AOL Time Warner ( AOL) this week joined the ranks of companies getting on the bad side of a major institutional shareholder during this proxy season.

The California Public Employees' Retirement System -- the nation's largest public pension fund -- said Thursday night that it won't vote for re-election of five of AOL Time Warner's directors, and that it was voting against ratification of auditor Ernst & Young.

Calpers, which has $131 billion in assets and investments in more than 1,800 companies, says it's voting against Ernst & Young because the accounting firm also does consulting work for AOL Time Warner. Calpers also won't be voting for three directors -- Stephen Bollenbach, Franklin Raines and Fay Vincent -- because they're members of AOL Time Warner's audit committee, which has authorized Ernst & Young to perform non-audit services.

Eliminating auditors' performance of work separate from auditing -- a dual role that many corporate governance critics say has led to lax accounting oversight -- has been a "pretty rampant" issue for Calpers in this shareholder voting season, says a Calpers spokesman.

In a large majority of shareholder votes this season, says the spokesman, Calpers was casting votes against auditors and withholding director votes because of the conflict-of-interest issue. "Frankly, we feel the auditing industry -- they're not getting it," he says.

Separately, Calpers objects to the presence of directors it labels "affiliated outsiders" on AOL Time Warner's compensation and nominating committees.

Thus, the pension fund is withholding its votes for two additional current directors: Jim Barksdale, former CEO of Netscape Communications, which America Online acquired in 1999, and Miles Gilburne, a former senior vice president of AOL.

Though AOL Time Warner characterizes these directors as independent, Calpers doesn't, and it believes that Barksdale shouldn't be on the compensation committee, nor Gilburne on the nominating committee. The spokesman acknowledges that Calpers' standards are stricter on the independence issue than are the New York Stock Exchange's.

Objections over director independence has been less common than objections over auditing this proxy season, says the Calpers spokesman. "Unfortunately, we still see it occuring quite often," he says.

An AOL Time Warner spokeswoman declined to comment.