Eli Lilly

A proposal to remove an 80% approval threshold for takeover bids against the wishes of Lilly’s board received approval from shareholders owning 74% of Lilly’s shares. But to pass, the proposal needed the approval of investors holding 80 percent of all of Lilly’s outstanding shares.

Another Lilly proposal aimed at improving governance also failed to get the necessary supermajority: to hold annual elections of directors, rather than staggered elections under current bylaws. Some 75% of shares outstanding were voted in favor of that proposal.

Both items were pushed by activists such as John Chevedden and CalPERS. However, this year, even with Lilly’s board behind the measures, they still didn’t get the 80% approval needed. Chevedden speculates the problem may be the Lilly Endowment, Inc., which controls 11% of the vote. Maybe the Endowment is acting like the US Treasury. (Shareholders fail to remove Lilly’s anti-takeover provision, Indianapolis Business Journal, 4/19/10 and Lilly’s Bid To End Supermajority Rule Misses Supermajority, WSJ, 4/19/10) Reform seems to be a very long time coming.

This just in:

This year, it appears that the Lilly Endowment, the company’s largest shareholder with an 11.8 percent stake, opposed the proposals. The endowment has voted against declassification measures in the past. It appears that the endowment is concerned that removing takeover defenses might expose the company to a hostile acquisition and cause Lilly to leave its hometown of Indianapolis. The private foundation, which is independent of the company, was founded in 1937 by Lilly family members and has a separate board. (Lilly’s Supermajority Rules Stymie Reform Again, RiskMetrics Group, 4/20/10)