Calpers to zap exex

Pension fund rejects five AOL TW directors

NEW YORK — The giant California Public Employees Retirement System said Friday that it would withhold votes for five AOL Time Warner directors up for re-election at the conglom’s annual meeting Friday.

The nation’s largest public pension fund — the second institutional investor in two weeks to express displeasure over the company’s board — won’t vote for Stephen Bollenbach, Franklin Raines, Fay Vincent Jr., James Barksdale or Miles Gilburne.

Calpers, which owns 20.4 million AOL Time Warner shares, said Bollenbach, Raines and Vincent are members of the audit committee that authorized Ernst & Young to perform nonaudit services. Accounting firms aren’t allowed to do that anymore after scandal erupted over Arthur Anderson’s dual role as auditor and consultant to Enron. Calpers also will vote against ratifying Ernst & Young as AOL TW’s auditor.

The Securities & Exchange Commission and the Justice Dept. are scrutinizing AOL TW’s books. Company has restated its earnings, due mostly to questionable revenue booked by America Online.

As for Gilburne and Barksdale, Calpers said, they sit on key board committees yet can’t be classified as independent directors. Gilburne used to be an AOL exec, and Barksdale ran Netscape Communications, which AOL acquired in 1999. AOL TW has said it considers the pair to be independent. Calpers called them “affiliated outsiders” and said that’s not good enough.

Institutional Shareholder Services, a shareholder advisory group, also has questioned Gilburne and Barksdale’s status as independents and recommended that investors not vote for them.

And AOL TW’s biggest institutional shareholder, Capital Research & Management, will oppose the re-elections of three board members, Steve Case, vice chairman Ken Novack and Gilburne.

Case resigned in January as chairman of AOL TW, pressured by angry shareholders, including Capital Research.

Ted Turner, also a director, helped eject Case from management but has said he plans to support the company’s board slate.

Shareholders have only two options in voting for directors — approve them or abstain. Directors with the most votes win the board seats.

No one has done it in this case, but shareholders also may present an alternative director or slate for vote at the meeting.

AOL TW has 13 directors. All are up for re-election.

Given the beating the stock’s taken and questions over AOL’s accounting, the annual meeting promises to be heated. However, it won’t be nearly as accessible as previous meets. It’s being held at the Landsdowne Resort in Virginia, about a 40-minute drive from Washington.

In past years, the event has been held in New York, where AOL Time Warner is headquartered.

America Online is based in Dulles, Va.

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