Calpers says won't vote for 3 Eli Lilly directors

LOS ANGELES, March 27 (Reuters) - The California Public Employees' Retirement System, or Calpers, said on Thursday that it plans to withhold re-election votes for three Eli Lilly and Co (LLY.N) directors, including John Lechleiter, who is slated to become the company's chief executive next week.

The pension fund said Lechleiter, Alfred Gilman and Karen Horn are accountable for a weak stock price and bad corporate governance policies.

"It was on their watch that Eli Lilly experienced severe stock underperformance, poor corporate governance practices, and was unresponsive to shareowners," Russell Read, chief investment officer at Calpers, said in a statement.

Officials at Lilly could not be immediately reached for comment.

Calpers also asked other Lilly shareholders to support a proxy resolution giving them the right to amend company bylaws by majority vote.

Calpers said that as of the end of February, Lilly's stock had significantly underperformed both the S&P 500 and the S&P 500 Health Care Index.

The Indianapolis-based company trailed index peers by 16.7 percent over three years, by 35.5 percent for five years, and by 55.7 percent over the past 10 years, according to the pension fund.

Calpers said it named Lilly to its focus list of underperforming companies in 2007, after which the company refused to implement simple majority voting after a 62 percent shareholder vote for a resolution proposing that right.

The pension fund said around 95 percent of companies in the S&P 500 and Russell allow shareholders the right to institute bylaw amendments by vote.

Calpers, the nation's largest public pension fund with assets totaling more than $235 billion, said it owns around 4.7 million Eli Lilly shares. At the end of last year, the company had around 1.1 billion shares outstanding. (Reporting by Deena Beasley; Editing by Gary Hill)