To many, AOL Time Warner Inc. Chief Executive Richard D. Parsons is the logical choice to be the new chairman of the company. He is a respected leader who has brought peace to the world's largest media conglomerate after two years of corporate turf wars and boardroom battles.

But in the wake of the scandals that have rocked Wall Street, Parsons may find himself boxed out by reforms aimed at ensuring stronger checks and balances at the nation's top corporations. Shareholders, analysts and business scholars say recent history has proven that it is dangerous to vest one person with the two lofty titles of chairman and CEO.

As a result, AOL Time Warner Inc. finds itself grappling with new complexities as it seeks to replace the outgoing chairman, Steve Case, who said Sunday he will step down from the post in May.

When the $106.2-billion merger of Internet service provider America Online and old-line media giant Time Warner was conceived at the peak of the dot-com boom, it was hailed as a model of the new economy. But the marriage never worked. The company last year reported a $54-billion write-down — the biggest in history — and investors have seen the value of their shares dwindle.

In recent months, the New York-based conglomerate has launched a series of initiatives aimed at improving the performance of its troubled Internet operation, which has dragged down the whole corporation. Among other things, AOL will beef up its Internet service by offering subscribers exclusive access to premium services such as Time Warner's publishing and film properties.

The upshot: With the company already aggressively pressing ahead, the selection of a new chairman is perhaps as important symbolically as it is strategically.

Inside the company, many employees will be looking for someone to bring stability — someone like Parsons. But outside, some observers are waiting to see whether AOL Time Warner is willing to adjust to the tougher standards that advocates say are needed to protect shareholders' interests.

With companies increasingly under pressure to have separate chairmen and CEOs, "it doesn't seem like Parsons is a slam-dunk," said analyst Michael Gallant of CIBC World Markets.

Already, speculation is surfacing that one of two executives who serve on AOL Time Warner's board — Hilton Hotels Corp. CEO Stephen F. Bollenbach and Colgate-Palmolive Co. Chairman Reuben Mark — may be contenders. At the same time, CNN founder Ted Turner, a major shareholder and member of the board, could well lobby for the top job. But insiders say he is seen as too volatile a force for the company as it tries to recover from the strife of recent years.

The selection of Parsons, by contrast, would help send a message of calm and unity within a company that has such disparate interests as AOL, CNN, HBO and Warner Bros.

"It would be the right approach to heal the company," one AOL Time Warner executive said.

Bringing in an outsider would carry more risk, experts said, because it might disrupt existing turnaround plans or result in unforeseen personality clashes.

"You can always go outside to the gray-haired wise man," said Morton Pierce, chairman of law firm Dewey Ballantine's mergers and acquisitions group. "But no matter how wise they are, they'll still be coming into a situation that's completely new. In this situation, they need to stay the course. Continuity and lack of divisiveness is very important."

Selecting an outsider to oversee Parsons might also be interpreted as a sign that the board lacks confidence in him, Pierce added. "It's a very delicate thing," he said.

That balancing act has become more difficult in the wake of fraud cases such as the one involving Enron Corp. That company's failure to have a strong-willed, independent chairman was blamed for the board of directors' poor oversight.

AOL Time Warner contributed to Wall Street's overall anxiety when it revealed last year that it overstated advertising revenue by $190 million. A government investigation is underway.

In the last year Congress tightened some corporate governance rules, though it stopped short of requiring that different individuals hold the titles of chairman and chief executive. The CEO oversees day-to-day management, sets corporate strategy and typically reports to and receives guidance from a chairman and a board of directors. Just last week, a commission made up of some of the nation's top businesspeople and executives recommended that the jobs be kept separate.

But some AOL Time Warner officials noted that having a separate CEO and chairman, as they have for the last two years, actually created more problems than it solved because of the clashes between Case and former CEO Gerald M. Levin, who resigned last year.

One option would be to make Parsons interim chairman until the company stabilizes, and then seek a separate chairman at a later date, company sources said.