Proxy Blog

Eli Lilly

April 12, 2018

The annual proxy for this pharmaceutical company had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Board proposals to declassify the board and eliminate supermajority requirements 
  3. Shareholder proposals on:
    -Cannabis
    -Political disclosure
    -Animal rights
    -Tying executive compensation to drug pricing 

Magni voted as follows: 

  1. Magni voted for all proforma proposals.
    -Directors – The board has a majority of independent directors and some have CEO/CFO experience with other companies. The compensation of directors is disclosed with a meaningful portion in equity where the equity has restrictions to align director incentives with long-term value creation. The compensation levels are set using a benchmarking process.
    -Auditors – There appear to be no controversies with the financial statements of the company.
    -“Say-on-pay” – The proxy materials demonstrated that the board has more than considered shareholder feedback on executive compensation. In addition, the proxy materials disclosed the benchmarking done on executive compensation, including listing the peer group used in the benchmarking.

  2. Magni voted for board proposals to declassify the board structure and eliminate supermajority requirements. On both proposals Eli Lilly has been attempting to make these changes for years, however the 80% supermajority requirement for passage has been too high a bar. Recently they achieved 77% yes votes on the respective proposals. The proposals are consistent with good shareholder relationships and good governance.

  3. Magni voted against shareholder proposals.
    -Cannabis– Cannabis is a political topic and unrelated to governance. Often when companies get involved in political causes, the company and its stakeholders can suffer.
    -Political disclosure – The company already discloses its activities and contributions. 
    -Animal testing – The company already abides by international standards on animal testing.
    -Tying executive compensation to drug prices – The company behavior on executive compensation is consistent with best practices from Magni’s Corporate Governance Model. The issue of drug prices is more relevant to government than any one company.