CALPERS gains allies in Lilly bylaw fight

Norm Heikens
April 17, 2008
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The California Public Employees' Retirement System, the nation's largest public pension fund, said yesterday it has backing from four major proxy advisory services for a resolution that would require only a simple majority vote of Lilly shareholders to amend the company's bylaws.

Endorsing the giant pension fund's shareholder resolution are Egan-Jones, Glass Lewis, RiskMetrics Group (formerly ISS), and Proxy Governance.

The new support ratchets up pressure on Lilly directors and particularly John Lechleiter, whose promotion from president and chief operating officer to CEO took effect just days ago, on April 1.

CALPERS said in March it would withhold votes for Lechleiter as well as existing directors Dr. Alfred Gilman and Karen Horn at Lilly's annual meeting on Monday to protest the company's lackluster stock performance.

Indiana University corporate governance specialist Dan Dalton said it is the first time he has seen shareholders try to nip a CEO's entry to a board so early in the CEO's tenure.

"This is big," Dalton said. "It is extremely aggressive."

CALPERS reiterated yesterday that it is withholding its vote for Lechleiter, Gilman and Horn because they "provided oversight" while the stock languished and the company retained its "poor governance practices."

CALPERS owns about 4.8 million Lilly shares valued at more than $265 million.

Lilly stock has trended sideways since 2005 largely because few potential blockbuster drugs are in its development pipeline. The shares are trading near $53.

In the past five years, Lilly shares have lagged peers by 22.4 percent and the S&P 500 by 67.7 percent, CALPERS charged.

Lilly has said allowing a majority vote would expose the company to the risk of a few shareholders wanting to make changes that wouldn't benefit the company in the long term.

CALPERS contends the rule retards the stock price.

Dalton noted that Lilly directors are not obligated to follow through on what in affect would be a no-confidence vote in Lechleiter.

Still, if CALPERS were able to garner enough shareholder support for a strong showing at the shareholder meeting, Lilly and Lechleiter would be subjected to an unusual level of humiliation.

On the outside chance Lechleiter's ascent to the board were thwarted, Dalton said it would be a first in his memory.

"I have never heard of a CEO of a company who was not a director of the company," Dalton said. "One wonders what it means for a board of directors not to be represented by its CEO."

Comment at NewsTalk.


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  1. Socialized medicine works great for white people in Scandanavia. It works well in Costa Rica for a population that is partly white and partly mestizo. I don't really see Obamacare as something aimed against whites. I think that is a Republican canard designed to elicit support from white people for republican candidates who don't care about them any more than democrats care about the non-whites they pander to with their phony maneuvers. But what is different between Costa Rica nd the Scandanavian nations on one hand and the US on the other? SIZE. Maybe the US is just too damn big. Maybe it just needs to be divided into smaller self governing pieces like when the old Holy Roman Empire was dismantled. Maybe we are always trying the same set of solutions for different kinds of people as if we were all the same. Oh-- I know-- that is liberal dogma, that we are all the same. Which is the most idiotic American notion going right back to the propaganda of 1776. All men are different and their differences are myriad and that which is different is not equal. The state which pretends men are all the same is going to force men to be the same. That is what America does here, that is what we do in our stupid overseas wars, that is how we destroy true diversity and true difference, and we are all as different groups of folks, feeling the pains of how capitalism is grinding us down into equally insignificant proletarian microconsumers with no other identity whether we like it or not. And the Marxists had this much right about the War of Independence: it was fundamentally a war of capitalist against feudal systems. America has been about big money since day one and whatever gets in the way is crushed. Health care is just another market and Obamacare, to the extent that it Rationalizes and makes more uniform a market which should actually be really different in nature and delivery from place to place-- well that will serve the interests of the biggest capitalist stakeholders in health care which is not Walmart for Gosh Sakes it is the INSURANCE INDUSTRY. CUI BONO Obamacare? The insurance industry. So republicans drop the delusion pro capitalist scales from your eyes this has almost nothing to do with race or "socialism" it has to do mostly with what the INSURANCE INDUSTRY wants to have happen in order to make their lives and profits easier.

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