Lilly execs take $3M hit to 2014 bonuses, but the pay freeze thaws for 2015

Suffering from generic competition and patent losses, Eli Lilly & Co. ($LLY) froze salaries and cut bonuses last year--from the top management ranks on down. But the decreases in incentive pay didn't make a huge dent in those executive pay packages.

Lilly CEO John Lechleiter

For CEO John Lechleiter, salary held steady at $1.5 million. His stock awards also stood firm at $6.75 million. His incentive pay did sink by more than $1 million, to $1.8 million from $2.9 million. But that decline was more than offset by the increase in his pension value, which amounted to more than $4 million.

Total: $14.5 million for the year, up from $11.2 million last year, when an accounting change quashed any growth in his pension. Back out the pension, and Lechleiter's 2014 package equals $10.125 million--a 9.7% decrease.

The rest of the executive team saw similar changes, with increases in their overall compensation, but declines in their cash incentive pay. CFO Derica Rice took a $471,000 hit to his incentive pay, to $780,000. General Counsel Michael Harrington's incentive pay dropped to $488,000 from $786,000, a $302,000 decline. And R&D chief Jan Lundberg suffered a similar incentive-pay decrease, to $771,000 from $1.236 million.

The proxy doesn't disclose details about Lilly incentive-pay changes below the executive level, dollarwise. When the company disclosed the pay freeze last year, it said that the bonus multiple--the amount used to calculate incentive pay, based on each employee's bonus target--would be cut by 0.25.

That was indeed the number used to slice executive bonus pay; according to the proxy statement, Lilly execs earned a 1.10 bonus multiple, because the company met or beat revenue and adjusted EPS targets. They got 0.85.

Of course, the fact that Lilly's performance beat earnings and sales goals says a lot about those goals. Lilly's sales plummeted by almost $4 billion last year, with generic competition for its blockbuster antidepressant Cymbalta taking a $3.5 billion bite out of the top line. Evista sales slid by 60% as well, to $419 million

Lilly execs were rewarded not for growth, but for keeping the bleeding from spreading, and prepping new products for market. The company nabbed some key FDA approvals last year, including the SGLT2 diabetes-fighter Trulicity and cancer treatment Cyramza. It just launched its diabetes combo med Glyxambi last week.

The company isn't expecting a lot from 2015, either. Lilly execs forecast sales growth in the mid- to high-single digits--but that's without the expected hit from generic competition and currency factors. With those included, the expectation was for $20.3 billion to $20.8 billion, just 2% higher than 2014.

Analysts had been expecting better numbers--$20.8 billion at the low end. And since then, the company cut its guidance further, to $19.5 billion to $20 billion--essentially flat, compared with 2014.

But Lilly employees--executives included--can take heart. The forecast may not be all that sunny, but the pay freeze has ended. According to the proxy statement, salary increases and full-fledged bonuses returned as of January 1.

- get the Lilly proxy statement

Special Reports: Top 15 pharma companies by 2014 revenue - Eli Lilly | 20 Highest-Paid Biopharma CEOs of 2012 - John Lechleiter, Eli Lilly

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