The nation’s largest public pension approved a new approach to auditor independence that targets not corporate directors but audit firms.

But the board of the California Public Employees’ Retirement System, known as Calpers, voted to give governance staffers discretion to vote against directors in "egregious" cases, according to a spokesman.

The new policy, which will be applied to 1,700 companies it holds in the Wilshire 2500 index, means that Calpers will not support ratification of firms that handle certain types of work for audit clients that the fund considers can potentially question their independence.

Approving a staff recommendation, the board voted to follow a proposal outlined by the Public Company Accounting Oversight Board that would bar only those tax services seen as most likely to undermine auditor independence, according to Dow Jones Newswires.

Under the PCAOB’s proposal, firms would be prohibited to audit publicly held companies to which they have sold aggressive tax-avoidance plans. Auditors won’t get any right to sell tax services to top executives of companies they are auditing. Accounting firms also would be prohibited to have any "contingent-fee" arrangements with audit clients, under which the clients get a percentage of the money they save as a result of their auditors’ tax advice.