(adds comment about Hospitality Properties) 
   DOW JONES NEWSWIRES 
 

The largest public pension in the U.S. is calling out drug giant Eli Lilly & Co. (LLY) and three other companies for what it says is a combination of poor returns and resistance to governance changes that could improve performance.

The California Public Employees' Retirement System added the four to its latest "focus list." Calpers, which has $167 billion in assets, also called out medical-technology provider Hill-Rom Holdings Inc. (HRC) and pharmaceutical research firm IMS Health Inc. (RX), as well as real-estate investment trust Hospitality Properties Trust (HPT).

Calpers, which has been publishing the list each year since 1987, is known for pushing for governance changes at companies where it believes such changes could improve board accountability and financial performance. "In today's current economic environment, no company should resist strengthening their corporate governance, but these four companies did," said Calpers President Rob Feckner in a statement.

The fund criticized Eli Lilly for continuing "to deny shareholders any opportunity to amend bylaws - a restriction used by only 4% of S&P 500 companies." Calpers is seeking shareowner support for a resolution to overturn the bylaw amendment provision at the company's annual meeting next month. Moreover, Calpers said, Eli Lilly has underperformed its peers by 64% during the past five years.

Hill-Rom lagged its peers in the health-care equipment industry by 84% over the same period, Calpers said. The fund objects to "the company's refusal to remove its staggered board structure and to allow shareowners to amend its bylaws."

IMS underperformed by 63%. The pension fund cites IMS' denial of shareholders' right to call a special meeting and to adopt annual nonbinding advisory votes on executive compensation practices.

Hospitality Properties was 23% behind its peers over the past five years. Calpers is pushing for termination of the hotel owner's "classified" board, where directors serve staggered terms rather than standing for election each year.

"Placing these companies on the Focus List and bringing shareowner resolutions against them in some cases are last resorts for us," said George Diehr, head of Calpers' Investment Committee. "We much prefer engaging them first to achieve better alignment with management, boards and investors and set the table for improved share value over time."

-By Mike Barris, Dow Jones Newswires; 201-938-5658; mike.barris@dowjones.com