Document

DEF 14A 1 llydef14a2022.htm DEF 14A Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

Filed by the Registrant x

Filed by a Party other than the Registrant ¨

Check the appropriate box:


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


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


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

Payment of Filing Fee (Check all boxes that apply):

No fee required

Fee paid previously with preliminary materials

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

Notice of 2022

Annual Meeting of Shareholders

and Proxy Statement

YOUR VOTE IS IMPORTANT


Please vote online, by telephone, or, if you received or requested paper copies of your proxy materials, by signing, dating, and returning your proxy card by mail.
Important notice regarding the availability of proxy materials for the shareholder meeting to be held May 2, 2022: The annual report to shareholders and proxy statement are available at ProxyVote.com as well as on our website at lilly.com/policies-reports/annual-report.

From Our Chair and Lead Independent Director

Dear fellow Lilly shareholders,

Thank you for your continued support of, and investment in, Eli Lilly and Company. We are proud of Lilly's achievements in 2021. We delivered on important pipeline advancements that help people with diabetes, immune disorders, neurodegenerative disorders, and cancer, continued our efforts to fight COVID-19, and strengthened our initiatives in support of patients and communities. We also worked hard to deliver value to you, our shareholders. We generated strong total shareholder returns through December 31, 2021, in terms of both share price appreciation and dividends.

To support the health and well-being of our employees, board of directors, shareholders, and other meeting participants, and to facilitate broad shareholder attendance and provide a consistent experience to all shareholders, regardless of location, the 2022 Annual Meeting of Shareholders (the Annual Meeting) will be held virtually via live webcast. We learned during the virtual annual meetings held in 2020 and 2021 that this format, in addition to being safer during the COVID-19 pandemic, actually enables more shareholders to attend, and gives our leadership team time to address more questions from those in attendance.

As part of our mission to improve lives around the world, we are committed to creating a safe, supportive, ethical, and rewarding work environment. Lilly’s core values of integrity, excellence, and respect for people, and our dedication to diversity, equity, and inclusion (DEI) are critical components of how we do business. We take a holistic approach because we’re a stronger company when we have a workforce of top talent from different backgrounds—people who are respected, valued, welcomed, and heard. To fulfill our purpose, we must look at challenges from multiple viewpoints and understand the diverse experiences of the patients who depend on us. In short, our differences make a difference—to patients and to our business.

Our board recognizes that one of its key responsibilities is to ensure that Lilly is governed in a manner that provides both independent oversight and efficient and effective decision-making. Our chief executive officer brings to the role of chair of our board substantial strategic and operational perspectives and a unique understanding of Lilly's opportunities and challenges. This familiarity with our business, as well as extensive experience and leadership in our industry, positions our CEO to establish the agenda and drive strategy at the board level. Further, our lead independent director, currently CEO of a Fortune 100 company, elucidates an "outside in" analysis of company decisions and performance, maintains frequent contact with our chair to ensure a productive partnership between our independent directors and management, and leads our independent directors in their important oversight function.

Our board continues to prioritize meaningful engagement with our shareholders and other key stakeholders. Since our 2021 annual meeting, we have spoken with a number of investors on an array of subjects, including: board leadership; environmental social and governance topics; drug pricing transparency and global access to our products; product quality and safety; key enterprise risks; executive compensation; DEI; and human capital management.

We appreciate the thoughtful and constructive feedback that we receive from our stakeholders. As a result of this input, as in past years, the board is putting forward management proposals at the Annual Meeting to eliminate the classified board structure and supermajority voting requirements in our articles of incorporation. In addition, the board is putting forward a management proposal to amend our articles of incorporation to provide shareholders the ability to amend our bylaws.

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

Sincerely,



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

Table of Contents


Notice of 2022 Annual Meeting of Shareholders		1
Proxy Statement Summary		3
Governance		11
	Item 1 - Election of Directors	11
	Board Operations and Governance	11
	Director Qualifications and Nomination Process	19
	Director Compensation	20
	Director Independence	22
	Committees of the Board of Directors	22
	Membership and Meetings of the Board and Its Committees	23
	Board Oversight of Strategy, Compliance , and Risk Management	25
	Highlights of the Company's Corporate Governance	25
	Communication with the Board of Directors	34
Shareholder Engagement on Governance Issues		34
	Management Proposals to Eliminate Classified Board, to Eliminate Supermajority Voting Provisions, and to Give Shareholders the Ability to Amend Bylaws	34
	Shareholder Proposals	35
	Shareholder Recommendations and Nominations for Director Candidates	35
Ownership of Company Stock		36
Compensation		37
	Item 2 - Advisory Vote on Compensation Paid to Named Executive Officers	37
	Compensation Committee Matters	38
	Compensation Discussion and Analysis	39
	Executive Compensation	55
	CEO Pay Ratio	64
Audit Matters		64
	Item 3 - Ratification of the Appointment of the Independent Auditor	64
Management Proposals		66
	Item 4 - Proposal to Amend the Company's Articles of Incorporation to Eliminate the Classified Board Structure	66
	Item 5 - Proposal to Amend the Company's Articles of Incorporation to Eliminate Supermajority Voting Provisions	67
	Item 6 - Proposal to Amend the Company's Articles of Incorporation to Give Shareholders the Ability to Amend the Company’s Bylaws	68
Shareholder Proposals		69
	Item 7 - Proposal to Amend the Bylaws to Require an Independent Board Chair	70
	Item 8 - Proposal to Publish an Annual Report Disclosing Lobbying Activities	72
	Item 9 - Proposal to Disclose Lobbying Activities and Alignment with Public Policy Positions and Statements	75
	Item 10- Proposal to Report Oversight of Risks Related to Anticompetitive Pricing Strategies	77
Other Information		80
	Meeting and Voting Logistics	80
	Other Matters	83
Appendix A - Summary of Adjustments Related to the Annual Cash Bonus and Performance Award		A-1
Appendix B - Proposed Amendments to the Company's Articles of Incorporation		B-1
Appendix C - Proposed Amendments to the Company's Articles of Incorporation		C-1

Notice of 2022 Annual Meeting of Shareholders

To the holders of common stock of Eli Lilly and Company:

The 2022 Annual Meeting of Shareholders (the Annual Meeting) of Eli Lilly and Company (referred to as Lilly, we, us, or the company in this proxy statement) will be held at the time and location below:


TIME AND DATE	LOCATION	WHO CAN VOTE
11:00 a.m. EDT, Monday, May 2, 2022	Virtually at virtualshareholdermeeting.com/LLY2022	Shareholders of record at the close of business on February 22, 2022

To support the health and well-being of our employees, board of directors, shareholders, and other meeting participants, the Annual Meeting will be held virtually via live webcast. We have designed the Annual Meeting live webcast to provide shareholders the opportunity to participate virtually to facilitate shareholder attendance and to provide a consistent experience to all shareholders, regardless of location.

This proxy statement is dated March 18, 2022. We mailed a notice of internet availability of proxy materials on or about that date to our shareholders of record as of February 22, 2022 (other than those who previously requested electronic or paper delivery of our proxy materials and certain participants in The Lilly Employee 401(k) plan (401(k) Plan)).

ITEMS OF BUSINESS


Governance		Board Voting Recommendation	Page Reference
Item 1	Election of each of the three director nominees to serve three-year terms	FOR each of the director nominees	11
Compensation
Item 2	Approval, on an advisory basis, of the compensation paid to the company's named executive officers	FOR	37
Audit Matters
Item 3	Ratification of the appointment of Ernst & Young LLP as the independent auditor for 2022	FOR	64
Management Proposals
Item 4	Approval of amendments to the company’s Articles of Incorporation to eliminate the classified board structure	FOR	66
Item 5	Approval of amendments to the company’s Articles of Incorporation to eliminate supermajority voting provisions	FOR	67
Item 6	Approval of amendments to the company's Articles of Incorporation to give shareholders the ability to amend the company's bylaws	FOR	68
Shareholder Proposals
Item 7	Shareholder proposal to amend the bylaws to require an independent board chair, if properly presented at the meeting	AGAINST	70
Item 8	Shareholder proposal to publish an annual report disclosing lobbying activities, if properly presented at the meeting	AGAINST	72
Item 9	Shareholder proposal to disclose lobbying activities and alignment with public policy positions and statements, if properly presented at the meeting	AGAINST	75
Item 10	Shareholder proposal to report oversight of risks related to anticompetitive pricing strategies, if properly presented at the meeting	AGAINST	77

Admission Procedure for Attending the Annual Meeting

You will be able to attend the Annual Meeting, vote, and submit questions virtually via live webcast by visiting virtualshareholdermeeting.com/LLY2022. To be admitted to the Annual Meeting webcast, you must enter the 16-digit control number found on the proxy card, voting instruction form, or notice you received. You may vote during the Annual Meeting by following the instructions available on virtualshareholdermeeting.com/LLY2022 during the Annual Meeting.

For further information on how to attend the Annual Meeting, see the section titled "Other Information—Meeting and Voting Logistics."

Every shareholder vote is important. Even if you plan to attend the Annual Meeting, we encourage you to vote promptly online, by telephone, or, if you received or requested paper copies of your proxy materials, by signing, dating, and returning your proxy card or voting instructions by mail, so that a quorum may be represented at the meeting.


By order of the Board of Directors,

Ms. Anat Hakim
Senior Vice President, General Counsel, and Secretary
March 18, 2022
Indianapolis, Indiana

Proxy Statement Summary

New in This Year's Proxy Statement

In 2021, we focused on advancing our pipeline to help people with diabetes, immune disorders, neurodegenerative disorders, and cancer. In addition, we have continued to support patients, communities, and our employees affected by the COVID-19 pandemic.

We have undertaken a detailed review of our sustainability efforts, how we communicate progress toward our Environmental, Social and Governance (ESG) goals, and our broader ESG strategy. In 2021, we established new 2030 sustainability goals and held an ESG stakeholder day to share our strategy and progress. In 2021, we also issued Lilly’s first sustainability bond, which will help fund projects that will contribute to our ESG objectives. In this proxy statement, you will find additional information about our approach to ESG and sustainability. See "Governance—Highlights of the Company’s Corporate Governance—Environmental, Social and Governance."

In addition, we recently enhanced our disclosures related to our lobbying and political activities. For additional information, see “Governance—Highlights of the Company’s Corporate Governance—Political and Policy Participation.”

Our board has approved, and recommends that our shareholders approve, three important management proposals at the Annual Meeting. As in past years, the board recommends approval of amendments to the company’s articles of incorporation to eliminate the classified board structure (see Item 4 herein) and to eliminate supermajority voting provisions (see Item 5 herein). The board also recommends approval of amendments to the company’s articles of incorporation to give shareholders the ability to amend our bylaws (see Item 6 herein). The board believes these three proposals balance shareholder interests and demonstrate its accountability and willingness to take steps that address concerns expressed by shareholders.

Michael L. Eskew, who joined the board in 2008 and serves as the Chair of the Directors and Corporate Governance Committee, will retire from the board following the Annual Meeting.

Highlights of 2021 Performance

The following provides a brief overview of our 2021 performance in four dimensions: operating performance, progress in our innovation pipeline, business development, and shareholder return, both absolute and relative. See our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, for more details.

We continued to progress our company's purpose and strategy in 2021 as we remained focused on:

•discovering, developing, and acquiring first- or best-in-class medicines to address significant unmet needs in our core therapeutic areas—diabetes, immunology, neuroscience, and oncology;

•reaching patients who can benefit from our innovative medicines around the world, directly and through partnership with healthcare systems and collaborators, providing broad access to safe, life-changing medicines;

•focusing our time and resources on new medicines that patients value most, delivering volume-driven sustainable growth;

•expanding our manufacturing footprint and bolstering our supply chain to support our growing portfolio; and

•reinvesting in our business and our people to discover new medicines to address unmet medical needs, improve cost productivity, reduce environmental impact, and supply quality medicines, while returning capital to shareholders.

We believe our strategic choices, coupled with robust execution, delivered significant value for shareholders and patients in 2021. We reached over 47 million patients globally with our medicines, expanded our patient support programs, achieved significant pipeline advancements and key data readouts across our core therapeutic areas, leveraged external innovation to expand our pipeline, and delivered high total shareholder returns relative to our peers and the S&P 500 index. The discussion below expands on our considerable success in 2021.

Operating Performance

Performance highlights:

•2021 revenue increased 15 percent to approximately $28.3 billion;

•2021 earnings per share (EPS) on a reported basis were $6.12, compared to 2020 EPS on a reported basis of $6.79; and

•on a non-GAAP basis, 2021 EPS increased 20 percent to $8.16.

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

2021 Innovation and Business Development Progress

We made significant pipeline advances in 2021, including:

•U.S. approval of a new indication for Verzenio® (abemaciclib) for certain people with high-risk, early breast cancer;

•in collaboration with Boehringer Ingelheim International GmbH, U.S. and European Union approval of a new indication for Jardiance® in adults with heart failure with reduced ejection fraction, with and without diabetes;

•in collaboration with AbCellera Biologics Inc. and Junshi Biosciences Co., Ltd., the U.S. FDA granted Emergency Use Authorization for the administration of bamlanivimab and etesevimab together as a treatment for COVID-19 in patients at high risk for hospitalization; and

•in collaboration with Incyte Corporation, approval in Japan for Olumiant® (baricitinib), in combination with remdesivir, as a treatment for COVID-19.

We announced several key data readouts in 2021, including:

•positive topline results from four studies from tirzepatide’s Phase III type 2 diabetes program, SURPASS-2, 3, 4, and 5, and regulatory submission for tirzepatide for type 2 diabetes in the U.S. to which Lilly applied a priority review voucher, as well as submission in Europe and Japan;

•positive topline results from donanemab’s TRAILBLAZER-ALZ, a Phase II study evaluating the efficacy and safety of donanemab compared to placebo in patients with early symptomatic Alzheimer’s disease;

•updated data for pirtobrutinib from the LOXO-305 BRUIN Phase I/II clinical trial in mantle cell lymphoma and other non-Hodgkin lymphomas, as well as in chronic lymphocytic leukemia and small lymphocytic lymphoma, at the 2021 American Society of Hematology Annual Meeting;

•positive topline results from mirikizumab’s Phase III LUCENT-1 and 2 studies evaluating the efficacy and safety of mirikizumab compared to placebo for the treatment of patients with moderately-to-severely active ulcerative colitis;

•positive topline results from three studies of lebrikizumab’s Phase III program evaluating the efficacy and safety of lebrikizumab in people with moderate-to-severe atopic dermatitis; and

•in collaboration with Boehringer Ingelheim International GmbH, positive topline results from a Phase III study of Jardiance® (empagliflozin) in adults with heart failure with preserved ejection fraction, with and without diabetes, and submissions in the U.S., Europe, and Japan.

We also completed over fifteen acquisitions, license agreements, and research collaborations to complement our pipeline in 2021, including:

•acquisition of Prevail Therapeutics Inc. to complement our existing expertise as we work to develop a gene therapy platform anchored by Prevail’s portfolio of clinical-stage and late pre-clinical stage gene therapies across a range of neurodegenerative disorders;

•acquisition of Protomer Technologies Inc., a private biotechnology company whose proprietary peptide- and protein-engineering platform is used to identify and synthesize molecules that can sense glucose or other endogenous modulators of protein activity; and

•entry into a global exclusive license agreement and strategic collaboration with Rigel Pharmaceuticals, Inc. to co-develop and commercialize Rigel’s R552, a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor for all indications, including autoimmune and inflammatory diseases.

Shareholder Returns

We generated strong total shareholder returns (TSR) through December 31, 2021. Our TSR takes into account both share price appreciation and dividends. Any dividends paid by a given company are assumed to be reinvested in that company’s stock on a quarterly basis. Our returns significantly exceeded our compensation peer group and the S&P 500 during the three- and five-year periods presented below:

Health, Safety and Welfare

In 2021, we continued to supply our therapies for COVID-19 and continued our research and development efforts and our partnership with regulators and governments to bring COVID-19 treatments to patients around the world. Throughout the COVID-19 pandemic, we have prioritized maintaining supply of and access to our medicines, particularly insulin, reducing the strain on the medical system, protecting the health, safety, and well-being of our employees, and supporting our workforce, affected communities, and patients who need our medicines.

Maintaining Supplies of and Access to Lilly Medicines

Throughout 2021, we continued our efforts to protect our manufacturing processes and remained in close communication with key suppliers regarding logistics, transportation, and supplies of raw materials. As a result, we were able to largely maintain our normal operations and continue to provide medicines on which millions of patients rely in the face of global supply chain challenges. We also continued patient support programs to ensure patients maintained affordable access to their medications and adjusted how we operate to offer innovative solutions to our customers. We remain committed to working with stakeholders in healthcare systems to help patients get the medicines they need, including through our Insulin Value Program, which allows anyone with commercial insurance and those without insurance to fill their monthly prescription of Lilly insulin for $35, as well as our other access and affordability initiatives.

Working to Ensure Diversity in Clinical Trials

We continue to identify and address barriers to fair access and representation of communities in our clinical research to help develop innovative medicines. Diverse representation in clinical trials is critical to helping our researchers develop medicines that will be as effective as possible for patients who use them. We are working to ensure trial participants match the composition of the patient population that might use the trial’s medicine by selecting diverse investigators and collaborating with external groups to identify and implement solutions. We collaborate with patients, patient advocacy groups, regulatory agencies, health care professionals and community organizations to identify and implement solutions that will result in diverse representation, improve health equity and generate evidence to support better patient outcomes.

Keeping Our Employees Safe and Healthy

We remain focused on protecting the health and safety of our employees and strive to foster a healthy, vibrant work environment. For additional information on our employee health and safety initiatives, see "Governance—Highlights of the Company’s Corporate Governance—Human Capital Management—Employee Health and Safety."

Governance


Item 1: Election of Directors
For further information, see page 11

Name, age* and principal occupation

Public boards

Management recommendation

Vote required to pass

Ralph Alvarez, 66

Operating Partner, Advent International Corporation

Director since 2009

Lowe's Companies, Inc.; Traeger, Inc.; First Watch Restaurant Group, Inc.

Vote FOR

Majority of votes cast

Kimberly H. Johnson, 49

Executive Vice President and Chief Operating Officer, Federal National Mortgage Association (Fannie Mae)

Director since 2021

Vote FOR

Majority of votes cast

Juan R. Luciano, 60

Chairman, Chief Executive Officer and President, Archer-Daniels-Midland Company

Director since 2016; Lead Independent Director since 2019

Archer-Daniels-Midland Company

Vote FOR

Majority of votes cast

*Age is as of the date of this proxy statement.

Our Corporate Governance Policies Reflect Best Practices

Strategy and risk oversight


ü			Our board approves and actively oversees our corporate strategy.
ü			Our board and board committee agendas are structured to engage our directors in informed reviews of strategic and forward-looking issues, as well as in constructive challenges to management initiatives and programs.
ü			Our board reviews the overall state of our compliance program at least annually and reviews our enterprise-level risks, including related to cybersecurity; our Audit Committee oversees the process by which we identify and create mitigation plans for enterprise-level risks.
ü			Our board and Audit Committee receive regular presentations on cybersecurity from our management as part of their oversight of enterprise-level risks; in addition to regular presentations, management updates our board regarding changes to the broader cybersecurity landscape, as well as significant threats or incidents as they arise.
ü			We have a comprehensive code of business conduct, called The Red Book, which applies to our board and all employees worldwide. This code is reviewed and approved annually by the board, and in 2022 we revised The Red Book training to update our Global Conduct in the Workplace procedure to continue to help ensure that we maintain a respectful, safe, inclusive, and professional workplace.
ü			We have a supplemental code of conduct for our CEO and all members of financial management, in recognition of their unique responsibilities to ensure proper accounting, financial reporting, internal controls, and financial stewardship.

SEC Form DEF 14A filed by Eli Lilly and Company