DEF 14A of Eli Lilly & Co

Filed Mar 22, 2024 · FY20230000059478-24-000099

Open on EDGAR

Director Nominee Snapshot
Director Nominee Snapshot
Director Nominee Snapshot
| | Name | Age | Director Since | Other Public Boards | Principal Occupation | | Committee Membership | | | Katherine Baicker, Ph.D. Independent Director | 52 | 2011 | 0 | Provost, the Emmett Dedmon Professor, Harris School of Public Policy, University of Chicago | Ethics and Compliance (Chair) Science and Technology | | | | J. Erik Fyrwald Independent Director | 64 | 2005 | 1 | Chief Executive Officer and board member, International Flavors & Fragrances Inc. | Science and Technology Talent and Compensation | | | | Jamere Jackson Independent Director | 55 | 2016 | 0 | Chief Financial Officer, AutoZone, Inc. | Audit (Chair) Directors and Corporate Governance | | | | Gabrielle Sulzberger Independent Director | 63 | 2021 | 3 | Chair of Global ESG Advisory, Teneo | Audit Directors and Corporate Governance | |
Director Qualifications
Director Qualifications Character: Our board members should possess the personal attributes necessary to be an effective director, including unquestioned integrity, sound judgment, a collaborative spirit, and commitment to our company, our shareholders, and other constituencies. Independence: We believe there should always be a substantial majority (75 percent or more) of independent directors. The board annually determines the independence of directors based on a review and recommendation by the Directors and Corporate Governance Committee. No director is considered independent unless the board has affirmatively determined that he or she has no material relationship with the company, either directly or as a partner, shareholder, or officer of an organization that has a relationship with the company. In assessing whether a director has no material relationship with Lilly, the board of directors also considers any persons or organizations with which the director has an affiliation. 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. Lilly’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/leadership/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 and that the members of our Audit and Talent and Compensation Committees meet the heightened independence standards applicable to those committees. The board determined that none of the current non-employee directors has had during the last three 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.
Director Qualifications
| | In making its independence determinations, the board considered that Ms. Walker is affiliated with the Goldman Sachs Group, which the company may use for advisory, investment banking or similar services from time to time. In addition, the board considered that some of the current non-employee directors are affiliated with companies or entities to which the company sold products or made payments, or from which the company purchased products or services during the year. Drs. Baicker, Kaelin, Hedley, and Runge are employed at medical or academic institutions with which the company engages in clinical research, |
Director Qualifications
provides research grants, and/or engages in commercial transactions in the ordinary course of business. Mr. Luciano is employed by Archer-Daniels-Midland Company and Mr. Fyrwald is employed by International Flavors & Fragrances Inc. The company engages in routine business transactions with these organizations. Aggregate payments to or from each such organization, in each of the last three 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. In reviewing these relationships, the board considered all relevant factors, including: •whether transactions were entered into at arm’s length in the normal course of business and, to the extent they were commercial relationships, had standard commercial terms; and •whether any director had any direct business relationships with the company or received any direct personal benefit from any of these transactions, relationships, or arrangements.
Director Qualifications
| Diversity: The board strives to achieve diversity in the broadest sense, including persons diverse in geography, gender, ethnicity, age, and experience. Although the board does not establish specific diversity goals or have a standalone diversity policy, the board’s overall diversity is an important consideration in the director selection and nomination process. The Directors and Corporate Governance Committee assesses the effectiveness of board diversity efforts in connection with the annual nomination process as well as in new director searches. The company’s current 12 directors range in age from 51 to 69 and include five women and five minority group members (MGM). | |
Director Qualifications
| 8 Years Average Director Tenure | | Tenure: Our director composition reflects a mix of tenure on the board, which provides an effective balance of historical perspective and an understanding of the evolution of our business with fresh perspectives and insights. |
Director Qualifications
| | Director Governance Spotlight | | ü | Resignation Policy - 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. | | ü | Director Retirement Policy - Non-employee directors must retire from the board no later than the date of the annual meeting that follows their seventy-second birthday, although the Directors and Corporate Governance Committee may 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. | | ü | Other Board Service Policy - To ensure proper engagement from our directors and effective functioning of our board, we have instituted certain limitations on service on the boards of other companies. In general, no director may serve on more than three other public company boards. No director that is an executive officer of a public company may serve on more than two public company boards (inclusive of Lilly). 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. In addition, no director serving on the Audit Committee may serve simultaneously on the audit committee of more than two other public companies without the prior approval of the board. | | ü | Confidentiality Policy - The board has adopted a Confidentiality Policy, applicable to all members of the board. The policy prohibits a director from sharing confidential information obtained in his or her role as a director with any third 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 at: lilly.com/leadership/governance. |
Director Qualifications
Director Skills: 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 experiences. We believe the board is well-rounded, with a balance of relevant perspectives and experience, as illustrated in the following chart. Director Experience: Set forth below is information, as of February 28, 2024, regarding our directors and director nominees. We have provided the most relevant 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 operations. 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 laws, no criminal proceedings and no judgments, sanctions, or injunctions during the past 10 years that are material to the evaluation of the ability or integrity of any of our directors or nominees for director. There is no arrangement or understanding 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. Under our articles of incorporation, the board is divided into three classes with approximately one-third of the directors standing for election each year.
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Dr. Baicker’s experience in health economics research and policy at the highest levels, including as a former economic advisor to the White House and a current health advisor to the Congressional Budget Office, provides an invaluable perspective to the board. In addition to Dr. Baicker’s own high-impact research, her leadership of a preeminent research and educational institution gives her both insight into and influence over the future of health policy. •Through Dr. Baicker’s decades of research and policy engagement, including with respect to the effects of health system reforms of public and private insurance coverage and payment policy, she brings to the board insight and context as it oversees the company’s navigation of the complex environment of government regulation, insurance reimbursement, and access to affordable care. •Drawing on Dr. Baicker’s experience as an advisor to both the executive and legislative branches of the U.S. government, state governments, and numerous healthcare-related commissions and committees provides a keen understanding of government perspectives in our highly regulated industry. •Dr. Baicker, with extensive involvement with medical and health system research organizations, adds valuable input on the research and development landscape within the pharmaceutical industry. | | Katherine Baicker, Ph.D. | | | Age: 52 Director since: 2011 Board Committees: –Ethics and Compliance (Chair) –Science and Technology Other Public Boards: –None Recent Prior Public Boards: –HMS Holdings Corp. Key Skills: | | | | CAREER HIGHLIGHTS •University of Chicago –Provost (2023 - present) –Emmett Dedmon Professor, Harris School of Public Policy (2017 - present) –Dean of the Harris School of Public Policy (2017 - 2023) •Harvard University –C. Boyden Gray Professor of Health Economics (2014 - 2017) –Department of Health Policy and Management, chair (2014 - 2016) –Harvard T.H. Chan School of Public Health (primary) –Harvard Kennedy School of Government (secondary) •National Bureau of Economic Research –Research Associate, Health Care and Public Economics Programs (2007 - present) –Faculty Research Fellow, Public Economics Program (2001 - 2005) •Council of Economic Advisers, Executive Office of the President –Member, confirmed by U.S. Senate (2005 - 2007) | | | OTHER HIGHLIGHTS •Panel of Health Advisers to the Congressional Budget Office •Advisory Board of the National Institute for Health Care Management •Editorial Board of Health Affairs, JAMA Health Forum •Trustee of the Mayo Clinic •Member of the National Academy of Medicine, the National Academy of Social Insurance, the Council on Foreign Relations, and the American Academy of Arts and Sciences |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Mr. Fyrwald brings to the board a deep understanding of operational and strategic leadership and international business. •Mr. Fyrwald’s substantial experience in leading international companies provides valuable perspectives relating to international operations, manufacturing, logistics, and sustainability. •Mr. Fyrwald has a demonstrated focus on technology and a deep understanding of the challenges of developing and commercializing the results of innovation, as he worked to align Syngenta to digital innovation and new agricultural technologies in the fight against climate change. •Mr. Fyrwald has also developed significant corporate governance experience through his current and prior service on the boards of directors of international companies and not-for-profit entities. | | J. Erik Fyrwald | | | Age: 64 Director since: 2005 Board Committees: –Talent and Compensation –Science and Technology Other Public Boards: –International Flavors & Fragrances Inc. Recent Prior Public Boards: –Bunge Limited Key Skills: | | | | CAREER HIGHLIGHTS •International Flavors & Fragrances Inc., creator and manufacturer of food, beverage, health and biosciences, scent and pharma solutions –Chief Executive Officer (2024 - present) –Member of the board of directors (2024 - present) •Syngenta Group, a global Swiss-based agriculture technology company that produces agrochemicals and seeds –President and Chief Executive Officer (2016 - 2023) –Member of the board of directors (present) –Member of the sustainability committee (present) •Univar, Inc., a leading distributor of chemicals and provider of related services –President and Chief Executive Officer (2012 - 2016) •Ecolab, Inc., a leading provider of cleaning, sanitation and water products and services –President (2011 - 2012) •Nalco Company, a leading provider of water treatment products and services –Chairman and Chief Executive Officer (2008 - 2011) •E.I. du Pont de Nemours and Company, a global chemical company –Various management positions from 1980 to 2008 in production, sales, and marketing, including most recently Group vice president, agriculture and nutrition (2003 - 2008) |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Mr. Jackson brings to the board significant global financial experience and a strong background in strategic planning. •Mr. Jackson’s global finance experience, including as chief financial officer at multiple Fortune 500 companies, provides extensive knowledge of international business operations and their associated financial complexities. •Mr. Jackson brings a valuable perspective on the management of complex financial risks and wide-ranging knowledge of finance and accounting matters to his role as Audit Committee Chair. •Mr. Jackson has also held roles in strategic planning and mergers and acquisitions, including responsibility for driving financial rigor, developing strategy and implementing change. | | Jamere Jackson | | | Age: 55 Director since: 2016 Board Committees: –Audit (Chair) –Directors and Corporate Governance Other Public Boards: –None Recent Prior Public Boards: –Hibbett, Inc. Key Skills: | | | | CAREER HIGHLIGHTS •AutoZone, Inc., a leading retailer and distributor of automotive replacement parts and accessories in the United States, Mexico and Brazil –Chief Financial Officer (2020 - present) •Hertz Global Holdings, Inc., a global vehicle rental, leasing and fleet management business –Chief Financial Officer (2018 - 2020) •Nielsen Holdings plc, a global measurement and data analytics company –Chief Financial Officer (2014 - 2018) •General Electric Corporation, an American multinational company and leader in the power renewable energy, aviation and healthcare industries –Vice President and Chief Financial Officer, General Electric Oil and Gas, drilling and surface division (2013 - 2014) –Senior Executive, Finance, General Electric Aviation (2007 - 2013) –Finance Executive, General Electric Corporate (2004 - 2007) | | | OTHER HIGHLIGHTS •Certified Public Accountant •Not-for-profit boards of directors: –Youth Villages |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Ms. Sulzberger brings over 30 years of experience advising public and privately held companies in consumer products, retail, financial services, and life sciences. •Ms. Sulzberger provides global perspective as the chair of global ESG advisory at Teneo, supporting Lilly and the board’s commitment to continuous progress and improving our positive impact on people, the planet and society. •Ms. Sulzberger developed deep corporate governance experience through her work with corporate boards, both as a board member and as a governance committee chair. •Ms. Sulzberger’s career in private equity has given her valuable experience in helping companies navigate disruption and transformation, engage with shareholders, and position businesses for growth and success. •Ms. Sulzberger also draws on experiences from her prior service as chief financial officer of several publicly and privately held companies and audit committee chair of several public companies, providing leadership as an Audit Committee Financial Expert. | | Gabrielle Sulzberger | | | Age: 63 Director since: 2021 Board Committees: –Audit –Directors and Corporate Governance Other Public Boards: –Mastercard Incorporated –Cerevel Therapeutics Holdings, Inc. –Warby Parker Inc. Recent Prior Public Boards: –Teva Pharmaceutical Industries Limited –Brixmor Property Group Inc. Key Skills: | | | | CAREER HIGHLIGHTS •Teneo, a global CEO advisory firm –Chair of Global ESG Advisory (2021 - present) •Two Sigma Impact, a private equity firm based in New York, New York –Senior Advisor (2021 - 2023) •Centerbridge Partners, a multidisciplinary investment firm –Senior Advisor (2021 - present) •Rustic Canyon/Fontis Partners L.P., a private equity firm based in California –General Partner (2005 - 2018) | | | OTHER HIGHLIGHTS •Director or trustee of the following not-for-profit organizations: –Metropolitan Museum of Art –Ford Foundation –Trinity Church Wall Street –Sesame Street Workshop •Former director, board chair and audit committee chair, Whole Foods Market, Inc. |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Mr. Alvarez brings to the board more than 40 years of experience in consumer marketing, global operations, international business, and strategic planning, as well as extensive executive leadership experience in managing some of the world’s best-known brands. Mr. Alvarez is a leader of people and brings to the board a strong perspective on how to motivate and engage diverse talent. •As a senior executive of a leading global foodservice retailer and other global restaurant businesses, Mr. Alvarez developed in-depth knowledge of consumer marketing, talent and brand management and strategic planning. •Mr. Alvarez also contributes an understanding of international markets and operations, including a special focus on Japan and emerging markets. •Mr. Alvarez has acquired wide-ranging corporate governance experience from his service on other publicly and privately held company boards. •Mr. Alvarez is an Audit Committee Financial Expert based on his public company experience, including his prior audit committee service on Lowe’s board of directors. | | Ralph Alvarez | | | Age: 68 Director since: 2009 Board Committees: –Audit –Talent and Compensation (Chair) Other Public Boards: –Lowe’s Companies, Inc. –Traeger, Inc. –First Watch Restaurant Group, Inc. (Chair) Recent Prior Public Boards: –Dunkin’ Brands Group, Inc. –McDonald’s Corporation –KeyCorp –Skylark Co., Ltd. –Realogy Holdings Corp. Key Skills: | | | | 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, a leading food service retailer –President and Chief Operating Officer (2006 - 2009) | | | OTHER HIGHLIGHTS •Member, University of Miami President’s Council |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Dr. Hedley’s career has uniquely combined discovery, translational and clinical research and commercialization, bringing to the board extensive business leadership and scientific investigation experience in the biotechnology industry. •Having served as co-founder, chief executive officer, president, chief scientific officer or chief operating officer of several biotechnology companies, Dr. Hedley has experience leading and overseeing the complex operations and risks of these businesses, including building C-suite teams, raising capital, and managing research and development, commercial development, manufacturing and supply chains, quality, regulatory affairs, and corporate strategy. •Dr. Hedley contributes a wide-ranging perspective on the life science business, acquired through her roles at multiple successful companies and her industry-spanning work advising chief executive officers, venture and life science companies in addition to academic scientists advancing therapeutic drug development while at the Broad Institute. •Dr. Hedley has substantial experience with developing and commercializing oncology therapeutics, one of Lilly’s core therapeutics areas. •Dr. Hedley’s service on the boards of directors and board committees of other public companies and not-for-profit entities, and, in particular, as chair or former chair of the nominating and corporate governance committees at each of Veeva Systems and Millendo Therapeutics and the audit committee of Centessa Pharmaceuticals, provides a multifaceted governance perspective. | | Mary Lynne Hedley, Ph.D. | | | Age: 61 Director since: 2022 Board Committees: –Ethics and Compliance –Science and Technology Other Public Boards: –VEEVA Systems Inc. –Centessa Pharmaceuticals plc Recent Prior Public Boards: –Millendo Therapeutics, Inc. Key Skills: | | | | CAREER HIGHLIGHTS •Broad Institute of Harvard and MIT –Senior Scientific Fellow (2021 - present) •Third Rock Ventures, a leading healthcare venture capital firm –Venture Partner (2023 - present) •GlaxoSmithKline plc, a leading global pharmaceutical company –Member of executive research and development team; led integration efforts for TESARO acquisition (2019 - 2020) •TESARO, Inc., a company focused on the development and global commercialization of oncology therapeutics (acquired by GlaxoSmithKline plc in 2019) –President and Chief Operating Officer (2010 - 2019) •Abraxis BioScience, Inc., a biotechnology company (acquired by Celgene Corporation in 2010 –Executive Vice President and Chief Science Officer (2009 - 2010) | | | OTHER HIGHLIGHTS •Member, American Association of Immunologists; American Association for Advancement of Science; American Society of Clinical Oncology; American Association of Cancer Research •Advisory board, Boston Museum of Science and chair, Life Science Committee |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Ms. Johnson brings to the board considerable financial experience and a strong background in technology, governance, talent management and strategy for global risk management. •Ms. Johnson’s wide-ranging operational experience at two complex financial institutions has included leadership over various departments focused on cybersecurity, technology, operations, account services, enterprise change, data, modeling, analytics, information security, resiliency, innovation, and corporate strategy. •Ms. Johnson also brings deep understanding of enterprise risk management, having served as chief risk officer of Fannie Mae and currently overseeing enterprise risk as part of her role at T. Rowe Price. •Ms. Johnson also brings to the board knowledge of technology operations, having led Fannie Mae’s digital transformation, establishing a four-year enterprise modernization plan and an operational roadmap for redesigning business processes and reengineering core technology. | | Kimberly Johnson | | | Age: 51 Director since: 2021 Board Committees: –Talent and Compensation –Ethics and Compliance Other Public Boards: –None Recent Prior Public Boards: –None Key Skills: | | | | CAREER HIGHLIGHTS •T. Rowe Price Group, Inc., a global leader in asset management –Vice President and Chief Operating Officer (2022 - present) •Federal National Mortgage Association (Fannie Mae), a provider of affordable mortgage financing in the United States –Executive Vice President and Chief Operating Officer (2018 - 2022) –Executive Vice President and Chief Risk Officer (2017 - 2018) –Senior Vice President and Chief Risk Officer (2015 - 2017) –Senior Vice President and Deputy Chief Risk Officer (2013 - 2015) •Credit Suisse AG, a global wealth manager, investment bank, and financial firm founded and based in Switzerland –Director, Interest Rate Derivative Products (2005 - 2006) –Vice President (2002 - 2004) | | | OTHER HIGHLIGHTS •Trustee, Princeton University |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Mr. Luciano’s decades of experience, including as chairman and chief executive officer of Archer-Daniels-Midland Company, in leading large organizations, international business, strategy, and operations bring to the board valuable insights into the complexities of operating in a rapidly changing global market. Mr. Luciano has robust leadership qualities that enable him to act as a strong lead independent leader for the board. •As chairman and chief executive officer of a major global enterprise, Mr. Luciano contributes extensive knowledge of international business and the development and execution of strategy, such as the increased use of innovative technologies to meet customer needs. •Mr. Luciano’s experience as a chief operating officer and line executive in several product areas also bring a thorough understanding of operations, especially in highly regulated sectors. •Mr. Luciano’s results-oriented perspective and his experience in leading a major multinational company are particularly valuable to the board and make him a strong and engaged lead independent director. •Mr. Luciano is a well-respected leader of the board, with the willingness and ability to provide direct, candid feedback to the chief executive officer while acting as a facilitator of discussion and progress. | | Juan R. Luciano Lead Independent Director (2019) | | | Age: 62 Director since: 2016 Board Committees: –Talent and Compensation –Directors and Corporate Governance (Chair) Other Public Boards: –Archer-Daniels-Midland Company Recent Prior Public Boards: –None Key Skills: | | | | CAREER HIGHLIGHTS •Archer-Daniels-Midland Company, a global food processing and commodities-trading company –Chairman (2016 - present) –Chief Executive Officer and President (2015 - present) –President and Chief Operating Officer (2014 - 2015) •The Dow Chemical Company, a multinational chemical company –Executive Vice President and President, Performance Division (2010 - 2011) | | | OTHER HIGHLIGHTS •Alternate director, Wilmar International •Director, Intersect Illinois •Director, Rush University Medical Center •Member, The Business Roundtable •Member, Civic Committee at the Commercial Club of Chicago •Member, Economic Club of Chicago |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Dr. Kaelin is a world-renowned Nobel Laureate, scientist, academician, and physician who provides valuable leadership to the board’s oversight of Lilly’s discovery and development programs. His groundbreaking research and discovery talents provide an important resource to management, including in his role as the chair of the board’s Science and Technology Committee. •With decades of preeminent medical research experience, particularly within oncology, Dr. Kaelin offers a valuable perspective to the board and management in pharmaceutical research and discovery in key therapeutic areas. •Dr. Kaelin has extensive experience as a professor and mentor to medical professionals who are key constituents for Lilly’s business and workforce. •As an investigator at Howard Hughes Medical Institute, Dr. Kaelin has a deep understanding of the challenges, perspectives, and opportunities for medical researchers. •Dr. Kaelin also brings commercialization experience to the board through his work with venture capital funds and biotech companies. •Dr. Kaelin’s passion for improving the lives of patients drives his ongoing research and is core to Lilly’s mission. | | William G. Kaelin, Jr., M.D. | | | Age: 66 Director since: 2012 Board Committees: –Directors and Corporate Governance –Science and Technology (Chair) Other Public Boards: –None Recent Prior Public Boards: –None Key Skills: | | | | CAREER HIGHLIGHTS •Harvard Medical School –Sidney Farber Professor of Medicine (2018 - present) –Professor of Medicine (2002 - 2018) •Dana-Farber Cancer Institute and Brigham and Women’s Hospital –Professor (2002 - present) •Howard Hughes Medical Institute –Investigator (2002 - present) –Assistant Investigator (1998 - 2002) | | | OTHER HIGHLIGHTS •Recipient of numerous prizes and honors, including: –Nobel Prize in Physiology or Medicine –Albert Lasker Basic Medical Research Award –Canada Gairdner International Award –Wiley Prize in Biomedical Sciences from the Rockefeller University –Paul Marks Prize for Cancer Research from the Memorial Sloan Kettering Cancer Center •Member, National Academy of Medicine; National Academy of Sciences; American College of Physicians; Association of American Physicians; American Society of Clinical Investigation; American Academy of Arts and Sciences |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Mr. Ricks has 25 years of experience at Lilly, leading and shaping large-scale operations across the world. He has overseen some of the most transformative growth in the company’s history; since assuming the role as Chief Executive Officer, Lilly has (i) experienced revenue growth of approximately 61%, (ii) experienced a five-year total shareholder return of 446%, and (iii) taken important steps to increase the affordability and accessibility of our products around the globe. •Mr. Ricks embodies the “tone at the top” that strengthens Lilly’s culture, including through his commitment to compliance, talent development, and the expansion of our diverse workforce. •Mr. Ricks has combined his company-specific and industry knowledge to grow, articulate and implement Lilly’s strategic plan, as reflected by the growth in revenue, robust pipeline, and progressive approach on leveraging technology into the business. •As the primary face of Lilly, Mr. Ricks is able to draw on his extensive interactions with various stakeholders to apprise the board of significant developments in our business and industry, as well as to communicate feedback to the board and offer insights. •Mr. Ricks’ multi-faceted leadership approach is derived from his experience in marketing, sales, drug development, and international operations, as well as his significant experience in public policy. | | David A. Ricks Chair, President, and CEO | | | Age: 56 Director since: 2017 Board Committees: None Other Public Boards: –Adobe Inc. Recent Prior Public Boards: –None Key Skills: | | | | CAREER HIGHLIGHTS •Eli Lilly and Company –Chair, President, and Chief Executive Officer (2017 - present) –Senior Vice President and President, Lilly Bio-Medicines (2012 - 2016) –President, Lilly USA (2009 - 2012) –Served in various marketing, sales and international leadership roles (1996 - 2009), including: •As President and General Manager of Lilly China •As General Manager of Lilly Canada | | | OTHER HIGHLIGHTS •Director, International Federation of Pharmaceutical Manufacturers & Associations (IFPMA) •Director and former chair, Pharmaceutical Research and Manufacturers of America (PhRMA) •Member, U.S. Patent and Trademark Office Council for Inclusive Innovation •Director and executive committee member, Central Indiana Corporate Partnership •Director, The Business Roundtable |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Dr. Runge’s extensive experience as a physician and scientist contributes a unique depth of understanding to the board’s risk oversight and advice on scientific matters involving Lilly’s discovery and development programs, including a strong understanding of healthcare facility systems, biomedical research and training, innovation, clinical trial design and patient safety. •As CEO of one of the largest hospitals in Michigan that is committed to high-quality care to under-resourced communities and is also a premier academic medical center, Dr. Runge brings to the board first-hand knowledge of healthcare services delivery, including hospital procurement and in-patient experiences with pharmaceuticals. Dr. Runge is committed to providing high-quality, low-cost healthcare for underserved populations – locally and across the state. •With over three decades of academic experience across the United States, Dr. Runge provides a distinctive perspective on how future healthcare professionals are trained. •Dr. Runge’s service as a principal investigator and director of an institution that was part of a national consortium to improve the way biomedical research is conducted across the country, as well as his own research efforts, provide valuable insights into the medical research process. •Dr. Runge’s practical experience obtained at some of the nation’s renowned medical institutions offers a valuable perspective on diabetes and obesity treatment. | | Marschall S. Runge, M.D., Ph.D. | | | Age: 69 Director since: 2013 Board Committees: –Ethics and Compliance –Science and Technology Other Public Boards: –None Recent Prior Public Boards: –None Key Skills: | | | | CAREER HIGHLIGHTS •University of Michigan –Chief Executive Officer, Michigan Medicine (2015 - present) –Executive Vice President for Medical Affairs (2015 - present) –Dean, Medical School (2015 - present) –Board of Regents (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) | | | OTHER HIGHLIGHTS •Vice Chair, the University of Michigan Health Board •Chair, the Michigan Health Corp. Board (the governing board for business partnerships) •Member, American Association of Medical Colleges, American College of Cardiology, and American Medical Association •Cardiology Fellow and Faculty Member, Harvard’s Massachusetts General Hospital •Associate Professor of Medicine, Emory University •John Sealy Distinguished Centennial Chair in Internal Medicine and Director of the Division of Cardiology and the Sealy Center for Molecular Cardiology, University of Texas Medical Branch at Galveston |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Qualifications
| | KEY EXPERIENCE AND QUALIFICATIONS | | | | | | Ms. Walker brings to the board extensive experience in building and strengthening brands, cultivating opportunities in new and existing markets, scaling organizations, and demonstrating accountability for results. She has an acute understanding of technology’s importance in organizational success. •Ms. Walker has spent more than three decades in the information technology industry, building strong technology acumen and strategic insight through business and consumer leadership positions. •Ms. Walker has been a key leader in international organizations applying new strategies to achieve transformative change, including transforming the Intel brand, and an award-winning integrated marketing and communications approach using digital and social media to engage customers and partners on their purchase journey. •During her career at Cisco, Ms. Walker led a complete transformation of the company’s marketing function to become a leader in real-time marketing and communications while also spearheading transformation to a hybrid business model selling hardware, services, software as a service (SaaS) and software. | | Karen Walker | | | Age: 62 Director since: 2018 Board Committees: –Audit –Talent and Compensation Other Public Boards: –Sprout Social, Inc. Recent Prior Public Boards: –None Key Skills: | | | | CAREER HIGHLIGHTS •The Goldman Sachs Group, Inc., a leading global financial institution that delivers a broad range of financial services –Operating Partner (2023 – present) •Boston Consulting Group, a leading management consulting firm –Senior Advisor (2023 - present) •Intel Corporation, a leader in the semiconductor industry –Senior Vice President and Chief Marketing Officer (2019 - 2022) •Cisco Systems, Inc., a provider of communications 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 Marketing Partner (2012 - 2013) •Hewlett-Packard Company, a manufacturer of software and computer services –Various marketing, strategy and operations roles in Europe, North America and Asia-Pacific (1984 - 2009) | | | OTHER HIGHLIGHTS •Advisory board member, Salvation Army of Silicon Valley •Forbes Top 10 Most Influential CMOs in the World (2017 and 2019) |
Director Qualifications
| | CEO Leadership | | Finance / Accounting | | International Business | | Healthcare Industry | | Science / Academia |
Director Qualifications
| | Government Relations / Public Policy | | Sales / Marketing | | Technology / Digital | | Operations / Strategy |
Director Compensation
Director Compensation Directors who are employees receive no additional compensation for serving on the board. Non-employee director compensation is reviewed and approved by the board, on the recommendation of the Directors and Corporate Governance Committee.
Director Compensation
| 65% board service annual retainer amounts linked to the long-term performance of Lilly stock | 5x annual board retainer share ownership requirement for non-employee directors | CAPPED total annual compensation for non-employee directors |
Director Compensation Governance
Director Compensation Governance The Directors and Corporate Governance Committee performs an annual in-depth review of non-employee director compensation, including considerations such as: ü general industry and pharmaceutical company peer group analysis conducted with the assistance of an outside compensation consultant, ü the desire to have non-employee director compensation positioned near the market median when compared against the general industry peer group, ü the desire to avoid excess compensation, and ü a focus to link a significant portion of compensation to the long-term performance of Lilly stock. If the Directors and Corporate Governance Committee determine adjustments to non-employee director compensation are warranted, it will make recommendations to the full board for consideration.
2023 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 | $136,000 | $200,000 | $0 | $336,000 | | Dr. Baicker | $136,000 | $200,000 | $0 | $336,000 | | Mr. Fyrwald | $119,000 | $200,000 | $25,884 | $344,884 | | Dr. Hedley | $119,000 | $200,000 | $0 | $319,000 | | Mr. Jackson | $145,000 | $200,000 | $0 | $345,000 | | Ms. Johnson | $116,000 | $200,000 | $0 | $316,000 | | Dr. Kaelin | $137,000 | $200,000 | $12,150 | $349,150 | | Mr. Luciano | $173,000 | $200,000 | $0 | $373,000 | | Dr. Runge | $119,000 | $200,000 | $0 | $319,000 | | Ms. Sulzberger | $119,000 | $200,000 | $16,500 | $335,500 | | Ms. Walker | $119,000 | $200,000 | $40,000 | $359,000 | | Former Director: | | | | | | Mr. Tai4 | $39,987 | $83,333 | $70,000 | $193,320 |
Item 1. Election of Directors
Item 1. Election of Directors Under our articles of incorporation, the board is divided into three classes with approximately one-third of the directors standing for election each year. The Directors and Corporate Governance Committee has recommended that each of the following four nominees be elected at the Annual Meeting. Each of the director nominees is currently serving as a director.
Item 1. Election of Directors
| 2024 Nominees | | | | | | | | | | Katherine Baicker Independent Director | J. Erik Fyrwald Independent Director | Jamere Jackson Independent Director | Gabrielle Sulzberger Independent Director |
Item 1. Election of Directors
The term for directors to be elected this year will expire at the annual meeting of shareholders held in 2027. Each of the director nominees above has agreed to serve for that term. Nominees are elected to serve until his or her successor is duly elected and qualified. If a 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. For more information about each of the nominees and the other directors serving on our board, please see “Director Experience” in this proxy statement.
Item 1. Election of Directors
| | | RECOMMENDATION FOR | | The board recommends that you vote FOR the election of each of the board’s nominees, Katherine Baicker, J. Erik Fyrwald, Jamere Jackson, and Gabrielle Sulzberger to serve as directors until our 2027 Annual Meeting of Shareholders and until their successors are duly elected and qualified, or until their earlier death, resignation, or removal. | | |
Setting Compensation
Setting Compensation The Talent and Compensation Committee considers individual performance assessments, compensation recommendations from the CEO (with respect to each of the other executive officers), company performance, peer group data, input from its compensation consultant, feedback from shareholders, and its own judgment when determining compensation for the company’s executive officers. •Individual performance: –CEO: 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, environmental, social and governance matters, ethics, and integrity. This evaluation is used in setting the CEO’s total direct compensation target. –Other Executives: The Talent and 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 contribution to the company’s performance, environmental, social and governance matters, ethics, and integrity. The Talent and 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 Talent and Compensation Committee at the time of appointment. •Company performance: Lilly performance is considered in multiple ways: –Overall prior year performance is a factor in setting target compensation for the upcoming year. –At the beginning of each calendar year, annual performance goals are established and approved by the Talent and Compensation Committee. Performance against these annual goals is used to determine the short-term cash incentive payout. –Prior to the annual equity grant, multi-year performance goals are established and approved by the Talent and Compensation Committee. Performance against these multi-year objectives is used to determine the long-term incentive equity payout. •Peer group analysis: The Talent and Compensation Committee uses data from the peer group described below as a market check for compensation decisions but does not use these data as the sole basis for its compensation targets and does not target a specific position within that range of market data. •Input from independent compensation consultant: The Talent and Compensation Committee considers the advice of its independent compensation consultant, FW Cook, when setting executive officer compensation.
Competitive Pay Assessment
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 Talent and Compensation Committee selects a peer group whose median market cap and revenue are broadly like Lilly’s. The Talent and Compensation Committee reviews and approves the peer group at least every three years, and the Chair and independent compensation consultant review the peer group annually. The Talent and Compensation Committee approved the following peer group in May 2021 for purposes of assessing competitive pay:
Competitive Pay Assessment
| AbbVie | Bristol-Myers Squibb | Merck | Roche | | Amgen | Gilead | Novartis | Sanofi | | AstraZeneca | GlaxoSmithKline | Novo Nordisk | Takeda | | Biogen | Johnson & Johnson | Pfizer | |
Competitive Pay Assessment
At the time of the review, all peer companies were no greater than two times our revenue or market cap except Johnson & Johnson and Roche. The Talent and Compensation Committee included these two 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 Talent and Compensation Committee considers an analysis of market competitive pay for each executive officer position, along with internal factors such as the performance and experience of each executive officer, and the CEO’s recommendations for executives other than himself. The independent compensation consultant for the Talent and Compensation Committee provides a similar analysis when recommending pay levels for the CEO. The CEO analysis includes a comparison of our CEO’s actual total direct compensation in the prior year to company performance on an absolute and relative basis. The analysis also includes a comparison of current target total direct compensation for our CEO to recently available data on CEO target total direct compensation for our peer group with an emphasis on peers that are headquartered in the United States. On average, the named executive officers’ target total direct compensation for 2023 was comparable to the median of the peer group.
Components of Our Compensation
Components of Our Compensation Our 2023 executive compensation was primarily composed of three components: •base salary; •annual cash bonus, which is generally based on company performance relative to internal targets for revenue, EPS, and the progress of our pipeline; and •three different forms of equity incentives: –performance award, which is a performance-based equity award that vests over three years. Payout is based on the company’s two-year growth in EPS relative to the median external analyst-anticipated peer group EPS growth. After the two-year performance period, the performance-adjusted shares are then subject to a 13-month service-vesting period. –shareholder value award, which is a performance-based equity award that pays out based on absolute company stock price growth measured over a three-year period, followed by a one-year holding period. –relative value award, which is a performance-based equity award that pays out based on company TSR results relative to peers 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
Adjustments to Reported Financial Results The Talent and Compensation Committee has the 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 during the performance period; •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; and •facilitate comparisons with peer companies. The Talent and Compensation Committee considers the adjustments approved by the Audit Committee for reporting non-GAAP EPS and other adjustments, based on guidelines approved by the Talent and Compensation Committee. The Talent and 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. Further details on the adjustments for 2023 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 to “revenue”, “EPS”, and “adjusted non-GAAP EPS”, but we encourage you to review the information in Appendix A to understand the adjustments from reported revenue and EPS that were approved. The Talent and Compensation Committee has general authority to apply downward discretion to bonus, performance award, shareholder value award, and relative value award payouts for individual or all executive officers.
2. Annual Cash Bonus (Bonus Plan)
2. Annual Cash Bonus (Bonus Plan) 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 2023. The Talent and Compensation Committee sets Bonus Plan performance goals and individual bonus targets at the beginning of each year. The bonus is based on three areas of company performance measured relative to internal targets: revenue, EPS, and pipeline progress. The annual cash bonus payout is calculated as follows:
2. Annual Cash Bonus (Bonus Plan)
| base salary earnings | | individual bonus target | | bonus multiple |
2. Annual Cash Bonus (Bonus Plan)
Actual payouts can range from 0 to 200 percent of an individual’s bonus target. The Talent and Compensation Committee references the annual operating plan and pipeline objectives to establish performance targets and to assess the relative weighting for each objective. In 2023, the performance measures and weightings remained unchanged from the prior year:
2. Annual Cash Bonus (Bonus Plan)
| Lilly 2023 Goals | Weighting | | Revenue performance | 25% | | EPS performance | 50% | | Pipeline progress | 25% |
2. Annual Cash Bonus (Bonus Plan)
Based on this weighting, the company bonus multiple is calculated as follows:
2. Annual Cash Bonus (Bonus Plan)
| 25% x revenue multiple | | 50% x EPS multiple | | 25% x pipeline multiple | | bonus multiple |
3. Equity Incentives
3. Equity Incentives The company grants three 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, shareholder value awards that are intended to align earned compensation with long-term growth in shareholder value, and relative value awards which encourage TSR outperformance compared to our peer group. These awards, when considered together, align with shareholder interests by incenting long-term operational excellence, shareholder return, and peer company outperformance without encouraging excessive risk-taking behaviors.
Relative Value Awards
Relative Value Awards Relative value awards are earned based on Lilly’s TSR performance relative to our peer group. The minimum performance to achieve target is a TSR that is equal to the median TSR performance for the peer group. Relative 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 24 or more percentage points below the median TSR performance for the peer group over the same time period. Possible payouts range from 0 to 200 percent of the target number of shares.
Annual Cash Bonus Targets
Annual Cash Bonus Targets Based on a review of internal relativity, peer group market data, and individual performance, the Talent and Compensation Committee retained the same percent-of-salary bonus targets as in 2022 for Mr. Ricks, Ms. Ashkenazi, Dr. Skovronsky, Ms. Hakim, and Mr. Van Naarden. The 2022 and 2023 Bonus targets were:
Annual Cash Bonus Targets
| Name | 2022 Bonus Target | 2023 Bonus Target | | Mr. Ricks | 150% | 150% | | Ms. Ashkenazi | 100% | 100% | | Dr. Skovronsky | 100% | 100% | | Ms. Hakim | 100% | 100% | | Mr. Van Naarden | 100% | 100% |
Equity Incentives - Target Grant Values
Equity Incentives - Target Grant Values For 2023 equity grants, the Talent and Compensation Committee set the total target values for named executive officers based on internal relativity, peer group market data and individual performance. Named executive officers have 35 percent of their equity target allocated to shareholder value awards and relative value awards, respectively, and 30 percent to performance awards. Total target values for the 2022 and 2023 equity grants to the named executive officers were as follows:
Equity Incentives - Target Grant Values
| Name | 2022 Annual Equity Grant | 2023 Annual Equity Grant | | Mr. Ricks | $16,250,000 | $17,875,000 | | Ms. Ashkenazi | $3,000,000 | $3,500,000 | | Dr. Skovronsky | $5,500,000 | $7,100,000 | | Ms. Hakim | $3,000,000 | $3,750,000 | | Mr. Van Naarden | $1,850,000 | $2,300,000 |
Performance Goals for Incentive Programs
Performance Goals for Incentive Programs
Annual Cash Bonus Goals
Annual Cash Bonus Goals The Talent and Compensation Committee established the company performance targets using the company’s 2023 annual operating plan, which was approved by the board in 2022. These targets are described below under “Compensation Results.”
Relative Value Award
Relative Value Award The relative value award is based on the three-year Lilly TSR performance compared to our peer group. To determine payout, the TSR performance is calculated for Lilly and its peers. This calculation compares the average closing price of each company’s stock for all trading days in November and December 2022 to the average closing price of each company’s stock for all trading days in November and December 2025, assuming reinvestment of dividends, to obtain the TSR for each company. The median TSR for the peer companies is then subtracted from Lilly’s TSR to determine what payout has been earned. For example, if Lilly’s TSR was 55 percent over the three-year performance period and the median peer company performance was 40 percent, Lilly would have outperformed by 15 percentage points (55 percent - 40 percent). This outperformance would have resulted in a 150 percent payout based on the payout graphic below.
Bonus Plan
Bonus Plan The company utilized revenue, EPS, and pipeline progress to incentivize the achievement of 2023 company objectives. Each measure contributes to the final payout multiple on a weighted basis: revenue (25 percent), EPS (50 percent), and pipeline progress (25 percent). Each performance measure is assessed a payout multiple of 0 to 200 percent. The Science and Technology Committee’s assessment of the company’s product pipeline achievements is detailed below:
Bonus Plan
| Activity | Objective | Achievement | | Approvals | 2 new drug first approvals 9 other approvals | 3 new drug first approvals 17 other approvals | | Potential new drug Phase 3 starts | 4 | 4 | | Potential new drug Phase 1 starts | 14-16 | 15 | | Potential new indication or line extension Phase 3 starts | 5 | 3 | | Plan Boldly | Meet industry benchmark for speed of development | Exceeded industry benchmark for speed of development | | Deliver to Launch | Meet planned project timelines | Met project timelines | | Qualitative Assessment | Assessment of the chief scientific and medical officer’s evaluation of performance against strategic objectives | | | Game Changer Event1 | Assessment by the Science and Technology Committee of the board regarding significant scientific events | |
Bonus Plan
1 A Game Changer Event is a significant scientific advancement that the Science and Technology Committee deems could capture significant value for patients and for the company. The Science and Technology Committee may also recommend that the Talent and Compensation Committee use downward discretion on the pipeline metric result if clinical development for a potential major asset is unsuccessful. The Science and Technology Committee did not recommend that the Talent and Compensation Committee exercise this discretion related to the 2023 pipeline multiple. Based on the recommendation of the Science and Technology Committee, the Talent and Compensation Committee approved a pipeline multiple of 1.86. The company’s strong financial performance and pipeline progress compared to targets resulted in an above target bonus multiple as illustrated below: For additional information on financial results, see Appendix A, “Summary of Adjustments Related to the Annual Cash Bonus and Performance Award.”
Bonus Payments
Bonus Payments The 2023 bonuses paid to the applicable named executive officers under the Bonus Plan were as follows:
Bonus Payments
| Name | 2023 Bonus ($) | | Mr. Ricks | $4,401,433 | | Ms. Ashkenazi | $1,865,692 | | Dr. Skovronsky | $2,408,692 | | Ms. Hakim | $1,775,192 | | Mr. Van Naarden | $1,503,692 |
2022-2024 Performance Awards
2022-2024 Performance Awards The target cumulative EPS for the 2022-2024 performance award was originally set in the first quarter of 2022, reflecting expected peer group EPS growth of 6.3 percent each year and a total cumulative target EPS of $17.89 over the two-year performance period. In May 2022, following the change to its presentation of non-GAAP measures, the Talent and Compensation Committee updated the award to align with the new SEC guidance to exclude adjustments for acquired IPR&D and development milestone charges from its non-GAAP results. The updated award retained the Talent and Compensation Committee’s decision to establish a two-year EPS growth target of 6.3 percent per year, but the growth was applied to an adjusted 2021 non-GAAP EPS of $8.25 that excluded acquired IPR&D and development milestone charges. Using this methodology, the updated cumulative EPS target became $18.09 for the two-year performance period of 2022-2023. The company’s actual adjusted non-GAAP EPS over the performance period was $19.26 representing a growth rate of 10.8 percent and a final payout percentage of 128 percent. For each named executive officer, shares earned for the 2022-2023 performance period are subject to an additional 13-month service-vesting period and are shown in the table below as restricted stock units.
2022-2024 Performance Awards
| Name | Target Shares | RSUs | | Mr. Ricks | 20,751 | 26,561 | | Ms. Ashkenazi | 3,831 | 4,904 | | Dr. Skovronsky | 7,023 | 8,989 | | Ms. Hakim | 3,831 | 4,904 | | Mr. Van Naarden | 2,362 | 3,023 |
2021-2023 Shareholder Value Award
| 2021-2023 Shareholder Value Award Payout | | | | | | | | | | | | | Target | | Final Result: Avg. Stock Price: $587.42 | | | % of Target | 0% | 50% | 75% | 100% | 125% | 150% | 175% | | Stock Price | <$140.70 | $140.70 - $160.36 | $160.37 - $180.02 | $180.03 - $199.69 | $199.70 - $219.36 | $219.37 - $239.03 | >$239.03 |
2021-2023 Relative Value Award
2021-2023 Relative Value Award The relative value award is based on the three-year Lilly TSR performance compared to our peer group. To determine relative performance, the calculation compares the average closing price adjusted for dividend reinvestment of each company’s stock for all trading days in November and December 2020 to the average closing price adjusted for dividend reinvestment of each company’s stock for all trading days in November and December 2023 to obtain the TSR for each company. The median TSR for the peer companies is then subtracted from Lilly’s TSR to determine what payout has been earned. Lilly’s TSR over the performance period was 301.4 percent. The median TSR for the peer companies was 17.2 percent thereby making Lilly’s peer outperformance 284.2 percentage points (301.4 percent minus 17.2 percent). This level of outperformance yields a 175 percent payout as depicted in the chart below. The number of shares paid to each named executive officer for the 2021-2023 relative value award performance period were as follows:
Severance and Other Post-Termination Benefits
Severance and Other Post-Termination 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 Talent and Compensation Committee. In addition, if the company chooses to enforce restrictive covenant agreements it has entered into with certain executive officers, such executive officers would be entitled to post-termination payments (absent a change in control), which payments are described and quantified in “Payments upon Termination or Change in Control” for the applicable named executive officers. 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.
Highlights of Our Change-in-Control Severance Plans
Highlights of Our Change-in-Control Severance Plans •all regular employees are covered •double trigger 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 plans’ 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 plans. See “Compensation—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, dental, life insurance and long-term disability 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 any change-in-control-related benefit 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.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | | Bonus ($) | | Stock Awards ($) 1 | | Non-Equity Incentive Plan Compensation ($) 2 | Change in Pension Value ($) 3 | All Other Compensation ($) 4 | Total Compensation ($) | | David A. Ricks | 2023 | $1,621,154 | | $0 | | $18,840,250 | | $4,401,433 | $1,439,822 | $263,073 | $26,565,732 | | Chair, President, and Chief Executive Officer | 2022 | $1,500,000 | | $0 | | $16,981,250 | | $2,700,000 | $0 | $216,885 | $21,398,135 | | | 2021 | $1,500,000 | | $0 | | $14,966,000 | | $2,475,000 | $2,442,235 | $126,750 | $21,509,985 | | Anat Ashkenazi | 2023 | $1,030,769 | | $0 | | $3,689,000 | | $1,865,692 | $951,950 | $61,846 | $7,599,257 | | Executive Vice President and Chief Financial Officer | 2022 | $940,385 | | $0 | | $3,135,000 | | $1,128,462 | $0 | $56,423 | $5,260,270 | | | 2021 | $850,432 | | $0 | | $2,453,000 | | $906,894 | $395,335 | $51,026 | $4,656,687 | | Daniel M. Skovronsky, M.D., Ph.D. | 2023 | $1,330,769 | | $0 | | $7,483,400 | | $2,408,692 | $551,222 | $79,846 | $11,853,929 | | Executive Vice President, Chief Scientific Officer and President, Lilly Research Laboratories and Lilly Immunology | 2022 | $1,201,923 | | $0 | | $5,747,500 | | $1,442,308 | $0 | $72,115 | $8,463,846 | | | 2021 | $1,000,000 | | $0 | | $5,024,300 | | $1,100,000 | $342,792 | $60,000 | $7,527,092 | | Anat Hakim | 2023 | $980,769 | | $0 | | $3,952,500 | | $1,775,192 | $239,430 | $58,846 | $7,006,737 | | Executive Vice President, General Counsel and Secretary | 2022 | $875,962 | | $0 | | $3,135,000 | | $1,051,154 | $146,792 | $52,558 | $5,261,466 | | | 2021 | $775,000 | | $0 | | $2,244,900 | | $852,500 | $98,953 | $46,500 | $4,017,853 | | Jake Van Naarden | 2023 | $830,769 | | $0 | | $2,424,200 | | $1,503,692 | $78,013 | $49,846 | $4,886,520 | | Executive Vice President and President, Loxo@Lilly | 2022 | $735,577 | | $0 | | $1,933,250 | | $882,692 | $26,178 | $44,135 | $3,621,832 | | | 2021 | $745,649 | 5 | $218,715 | 6 | $4,099,500 | 7 | $1,029,507 | $16,909 | $12,462 | $6,122,742 |
Summary Compensation Table
1 This column shows the grant date fair value of performance awards, shareholder value awards and relative value awards for all named executive officers 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, 2023, 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. The table below shows the target and maximum payouts (valuing the number of shares that would vest at each payout level using the grant date fair value) for the 2023-2025 performance award, the 2023-2025 shareholder value award, and the 2023-2025 relative value award, each of which are included in the Summary Compensation Table above. All awards below pay out in February 2026 and have a minimum payout of $0.
Summary Compensation Table
| | 2023-2025 PA | | 2023-2025 SVA | | 2023-2025 RVA | | | Name | Target | Maximum | Target | Maximum | Target | Maximum | | Mr. Ricks | $5,362,500 | $10,725,000 | $6,256,250 | $12,512,500 | $6,256,250 | $12,512,500 | | Ms. Ashkenazi | $1,050,000 | $2,100,000 | $1,225,000 | $2,450,000 | $1,225,000 | $2,450,000 | | Dr. Skovronsky | $2,130,000 | $4,260,000 | $2,485,000 | $4,970,000 | $2,485,000 | $4,970,000 | | Ms. Hakim | $1,125,000 | $2,250,000 | $1,312,500 | $2,625,000 | $1,312,500 | $2,625,000 | | Mr. Van Naarden | $690,000 | $1,380,000 | $805,000 | $1,610,000 | $805,000 | $1,610,000 |
Summary Compensation Table
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 an actuary. The changes in pension values in 2023 were driven by changes in actuarial assumptions offset by pay changes and an additional year of credited service. The design of the pension benefit plan did not change. See the Pension Benefits in 2023 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. For Mr. Ricks, the amount in this column reflects $97,269 of company matching contributions and Nonqualified Savings Plan contributions and $65,804 of aggregate incremental cost for his personal use of the corporate aircraft. The aggregate incremental costs for personal use of our aircraft are calculated based on our variable operating costs, which include crew travel expenses, on-board catering, landing fees, trip-related hangar/parking costs, fuel, trip-related maintenance, and other smaller variable costs. Because the vast majority of the use of the corporate aircraft is for business purposes, fixed costs such as aircraft purchase costs, maintenance not related to personal trips, and flight crew salaries are not included. 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. Additionally, the value of company stock owned by Mr. Ricks exceeded the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (“HSR”) size-of-transaction threshold limits set forth in the HSR regulations. Accordingly, Mr. Ricks was required to make a filing under HSR in 2023. Due to his position as Chief Executive Officer and Chair of the company, he is not able to rely on the passive investor exemption contained in the HSR regulations. Without this filing, Mr. Ricks would not be able to participate in our long-term incentive program and therefore, the Talent and Compensation Committee determined that it was appropriate for the company to reimburse Mr. Ricks for such expenses. The HSR filing fee for Mr. Ricks in 2023 was $100,000, which was processed as imputed income so taxes could be withheld. The company did not gross up the payment. 5 For Mr. Van Naarden, 2021 salary reflects $668,399 in salary payments and $77,250 of unused vacation pay from Loxo Oncology, Inc. 6 For Mr. Van Naarden, 2021 bonus represents a one-time cash payment of $218,715 in lieu of compensation and benefits Mr. Van Naarden was no longer eligible to receive following his transition to his new role, including compensation for the difference between the bonus he would have earned under the Loxo Bonus Plan and the Lilly Bonus Plan, and changes in his expected out-of-pocket costs for healthcare expenses. 7 Mr. Van Naarden became an executive officer effective September 5, 2021; as such, he was not an executive officer at grant date for 2021 performance awards.
Grants of Plan-Based Awards During 2023
Grants of Plan-Based Awards During 2023 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, relative value awards, and restricted stock units, among others. To receive a payout under a performance award, a shareholder value award and a relative value award issued annually to executive officers, the participant must remain employed with the company through the end of the relevant performance period, retire after December 31 of the year in which the award was granted or be subject to termination events outside of the control of the employee (death, plant closing or reduction in workforce). Annual awards granted to executive officers are also generally subject to non-competition and non-solicitation covenants that apply during the one-year period following termination of employment. Subject to the terms of the applicable award agreement, in the event of a restrictive covenant breach, the award will be immediately rescinded and the holder will forfeit any rights they have with respect to such award. No dividends accrue on performance awards, shareholder value awards, or relative value awards during the performance period. During the performance award 13-month service-vesting period and restricted stock unit award restriction period, non-preferential dividends accrue and are paid upon vesting.
Grants of Plan-Based Awards During 2023
| Name | Award | | Grant Date2 | Compensation Committee Action Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards 1 | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | Grant Date Fair Value of Stock and Option Awards 6 | | | | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (# shares) | Target (# shares) | Maximum (# shares) | | | Mr. Ricks | | | __ | __ | $607,933 | $2,431,731 | $4,863,462 | | | | | | | 2023-2025 PA | 3 | 2/10/2023 | 12/12/2022 | | | | 7,983 | 15,966 | 31,932 | $6,327,750 | | | 2023-2025 SVA | 4 | 2/10/2023 | 12/12/2022 | | | | 9,756 | 19,512 | 39,024 | $6,256,250 | | | 2023-2025 RVA | 5 | 2/10/2023 | 12/12/2022 | | | | 7,861 | 15,721 | 31,442 | $6,256,250 | | Ms. Ashkenazi | | | __ | __ | $257,692 | $1,030,769 | $2,061,538 | | | | | | | 2023-2025 PA | 3 | 2/10/2023 | 12/12/2022 | | | | 1,563 | 3,126 | 6,252 | $1,239,000 | | | 2023-2025 SVA | 4 | 2/10/2023 | 12/12/2022 | | | | 1,910 | 3,820 | 7,640 | $1,225,000 | | | 2023-2025 RVA | 5 | 2/10/2023 | 12/12/2022 | | | | 1,539 | 3,078 | 6,157 | $1,225,000 | | Dr. Skovronsky | | | __ | __ | $332,692 | $1,330,769 | $2,661,538 | | | | | | | 2023-2025 PA | 3 | 2/10/2023 | 12/12/2022 | | | | 3,171 | 6,342 | 12,684 | $2,513,400 | | | 2023-2025 SVA | 4 | 2/10/2023 | 12/12/2022 | | | | 3,875 | 7,750 | 15,500 | $2,485,000 | | | 2023-2025 RVA | 5 | 2/10/2023 | 12/12/2022 | | | | 3,122 | 6,245 | 12,489 | $2,485,000 | | Ms. Hakim | | | __ | __ | $245,192 | $980,769 | $1,961,538 | | | | | | | 2023-2025 PA | 3 | 2/10/2023 | 12/12/2022 | | | | 1,675 | 3,350 | 6,700 | $1,327,500 | | | 2023-2025 SVA | 4 | 2/10/2023 | 12/12/2022 | | | | 2,047 | 4,093 | 8,186 | $1,312,500 | | | 2023-2025 RVA | 5 | 2/10/2023 | 12/12/2022 | | | | 1,649 | 3,298 | 6,596 | $1,312,500 | | Mr. Van Naarden | | | __ | __ | $207,692 | $830,769 | $1,661,538 | | | | | | | 2023-2025 PA | 3 | 2/10/2023 | 12/12/2022 | | | | 1,027 | 2,054 | 4,108 | $814,200 | | | 2023-2025 SVA | 4 | 2/10/2023 | 12/12/2022 | | | | 1,256 | 2,511 | 5,022 | $805,000 | | | 2023-2025 RVA | 5 | 2/10/2023 | 12/12/2022 | | | | 1,011 | 2,023 | 4,046 | $805,000 |
Grants of Plan-Based Awards During 2023
1 These columns show the threshold, target and maximum payouts for performance under the Bonus Plan. The Bonus Plan payouts range from 0 to 200 percent of target. The Bonus Plan payout for 2023 performance was 181 percent of target. Actual payouts are shown in the Summary Compensation Table in the column titled “Non-Equity Incentive Plan Compensation.” 2 To assure grant timing is not manipulated for employee gain, the annual grant date is established in advance by the Talent and Compensation Committee. 3 This row shows the possible payouts for the 2023-2025 performance awards ranging from 0 to 200 percent of target. This performance award will pay out in February 2026 based on achievement of the EPS growth targets. 4 This row shows the range of payouts for the 2023-2025 shareholder value awards. This shareholder value award will pay out in February 2026, with payouts ranging from 0 to 200 percent of target based on share price performance. 5 This row shows the range of payouts for the 2023-2025 relative value awards. This relative value award will pay out in February 2026, with payouts ranging from 0 to 200 percent of target based on relative TSR performance. 6 The amounts in this column reflect the grant date fair value of the performance awards, shareholder value awards, and relative value awards computed in accordance with the requirements of ASC Topic 718 and were based upon the probable outcome of performance conditions.
Outstanding Equity Awards on December 31, 2023
Outstanding Equity Awards on December 31, 2023 The 2023 closing stock price used to calculate the values in the table below was $582.92.
Outstanding Equity Awards on December 31, 2023
| | | Stock Awards | | | | | | | Name | Award | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) | | Mr. Ricks | 2023-2025 SVA | | | | 34,146 | 1 | $19,904,386 | | | 2022-2024 SVA | | | | 56,651 | 2 | $33,023,001 | | | 2023-2025 RVA | | | | 27,512 | 3 | $16,037,295 | | | 2022-2024 RVA | | | | 43,274 | 4 | $25,225,280 | | | 2023-2025 PA | | | | 27,941 | 5 | $16,287,368 | | | 2022-2024 PA | 26,561 | 6 | $15,482,938 | | | | | | 2021-2023 PA | 29,611 | 7 | $17,260,844 | | | | | Ms. Ashkenazi | 2023-2025 SVA | | | | 6,685 | 1 | $3,896,820 | | | 2022-2024 SVA | | | | 10,458 | 2 | $6,096,177 | | | 2023-2025 RVA | | | | 5,387 | 3 | $3,140,190 | | | 2022-2024 RVA | | | | 7,989 | 4 | $4,656,948 | | | 2023-2025 PA | | | | 5,471 | 5 | $3,189,155 | | | 2022-2024 PA | 4,904 | 6 | $2,858,640 | | | | | | RSU | 11,499 | 8 | $6,702,997 | | | | | Dr. Skovronsky | 2023-2025 SVA | | | | 13,563 | 1 | $7,906,144 | | | 2022-2024 SVA | | | | 19,175 | 2 | $11,177,491 | | | 2023-2025 RVA | | | | 10,929 | 3 | $6,370,733 | | | 2022-2024 RVA | | | | 14,648 | 4 | $8,538,612 | | | 2023-2025 PA | | | | 11,099 | 5 | $6,469,829 | | | 2022-2024 PA | 8,989 | 6 | $5,239,868 | | | | | | 2021-2023 PA | 9,941 | 7 | $5,794,808 | | | | | Ms. Hakim | 2023-2025 SVA | | | | 7,163 | 1 | $4,175,456 | | | 2022-2024 SVA | | | | 10,458 | 2 | $6,096,177 | | | 2023-2025 RVA | | | | 5,772 | 3 | $3,364,614 | | | 2022-2024 RVA | | | | 7,989 | 4 | $4,656,948 | | | 2023-2025 PA | | | | 5,863 | 5 | $3,417,660 | | | 2022-2024 PA | 4,904 | 6 | $2,858,640 | | | | | | 2021-2023 PA | 4,442 | 7 | $2,589,331 | | | | | Mr. Van Naarden | 2023-2025 SVA | | | | 4,394 | 1 | $2,561,350 | | | 2022-2024 SVA | | | | 6,449 | 2 | $3,759,251 | | | 2023-2025 RVA | | | | 3,540 | 3 | $2,063,537 | | | 2022-2024 RVA | | | | 4,926 | 4 | $2,871,464 | | | 2023-2025 PA | | | | 3,595 | 5 | $2,095,597 | | | 2022-2024 PA | 3,023 | 6 | $1,762,167 | | | | | | RSU | 3,618 | 9 | $2,109,005 | | | |
Outstanding Equity Awards on December 31, 2023
1 Shareholder value awards granted for the 2023-2025 performance period will vest on December 31, 2025. The number of shares reported reflects the maximum payout, which will be made if the average closing stock price in November and December 2025 exceeds $584.73. Actual payouts may vary from 0 to 200 percent of target. Net shares from any payout must be held by executive officers for a minimum of one year. Had the performance period ended December 31, 2023, the payout would have been at 200 percent of target. 2 Shareholder value awards granted for the 2022-2024 performance period will vest on December 31, 2024. The number of shares reported reflects the maximum payout, which will be made if the average closing stock price in November and December 2024 exceeds $416.32. Actual payouts may vary from 0 to 175 percent of target. Net shares from any payout must be held by executive officers for a minimum of one year. Had the performance period ended December 31, 2023, the payout would have been 175 percent of target. 3 Relative value awards granted for the 2023-2025 performance period will vest on December 31, 2025. The number of shares reported reflects the maximum payout, which will be paid if Lilly’s absolute TSR exceeds the median peer absolute TSR by 30 percentage points or more. Net shares from any payout must be held by executive officers for a minimum of one year. Had the performance period ended December 31, 2023, the payout would have been 200 percent of target. 4 Relative value awards granted for the 2022-2024 performance period will vest on December 31, 2024. The number of shares reported reflects the maximum payout, which will be paid if Lilly’s absolute TSR exceeds the median peer absolute TSR by 30 percentage points or more. Net shares from any payout must be held by executive officers for a minimum of one year. Had the performance period ended December 31, 2023, the payout would have been 175 percent of target. 5 This number represents the maximum number of performance award shares that could pay out for the 2023-2025 performance awards, provided performance goals are met. Once the combined cumulative adjusted non-GAAP EPS result and associated payout level are determined at the end of the 2023-2024 performance period, the associated number of shares will be granted as restricted stock units, vesting in February 2026. Actual payouts may vary from 0 to 200 percent of target. The number of shares recorded in the table reflects the payout if the combined cumulative adjusted non-GAAP EPS for 2023 and 2024 is at least $21.57 under the 2023-2025 performance award grid. 6 The performance period ended December 31, 2023, for the 2022-2024 performance award, resulting in the issuance of restricted stock units for 128 percent of target shares. These restricted stock units will vest in February 2025. 7 The performance period ended December 31, 2022 for the 2021-2023 performance award, resulting in the issuance of restricted stock units that vested on February 1, 2024. 8 These grants were made outside of the normal annual cycle in 2020, and 4,600 units will vest on November 1, 2024, and 6,899 units will vest on November 1, 2026. 9 This grant was made outside the normal annual cycle in 2021 and 3,618 will vest on February 1, 2024.
Option Exercises and Stock Vested in 2023
Option Exercises and Stock Vested in 2023
Option Exercises and Stock Vested in 2023
| | Stock Awards | | | | Name | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($)1 | | Mr. Ricks | 47,786 | 2 | $16,445,552 | | | 39,447 | 3 | $29,082,695 | | | 29,908 | 4 | $22,049,972 | | Ms. Ashkenazi | 4,114 | 3 | $3,033,088 | | | 3,357 | 4 | $2,474,982 | | Dr. Skovronsky | 15,675 | 2 | $5,394,551 | | | 13,242 | 3 | $9,762,797 | | | 10,042 | 4 | $7,403,565 | | Ms. Hakim | 7,646 | 2 | $5,637,090 | | | 5,917 | 3 | $4,362,367 | | | 4,487 | 4 | $3,308,086 | | Mr. Van Naarden | 2,431 | 3 | $1,792,279 | | | 1,985 | 4 | $1,463,461 | | | 2,785 | 5 | $933,003 |
Option Exercises and Stock Vested in 2023
1 Amounts reflect the market value of Lilly stock on the day value is realized. 2 Restricted stock units resulting from the 2020-2022 performance award that vested in February 2023. 3 Payout of the 2021-2023 shareholder value award at 175 percent of target. 4 Payout of the 2021-2023 relative value award at 175 percent of target. 5 Restricted stock units resulting from a one-time award following Lilly’s acquisition of Loxo Oncology, Inc. that vested in February 2023.
Pension Benefits in 2023
Pension Benefits in 2023
Pension Benefits in 2023
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) 1 | Payments During Last Fiscal Year ($) | | Mr. Ricks | Retirement Plan (pre-2010) | 14 | $706,580 | | | | Retirement Plan (post-2009) | 14 | $427,692 | | | | Nonqualified Plan (pre-2010) | 14 | $10,088,613 | | | | Nonqualified Plan (post-2009) | 14 | $5,466,151 | | | | total | | $16,689,036 | $0 | | Ms. Ashkenazi | Retirement Plan (pre-2010) | 9 | $363,498 | | | | Retirement Plan (post-2009) | 14 | $328,505 | | | | Nonqualified Plan (pre-2010) | 9 | $1,333,867 | | | | Nonqualified Plan (post-2009) | 14 | $1,208,340 | | | | total | | $3,234,210 | $0 | | Dr. Skovronsky | Retirement Plan (post-2009) | 11 | $256,890 | | | | Nonqualified Plan (post-2009) | 11 | $1,769,771 | | | | total | | $2,026,661 | $0 | | Ms. Hakim | Retirement Plan (post-2009) | 4 | $116,250 | | | | Nonqualified Plan (post-2009) | 4 | $456,773 | | | | total | | $573,023 | $0 | | Mr. Van Naarden | Retirement Plan (post-2009) | 2 | $30,638 | | | | Nonqualified Plan (post-2009) | 2 | $90,462 | | | | total | | $121,100 | $0 |
Pension Benefits in 2023
1 The following standard actuarial assumptions were used to calculate the present value of each individual’s accumulated pension benefit:
Pension Benefits in 2023
| Discount rate: | 5.10 percent for the qualified plan and 5.04 percent for nonqualified plan | | Mortality (post-retirement decrement only): | Private 2012 white collar table with generational projection using Scale MP-2021 | | Pre-2010 joint and survivor benefit (% of pension): | 50 percent until age 62; 25 percent thereafter | | Post-2009 benefit payment form: | Life annuity |
Pension Benefits in 2023
The Retirement Plan benefits shown in the table are net present values. The benefits are not payable as a lump sum; they are generally paid as a monthly annuity for the life of the retiree and, if elected, any qualifying survivor. The annual benefit under the Retirement Plan is calculated using years of service and the average of the annual earnings (salary plus bonus) for the highest five out of the last ten calendar years of service (final average earnings). Post-2009 Plan Information: Following amendment of our Retirement Plan formulas, employees first hired on or after February 1, 2008, have accrued retirement benefits only under the new plan formula. Employees hired before that date have accrued benefits under both the old and new plan formulas. All eligible employees, including those hired on or after February 1, 2008, can currently retire at age 65 with at least five years of service and receive an unreduced benefit. The annual benefit under the new plan formula is equal to 1.2 percent of final average earnings multiplied by years of service. Early retirement benefits under this plan formula are reduced six percent for each year under age 65. Transition benefits were afforded to employees with 50 points (age plus service) or more as of December 31, 2009. These benefits were intended to ease the transition to the new retirement formula for those employees who were closer to retirement or had been with the company longer at the time the plan was changed. For the transition group, early retirement benefits are reduced three percent for each year from age 65 to age 60 and six percent for each year under age 60. Mr. Ricks and Ms. Ashkenazi are in this transition group. Pre-2010 Plan Information: Employees hired prior to February 1, 2008 accrued benefits under both plan formulas. For these employees, benefits that accrued before January 1, 2010 were calculated under the old plan formula. The amount of the benefit is calculated using actual years of service through December 31, 2009, while total years of service are used to determine eligibility and early retirement reductions. The benefit amount is increased (but not decreased) proportionately based on final average earnings at termination compared to final average earnings on December 31, 2009. Full retirement benefits are earned by employees with 90 or more points (the sum of his or her age plus years of service). Employees electing early retirement receive reduced benefits as described below: •The benefit for employees with between 80 and 90 points is reduced by three percent for each year before the earlier of 90 points or age 62. •The benefit for employees who have fewer than 80 points, but who reached age 55 and have at least ten years of service, is reduced as described above and is further reduced by six percent for each year before the earlier of 80 points or age 65.
Nonqualified Deferred Compensation in 2023
Nonqualified Deferred Compensation in 2023
Nonqualified Deferred Compensation in 2023
| Name | Plan | Executive Contributions in Last Fiscal Year ($)1 | Registrant Contributions in Last Fiscal Year ($)2 | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions in Last Fiscal Year ($) | Aggregate Balance at Last Fiscal Year End ($)3 | | Mr. Ricks | Nonqualified Savings Plan | $77,469 | $77,469 | $2,301,167 | $0 | $6,617,143 | | | Deferred Compensation Plan | $0 | $0 | $0 | $0 | $0 | | | total | $77,469 | $77,469 | $2,301,167 | $0 | $6,617,143 | | Ms. Ashkenazi | Nonqualified Savings Plan | $42,046 | $42,046 | $57,435 | $0 | $405,960 | | | Deferred Compensation Plan | $0 | $0 | $45,219 | $0 | $931,858 | | | total | $42,046 | $42,046 | $102,654 | $0 | $1,337,818 | | Dr. Skovronsky | Nonqualified Savings Plan | $60,046 | $60,046 | $232,120 | $0 | $1,201,700 | | | Deferred Compensation Plan | $0 | $0 | $0 | $0 | $0 | | | total | $60,046 | $60,046 | $232,120 | $0 | $1,201,700 | | Ms. Hakim | Nonqualified Savings Plan | $39,046 | $39,046 | $51,618 | $0 | $303,853 | | | Deferred Compensation Plan | $0 | $0 | $0 | $0 | $0 | | | total | $39,046 | $39,046 | $51,618 | $0 | $303,853 | | Mr. Van Naarden | Nonqualified Savings Plan | $30,046 | $30,046 | $20,058 | $0 | $153,051 | | | Deferred Compensation Plan | $0 | $0 | $0 | $0 | $0 | | | total | $30,046 | $30,046 | $20,058 | $0 | $153,051 |
Nonqualified Deferred Compensation in 2023
1 The amounts in this column are also included in the Summary Compensation Table (SCT) in the “Salary” column (with respect to the Nonqualified Savings Plan) or the “Non-Equity Incentive Plan Compensation” column (with respect to the Deferred Compensation Plan). 2 The amounts in this column are also included in the SCT in the “All Other Compensation” column as a portion of the Nonqualified Savings Plan company match. 3 Of the totals in this column, the following amounts have previously been reported in the SCT for this year and for previous years:
Nonqualified Deferred Compensation in 2023
| Name | 2023 ($) | Previous Years ($) | Total ($) | | Mr. Ricks | $154,939 | $836,015 | $990,954 | | Ms. Ashkenazi | $84,092 | $1,014,955 | $1,099,047 | | Dr. Skovronsky | $120,093 | $417,608 | $537,701 | | Ms. Hakim | $78,093 | $68,516 | $146,609 | | Mr. Van Naarden | $60,092 | $76,593 | $136,685 |
Nonqualified Deferred Compensation in 2023
The table above reports information about two company programs: the Nonqualified Savings Plan and the Deferred Compensation Plan. The Nonqualified Savings Plan is designed to allow each employee to contribute up to 6 percent of his or her base salary and receive a company match, beyond the contribution limits prescribed by the IRS with regards to 401(k) plans. This plan is administered in the same manner as the 401(k) Plan, with the same participation and investment elections. Executive officers and other U.S. executives may also defer receipt of all or part of their cash compensation under the Deferred Compensation Plan. Amounts deferred by executives under this plan are credited with interest at 120 percent of the applicable federal long-term rate as established the preceding December by the U.S. Treasury Department under Section 1274(d) of the Internal Revenue Code with monthly compounding, which was 5.1 percent for 2023 and is 5.89 percent for 2024. Participants may elect to receive the funds in a lump sum or in up to 10 annual installments following termination of employment but may not make withdrawals while employed by the company, except in the event of hardship as approved by the Talent and Compensation Committee. All deferral elections and associated distribution schedules are irrevocable. Both plans are unfunded and subject to forfeiture in the event of company bankruptcy.
Payments upon Termination or Change in Control (as of December 31, 2023)
Payments upon Termination or Change in Control (as of December 31, 2023) The following table describes the potential payments and benefits under the company’s compensation and benefit plans and arrangements to which the named executive officers would be eligible upon qualifying termination of employment. Except for certain terminations following a change in control of the company, as described below, there are no agreements, arrangements, or plans that entitle named executive officers to severance, perquisites, or other enhanced benefits upon termination of their employment. Any agreement to provide such payments or benefits to a terminating executive officer (other than following a change in control) would be at the discretion of the Talent and Compensation Committee.
Payments upon Termination or Change in Control (as of December 31, 2023)
| Name | | Cash Severance Payment 1 | Continuation of Medical / Welfare Benefits (present value) 2 | Acceleration and Continuation of Equity Awards as of 12/31/2023 | Total Termination Benefits | | Mr. Ricks | | | | | | | • | Retirement or Involuntary termination | $0 | $0 | $32,743,945 | $32,743,945 | | • | Involuntary or good-reason termination after change in control | $8,250,000 | $52,147 | $150,682,069 | $158,984,216 | | Ms. Ashkenazi | | | | | | | • | Retirement or Involuntary termination | $0 | $0 | $9,561,450 | $9,561,450 | | • | Involuntary or good-reason termination after change in control | $4,200,000 | $62,852 | $32,000,810 | $36,263,662 | | Dr. Skovronsky | | | | | | | • | Retirement or Involuntary termination | $0 | $0 | $11,034,932 | $11,034,932 | | • | Involuntary or good-reason termination after change in control | $5,400,000 | $52,335 | $54,460,286 | $59,912,621 | | Ms. Hakim | | | | | | | • | Retirement or Involuntary termination | $0 | $0 | $5,447,784 | $5,447,784 | | • | Involuntary or good-reason termination after change in control | $4,000,000 | $63,016 | $28,723,051 | $32,786,067 | | Mr. Van Naarden | | | | | | | • | Retirement or Involuntary termination | $0 | $0 | $3,871,382 | $3,871,382 | | • | Involuntary or good-reason termination after change in control | $3,400,000 | $62,540 | $18,182,650 | $21,645,190 |
Payments upon Termination or Change in Control (as of December 31, 2023)
1 See “Change-in-Control Severance Pay Plan—Cash Severance Payment” below. 2 See “Accrued Pay and Regular Retirement Benefits” and “Change-in-Control Severance Pay Plan—Continuation of Medical and Welfare Benefits” below. Accrued Pay and Regular Retirement Benefits: The amounts shown in the table above do not include certain payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. These include: •accrued salary and vacation pay; •regular pension benefits under the Retirement Plan and the Nonqualified Pension Plan. See “Retirement Benefits” above; •welfare benefits provided to eligible U.S. retirees, including retiree medical and dental insurance. The amounts shown in the table above as “Continuation of Medical/Welfare Benefits” are explained below; and •distributions of plan balances under the 401(k) Plan, the Nonqualified Savings Plan, and the Deferred Compensation Plan. See the narrative following the Nonqualified Deferred Compensation in 2023 table for information about these plans. Death and Disability: A termination of employment due to death or disability does not entitle named executive officers to any payments or benefits that are not available to U.S. employees generally. Termination for Cause: Executives terminated for cause receive no severance or enhanced benefits and forfeit any unvested equity grants. Equity Acceleration: Pursuant to the award agreements granted under the Amended and Restated 2022 Lilly Stock Plan, in the event an applicable transaction occurs prior to the end of the applicable performance period, the unvested equity awards would convert into restricted stock units of the new company, with the number of shares earned under the awards based on the accrued performance at the time of the transaction. The restricted stock units will continue to vest and 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 award. Change-in-Control Severance Pay Plan: As described in the CD&A under “Other Compensation Practices and Information—Severance Benefits,” the company maintains a change-in-control severance pay plan for nearly all employees, including the named executive officers. The change-in-control plan for executive officers defines a change in control specifically, but generally the terms include the occurrence of one of the following: (i) acquisition by any person of 20 percent or more of the company’s stock; (ii) replacement by the shareholders of one-half or more of the board of directors; (iii) consummation of a merger, share exchange, or consolidation of the company (other than a transaction that results in the Lilly shareholders prior to the transaction continuing to hold more than 60 percent of the voting stock of the combined entity); or (iv) complete liquidation of the company or sale or disposition of all or substantially all of its assets (other than a sale or disposition to any subsidiary of the company). The amounts shown in the table above for “involuntary or good-reason termination after change in control” are based on the following assumptions and plan provisions and are conditioned upon the executive’s execution and non-revocation of a general release of claims: •Covered terminations. The table assumes a termination of employment that is eligible for severance under the terms of the plan, based on the named executive officer’s compensation, benefits, age, and service credit on December 31, 2023. Eligible terminations include an involuntary termination for reasons other than “cause” or a voluntary termination by the executive for “good reason,” each as defined in the plan, within two years following the change in control. –A termination of an executive officer by the company is for “cause,” in general, if it is for any of the following reasons: (i) the employee’s willful refusal to perform, without legal cause, his or her material duties, resulting in demonstrable economic harm to the company or participating employers; (ii) any act of fraud, dishonesty, or gross misconduct resulting in significant economic harm or other significant harm to the company or participating employers or to the business reputation of the company or participating employers; or (iii) conviction by a court of competent jurisdiction of any crime (or the entering of a plea of guilty or nolo contendere to a charge of any crime) constituting a felony. –A termination by the executive officer is for “good reason,” in general, if it results from: (i) a material diminution in the nature or status of the executive’s position, title, reporting relationship, duties, responsibilities, or authority, or the assignment to him or her of additional responsibilities that materially increase his or her workload; (ii) any reduction in the executive’s then-current base salary; (iii) a material reduction in the executive’s opportunities to earn incentive bonuses below those in effect for the year prior to the change in control; (iv) a material reduction in the executive’s employee benefits from the benefit levels in effect immediately prior to the change in control; (v) the failure to grant to the executive stock options, stock units, performance shares, or similar incentive rights during each 12-month period following the change in control on the basis of a number of shares or units and all other material terms at least as favorable to the executive as those rights granted to him or her on an annualized average basis for the three-year period immediately prior to the change in control; (vi) relocation of the executive by more than 50 miles from his or her regularly assigned workplace in effect immediately prior to the change in control; or (vii) any failure by a successor entity to the company in connection with a change in control to assume the obligations of the company under the plan, or any attempted amendment, termination or repudiation of the plan by such successor entity. •Cash severance payment. The cash severance payment amounts, in general, equal two times the executive officer's annual base salary plus two times the executive officer’s bonus target for that year under the Bonus Plan, to be paid in a lump sum. •Continuation of medical and welfare benefits. This amount represents the present value of the change-in-control plan’s provision, following a covered termination, of 18 months of continued coverage equivalent to the company’s current active employee medical, dental, group life, company-provided death benefit, and long-term disability insurance. Similar actuarial assumptions to those used to calculate incremental pension benefits apply to the calculation for continuation of medical and welfare benefits, with the addition of actual COBRA rates based on current benefit elections. In addition, the executive will receive two years of additional age and service credit for eligibility purposes under the retiree medical plan. •Excise taxes. Upon a change in control, employees may be subject to certain excise taxes under Section 280G of the Internal Revenue Code. The company does not reimburse the affected employees for those excise taxes or any income taxes payable by the employee. To reduce the employee’s exposure to potential excise taxes, the employee’s change-in-control benefit will be decreased to maximize the after-tax benefit to the individual. •Payments upon Change in Control Alone. The change-in-control plan is a “double trigger” plan, meaning payments are made only if the employee suffers a covered termination of employment within two years following the change in control, or in the case of equity awards, if the successor entity does not assume, substitute, or otherwise replace the awards.
CEO Pay Ratio
CEO Pay Ratio Lilly’s compensation and benefits philosophy across the organization is to encourage and reward all employees who contribute to our success. We strive to ensure that the pay of every Lilly employee reflects the level of their job impact and responsibilities and is competitive within our peer group. Lilly’s ongoing commitment to pay equity is critical to our success in supporting a diverse workforce with opportunities for all employees to grow, develop, and contribute. Below is the 2023 annual total compensation of our CEO and our median employee and the ratio of the annual total compensation of our CEO to that of our median employee.
CEO Pay Ratio
| CEO Pay Ratio: | | | CEO Annual Total Compensation* | $26,565,732 | | Median Employee Annual Total Compensation | $157,937 | | CEO to Median Employee Pay Ratio | 168:1 | | *This annual total compensation is the SCT amount. | |
CEO Pay Ratio
Methodology: •Measurement Date: We identified the median employee using our employee population (excluding the CEO) on October 31, 2023. On this date, Lilly employed approximately 43,400 people, with approximately 19,800 members of our workforce located in the United States and approximately 23,600 members of our workforce located outside of the United States. •Identification of Median Employee: In a manner consistent with SEC rules, we identified the median employee by use of a “consistently applied compensation measure,” or CACM. Specifically, we identified the median employee by looking at annual base pay, bonus opportunity at target, and the grant date fair value for annual equity awards. We did not adjust the compensation paid to part-time employees to calculate what they would have been paid on a full-time basis. •De Minimis Exception: Lilly has employees in 66 countries. In identifying the median employee, we excluded 418 workers in the following 10 countries, which represent approximately one percent of our workforce: Bahrain, Costa Rica, Egypt, Greece, Kuwait, Pakistan, Panama, Qatar, Russia and United Arab Emirates. •Calculated CEO Pay Ratio: After applying our CACM and excluding the employees listed above, we identified the median employee. Once the median employee was identified, we calculated the median employee’s total annual compensation in accordance with the requirements of the SCT.
Pay versus Performance
Pay versus Performance The Talent and Compensation Committee approves and administers compensation programs that are designed to attract, retain, engage, and incentivize our workforce to deliver medicines that make life better for people around the world. Our program aligns executive pay with shareholder interests and links pay to performance through a blend of short-, mid- and long-term performance measures. In 2023, incentive pay made up 92 percent of our CEO’s target compensation and, on average, 83 percent of our other named executive officers’ target compensation. The high utilization of incentive compensation results in higher total realized pay when leadership exceeds the Talent and Compensation Committee-approved performance targets. Conversely, failure to achieve approved targets results in lower realized pay including the possibility that some awards pay zero at the end of their performance period.
Pay versus Performance
Pay versus Performance
Pay versus Performance
| | | | | | | Value of initial fixed $100 investment based on: | | | | | Year1 | Summary Compensation Table Total for PEO2 | Compensation Actually Paid to PEO3 | Average Summary Compensation Table Total for Non-PEO NEOs4 | | Average Compensation Actually Paid to Non-PEO NEOs3 | Total Shareholder Return5 | Peer Group Total Shareholder Return5 | Net Income ($ millions) | Company Selected Measure (CSM) –Adjusted Non-GAAP EPS6 | | 2023 | $26,565,732 | $120,865,280 | $7,836,611 | 7 | $27,249,897 | $470.13 | $132.57 | $5,240 | $10.42 | | 2022 | $21,398,135 | $64,088,705 | $5,769,810 | 8 | $13,893,269 | $292.18 | $133.61 | $6,245 | $8.84 | | 2021 | $21,509,985 | $75,705,116 | $4,730,690 | 9 | $4,563,545 | $217.66 | $121.90 | $5,582 | $8.25 | | 2020 | $23,708,629 | $51,253,831 | $6,787,934 | 10 | $10,732,708 | $131.06 | $102.07 | $6,194 | $6.89 |
Pay versus Performance
1 All calculations for the PEO Compensation Actually Paid (CAP) and for Average Non-PEO NEO CAP do not reflect the actual amount of compensation earned by or paid to our NEOs. The amounts are based on valuation assumptions required by the SEC under Item 402(v) of Regulation S-K. The value actually realized from unvested awards, if any, will be determined when the award fully vest and settle. 2 Mr. Ricks was the PEO for each year represented in the table. The PEO Summary Compensation Table (SCT) to compensation actually paid reconciliation is summarized in the following table.
Pay versus Performance
| Year | SCT Total Compensation for PEO | SCT Change in Pension Value | Pension Service Cost | SCT Equity Value | Change in Value: Equity Granted in Current Year | Change in Value: Unvested Equity | Final Value: Vested Equity | Compensation Actually Paid to PEO | | | a | b | c | d | e | f | g | a-b+c-d+e+f+g | | 2023 | $26,565,732 | $1,439,822 | $491,959 | $18,840,250 | $20,443,264 | $36,659,046 | $56,985,351 | $120,865,280 | | 2022 | $21,398,135 | $0 | $623,346 | $16,981,250 | $10,443,998 | $(2,718,134) | $51,322,610 | $64,088,705 | | 2021 | $21,509,985 | $2,442,235 | $680,872 | $14,966,000 | $3,627,520 | $17,758,456 | $49,536,518 | $75,705,116 | | 2020 | $23,708,629 | $5,883,924 | $660,302 | $13,587,500 | $4,409,485 | $(7,739,531) | $49,686,370 | $51,253,831 |
Pay versus Performance
3 In calculating the ‘compensation actually paid’ amounts reflected in these columns, the fair value or change in fair value, as applicable, of the equity award adjustments included in such calculations was computed in accordance with FASB ASC Topic 718. The assumptions used to calculate the fair values did not materially differ from what was used at the time of grant. 4 The Non-PEO NEO Summary Compensation Table (SCT) to compensation actually paid reconciliation is summarized in the following table, including the shift in pension from change in pension value to pension service cost, and the summary compensation table equity amount to the change in value for equity:
Pay versus Performance
| Year | Average SCT Total Compensation for Non-PEO NEOs | Average SCT Change in Pension Value | Average Pension Service Cost | Average SCT Equity Value | Average Change in Value: Equity Granted in Current Year | Average Change in Value: Unvested Equity | Average Final Value: Vested Equity | Average Compensation Actually Paid to Non-PEO NEOs | | | a | b | c | d | e | f | g | a-b+c-d+e+f+g | | 2023 | $7,836,611 | $455,154 | $159,626 | $4,387,275 | $5,693,252 | $9,514,261 | $8,888,576 | $27,249,897 | | 2022 | $5,769,810 | $93,171 | $185,293 | $3,553,000 | $2,494,818 | $1,188,603 | $7,900,916 | $13,893,269 | | 2021 | $4,730,690 | $159,911 | $135,445 | $3,115,360 | $1,276,786 | $861,413 | $834,482 | $4,563,545 | | 2020 | $6,787,934 | $1,448,154 | $187,254 | $3,665,898 | $2,289,092 | $(505,850) | $7,088,331 | $10,732,708 |
Pay versus Performance
5 The company’s TSR and the company’s peer group TSR reflected in these columns for each applicable fiscal year is calculated based on a fixed investment of $100 at the applicable measurement point on the same cumulative basis as is used in Item 201(e) of Regulation S-K. The peer group used for calculating Peer Group Total Shareholder Return for each applicable fiscal year is the same peer group that was used by the company for benchmarking compensation, setting the growth goals for the performance award and for determining relative total shareholder return performance for the relative value award for the 2023 fiscal year. 6 For pay versus performance analysis, adjusted non-GAAP EPS is consistent with the adjusted non-GAAP EPS values for performance awards in Appendix A, “Summary of Adjustments Related to the Annual Cash Bonus and Performance Award.” 7 The average CAP for 2023 comprised compensation for Ms. Ashkenazi, Dr. Skovronsky, Ms. Hakim and Mr. Van Naarden. 8 The average CAP for 2022 comprised compensation for Ms. Ashkenazi, Dr. Skovronsky, Ms. Hakim and Mr. Jonsson. 9 The average CAP for 2021 comprised compensation for Ms. Ashkenazi, Dr. Skovronsky, Mr. Van Naarden, Mr. Rau, and Mr. Smiley. Ms. Ashkenazi succeeded Mr. Smiley as CFO on February 9, 2021 when Mr. Smiley resigned his position. 10 The average CAP for 2020 comprised compensation for Mr. Smiley, Dr. Skovronsky, Ms. Hakim and Mr. Zulueta.
Pay versus Performance: Most Important Measures
Pay versus Performance: Most Important Measures The measures most important in determining pay during 2023 were those most heavily weighted in our long-term incentive and annual bonus programs.
Pay versus Performance: Most Important Measures
| Most Important Performance Measures | | Adjusted non-GAAP EPS1 | | Total Shareholder Return | | Revenue |
Pay versus Performance: Most Important Measures
1 For pay versus performance analysis, adjusted non-GAAP EPS is consistent with the adjusted non-GAAP EPS values for performance awards in Appendix A, “Summary of Adjustments Related to the Annual Cash Bonus and Performance Award.”
Pay versus Performance: Total Shareholder Return
Pay versus Performance: Total Shareholder Return Over the immediately preceding four-year period, the company’s total shareholder return (TSR) significantly exceeded the peer group’s TSR. The company’s chosen peer group is the same as the group used for benchmarking compensation, setting growth goals for the performance award and for determining relative TSR performance for the relative value award. Lilly’s relative TSR outperformance was substantially attributable to strong developments in our product pipeline and launches of new products and indications. As reflected in the chart below, this outperformance was a significant contributor to the PEO and non-PEOs’ compensation over the four-year period. While the PEO CAP grew with each successive year of TSR outperformance, the highest growth occurred during 2023 when Lilly’s TSR was 61 percent compared to -1 percent for the peer group. Non-PEO average CAP was impacted by the shifting of non-PEO membership and the cancellation of compensation for the company's former CFO, who departed during the 2021 reporting year.
Pay versus Performance: Net Income
Pay versus Performance: Net Income Lilly does not currently utilize GAAP or non-GAAP net income as a metric in any of its incentive programs. Generally, CAP is not heavily correlated with GAAP net income because GAAP net income includes certain items that the Talent and Compensation Committee believes are not reflective of the underlying performance of the business. By excluding the impact of (i) amortization of intangible assets primarily associated with costs of marketed products acquired or licensed from third parties, (ii) net losses or gains on investments in equity securities, and (iii) other specified items that are not reflective of underlying business performance, the Talent and Compensation Committee believes non-GAAP net income better represents the operating performance of the company. For comparison purposes, the graph below reflects both GAAP net income and non-GAAP net income against PEO and average NEO CAP. The 2023 GAAP and non-GAAP net income results include significantly higher acquired IPR&D charges compared to prior years. While immediately expensed for accounting purposes, the company views investments in acquired IPR&D as important contributions to its pipeline of product candidates which is a key driver of the company’s future performance. For additional information on non-GAAP financial metrics, see Appendix A, “Summary of Adjustments Related to the Annual Cash Bonus and Performance Award.” * GAAP net income and non-GAAP net income are discrete outcomes. GAAP Net Income and non-GAAP Net Income figures shown in the graphic above both include acquired IPR&D charges, net of taxes, as follows: $680.3 million in 2020, $785.5 million in 2021, $813.2 million in 2022, and $3.70 billion in 2023.
Pay versus Performance: Adjusted Non-GAAP EPS
Pay versus Performance: Adjusted Non-GAAP EPS Lilly has chosen adjusted non-GAAP EPS as its most important CSM. Lilly leverages annual non-GAAP EPS derived from the board-approved business plan to set targets for the Lilly bonus. Additionally, Lilly uses a non-GAAP EPS derived from the median external analyst anticipated two-year non-GAAP EPS growth for our peer group to set our growth goal for our performance award. While these two approaches differ in performance period duration and source of performance comparison, significant sustained profitability growth can contribute to higher total CAP as seen in the graphic below. For additional information on non-GAAP financial metrics, see Appendix A, “Summary of Adjustments Related to the Annual Cash Bonus and Performance Award.” * Adjusted non-GAAP EPS data points are discrete outcomes.
Pay versus Performance: Revenue
Pay versus Performance: Revenue Lilly strives to make breakthrough medicines available to patients around the globe. Given a growing portfolio of new medicines, we motivate our entire workforce to reach as many patients as possible. The combination of a strong product portfolio and effective patient delivery yields higher sales volume and, generally, higher total revenue. A decline in product portfolio quality or effective launch execution reduces revenue. As such, revenue is one of our most important measures to ensure we are consistently growing the number of patients we serve. Our revenue curve over the preceding four-year period aligns with the growth in PEO and average non-PEO CAP. * Revenue data points are discrete outcomes.
Pay versus Performance: Conclusions
Pay versus Performance: Conclusions The Talent and Compensation Committee believes in pay for performance and has structured the Lilly compensation programs to reward leaders when the company is delivering strong results. Lilly has had strong cumulative TSR, EPS and revenue growth over the immediately preceding four-year period. As a result of this strong performance, shareholders have been rewarded with significant total stock returns and leadership has been rewarded with above target payouts from their incentive compensation programs.

DEF 14A of Eli Lilly & Co

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