8-KLeadership Changes

ELI LILLY & Co 8-K Report, Executive Changes (Feb 19, 2008)

Filed February 19, 2008For Securities:LLY

Summary

Eli Lilly and Company (LLY) filed an 8-K on February 18, 2008, primarily to announce changes within its Board of Directors and executive leadership. George M.C. Fisher, a director since 2000, announced his intention to retire from the board effective April 21, 2008. In a related move, Michael L. Eskew, former CEO of UPS, was elected to the board for an interim term and nominated for a full three-year term at the upcoming annual meeting. Mr. Eskew's appointment brings valuable experience from another major public company. More significantly for investors, the filing details compensation arrangements for John C. Lechleiter, who is set to become President and CEO on April 1, 2008. This transition follows the previously announced retirement of current CEO Sidney Taurel. Dr. Lechleiter's compensation package includes an annualized base salary of $1,400,000 and a target annualized non-equity incentive compensation of $1,960,000, with actual payouts dependent on corporate performance metrics including sales growth and adjusted earnings per share growth. The report also confirms the timeline for Sidney Taurel's retirement as CEO and Board Chairman.

Key Highlights

  • 1George M.C. Fisher, a long-serving board member, announced his retirement from the Board of Directors, effective April 21, 2008.
  • 2Michael L. Eskew, former Chairman and CEO of UPS, has been elected to the Board of Directors for an interim term and nominated for a three-year term.
  • 3Mr. Eskew will bring extensive leadership experience and will serve on the Audit and Compensation committees.
  • 4John C. Lechleiter is confirmed to assume the role of President and CEO on April 1, 2008, succeeding Sidney Taurel.
  • 5Sidney Taurel's retirement as CEO is set for March 31, 2008, and as Chairman and Board member on December 31, 2008.
  • 6Dr. Lechleiter's annualized base salary will be $1,400,000, and his target annualized non-equity incentive compensation is $1,960,000.
  • 7Executive compensation for Dr. Lechleiter will be tied to corporate performance, specifically sales growth (25%) and adjusted earnings-per-share growth (75%).

Frequently Asked Questions

The filing announces the upcoming retirement of board member George M.C. Fisher and the appointment of Michael L. Eskew, former UPS CEO, to the board. Crucially, it confirms that John C. Lechleiter will become President and CEO on April 1, 2008, following the previously announced retirement of Sidney Taurel as CEO and later as Chairman.

Effective April 1, 2008, Dr. Lechleiter's annualized base salary will be $1,400,000, and his target annualized non-equity incentive compensation will be $1,960,000. These amounts are annualized but will be prorated for the nine months he serves in 2008. The actual bonus payout will depend on Lilly's performance against predetermined metrics.

Dr. Lechleiter's incentive compensation payouts will be based on corporate performance, with 25% tied to sales growth and 75% tied to earnings-per-share growth. These earnings-per-share calculations will be adjusted for unusual items according to predetermined criteria.

Michael L. Eskew is the former Chairman and CEO of United Parcel Service (UPS). He has been elected to serve as an interim director and has been nominated for a three-year term starting April 21, 2008. He will also serve on the company's Audit and Compensation committees, bringing significant experience from leading a major public company.