee broad discretion to claw back incentive payouts from any member of senior management 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 from an executive officer in the case of materially inaccurate financial statements or material errors in the performance calculation, whether or not such inaccuracies or errors 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 a member of senior management during the last three years. Subsequent changes in status, including retirement or termination of employment, do not affect the company’s rights to recover compensation under the policy.

Looking Ahead to 2020 Compensation
The executive officer incentive plan (EOIP) was designed to maximize the deductibility of performance-based compensation under Internal Revenue Code Section 162(m). The changes to the US tax code associated with the Tax Cuts and Jobs Act of 2017 disallowed the deductibility of any compensation exceeding one million dollars. As a result, the company is discontinuing the EOIP as of December 31, 2019, and all executive officers will participate in the Bonus Plan starting January 1, 2020.

The Compensation Committee reviewed and approved an update to the annual equity program that encourages company leadership to successfully and efficiently execute the company’s business plan, deliver value to Lilly shareholders, and effectively compete against Lilly’s peers. For 2020, we continued rewarding strong financial results (as measured by two-year cumulative EPS growth goals) through use of the performance award and

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continued to encourage delivery of long-term shareholder value (as measured by our three-year absolute stock price appreciation) through the shareholder value award. However, we discontinued use of the relative TSR modifier in shareholder value awards granted beginning in 2020 and instead implemented a new award called the relative value award. The relative value award is based on Lilly’s TSR versus the median TSR of our peer group. If Lilly outperforms the peer group median TSR, payouts will be at target or higher. If Lilly underperforms the peer group median TSR, payouts will fall below target or result in no pay out.

We have also aligned all three equity awards to have a maximum payout of 175 percent of target. This is an increase from 150 percent of target for the performance award design, and a decrease from 180 percent of target for the prior shareholder value award (including the relative TSR modifier). This adjustment is designed to reward significant outperformance in each of three important areas: our business plan, total shareholder return, and performance relative to our peers.

For 2020, Lilly's named executive officers' equity awards were allocated into three separate awards as shown below:

Award Type
Percent
Performance Awards
30%
Shareholder Value Awards
35%
Relative Value Awards
35%


Additional details regarding each award will be provided in the 2021 proxy statement.




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Executive Compensation

Summary Compensation Table
Name and Principal Position
Year
Salary
($)
Bonus
($)
Stock Awards
($)
1
 
Option Awards
($)
Non-Equity Incentive Plan Compensation
($)
2
Change in
Pension Value
($)
3
 
All Other Compensation
($)
4
Total Compensation
($)
David A. Ricks
2019
$1,400,000
$0
$12,222,000
 
$0
$2,919,000
$4,658,242
 
$84,000
$21,283,242
Chairman, President, and Chief Executive Officer
2018
$1,400,000
$0
$10,584,000
 
$0
$3,633,000
$1,529,337
 
$84,000
$17,230,337
2017
$1,400,000
$0
$10,200,000
 
$0
$2,814,000
$1,347,991
 
$84,000
$15,845,991
Joshua L. Smiley
2019
$895,833
$0
$3,142,800
 
$0
$1,182,948
$2,073,070
 
$53,750
$7,348,401
Senior Vice President and Chief Financial Officer
2018
$875,000
$0
$2,704,800
 
$0
$1,438,063
$174,980
 
$52,500
$5,245,343
2017
N/A
N/A
N/A
 
N/A
N/A
N/A
 
N/A
N/A
Daniel M. Skovronsky, M.D., Ph.D.
2019
$900,000
$0
$4,074,000
 
$0
$1,188,450
$446,521
 
$54,000
$6,662,971
Senior Vice President,
Chief Scientific Officer, and President, Lilly Research Laboratories
2018
$837,500
$0
$2,806,000
 
$0
$1,376,431
$75,717
 
$50,250
$5,145,898
2017
N/A
N/A
N/A
 
N/A
N/A
N/A
 
N/A
N/A
Enrique A. Conterno (retired)
2019
$833,333
$0
$3,026,400
 
$0
$1,100,417
$2,165,228
 
$50,000
$7,175,378
Senior Vice President and President, Lilly Diabetes and President, Lilly USA
2018
$794,683
$0
$3,057,600
 
$0
$1,099,842
$0
 
$47,681
$4,999,806
2017
$762,002
$0
$6,000,000
 
$0
$816,866
$999,426
 
$45,720
$8,624,014
Michael J. Harrington (retired)
2019
$893,383
$0
$2,968,200
 
$0
$993,442
$2,587,220
 
$53,603
$7,495,848
Senior Vice President and General Counsel
2018
$860,300
$0
$2,998,800
 
$0
$1,190,655
$338,947
 
$51,618
$5,440,320
2017
$856,130
$0
$2,760,000
 
$0
$917,771
$1,657,718
 
$51,368
$6,242,987

1 This column shows the grant date fair value of performance awards and shareholder value awards computed in accordance with FASB ASC Topic 718. See Note 12 of the consolidated financial statements in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, for additional detail regarding assumptions underlying the valuation of equity awards. All values in the “Stock Awards” column were based upon the probable outcome of performance conditions as of the grant date, which vary year to year.

For purposes of comparison, the supplemental table below shows the total target grant values of stock awards approved by the Compensation Committee:
Name
2017 Total Equity
2018 Total Equity
2019 Total Equity
Mr. Ricks
$8,500,000
$9,000,000
$10,500,000
Mr. Smiley
N/A
$2,300,000
$2,700,000
Dr. Skovronsky
N/A
$2,300,000
$3,500,000
Mr. Conterno (retired)*
$2,500,000
$2,600,000
$2,600,000
Mr. Harrington (retired)*
$2,300,000
$2,550,000
$2,550,000

*Due to the retirement of Mr. Conterno on December 31, 2019, and Mr. Harrington on January 31, 2020, the stock awards granted in 2018 and 2019 will be prorated for time worked in the performance period.

The table below shows the minimum, target, and maximum payouts (using the grant date fair value) for the 2019-2021 performance award included in the Summary Compensation Table, which will payout in January 2022.

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Name
Minimum Payout
Target Payout
Maximum Payout
Mr. Ricks
$0
$4,200,000
$6,300,000
Mr. Smiley
$0
$1,080,000
$1,620,000
Dr. Skovronsky
$0
$1,400,000
$2,100,000
Mr. Conterno (retired)*
$0
$1,040,000
$1,560,000
Mr. Harrington (retired)*
$0
$1,020,000
$1,530,000

*Mr. Conterno’s and Mr. Harrington’s 2019-2021 performance award will be prorated for time worked in the performance
period due to retirement.

The table below shows the minimum, target, and maximum payouts (using the grant date fair value) for the 2019-2021 shareholder value award included in the Summary Compensation Table, which will payout in January 2022.

Name
Minimum Payout
Target Payout
Maximum Payout
Mr. Ricks
$0
$6,300,000
$11,340,000
Mr. Smiley
$0
$1,620,000
$2,916,000
Dr. Skovronsky
$0
$2,100,000
$3,780,000
Mr. Conterno (retired)*
$0
$1,560,000
$2,808,000
Mr. Harrington (retired)*
$0
$1,530,000
$2,754,000

*Mr. Conterno’s and Mr. Harrington’s 2019-2021 shareholder value award will be prorated for time worked in the performance period due to retirement.

2 Payments under the Bonus Plan for performance in the years represented.

3 The amounts in this column reflect the change in pension value for each individual, calculated by our actuary, and are affected by additional service accruals and pay earned, as well as actuarial assumption changes. The changes in pension values in 2019 were driven primarily by the change in the discount rate and increases to pensionable earnings. The design of the pension benefit plan did not change. See the Pension Benefits in 2019 table below for information about the standard actuarial assumptions used. No named executive officer received preferential or above-market earnings on deferred compensation.
 
4 The amounts in this column are company matching contributions into each individual's 401(k) and nonqualified savings plan contributions. The company does not reimburse executives for taxes outside of the limited circumstance of taxes related to a domestic employee relocation or a prior international assignment. There were no reportable perquisites or personal benefits.

Grants of Plan-Based Awards During 2019
The compensation plans under which the grants in the following table were made are described in the CD&A above and consist of the Bonus Plan (a non-equity incentive plan) and the Amended and Restated 2002 Lilly Stock Plan (which provides for performance awards, shareholder value awards, and restricted stock units, among others).

To receive a payout under the performance award or the shareholder value award, a participant must remain employed with the company through the end of the relevant award period (except in the case of death, disability, retirement, or plant closing or reduction in workforce). No dividends accrue on either performance awards or shareholder value awards during the performance period. For performance awards, non-preferential dividends accrue during the 13-month service-vesting period (following the two-year performance period) and are paid upon vesting.



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Name
Award
 
Grant Date2
Compensation Committee Action Date
Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards
1
Estimated Possible and Future
Payouts Under Equity
Incentive Plan Awards
All Other
Stock or Option Awards:
Number of
Shares of Stock,
Options, or Units
Grant Date
Fair Value
of Equity
Awards
Threshold
($)
Target
($)
Maximum
($)
Threshold
(# shares)
Target
(# shares)
Maximum
(# shares)
Mr. Ricks
 
 
__ 
__ 
$525,000
$2,100,000
$4,200,000
 
 
 
 
 
 
2019-2021 PA
3 
2/7/2019
12/17/2018
 
 
 
18,735
37,470