Eli Lilly faces criticism for pay raise

Last year was a bad year for Indianapolis-based pharmaceutical company Eli Lilly. The company faced a continued fall in stock price, government fines and bad publicity.

This year looks no better. Last week, Lilly agreed to an $18.5 million settlement with the Arkansas Attorney General’s office over false advertising of the antipsychotic drug Zyprexa.

But it wasn’t bad news for everyone at Lilly: CEO John Lechleiter received a 2009 compensation package of $20.9 million, according to the company’s preliminary proxy statement. The compensation package was $6.4 million higher than in 2008.

Executive pay has come under increasing scrutiny since the economic slump began, with both the public and politicians expressing anger about the pay awarded to company directors.

Although Lilly reported a 7 percent increase in revenue during 2008, the company sold its Lafayette plant and plans to shed 5,500 staff by 2011.

“There’s always going to be a tension between the CEO and the employees,” said Carol Rogers, deputy director at the Indiana Business Research Center. “Is it the job of a business to employ people or to make money?”

During the next five years, Lilly will also lose patents on many of its drugs, including Zyprexa, allowing competitors to make cheap generic copies.

Lilly’s poor performance doesn’t help other Indiana companies. Rogers said pharmaceutical companies cluster together, creating a group of experts who can supply the industry with the research base it needs, so Bloomington pharmaceutical companies such as Cook Medical and KP Pharmaceutical Technology, Inc. could suffer, too.

IU is also reliant on Lilly for research grants totaling millions of dollars each year.
The culture of increasing executive pay is not a new one. In 1949 the highest paid executive’s salary was 200 times the average worker’s pay. In 2009 the highest paid executive received a salary 15,000 times the average worker’s pay.

“CEO pay is just going up since the depression,” said Tom Szymanski of the International Brotherhood of Electrical Workers Local 725 Bloomington, who actively lobbies for caps on executive pay. “Workers are still suffering while CEO pay goes up. It’s just not right.”

In January, President Barack Obama said he would limit executive compensation to $500,000 for companies receiving government assistance. But companies like Lilly that did not receive financial help, have no obligation to limit executive salaries and can pay whatever they want.

Lauren Cislak, adviser for corporate responsibility at Lilly, said corporate pay would always be dictated by performance but declined to comment further.